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Niko's guilty plea will act as deterrent, lawyers say

Niko Resources Ltd.'s multimillion-dollar fine for bribing a foreign official will only make a small scuff on the oil and gas company's balance sheet, but Niko's admission, as well as its punishment, may well be enough to prevent more Canadian companies from doling out gifts in the hope of gaining business.

The Calgary-based company on Friday was fined $9.5-million after it pleaded guilty to bribing Bangladesh's junior energy minister in 2005; this gives the RCMP its first win in its attempt to battle bribery abroad. While the fine is less than Niko's chief executive's $16-million pay package in 2010, the message may be effective.

"It sends a very strong signal to Canadian companies that they can't do business in the 'local way,'" said Riyaz Dattu, a lawyer with Osler, Hoskin & Harcourt LLP in Toronto.

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"It's an eye-opener. It's a very significant case," he said. "I think this is going to be a seminal case that Canadian companies that operate around the world are going to look at. And it gives an indication of the seriousness with which the Canadian government is going to be viewing the giving of bribes."

Indeed, Mr. Dattu believes the "astounding" $9.5-million suggests an even larger fine would have been sought had the case gone to trial.

The fact that the Niko case involved bribery with an SUV, as well as a trip to New York and Calgary - rather than the more obvious wads of cash in an envelope - has already prompted e-mails from clients asking him questions about the case, Mr. Dattu said.

Calgary executives also believe the Niko case will prevent companies from illegally wooing officials.

"As a deterrent ... it's real," said Jim Buckee, Talisman Energy Inc.'s former chief executive. "People don't like paying out things like that. It's a big slap on the wrist."

Further, while some investors argue the $9.5-million is financially insignificant, Niko's damaged status in the market will be key in preventing other Canadian companies from bending the rules. "The dollars aren't the big thing," said Kenneth Pinsky, chief financial officer at Parex Resources Inc. "It's the public perception."

The idea that companies, particularly mining and energy outfits, have to pay bribes to operate in developing countries rich in resources is outdated, according to James Klotz, a partner at Miller Thomson LLP and chair of the Canadian chapter of the non-profit organization, Transparency International. Niko's $9.5-million may be low in comparison to future punishments.

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"In the U.S., the fines started off fairly small when they started prosecuting under their version of our act, and now the fines are hundreds of millions, and [involve]going to jail," he said.

"[Niko's]subsidiary felt they had to do these things because that's how business is done in Bangladesh. That excuse is an old saw," he said. You don't have to do business that way, and if you do, you might find yourself getting a fine the size of this one or bigger."

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About the Authors

Carrie Tait joined the Globe in January, 2011, mainly reporting on energy from the Calgary bureau. Previously, she spent six years working for the National Post in both Calgary and Toronto. She has a master’s degree in journalism from the University of Western Ontario and a bachelor’s degree in political studies from the University of Saskatchewan. More

Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

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