This story was first published in July 2019. We are sharing it again as the the engineering firm pleads guilty to fraud charges related to the The Globe’s original investigation.
It was 9:30 at night when Ann Sheppard, a Department of Justice lawyer, took her seat in Parliament Hill’s Centre Block to testify before the House of Commons finance committee.
The Liberal government was proposing a major change to the Criminal Code, one that would affect how Canada meets its international obligations to fight corporate bribery of foreign officials.
For the first time, prosecutors would be given legislated permission to suspend criminal proceedings against companies charged with white-collar crimes, in exchange for a negotiated settlement known in some countries as a deferred prosecution agreement (DPA) and in Canadian law as a remediation agreement. The change was tucked into the government’s massive budget bill, which is why it had come before the finance committee.
As Ms. Sheppard spoke about the proposed law that May night in 2018, MPs on the committee yawned, sighed deeply and rubbed their eyes. It was their third meeting of the day. They had already spent seven hours listening to 40 witnesses address the 584-page Budget Implementation Act on topics as varied as parental leave for parliamentarians, wildlife protection in Nunavut and the quality of Royal Canadian Mint bills and coins. The DPA provision would get a half-hour of airtime.
The sleepy surface of the finance committee belied the political winds then gathering force around the coming DPA law. A justice minister reluctant to get behind the provision. A politically well-connected company undertaking an unprecedented lobbying campaign to ensure it would avoid criminal conviction. Legislation, rushed into place, that did not square easily with the goal it was meant to accomplish.
A storm hit Parliament earlier this year when The Globe and Mail reported allegations of political interference in the prosecution of Montreal’s SNC-Lavalin by senior government officials and members of the Prime Minister’s Office.
Those allegations prompted public hearings at which Jody Wilson-Raybould, the former justice minister and attorney-general, accused Prime Minister Justin Trudeau and other top officials of putting pressure on her to support a DPA in the SNC-Lavalin fraud and foreign-bribery case.
At issue were the principle of prosecutorial independence, on the one hand, and the future of a long-established Quebec company, on the other.
The Prime Minister and other officials have denied doing anything improper.
To understand how Canada got its law and what went wrong in the pursuit of a DPA for the country’s biggest engineering and construction firm, The Globe pored over more than a thousand pages of committee testimony, court documents, international white-collar crime reports and submissions to the federal consultation process on DPAs; examined the Government of Canada’s lobbying registry; obtained documents, including internal and external government communications, under access-to-information laws; analyzed other countries’ DPA regimes; and interviewed dozens of politicians, business stakeholders and global anti-bribery experts.
Many of the actors in the SNC-Lavalin affair have given a public account of events as they saw them. But while much ink has been spilled on this subject, The Globe’s investigation uncovered these findings:
- Ms. Wilson-Raybould questioned the effectiveness of DPAs and was concerned that they were being pushed by a powerful company with a history of legal issues, said a source with knowledge of the situation. Ms. Wilson-Raybould wanted nothing to do with the legislation and certainly did not wish to take the lead on it. This should have been a red flag for Mr. Trudeau and his team. As justice minister, she was responsible for Criminal Code changes. As attorney-general, she had the power to reject any DPA. A spokesman for Finance Minister Bill Morneau said that such assertions were “completely absurd,” telling The Globe that Criminal Code amendments cannot be introduced without the “intimate collaboration and support” of the minister of justice.
- SNC-Lavalin had influential help as it worked aggressively toward a DPA law. The public company, alongside the Business Council of Canada, drove Corporate Canada’s push for the legal tool. Inside the Liberal government, the champions of a DPA law were Innovation Minister Navdeep Bains and his then-chief of staff, Elder Marques (who later, as a senior adviser in the PMO, continued to press for it), and Mr. Morneau and his team, the source said. Mathieu Bouchard, a senior Quebec adviser in the PMO, stickhandled the file. The PMO told The Globe there is nothing unusual about its staff working on any piece of government legislation.
- SNC-Lavalin did not get everything it asked for in the DPA law. The company’s submission to the government on proposed DPA legislation said that prosecutors, when deciding whether to make an agreement, should be allowed to consider such factors as the impact of a conviction on the manufacturing supply chain. Had that been the case, SNC-Lavalin’s importance to the broader Canadian economy could have been its trump card. But the law as passed explicitly bars prosecutors from considering the “national economic interest” in cases of alleged foreign bribery.
The government’s support of DPAs was in line with international practice. In the United States, nearly all foreign corruption cases are resolved through DPAs or other alternatives to prosecution. DPAs were introduced in Britain in 2014, and judges there have approved four such agreements.
Why have they become so prevalent? Partly because many countries do not wish to cause their own companies economic hardship over foreign bribery. And partly because prosecuting acts of business-related bribery committed abroad is difficult, expensive and time-consuming. (For instance, cases against former SNC-Lavalin executives Stéphane Roy and Sami Bebawi connected to foreign-bribery allegations in Libya collapsed in February over delay.) DPAs, then, are a pragmatic way for countries to uphold their international obligations. A compromise, for better or worse.
