Tough new federal anti-corruption rules risk disqualifying several key government suppliers, jeopardizing government plans to buy items ranging from ships and fighter jets to computer systems.
At least five foreign multinationals – BAE Systems PLC, Siemens AG, Alcatel-Lucent SA, Tyco International Inc. and Hewlett-Packard Inc. – have been convicted of crimes overseas and consequently face possible 10-year bans from doing business with Ottawa.
A number of other suppliers are now targets of ongoing foreign corruption probes that have yet to be concluded, including Montreal-based SNC Lavalin Group Inc.
Business groups complain the government's new "integrity framework," introduced in March, is unfairly harsh, denies due process and could have severe economic consequences, including lost jobs and investment.
"It doesn't make sense to punish Canadian operations for acts that occurred thousands of miles away in which no Canadian played any part," said Ross Laver, vice-president of the Canadian Council of Chief Executives, which has raised its concerns with federal officials. "Companies shouldn't be allowed to get away with corruption, but the way you deal with it has to make sense."
Under the new regime, companies looking to sell products or services to Ottawa must certify that neither they nor their affiliates have been charged with a long list of criminal offences anywhere in the world, including bribery and fraud, in the past 10 years. Unlike the U.S. and the European Union, Canada doesn't offer disbarred companies a way to get back on-side, such as dismissing employees involved or introducing new anti-corruption policies.
"Corporations that do business with the federal government would be well-served to remember the startling breadth of the Integrity Framework," McCarthy Tétrault partners Robert Glasgow and Brenda Swick said this week in a posting on the firm's website.
HP – the only supplier whose status the federal government has so far confirmed is under review – would not be able to bid on federal government contracts for the next 10 years and existing contracts would be jeopardized if it's disqualified, the lawyers said. "Debarred suppliers stand to lose millions in existing and future opportunities," according to the posting.
Spokeswoman Sandra Benjamin said HP is "aware of the new guidelines and we are working to fully understand them." In the meantime, she said HP continues to sell products and services to the government.
Officials of Public Works and Government Services Canada said Wednesday they need more time to determine the status of the other companies with foreign convictions.
"We are looking into it, but we need to do our due diligence," PWGSC spokeswoman Annie Trépanier said. "We need to respond in an informed manner."
HP, a leading technology supplier to the government, is just one of several suppliers that have been convicted of crimes in U.S. courts.
BAE Systems pleaded guilty to criminal charges in 2010 that it conspired to defraud the U.S. government following an overseas corruption probe. The company is a partner in both the F-35 fighter-jet program and weapons maker MBDA Missile Systems, which is bidding on the navy's ship replacement program.
BAE has not "encountered any regulatory restrictions on our ability" to sell to customers anywhere in the world, including in Canada, spokesman Peter Edwards said. He pointed out that the conviction was not under the U.S. Foreign Corrupt Practices Act.
Siemens, Alcatel-Lucent and Tyco likewise have had corruption-related convictions in the U.S., mostly under the U.S. Foreign Corrupt Practices Act. All of them do a significant amount of business with the Canadian government.
Siemens of Germany pleaded guilty in 2008 to violations of the U.S. FCPA for acts committed in Bangladesh and several Latin American countries.
"We have responded to the [Canadian] government's request for assurances but are currently waiting for clarification," Siemens spokeswoman Ann Adair said.
In 2010, three Alcatel-Lucent subsidiaries pleaded guilty to civil and criminal corruption charges in the U.S. related to its overseas sales practices.
"Alcatel-Lucent is looking into the new Canada Integrity ruling to understand its implications for the company," spokeswoman Denise Panyik-Dale said.
In 2012, a Tyco subsidiary pleaded guilty to a criminal charge for conspiring to violate the FCPA.
Tyco spokesman Stephen Wasdick said the conviction was related to a subsidiary that was "spun off" two years ago.
SNC Lavalin, the subject of various corruption probes, said in a statement that while it has not been found guilty of any offences, "we are of course following this situation in Canada, and elsewhere, with great interest."
Ottawa can lift restrictions under a limited set of exemptions, such as if there are no other available suppliers or there is a compelling national interest to award a contract to a particular bidder.