Corporate leader or crime figure?

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In a pivotal case for coordinated international anti-corruption efforts, the Supreme Court of Canada ruled, on 29 April 2016, that the World Bank Group retains immunity from being forced to produce documents or provide its own employees as witnesses in Canadian legal cases. The ruling also highlights both the change in approach to foreign bribery cases by law enforcement agencies and multi-lateral development banks, and a willingness to concurrently deploy the powers at their disposal.

 

The Facts

The Court ruled that a number of the World Bank’s anti-bribery and corruption staff are not required to appear in Toronto courts and provide information about whistleblowers of Canadian EPC firm SNC-Lavalin, and the company’s efforts to secure a supervision and advisory contract for the US$2.9 billion Padma Bridge project in Bangladesh. In 2013, Kevin Wallace, former SNC-Lavalin vice president of energy and infrastructure, along with Zulfiquar Bhuiyan, were charged with bribing a foreign public official over a contract to supervise the construction of the planned 6-kilometre long bridge.

The underlying case began in 2010, when the Bank’s Integrity Vice Presidency (INT) commenced its own investigation into the bribery allegations following information provided by unnamed ‘tipsters’. The Bank ultimately cancelled its involvement in the construction of the bridge and imposed a debarment of 10 years against SNC-Lavalin and over 100 of their affiliates.

However, as the Bank undertakes “administrative” and not “criminal” investigations, it cannot initiate criminal proceedings. As a result, the World Bank brought those allegations, including information from the tipsters, to the attention of the Royal Canadian Mounted Police (RCMP). This ultimately led to the 2013 bribery charges against Wallace and Bhuiyan.

The Supreme Court’s decision overturned a 2014 ruling in a lower court for the Bank to disclose information in a Canadian bribery case, threatening what the Bank considers its autonomy and independence.

Initially argued successfully by defence lawyers at first instance, an Ontario Court ordered that the World Bank disclose all its case files on their investigation, not just the material given to the RCMP. Lawyers for Wallace had contended that the defence should be able to examine bank records and challenge the World Bank investigators because they initially tipped off the RCMP, who then set up wiretaps to investigate SNC-Lavalin employees.

The World Bank insisted that it has to protect its sources, including informants and tipsters who may refuse to co-operate should they fear a foreign court might reveal their identities. The Court agreed, and made it clear that Canada was signatory to the international treaty that formed the World Bank and International Monetary Fund. In doing so, the country agreed to abide by its conditions [at 93]:

It must be remembered that when a state agrees to become a member of the World Bank Group, it makes a deliberate decision to accept the terms and conditions of the organization, which include archival and personnel immunities. It is part of the original agreement that in exchange for admission to the international organization, every member state agrees to accept the concept of collective governance.

If the Bank were to be exposed to any form of “implied or constructive waiver”, it would have a “chilling effect on collaboration with domestic law enforcement”.

The government of Canada, several international development banks, and Transparency International formally intervened in the case and supported the World Bank’s position.

The broader implications

Whilst the import of this decision to the inviolability of the Bank’s immunities is clear, it is also significant for other reasons.

The ruling also reveals a significant methodological change in approach to foreign bribery cases by both the multi-lateral development banks and law enforcement. The use of covert methods such as telephone intercepts demonstrates that foreign bribery cases can be pursued in real-time, and across international borders, using methods more commonly used in organised crime investigations.

As salient as it may seem, this is not the first case where the World Bank has cooperated with law enforcement in the early phases of its own investigations. Similarly, it is not the first case where INT has worked in parallel with member state organisations that have employed covert methods. This is a now long established methodology.

It also demonstrates that the classic fraud agency approach that was, more often than not, a paper driven and historic look-back exercise has largely had its day. Moreover, it clearly shows the benefits of agencies such as the World Bank’s INT actively building multi-disciplinary teams of investigators who have wider criminal investigation profiles than the white-collar investigators of old.

The old methods that prevailed in Integrity arms of the multi-lateral investment banks meant that many opportunities to expose corruption were lost. Fraud-focused investigators failed to recognise the potential for member state agencies to use the full array of their overt and covert methods and hence did not seek to find ways to lawfully pass actionable intelligence to their member state counterparts. Their legal departments, who until relatively recently were fearful of any act that may threaten the immunities enjoyed by the organisation, took a great deal of convincing by the investigators to release anything (though this was made easier when legal officers with criminal prosecution backgrounds were able to add their voice of support). The Canadian Supreme Court has now put these fears to bed.

The concerted move towards the treatment of foreign bribery as an organised criminal activity is also demonstrated by the actions of other members of the International Foreign Bribery Task Force, the US DoJ, and the UK’s NCA. In 2015, these organisations have merged their overseas corruption units with their kleptocracy functions (within the last few weeks Australia has announced a similar approach) and made it expressly clear that they will use every weapon in their arsenal to tackle foreign bribery. In merging these functions they have also found a way to help pay for the costly business of offshore investigations.

For corporates, the message should now be clear: if you become the subject of a foreign bribery investigation, domestic production orders are the least of your problems. You are now much more likely to be watched, be listened to, encounter a wired-up employee/agent, or targeted by a multi-national taskforce and generally dealt with in much the same way as a criminal syndicate.

 

For further information, please contact:
Sam Peace or Mick Stefanovic

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