But such a compromise for SNC-Lavalin was at best a long shot, and at worst, doomed from the outset – despite the company’s three-year push to avoid trial.
The company undertook what Michael Wernick, who was then the country’s top civil servant, would call the “most extensive government relations effort in modern times” to establish a DPA law in Canada, and to have that law work in its favour.
How is it that the Liberal government wanted the same outcome as SNC-Lavalin, but wound up on a disastrous course, culminating in cabinet departures, caucus ejections and an ethics investigation – all with a federal election looming? The answer is that, in its haste, it failed to remove key obstacles ahead of time.
Global index: How corrupt were the
world's countries perceived
to be in 2018?
MURAT YÜKSELIR / THE GLOBE AND MAIL, SOURCE:
Global index: How corrupt were the world's
countries perceived to be in 2018?
MURAT YÜKSELIR / THE GLOBE AND MAIL, SOURCE:
Global index: How corrupt were the world's countries perceived to be in 2018?
MURAT YÜKSELIR / THE GLOBE AND MAIL, SOURCE: TRANSPARENCY INTERNATIONAL
‘GEARING UP TO AVOID THE FULL COURT PROCESS’
The collective fight against foreign bribery represents an enormous shift – at least on paper – over a short time. Barely a generation ago, if a foreign country’s laws permitted bribery, well, the West was simply respecting the sovereignty of other nations.
This changed in the late 1990s, when the Organization for Economic Co-operation and Development (OECD), representing, by and large, the wealthy and industrialized West, established a convention requiring member states to investigate and prosecute foreign bribery.
Today, 44 countries have signed on. But, in a sign of the widespread ambivalence about potentially damaging their own economies, just seven have “active enforcement,” according to Transparency International, which monitors anti-corruption efforts. Canada is not one of the seven.
Tackling foreign bribery is a bit like the battle against global warming: an uphill slog without the entire world on board. “Corporate behaviour has improved, but not radically," Laurence Cockroft, a co-founder of Transparency International, told The Globe.
The OECD expected such ambivalence and barred prosecutors from considering national economic interest in foreign-bribery cases, under the convention’s Article 5. Mark Pieth, a Swiss law professor who chaired the OECD Working Group on Bribery from 1990 to 2013 and has been called the “founding father” of the bribery convention, says the purpose of Article 5 is to keep governments from giving in to their worst instincts.
“When we negotiated the convention, the representative from the Netherlands raised his hand and said, ‘Oh, but we have this very good relationship with Indonesia. If my company is bribing in Indonesia, I should be able to say, it’s good for business, isn’t it?' " Mr. Pieth recounted in an interview with The Globe. "The rest of the room said, ‘Stop. That’s exactly what we don’t want.' ” Article 5 would, nearly word for word, become part of Canada’s 2018 DPA law and a flashpoint in the SNC-Lavalin case.
The OECD bribery convention took effect in 1999, and in that same year, Canada’s Corruption of Foreign Public Officials Act became law, setting a maximum of five years in jail for acts of foreign bribery committed by individuals, and fines with no maximum at all for acts by corporations.
In its first decade, Canada did little to enforce the new law. There was only one prosecution – a minor one in 2005 involving a $28,000 bribe of a U.S. border official. All told, Canada has achieved just four convictions under its foreign-bribery law in 20 years.
The country’s tentativeness did not go unnoticed. The OECD’s Working Group on Bribery repeatedly chastised Canada for being a laggard in enforcement.
The criticism eventually hit home. In 2008, the RCMP established two seven-member anti-corruption teams, in Calgary and Ottawa. By 2011, the force had nearly 35 cases under investigation. That same year, Alberta’s Niko Resources pleaded guilty to bribery involving a Bangladeshi cabinet minister and was fined $9.5-million. In 2013, Stephen Harper’s Conservative government increased the maximum imprisonment for individuals convicted of foreign bribery, from five to 14 years.
Then in 2014, the Conservatives brought in 10-year automatic debarment from federal contracting for convicted companies. This ban is part of what is now known as the Integrity Regime, which sets out rules for government procurement. It made the stakes incredibly high for companies facing prosecution. (The Harper government made the debarment rule more flexible the following year, allowing companies a possible five-year reduction if they co-operate with authorities and change their ways.)
SNC-Lavalin would become the only corporation charged since the tough debarment policy came in. In February, 2015, the RCMP laid charges alleging that the company paid nearly $47.7-million in bribes to Libyan government officials and that SNC-Lavalin and two of its subsidiaries defrauded Libyan organizations of about $129.8-million. The offences were alleged to have occurred between 2001 and 2011. The allegations have not been proven in court.
