Canada's new deferred prosecutions regime, once quietly cheered, now jeered in media amid scandal

13 February 2019 1:11pm

12 February 2019. By Richard Vanderford.

Canada's new deferred prosecution agreement regime, a legal change that brought the country in line with the US and UK, has been the center of attention after a report alleging that Prime Minister Justin Trudeau pressured an attorney general to grant a deal to bribery-accused engineering firm SNC-Lavalin.

The negative attention could derail a program widely welcomed at its inception.

It has been a tough few days for Trudeau. On Thursday, a newspaper reported that he had pressured one-time Attorney General Jody Wilson-Raybould to allow a deferred prosecution agreement that would resolve bribery charges against SNC-Lavalin, a large, Montreal-based firm. Wilson-Raybould declined, in the paper's telling, and was unceremoniously moved to the Veterans Affairs portfolio in a Cabinet shuffle widely seen as a demotion.

After demurring that solicitor-client privilege bound her to silence amid non-stop press calls for particulars, Wilson-Raybould resigned from Cabinet today. She said in an open letter that she had hired a former Supreme Court justice to advise her on what she could legally say, and thanked veterans, their families, officials, staff, and "all Canadians." She did not thank Trudeau, the prime minister who first elevated her to the Cabinet.

When she left the attorney general role in January, she gave a statement defending her independence. At the time, it seemed a non sequitur. Today it reads as foreshadowing.

"It is a pillar of our democracy that our system of justice be free from even the perception of political interference and uphold the highest levels of public confidence," she said. "As such, it has always been my view that the Attorney General of Canada must be non-partisan, more transparent in the principles that are the basis of decisions, and, in this respect, always willing to speak truth to power. This is how I served throughout my tenure in that role."

Trudeau on Thursday denied he had ever "directed" Wilson-Raybould, repeating that language verbatim when a reporter pointedly asked whether he had applied any pressure. An opposition leader called the response "legalistic."

Trudeau said yesterday that he had told Wilson-Raybould that "any decisions" were "hers alone."

The episode has been a fraught kick-off for Canada's deferred prosecution agreement program, known in the country as the remediation agreement program. The program, which allows a company to avoid criminal prosecution if they commit to reform themselves and pay a fine, came into legal force in September, aligning Canadian prosecutors' toolkit with those of counterparts in the US and UK.

The logic of the programs is simple: encourage compliance and cooperation with prosecutors by rewarding companies for those behaviors. Participation also helps companies avoid the stigma and knock-on effects of a criminal prosecution, which in some industries can be significant. For SNC-Lavalin, a major builder of infrastructure, a criminal conviction could mean a 10-year bar from federal public projects, a punishment the company has said would unfairly harm innocent employees and shareholders.

SNC-Lavalin, which has since 2015 faced charges over allegedly bribery in Libya, wanted a deferred prosecution badly enough that it has publicly sued the government to try to force prosecutors into talks, a case that is ongoing. And, according to the press report, the company privately lobbied for Trudeau's high-level meddling. The recent furor has made the prospect of a deal, at least for now, politically toxic.

Attitudes toward the program, at least in the mainstream press, have moved from oblivious to hostile. The recent events have given the public a miseducation that neither corporate practitioners nor prosecutors should welcome.

In a retelling that has emerged in much of the coverage, the program was snuck into law by the Liberal government, in some tellings for the sole purpose of aiding SNC-Lavalin, which regularly donated to the party. Through it, SNC-Lavalin and other lawbreakers get a free pass to trample over Canadian law, at least in many narratives.

In one op-ed in The Globe and Mail, which first broke the story, commentators said the government had "slipped" the remediation agreement program into legislation, a move that supposedly raised eyebrows. A columnist for the rival National Post said, without evidence, that SNC-Lavalin itself appears to have drafted the legislation, aided by "high-priced lobbyists telling sob stories to compliant politicians of … dire economic impact."

It is true that the Liberal government passed the program into the law as part of an omnibus bill, but the news hardly came as a surprise. Corporate practitioners in particular had pushed for such a program, and the government amended the law only after several months of public consultation in which industry groups, businesses, nongovernmental organizations and others weighed in.

Large firms with white collar practices roundly hailed the move.

"The time has now arrived," lawyers at the firm Gowling wrote in September. "A mechanism is finally in place in Canada that will allow for a better process to resolve criminal offences for corporations."

Lawyers at Osler wrote that the government had "finally" provided prosecutors with a "useful tool to address offences committed by organizations."

The new regime, far from being a hastily crafted get-out-of-jail card for SNC-Lavalin, bears obvious similarities to the US approach but also to Canada's own approach in antitrust enforcement. In that sphere, companies that come forward to report cartel behavior can receive leniency, especially if prosecutors didn't know about the misconduct before a company confesses.

The rationale for that approach is straightforward. Like cartel behavior, insider trading or other corporate crime, foreign bribery is corrosive to the proper functioning of markets but very difficult to detect. The leadership of most companies don't want to be involved in white-collar crime, but face a calculation when they discover misconduct: report the wrongdoing or hope it is never discovered? A program that lets them avoid criminal prosecution simplifies the calculus.

The programs also make prosecutors' work easier. Prosecutors tend to elide over this justification in defending the programs, but the reality is that with limited resources, law enforcement simply would fail to detect much foreign bribery unless it was reported to them. Though it remains too early to tell whether Canada's program will change enforcement in the country, Canada's foreign antibribery efforts have so far been anemic, with no boastworthy US-style high-profile resolutions. There have been barely any resolutions, boast-worthy or not, to speak of.

If anything, Canada's deferred prosecution agreement regime could improve compliance by making it far less risky for companies to self-report wrongdoing.

But observers might never get a chance to see the program working properly. The scandal that has swirled around Trudeau's Cabinet could conceivably end his premiership and leave a lasting taint on the program. Political observers have already drawn parallels between the recent events and AdScam, a mid-2000s scandal involving the Liberal Party in Quebec that led to a historic collapse of support for the party in its wake. Canada's parliamentary ethics commissioner has launched an investigation into Trudeau, the results of which could be equally historic.

With all this looming, the low-key civil servants who make up Canada's prosecuting corps are unlikely to enter a deferred prosecution agreement anytime soon, lest the media's guns turn toward them.

If SNC-Lavalin did author a lobbying push as the news report says, the outcome could only be described as tragic irony. The company, which has warned of potential ruin if it doesn't get an agreement, would have made it essentially impossible for a prosecutor to enter a deal with it, or with anyone, for that matter.

SNC-Lavalin wanted to write the ending to a chapter of alleged bribery that had hurt its reputation. It may have written the ending of the remediation agreements program.

	Eliot Gao