Hewlett-Packard Co., one of the leading technology suppliers to the Canadian government, is facing a possible 10-year ban on selling products and services to Ottawa in the wake of a high-profile U.S. bribery conviction.
The recent criminal conviction, involving bribes paid to Russian government officials, marks the first major test of strict new Canadian integrity rules quietly introduced in March by Public Works and Government Services.
Under the new regime, companies face an automatic ban on future government contracts if they or any of their affiliates are convicted of a list of various crimes, such as bribery, even if those crimes occurred outside Canada.
"The department is reviewing the recent U.S. court decision regarding HP Russia and is examining the impact of this court decision on our current and future business with HP Canada," confirmed Alyson Queen, communications director for Public Works Minister Diane Finley.
The department will conduct its review "as quickly as possible," Ms. Queen insisted, adding that the government is "committed to doing business with suppliers who respect the law and act with integrity, including affiliates of suppliers."
The case could have implications far beyond HP. Major federal government contractors are also watching closely to see how Public Works deals with HP, knowing that one day they could find themselves in similar circumstances, according to various legal and business sources.
"If a company the size of HP ends up being unable to do business with the federal government, then a lot of companies are going to be sitting up and taking much more notice," said Peter Dent, a forensic accountant at Deloitte and Touche and the chairman and president of Transparency International Canada.
Criminal charges are pending against a number of former employees of Montreal-based engineering firm SNC Lavalin Group Inc., as part of a global bribery investigation. But the company itself has not been charged or convicted. Under the federal rules, the company would have to be convicted of a criminal charge for the contracting ban to take effect. In July, Public Works selected a Lavalin-led consortium as one of three groups to bid on the multibillion-dollar replacement of Montreal's Champlain Bridge.
Unlike the United States and the European Union, Canada's tough stance doesn't offer companies who run afoul of the rules a way to come clean and win reinstatement, such as dismissing the employees who committed the offences.
"I don't think it's an oversight," said Paul Lalonde, a partner at law firm Dentons Canada LLC in Toronto and a government contracting and anti-corruption specialist. "They mean what they say."
Ottawa does reserve the right to lift the 10-year ban if there are no other available suppliers or if there is a compelling public interest to award a contract. But Public Works would have a "pretty tough row to hoe" to use that exemption in the case of a company convicted of criminal charges, Mr. Lalonde said.
A spokeswoman for Hewlett-Packard in Canada said the company is aware of Ottawa's integrity rules, but declined to say what impact the U.S. conviction might have on its business.
"We are working to fully understand them," said Sandra Benjamin, an HP spokeswoman. "In the meantime, we will continue to provide best-in-class products, services and software to all of our customers, including the Canadian government."
HP declined to say how much it sells to the federal government. But public records show the company sold at least $37-million worth of technology services in 2013 and has filled more than 1,000 recent contracts for laptops, servers and other equipment. HP is providing equipment and services for the $1.1-billion Ottawa headquarters of the Communications Security Establishment, the government's electronic eavesdropping agency.
HP's Russian subsidiary pleaded guilty Sept. 11 to what U.S. officials called a "brazen violation" of the U.S. Foreign Corrupt Practices Act for using a company slush fund to bribe Russian government officials to win a large government contract. The company was fined $58.7-million (U.S.). "Even more troubling was that the government contract up for sale was with Russia's top prosecutor's office," Deputy Assistant Attorney General Marshall Miller said in a statement.