SNC-Lavalin had for decades done work in the North African country. In 2011, the company defended its $275-million contract to build a state-run prison against criticism it was collaborating with dictator Moammar Gadhafi. It said the prison was being built to international human-rights standards. Mr. Gadhafi, who was killed that same year in the Arab Spring uprising, was notorious for human-rights abuses and terrorism. His government admitted responsibility for the 1988 bombing of a Pan Am flight over Lockerbie, Scotland, that killed 270 people, including some Canadians.
The company had been on the defensive outside Libya, too, beleaguered by several corruption, bribery and money-laundering scandals in places such as Cambodia, Bangladesh, the United Arab Emirates and even in Montreal. There was the matter of illegal political donations to the Parti Québécois and the Quebec Liberal Party. And the company made illegal donations federally between 2004 and 2011, with most of the money going to the Liberals. (That scheme was not revealed publicly until 2016.) All of this would need to be taken into account years later when the company pushed for a DPA in the Libya case.
SNC-Lavalin was keen to avoid a conviction and the blacklisting it would bring. As The Globe reported in 2015, the company unsuccessfully tried to settle the charges out of court. In effect, it had tried to get a sort of DPA, under Canada’s tradition of prosecutorial discretion. (The U.S. frequently grants DPAs, but has no DPA law. They are negotiated at the discretion of federal prosecutors.)
Robert Card, at the time SNC-Lavalin’s CEO, hoped policy-makers would understand that a conviction would jeopardize thousands of jobs. SNC-Lavalin has more than 50,000 employees, with 9,000 of them in Canada. Of those, roughly 3,400 are in Quebec, 3,000 are in Ontario and 1,000 are in B.C. In May of 2015, Mr. Card told analysts that SNC-Lavalin was “gearing up to avoid the full court process … We’ve got a lot of good momentum going.”
In mid-2015, op-eds championing DPAs were published (in the Financial Post) by Jack Mintz, a prominent University of Calgary economist, and (in The Globe) by John Manley, a former Liberal cabinet minister and, at the time, the president and CEO of the Canadian Council of Chief Executives, now known as the Business Council of Canada. SNC-Lavalin, Mr. Mintz wrote, “looks like the perfect candidate.”
In an interview for this story, Mr. Manley told The Globe that the Business Council’s push for DPAs, including through lobbying and a prebudget submission to the federal finance minister, was closely linked to the implementation of the debarment rule, which it felt was harsh.
The Conservative government had mulled DPA legislation, but it was not a priority. “I did get a memo at one point that I recall laying out the options, looking at different jurisdictions,” Peter MacKay, the former Conservative justice minister who is now a partner in Baker McKenzie’s Toronto office, told The Globe. “Had we extended another term of office, we probably would have gone down that road. That was my own inclination. It was something that interested me as a former front-line prosecutor.”
In mid-November of 2015, soon after the Liberals came to power, the Montreal-based Institute for Research on Public Policy hosted a round table on Canada’s approach to tackling white-collar crime and maintaining integrity in public procurement. A group of 21 business, legal and academic minds gathered in a conference room at a downtown Toronto hotel for the event.
Not only did SNC-Lavalin attend, it also paid about 15 per cent of the costs. Power Corp. of Canada and the Business Council, which is composed of CEOs and entrepreneurs from 150 leading Canadian companies, contributed funding, too. The round table culminated in a report stating that the “consensus view” was that the federal government should “seriously consider” adopting DPAs.
In the meantime, SNC-Lavalin found a short-term way forward: In December, 2015, the company signed an administrative agreement with Public Services and Procurement Canada, allowing it to continue bidding on federal contracts despite the pending charges. It is currently the only company with such an arrangement.
THE HEAT WAS ON
SNC-Lavalin’s lobbying effort percolated for years, garnering little public attention. But when the SNC-Lavalin affair erupted this past February, the company’s activity on the federal Registry of Lobbyists took on new import. Now, there was context.
Between February of 2016 and January of this year, the company logged 81 conversations with designated public-office holders on the subject of “justice and law enforcement.” But this log does not specify the number of times DPAs were discussed. In a more detailed part of the registry, only SNC-Lavalin and the Business Council listed DPA legislation as an area of interest.
“Once you’re in the glue, as SNC clearly was, then of course they’re the most active on it,” Mr. Manley said.
Because of loopholes in the federal Lobbying Act, there are limitations on what can be known about SNC-Lavalin’s campaign. Only arranged conversations must be logged, so if an executive bumped into a designated public-office holder at, say, a restaurant, the interaction might well go unlisted. This would be both above board and off the books. It is the lobbyist that must register the conversations. There is no evidence that SNC-Lavalin did anything illegal in its quest for a DPA.
Of the company’s 81 registered conversations on “justice and law enforcement,” 15 were with Mr. Bouchard, the senior Quebec adviser in the PMO; nine were with Mr. Marques, first when he was chief of staff to Mr. Bains and later as a senior PMO adviser; four were with Barbara Glover, who was at the time an assistant deputy minister for Public Services and Procurement; three were with Mr. Bains; three were with David MacNaughton, Canada’s ambassador to the U.S. and a co-chair of the Liberals’ 2015 election campaign; and two were with Robert Asselin, who was then policy and budget director for Finance Minister Bill Morneau. The company also met once each with Mr. Morneau; Gerald Butts, who was the Prime Minister’s principal secretary; and then-Privy Council clerk Mr. Wernick. (Mr. Butts stepped aside in February, saying the accusations of political interference were distracting from the Prime Minister’s work. Mr. Wernick resigned in March, saying he had lost the “trust and respect” of the opposition parties.)
