Canadian prosecutors refuse to use new “Deferred Prosecution Agreement” regime in high profile case

Despite the recent and welcome introduction of a ‘deferred prosecution agreement’ regime in the context of white collar infractions in Canada, Canadian prosecutors have recently refused to use it in one of its high profile investigations. On October 10, 2018, SNC-Lavalin Group Inc. (“SNC Lavalin”) issued a press release advising that the Director of the Public Prosecution Service of Canada (the “DPPSC”) informed it that at this time SNC-Lavalin will not be invited to negotiate a remediation agreement in order to resolve charges relating to alleged fraud and corruption in Libya.

A remediation agreement would have enabled SNC-Lavalin to defer prosecution in exchange for fines, remediation and cooperation with the prosecution. In its press release, SNC-Lavalin indicated that it “strongly disagrees” with the DPPSC’s position and remains “open and committed” to negotiating an agreement. SNC-Lavalin said it is reviewing its options to appeal the DPPSC’s decision.

Background

In February 2015, SNC-Lavalin and two of its subsidiaries, SNC-Lavalin International Inc. and SNC-Lavalin Construction Inc., were charged with fraud and corruption under the Criminal Code and the Corruption of Foreign Public Officials Act (the “CFPOA”) following an RCMP investigation into their dealings in Libya. It is alleged that former SNC-Lavalin executive Riadh Ben Aissa paid more than $160 million in bribes to the son of former Libyan leader Moammar Gadhafi in exchange for engineering contracts. After spending more than two years in a Swiss prison, Switzerland’s federal crime court entered into a plea deal in 2014 with Mr. Ben Aissa pursuant to which he forfeited approximately $40 million in cash and property and was then extradited to Canada. For further information regarding the Libyan allegations, refer to our earlier post. Separately, SNC-Lavalin has also faced corruption allegations relating to business activities in other jurisdictions including Bangladesh and Canada.

Canada’s new remediation agreement regime

Amendments to the Criminal Code establishing a remediation agreement regime came into force on September 19, 2018. The new regime will make available to Canadian authorities a commonly-used compliance and enforcement tool in jurisdictions such as the United States and the United Kingdom which has until now been unavailable in Canada. It was anticipated that the remediation agreement regime would increase the federal government’s ability to resolve charges of certain criminal offences including those under the CFPOA. Further information regarding the new regime and its application is available in our earlier post.

Implications

Prior to the September 2018 introduction of the remediation agreement regime, SNC-Lavalin had been a staunch advocate of its establishment in Canada – as were the majority of corporations that took part in the public consultations. SNC-Lavalin’s recent press release emphasizes that it has developed a “world-class” ethics and compliance framework, undertaken various measures to establish a culture of compliance, and fully cooperated with regulatory and governmental authorities, all of which are factors to be considered by the DPPSC in determining whether to negotiate a remediation agreement.

Given the DPPSC has denied SNC-Lavalin the ability to resolve the allegations by way of a remediation agreement, the case will process to go through the courts. It remains to be seen whether the introduction of the new regime will in fact improve the Canadian government’s record of CFPOA enforcement through encouraging self-reporting, remediation and cooperation in exchange for remediation agreements.

 

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Editors

Lawrence E. Ritchie

Partner, Litigation

Alexander Cobb

Partner, Litigation

Shawn Irving

Partner, Litigation

Kevin O’Brien

Partner, Litigation

Lauren Tomasich

Partner, Litigation

Geoffrey Grove

Associate, Litigation