Written By Milos Barutciski, Alan Gardner, and Richard Stone
The Value of Self-Reporting
A company that properly self-reports under the pilot project and fulfills all relevant criteria (including disgorgement of any ill-gotten profits): (i) is eligible for a reduction of up to 50% of the bottom end of the applicable fine; (ii) may be able to avoid the appointment of a monitor; and (iii) could even receive a declination (provided that executive management are not involved, there are no previous offences and the misconduct did not result in significant profits). A self-reporting company that does not fulfill all criteria will be eligible for, at most, a 25% reduction off the bottom end of the fine range.
The Pilot Project
Under the pilot project, the DOJ will assess three criteria:Voluntary Self-Disclosure: The DOJ will consider whether the disclosure occurred prior to an imminent threat of disclosure or investigation, whether it occurred within a reasonably prompt time after the company became aware of the misconduct, and whether all relevant facts (including identity of the individuals involved) were disclosed. Full Cooperation: Companies must provide all known facts concerning the misconduct, including sources of relevant information. They must provide timely updates of new developments to prosecutors and must accommodate and facilitate requests to interview officers and employees or examine foreign third-party production of documents and witnesses. Remediation: Companies must demonstrate that they have implemented an effective compliance and ethics program (including sufficient dedicated resources for compliance, regular auditing and experienced and qualified compliance personnel), have undertaken corrective action and discipline for responsible employees, and have taken appropriate additional steps in recognition of the seriousness of misconduct.
What does this mean for Canadian Companies?
While jurisdictions outside of the United States have not yet gone as far as the DOJ, experience shows that Canadian enforcement agencies look favourably on voluntary disclosure. Recent examples include the first ever deferred prosecution arrangement reached between the United Kingdom's Serious Fraud Office and ICBC Standard Bank Plc and the recent decision by the Royal Canadian Mounted Police (RCMP) to discontinue an investigation of Nordion Inc. under the Corruption of Foreign Public Officials Act, following a voluntary disclosure made by the company.
Outside of the anti-bribery and anti-corruption regime, similar programs have been a long-standing feature of a number of regulatory compliance regimes both in Canada and abroad. The underlying motivation from a policy point of view is to encourage companies to put past practices behind them and to focus on forward looking compliance while relieving the strain on scarce resources for enforcement.
It remains to be seen whether the Canadian enforcement agencies will follow the DOJ's lead but the following examples highlight a tendency of regulators and enforcement officials to offer value for disclosure and cooperation by companies that may have committed certain offences:
- The Ontario Securities Commission has implemented a Credit for Cooperation program, providing guidance to market participants hoping to obtain credit for cooperation. The credit available for self-reporting and cooperation includes a narrowing of the scope of allegations, reducing recommended sanctions, resolution of the matter on a settlement basis and, in limited circumstances, may result in no enforcement action at all.
- The Competition Bureau's Leniency Program allows a company that has contravened the criminal competition provisions of the Competition Act to approach the Competition Bureau and provide a detailed statement describing the illegal activity, along with supporting evidence. The first-in company that discloses conduct not previously known to the Bureau and that satisfies all of the conditions of the Program can be granted full immunity from prosecution under the Competition Act. Parties that come in and cooperate later maybe be eligible for a degree of leniency in a subsequent prosecution.
- The Canadian Border Services Agency (CBSA) has also implemented a Voluntary Disclosure Policy, intended to encourage importers to voluntarily come forward when they discover that they made errors in reporting to the CBSA. A voluntary disclosure that meets the CBSA criteria can result in the waiver of administrative monetary penalties and no prosecution.
These programs, like the DOJ's pilot project, all have the common objective of maximizing enforcement efficiency while encouraging investment compliance and self-policing.
It is unclear at this point whether the DOJ project will achieve its goals. The most important indicator will be the consistency with which the policy is applied and the willingness of the DOJ to give real credit for cooperation. However, companies can expect that Canadian authorities will monitor the implementation of the pilot project and consider the factors identified by the DOJ in their own efforts to promote voluntary disclosure and cooperation.
NOTES U.S. Dep't of Justice, The Fraud Section's Foreign Corrupt Practices Act Enforcement Plan and Guidance 2 (the Memorandum) (Apr. 5, 2016), https://www.justice.gov/opa/file/838386/download.  Revised Credit for Cooperation, OSC Staff Notice 15-702, 37 OSCB 2583 (13 March, 2014).