The Globe reached out to more than two dozen people, directly or through their offices, who were listed on the registry as having been lobbied by SNC-Lavalin. Some declined to provide details of what was discussed, including the PMO, the Department of Finance, Mr. Bains, Mr. MacNaughton, and cabinet ministers Jim Carr and François-Philippe Champagne. Some said the issue of DPAs was not raised. Some did not respond.
Others said the company did, indeed, raise the merits of DPAs, through Sam Boutziouvis, SNC-Lavalin’s vice-president of government relations. Mr. Boutziouvis’s mission was to sensitize government officials to the existence of DPAs elsewhere, to make the case for their value to Canadian companies and, later, to ensure the regime’s safe passage through Parliament, according to some of those who met with him.
SNC-Lavalin declined to make Mr. Boutziouvis available for an interview and did not answer questions about its government-outreach efforts. “Given the legal processes under way, we cannot go into any further detail,” spokesman Nicolas Ryan said in an e-mail.
On the lobbying front, the engineering firm got an assist from the Business Council, whose members were content to have it leading the charge on DPAs, said John Dillon, a senior vice-president with the industry group. (SNC-Lavalin is a member of the group.) Companies, he explained, “don’t necessarily want their name associated with something like this, if it implies that they might be worried about something – a charge or something like that.” Mr. Dillon himself discussed DPAs with PMO advisers, once in 2016 and once in 2017. “They were receptive,” he said of his second meeting with Mr. Bouchard. “I think, at the time, they were contemplating a consultation process.”
The Liberals opened consultations on the Integrity Regime and potential DPA legislation on Sept. 25, 2017. About two weeks later, SNC-Lavalin filed its seven-page DPA submission, which included a recommendation that had the potential to make life easier for the company: Were the legal tool to be approved, it should also be made retroactively available to companies already facing charges.
SNC-Lavalin was also concerned with what others were telling the government. In the fall of 2017, Mr. Boutziouvis met with Andre Leduc, the vice-president of government relations for the Information Technology Association of Canada (ITAC), which bills itself as the national voice for a $170-billion industry. Over lunch at the members-only Rideau Club in downtown Ottawa, they discussed the association’s pending submission, Mr. Leduc told The Globe. SNC-Lavalin was invested, he said, in making sure that the association articulated its support for DPAs using certain language. “You want to make sure everyone is singing out of the same hymnbook,” Mr. Leduc said.
Mr. Boutziouvis secured a Nov. 3, 2017, meeting in Gatineau to discuss SNC-Lavalin’s submission with representatives from three of the four main government departments managing the consultations – Public Services, Global Affairs, and Innovation. “No one from Justice Canada?” Mr. Boutziouvis wrote to government officials ahead of the meeting, according to e-mails obtained under access-to-information laws. “Shy, are they?” SNC-Lavalin wanted to make its case, in person, to the department responsible for drafting the law they were seeking, but Justice Canada seemed to be keeping its distance.
A spokeswoman for the department told The Globe that Justice officials did not meet privately with any companies during the consultation process. The department did, however, participate in round tables with stakeholder groups and reviewed all the submissions.
In response to e-mailed questions, Ms. Wilson-Raybould confirmed that no one from her office met with the engineering firm during her time as minister, and she pointed to her earlier public statements about the SNC-Lavalin affair.
The federal consultations, held in the fall of 2017, involved roughly 40 meetings with more than 370 participants and attracted 30 submissions related to the Integrity Regime and 45 related to DPAs. Of the DPA submissions, 21 were from the business sector, 12 came from individuals, nine were from the justice sector, and three were from non-governmental organizations. The majority advocated in favour of DPAs.
Neil Bruce, who was SNC-Lavalin’s CEO from the fall of 2015 until he stepped down last month, pushed back at the notion that the company had succeeded in getting a DPA regime in place. “We were one of a whole variety of companies that went through the consultation,” he told The Globe in March.
But when it comes to actual submissions, only three individual companies and one financial institution submitted to the DPA consultations, Public Services and Procurement said in an e-mail to The Globe. A 371-page package of submissions, released under access-to-information laws, reveals who they were: SNC-Lavalin; the PCL family of construction companies; and Ortus, a crisis-response firm whose founder and CEO once advised SNC-Lavalin’s board of directors.
SNC-Lavalin left its mark far and wide. For instance, Bell Canada participated in the DPA consultation stream, but instead of filing its own submission, it lent its support to that of a stakeholder whose identity was redacted in the access-to-information package. Bell told The Globe in an e-mail that the stakeholder was SNC-Lavalin. “We found SNC’s [submission] to be the most comprehensive and filed a letter of support,” a spokesman said.
