Thank you.
Mr. Chair and members of the standing committee, it's an honour to be invited to attend to speak about remediation agreements.
Since 2014, I along with others have argued that we ought to have deferred prosecution agreements, and I was happy to see that in 2018 the legislation passed. The legislation sets out six purposes or objectives in the statute. I want to go through those.
The first purpose of these agreements is to denounce wrongdoing. The second is to hold organizations accountable. The third is to promote a compliance culture. The fourth purpose, and this is a very important one, is to encourage voluntary disclosure of wrongdoing. This is the idea of a company coming in from the cold and telling prosecutors something that the government hasn't discovered yet. I'm going to come back to that if I have time. The fifth purpose is to provide remedies for harms done to victims. The sixth purpose is to reduce the negative consequences for employees, customers, pensioners and others who did not engage in the wrongdoing.
I want to spend some time on that last objective. A similar test is used in the United Kingdom legislation, which refers to collateral effects on public employees and shareholders, as Ms. Berman has stated. I think we need to talk a little bit about this to understand it. Negative or collateral effects on persons who are not guilty of any wrongdoing are particularly acute if the particular corporation is doing a lot of government work. That is because a conviction in Canada leads to debarment, and with the present regime, it leads to debarment for a 10-year period, subject to reduction to a five-year period. That is a very real collateral effect on employees, pensioners and customers if the company can't tender or do government work for 10 years.
I don't want to, but I may find myself giving a little bit of a lecture on corporate criminal liability. You really have to understand corporate criminal liability as set out in the Criminal Code under section 22.2 to understand the dynamic of a corporation vis-à-vis the individuals.
Let me give you an example. There's only one such litigated case in Canada. It's called R. v. Pétroles Global Inc. In that decision, Justice Tôth said:
It will no longer be necessary for prosecutors to prove fault in the boardrooms or at the highest levels of a corporation: the fault even of middle managers may suffice.
It means that it is possible that senior managers or even middle managers, acting within the scope of their authority—and that's an important point—may have committed an offence such as bribery, while many of the employees had no idea about that act. Customers and pensioners are a further step removed from the circle of knowledge about that bribery. These are the people, in my submission, who are referred to in the purpose section to reduce the negative consequences of the wrongdoing for persons who were not part of it.
The reduction of negative consequences has economic consequences. An important question, then, is how this objective relates to the prohibition against considering the national economic interest. I want to turn to that. Subsection 715.32(3) of the Criminal Code states:
Despite paragraph (2)(i), if the organization is alleged to have committed an offence under section 3 or 4 of the Corruption of Foreign Public Officials Act, the prosecutor must not consider the national economic interest, the potential effect on relations with a state other than Canada or the identity of the organization or individual involved.
This section is very similar to the U.K. legislation and, as was mentioned earlier, is consistent with the OECD treaty.
When this legislation was passed, I wrote about it in my text. At the time, none of the recent events had occurred, so I went back and I looked at what I said at the time. I want to read to you what I said, and give a comment. What I said at the time about this provision is as follows:
This clause is designed to avoid political or economic factors interfering with the administration of justice. Conceivably this clause prevents an organization that is a prominent Canadian company from seeking special treatment on the basis that a conviction of the corporation would impact the national economic interest. There is, however, room for such a corporation to argue that it should be considered for a remediation agreement under the purpose section (f) to reduce the negative consequences of the wrongdoing for persons — employees, customers, pensioners and others — who did not engage in the wrongdoing, while holding responsible those individuals who did engage in that wrongdoing.
Members of the committee, you might ask how it is logically possible to consider the reduction of negative economic consequences for employees and pensioners and those not guilty of wrongdoing while at the same time not considering the impact on the national economic interest. It seems like a logical paradox, right?
I'm going to suggest that there is a way out of that logical paradox. It comes back to the concept of the essence of corporate criminal liability. If you have a situation where a crime is committed by senior or even middle-level officials, but there's a whole range of folks who had nothing to do with it, those two provisions work together. You can give a deferred prosecution to save those people from being affected, while at the same time it has absolutely nothing to do with economic interest. It's designed specifically to deal with protecting the people who had nothing to do with the bribery.
Let's take the complete reverse scenario. Suppose you have a company where the corruption extends right down to most of the employees. Suppose you have a company that really can't say they're a lot of innocent folks. If that company goes to the prosecutor and says, “We still need a deferred prosecution agreement, not because we're protecting innocent people but because it's in the national economic interest and you can't let us fail”, that's prohibitive, in my view, and then there are all sorts of permutations and combinations that apply to considering the situation for pensioners and/or customers in that scenario.
Each case, as has been said before by the prior speakers, needs to be evaluated on its facts. There are no simple answers here.
I want to briefly touch on something that Ms. Berman talked about. She has spoken a lot about deferred prosecutions not being what I call “free passes”, and I'm not going to spend much time on it because she's done such a great job on that. I think the one thing I would want to say is that when we talk about these arcane examples, you need a fact pattern to give it substance. Let me give you an example of one that happened recently.
Panasonic, in 2018, received a deferred prosecution agreement in the United States. They had been accused of paying bribes to get their entertainment systems, through a subsidiary, onto Middle East Airline planes. Over a period of time they paid about $7 million and disguised this as consulting fees when they weren't really consulting fees. Not only were they paying bribes, but they were falsifying books and records.
They received a deferred prosecution agreement, but to Ms. Berman's point, listen to the penalties. The disgorgement of the profit.... They made a profit of $126 million. That was disgorged. They had to pay that back. On top of that, they then had to pay a penalty of $135 million, and that was with a 20% discount. Then they had a monitor imposed for a period of two years. That's a good example of how powerful these can be.
There have been a lot of people talking about gatekeepers. I'm not going to comment on that because people have done such a fantastic job, except to reiterate one point, and that is, what people haven't been talking about a lot is the fact that because the Canadian system requires court approval, a judge ultimately has that ultimate approval.
I'm speaking completely hypothetically here. Even if an Attorney General felt pressured and ultimately put something before a court as a remediation agreement, a judge has the right to say he needs to know the factors. The judge in our legislation has to be satisfied that it's fair, that it's appropriate. A judge could say that if you are only considering the national economic interests, that's a prohibitive factor and he's not going to approve this agreement. There is that judicial check. We have to keep that in mind.
I'm starting to run out of time so I'll probably save this for questioning. If anybody's interested in it, I'm happy to talk about the whole concept of coming in from the cold and how it applies. I think this is important in this spectre.
This is complex, and we're neophytes as Canadians. I think we ought to give some serious thought to the passing of guidelines. This legislation gives the cabinet power to pass guidelines for the implementation of remediation agreements. I think we ought to set up a panel of some really smart people, some of whom have come before you. I'm not saying I'd be one of them, but get some really smart people together and study this so guidelines could be passed by way of regulation that would help the Attorney General, the cabinet and the parties understand the differences between some of the factors that may be more partisan and some of them that are more legal.
Thank you.