Just one financial-services institution – Bank of Montreal – submitted in regard to DPAs. “This was a government consultation process that was open to public and private sectors,” a spokesman said in an e-mail. “BMO provided perspective as an engaged corporate citizen, and one that supports harmonized regulation in the U.S. and Canada.”
There are links between the bank, SNC-Lavalin and Ottawa. One of BMO’s vice-chairs is former Privy Council clerk Kevin Lynch, who was also SNC-Lavalin’s vice-chair at the time of the bank’s submission. He is now SNC-Lavalin’s chair. The Globe contacted Mr. Lynch through his BMO e-mail address to ask about the bank’s submission and also about a controversial call he placed to Mr. Wernick – at the time, himself the Privy Council Clerk – in the fall of 2018. Mr. Lynch did not reply to The Globe’s e-mail. Five hours later, SNC-Lavalin’s director of external communications, Daniela Pizzuto, responded, saying she was following up on Mr. Lynch’s behalf. She defended his call to Mr. Wernick, but reiterated that the company would not be answering any questions regarding this story.
DPAs were cast as part of the Liberals’ economic blueprint – a legal tool to help Canadian companies thrive. By briefly mentioning the proposal to legislate DPAs in its February, 2018, budget plan, the government opened the door to inserting the Criminal Code amendment into its Budget Implementation Act, known as Bill C-74.
It was a calculated decision. Ms. Wilson-Raybould would not take the lead on the file, according to the source with knowledge of the situation. She questioned both the effectiveness of DPAs and the merits of giving the country’s first one to SNC-Lavalin, an influential, high-profile company with a history of legal woes and now facing serious charges. She did not, however, actively work to thwart the government’s momentum toward a DPA regime, the source said.
Mr. Butts, the former principal secretary to the Prime Minister, has said publicly that he spoke only once with Ms. Wilson-Raybould on the SNC-Lavalin file, late last year, and that “there was nothing remotely negative about the exchange." And Pierre-Olivier Herbert, a spokesman for Mr. Morneau, said in an e-mail that “the notion that amendments to the Criminal Code could be developed and subsequently introduced in legislation without the intimate collaboration and support of the minister of justice and attorney general is completely absurd.”
In any event, the government chose the most expeditious of routes for its DPA law: inclusion in an omnibus bill, in the form of Bill C-74, which packaged a number of measures into one piece of legislation. Mr. Trudeau’s Liberals had campaigned against such bills, calling them an “undemocratic” approach that prevents Parliament from “properly reviewing and debating” proposals.
This may be true, but omnibus legislation certainly is efficient. The DPA provision, after all, could have been included in Bill C-75, whose main purpose was to amend the Criminal Code. That bill was tabled just two days after Bill C-74, but it took a full year longer to pass.
Omnibus budget bills, used frequently by the Harper government, do not typically include changes to criminal law. The Globe reviewed a decade of Budget Implementation Acts and found that only a handful contained Criminal Code amendments. Most of them were relatively minor changes to such things as charity-run raffles and the definition of “passport."
In an e-mail to The Globe, the PMO defended the legislative process, saying DPAs were “the subject of extensive public consultations and broad engagement across multiple departments.” The office would not explain why the DPA provision was included in the budget bill. On that point, it instead referred The Globe to Mr. Morneau’s office. That office cited earlier comments by the Finance Minister, in which he said the amendment had a clear economic angle.
While budget bills tend to be shoo-ins for a majority government, SNC-Lavalin was alive to the possibility that the DPA section of Bill C-74 could elicit pushback at the committee stage, where parliamentarians study and amend prospective legislation.
Mr. Boutziouvis, the SNC-Lavalin vice-president, met with Renze Nauta, a policy director in the office of Opposition Leader Andrew Scheer, on Sparks Street in Ottawa on April 16, 2018. “[The company] wanted to talk about DPAs and find out what our [Conservative] members would do on the finance committee,” Mr. Nauta told The Globe. “They wanted secure passage, I suppose, through the House of Commons.” The following month, with the DPA portion of the bill now before the House finance committee, the Chamber of Commerce and Industry of Quebec and some of its members, including SNC-Lavalin, met with NDP Leader Jagmeet Singh as well as NDP MP Pierre-Luc Dusseault, who is on the committee.
Still, after all that lobbying, the bill drafted by the Justice Department, at the behest of cabinet, would not offer an easy ride for the company. It was styled after Britain’s DPA law, in which the overarching principle is that, in many cases, prosecution will continue to be appropriate. In both countries, a judge must rule on whether a DPA is in the “public interest.”
The argument for public interest might have given SNC-Lavalin an advantage, as the company is a major employer and contributor to the economy. Mr. Butts has said that Mr. Trudeau directed government officials on this file to keep the prospect of job losses top of mind.
But while prosecutors have enormous discretion on what constitutes the public interest, they are expressly forbidden from considering the national economic interest in that decision-making process.
The Liberals’ inclusion of the clause would subsequently be perceived as puzzling. “Why did the government include this exception requiring the prosecutor not to consider the national economic interest if, as you say, your intention as a government is to protect the economy and jobs at SNC-Lavalin?” Senator Claude Carignan, whose affiliation is Conservative, asked Senator Peter Harder, the Government Representative in the Senate, after the DPA controversy emerged earlier this year.
Mr. Harder did not reply directly but said the government had sought to protect against the unintended consequences of prosecution on “communities, pensioners and workers.” Protecting the innocent is, in fact, part of the raison d’être of Canada’s DPA law. But as Britain’s experience with DPAs shows, when senior corporate managers are alleged to be involved in repeated instances of wrongdoing, the key to securing a DPA is how early and fully the company co-operated with authorities, not whether innocent employees might lose jobs – as SNC-Lavalin would find when it sought a DPA.
By contrast, in the U.S., there is no prohibition against taking into account the national economic interest. DPAs there became widespread after auditing giant Arthur Andersen collapsed in the face of a 2002 prosecution, costing 28,000 jobs. Critics have derided the approach as “too big to jail.”
To Mr. Wernick, weighing the effect on jobs and the economy was fair play. As he testified in March before the justice committee that probed allegations of political interference in the SNC-Lavalin case, the national economic interest section of Bill C-74 meant only that Canada could not favour one foreign country’s economic interest over another’s. It was an explanation that does not jibe at all with the description of the section’s purpose offered by Mr. Pieth, the Swiss law professor who chaired the OECD Working Group on Bribery.
When the legislation that set off this chain of events was first reviewed, back on that sleepy May night in 2018, the finance committee did not discuss the implications of the national-economic-interest clause. The committee would discuss DPAs twice more – for 15 minutes each time – as part of its clause-by-clause review of the budget bill. Not a single outside expert testified on the subject before the House committee.
Even some Liberal members were skeptical of the proposed legal tool. MP Greg Fergus, who acknowledged he had not read the entire provision, expressed concern at committee that DPAs would let corporate offenders off with a “little slap on the wrist.” Committee chair Wayne Easter questioned whether the Criminal Code amendment should have been inserted, as it was, into a budget bill. Opposition MPs had misgivings, too. Conservative MP Dan Albas argued that the DPA matter should have been brought before the justice committee for in-depth study. Conservative Pierre Poilievre wanted to know the impetus for the change: “Who asked for this?”
Within minutes, the gavel was struck and the meeting was over.
But SNC-Lavalin did not rest. Over the course of the next couple of weeks, the company took its lobbying effort into the Red Chamber, speaking with individual senators on the issue of “justice and law enforcement.” Among them was Mr. Harder, who is responsible for shepherding legislation through the Senate.
The Senate also studied the budget bill itself, with the DPA portion going before the legal affairs committee. The senators spent more time on the law than did their House counterparts, hearing from multiple witnesses who spoke in support of the legislation: Joanne Crampton, then an assistant RCMP commissioner; Mr. Dillon of the Business Council; Mark Morrison of Transparency International Canada; and Norma Kozhaya of the Quebec Employers Council, which advocated for DPAs as early as October of 2016 through a federal prebudget submission. Professor Alexander Dyck of the University of Toronto’s Rotman School of Management told senators that DPAs would likely lead to increased detection of wrongdoing and decreased corporate criminality. He expressed concern, however, that the language in the legislation left room for potential abuse by powerful companies paying unjustifiably small penalties.
The committee also heard from Liberal MP Marco Mendicino, at the time Ms. Wilson-Raybould’s parliamentary secretary, and from Public Services and Procurement Minister Carla Qualtrough, whose department manages the Integrity Regime. Ms. Qualtrough spoke to the DPA provision even though she is not the minister responsible for the Criminal Code. No one at the Senate committee raised the “national economic interest” clause.
The senators had invited Ms. Wilson-Raybould to appear on May 24, but were told she was not available. Much was made of her absence. Senator Denise Batters, whose affiliation is Conservative, questioned why the minister appeared on a television show, but was not testifying before the committee. (Ms. Wilson-Raybould spoke about divorce laws on CTV’s Your Morning that day). “Typically, the procedure is, no minister, no bill,” the senator told her colleagues.
The Senate’s study of the DPA provision was, apparently, rushed. Ms. Batters would later state in Question Period that she and her colleagues were “under the gun to get this through committee” and had time for only two meetings because the Trudeau government insisted that they report back to the Senate by the end of May. In its May 31 written report, the senators raised several concerns about the DPA legislation. Among them: its inclusion in such a large budget bill; uncertainty around the rights of victims to learn the outcome of a DPA; and Ms. Wilson-Raybould’s absence before the committee.
Three weeks later, on June 21, the budget bill received royal assent. It would come into force after 90 days.
DEAL OR NO DEAL
The news came by phone on Sept. 4. Counsel for Kathleen Roussel, the director of public prosecutions, gave SNC-Lavalin a “preliminary indication” that an invitation to negotiate a DPA would not be forthcoming, court documents filed by SNC-Lavalin say. The filing mentions three factors – articulated to the company the following day – that led to this position: the “nature and gravity of the acts alleged"; the “degree of involvement of senior officers of the organization”; and "the fact that the company did not self-report” the alleged wrongdoing. Ms. Roussel, it appears, did not believe that SNC-Lavalin met the requirements of the law the company had fought so hard to advance.
Ms. Wilson-Raybould, who was in Australia for a meeting of the Five Eyes intelligence-sharing countries, was uniquely privy to Ms. Roussel’s rationale, which the prosecutions director set out in a four-page memo. Obtained through access-to-information laws, it is redacted save for two sentences: “[The Director of Public Prosecutions] is of the view that an invitation to negotiate will not be made in this case. No announcement will be made by the [Public Prosecution Service of Canada].”
Within just a couple of days, according to Ms. Wilson-Raybould’s testimony on Feb. 27 before the House justice committee, various government officials ramped up a campaign aimed at convincing her to override Ms. Roussel. Ms. Wilson-Raybould would have had to put that directive in writing and make it public.
SNC-Lavalin, meanwhile, secured access to the highest levels of the Canadian government. On Sept. 18 alone, company executives had conversations on “justice and law enforcement” with Finance Department bureaucrats; Mr. Morneau and his then-chief of staff, Ben Chin, who is now a senior PMO adviser; and even the top level of the country’s non-political civil service, Mr. Wernick, plus Catrina Tapley, the deputy secretary to the cabinet.
Ahead of his meeting with SNC-Lavalin executives, Mr. Wernick was sent a memo from Shawn Tupper, who was then assistant secretary to the cabinet in the economic and regional-development policy secretariat of the Privy Council Office. The note, marked “Secret” and obtained under access-to-information laws, said SNC-Lavalin had strengthened its ethics and compliance structures, and had “high profile contracts” with Ottawa.
Mr. Wernick did not appear to be shy about showing support for the company’s position. “People want to make sure we test the limits of this,” he told SNC-Lavalin executives at the Sept. 18 meeting, according to Ms. Tapley’s contemporaneous notes, submitted to the justice committee. The time was right, he said, to deploy a DPA. “If not [now], then when would you?” He even suggested the beginnings of a legal strategy, telling the company to “go to Kathleen [Roussel] on public interest argument.”
Professor Ian Lee, of Carleton University’s Sprott School of Business in Ottawa, called the conversation extraordinary. “In Ottawa, [lobbying] is as common as snow in January,” he said. “But [stakeholders are] mostly lobbying about policy frameworks or budgets to be delivered, or regulatory changes. I just cannot remember another company lobbying to avoid a criminal prosecution.”
Even so, Ms. Roussel would not budge. She would not even meet with former Supreme Court justice Frank Iacobucci, a legal representative for SNC-Lavalin. Mr. Bruce, then the CEO, was at his office when he received word on Oct. 9 that her position stood. “I was shocked,” he told The Globe.
The next day, SNC-Lavalin released a statement saying the director of the Public Prosecution Service had advised the company it was not being invited to negotiate a DPA. SNC-Lavalin said it strongly disagreed with the director’s “current position” and remained committed to negotiating an agreement. (The company is now facing a proposed class-action lawsuit seeking damages for investors who acquired shares between Sept. 4, when Ms. Roussel gave her “preliminary indication” of a thumbs-down on a DPA, and Oct. 10, when SNC-Lavalin publicly disclosed the news. The company has said it complied with its disclosure obligations to shareholders.)
On Oct. 15, at around 11 a.m., Mr. Wernick received a telephone call from Mr. Lynch expressing the company’s frustration, according to Mr. Wernick’s testimony before the justice committee. “Isn’t there anything that can be done?” asked the SNC-Lavalin chair. “No,” Mr. Wernick replied. SNC-Lavalin would have to go through the attorney-general and the director of public prosecutions, via the company’s counsel, he said.
Ms. Pizzuto, the SNC-Lavalin communications director, said in her e-mail to The Globe that the purpose of Mr. Lynch’s call was to “inform” Mr. Wernick of the statement the company had released five days earlier. She also said Mr. Lynch did not violate the Lobbying Act. Democracy Watch, an ethics watchdog, filed complaints with the Ethics Commissioner and Lobbying Commissioner regarding the call, which was not registered, alleging that Mr. Lynch improperly used inside information from his time in government and should have been registered as a consultant lobbyist. Through his lawyer, Frank Addario, Mr. Wernick declined to comment, citing continuing investigations.
In a letter dated the same day as the call, the company took its case straight to the top. Mr. Bruce wrote to the Prime Minister requesting a meeting to discuss DPAs and the future of SNC-Lavalin. About six weeks later, on Dec. 6, Mr. Trudeau declined the meeting and sent a letter to Ms. Wilson-Raybould advising that Mr. Bruce had “raised concerns regarding the remediation agreement provisions of the Criminal Code and the future of SNC-Lavalin.” He attached Mr. Bruce’s correspondence.
The company also went, again, to the top of the civil service. On Dec. 13, Mr. Boutziouvis sent Mr. Wernick an e-mail that said, simply, “FYI...” and contained a copy of a Bloomberg news story headlined SNC-Lavalin Vulnerable to Hostile Takeover, Quebec Premier Says. The Globe obtained the e-mail through an access-to-information request.
The Liberal government knew long before the remediation law took effect that SNC-Lavalin would be requesting a DPA. Yet, no one apparently gave "any really deep thought as to how they were going to handle the inevitable serpent in the garden, namely the lobbyists,” said Thomas Heintzman, a former president of the Canadian Bar Association.
There was no indication during the justice committee’s probe that boundaries were discussed for communications between the government and attorney-general. Such communications would be fraught: A prosecution was at stake, and prosecutors are independent in law.
The government had options. Britain set an example of how it could be done. Fifteen years ago, under pressure from the Saudis, then-prime minister Tony Blair and his cabinet wanted to stop his country’s investigation of corporate bribery in Saudi Arabia. Rather than simply blitz the attorney-general behind the scenes, the British government asked, in writing, for permission to speak to him. The attorney-general granted that permission but warned that he would not discuss the national economic interest, because he had just promised the OECD he would not. Ultimately, the attorney-general killed the investigation, citing national security reasons, not national economic ones.
In the SNC-Lavalin case, politicians and bureaucrats would repeatedly cite the “Shawcross principle” from Britain that allows the government and attorney-general to discuss prosecutions. But the Liberal government began a Shawcross process without first seeking Ms. Wilson-Raybould’s permission and without setting the parameters.
It has been 10 months since Canada’s DPA legislation became law. And yet, the prosecution service’s Deskbook, which is published online and guides the work of federal prosecutors, is still silent on the subject. By comparison, British prosecutors published 22 pages of guidelines on how DPAs would work 10 days before their DPA law took effect.
The uncertainty may have worked against SNC-Lavalin. The company was asking to be the benchmark case, whose outcome would set the parameters of DPA agreements for years to come. A DPA in these circumstances would have been a huge leap for prosecutors because it would have set such a broad precedent for the nascent law.
So, what next?
Canada’s prosecution service is beginning, tentatively, to find its voice on DPAs. In May, Stéphane Hould, the senior counsel responsible for DPAs, encouraged firms to “come in early” with admissions of wrongdoing. Speaking at a Transparency International Canada conference in Toronto, Mr. Hould stressed the importance of voluntary disclosure. It is a risk, though: The prosecution could still decide to pursue charges, he said. “[DPAs] will not be … a get-out-of-jail-free card,” Mr. Hould promised. “You’ll have to throw your officials who committed the crimes under the bus.”
Ms. Wilson-Raybould was moved out of Justice in January and resigned from cabinet the next month. She was ejected from the Liberal caucus in April and now sits as an independent MP. The new Justice Minister and Attorney-General, David Lametti, still has the power to override Ms. Roussel’s decision. Ms. Roussel could also change her mind if the case runs into problems. For now, though, SNC-Lavalin is headed to a judge-only trial.
The possible consequences of a guilty finding in the Libya case were laid out in a Nov. 9, 2018, memo to Mr. Wernick, labelled “Protected” and prepared by Nathalie Drouin, the deputy minister of justice and deputy attorney-general. The note says there is no maximum fine; the penalty is “unlimited” and at the court’s discretion. The most a Canadian company has paid as a result of a corruption-related conviction was $10.4-million, by Calgary’s Griffiths Energy in 2013. SNC-Lavalin could also be put on probation, as Niko Resources was, requiring specific disclosure and internal compliance measures.
The memo notes that the key difference between a conviction, on the one hand, and any penalties agreed to under a DPA, on the other, is that a conviction would likely lead to a debarment period – in Canada, and possibly elsewhere, including by the World Bank, which provides financial support to most major infrastructure projects in the developing world.
Without a DPA, SNC-Lavalin and its investors have already faced consequences. Mr. Bruce said in May that the shadow of continuing legal trouble has cost the company at least $5-billion in lost work. (Mr. Bruce was replaced internally last month on an interim basis by executive Ian Edwards.) As for its market value, SNC-Lavalin shares closed at $51.85 on the Toronto Stock Exchange on Oct. 9, 2018. The next day, the company disclosed that a DPA was not forthcoming and its stock price dropped to $44.86. Shares had tumbled to $21.24 by Wednesday’s close.
The next court date on the Libya file is slated for Sept. 20. SNC-Lavalin is pleading not guilty.
With reports from Robert Fife, Steven Chase and Daniel Leblanc in Ottawa, and Tom Cardoso in Toronto
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