Ontario Superior Court Provides Key Guidance About the Corruption of Foreign Public Officials Act

The Ontario Superior Court of Justice (Court) recently released its decision in R. v. Arapakota. The decision provides comprehensive guidance about the foreign bribery prohibitions in the Corruption of Foreign Public Officials Act (CFPOA). It also highlights compliance risks associated with gifts, entertainment and travel involving foreign government officials.

BACKGROUND

The accused (Accused) was the CEO and chief technology officer of a Canadian company (Company) specializing in software for e-government solutions. Between December 2013 and August 2015, the Company indirectly worked on a project for the Government of Botswana (Government) as a subcontractor to another Canadian e-services company. In 2015, the Accused sought to obtain business for the Company directly with the Government to complete the project. In November 2015, the Government announced that it intended to enter into a sole sourced contract with the Company to complete the project, with a value of US$30-million over three years. In the months following that announcement, the Accused requested and received three letters (Letters) from a senior Government official (Official) about the Government’s intention to award the contract to the Company.

In November 2015, the Accused also organized, used his credit cards to pay for, and later attended a trip to Florida (U.S. Trip) with the Official and both of their families in late December 2015, which included flights, hotels, meals, attractions, shopping and other expenses totalling approximately C$40,000, a significant portion of which was for the Official and his family. The Official partially reimbursed the Accused by providing US$15,000 in cash at the end of the U.S. Trip.

Ultimately, the project fell apart, and no contract was awarded to the Company. The Accused resigned as CEO. After his resignation, the Company became aware of the U.S. Trip and reported the matter to the RCMP. After obtaining search warrants and reviewing numerous documents, the RCMP charged the Accused with bribing a foreign official.

DECISION

The Court ultimately acquitted the Accused because the Crown did not prove beyond a reasonable doubt that: (i) the U.S. Trip was in consideration for the Letters, and (ii) that the Letters were an advantage to the Company’s business. In doing so, the Court engaged in a detailed interpretation and analysis of several essential components of the CFPOA. Important takeaways from this decision include:

1. The Interpretation of a “Benefit, Reward, or Advantage” Under the CFPOA. The judge confirmed that the CFPOA is meant to capture all benefits that are not trivial, meaning that they are either a “material or tangible gain” or a “material economic advantage.” This applies regardless of their form. Guidance from other cases reflects that sports tickets, an extravagant meal, a $500 gift card, or payment for travel are examples of “material or tangible gains.” Conversely, items such as an infrequent moderately priced meal, coffee or logoed and low-value promotional items (such as a mug or golf shirt) are unlikely to constitute a benefit for government corruption offences. Here, the judge found that the Accused’s planning and advancing payment for flights, hotels and other expenses for the Official and his family were non-trivial, and in the Court’s view, “cannot be characterized as ordinary ‘hospitality’.”

2. Partial Reimbursement of Travel Costs. The judge ruled that the partial reimbursement of gifts and hospitality provided to an official does not change the fact that gifts and hospitality were provided to the official. This is so even where, for instance, an official is unable to pay up front for travel or shopping excursions due to credit card or currency exchange issues. The judge also found that the Official received a tangible benefit by having the Accused handle all the logistics and planning for the U.S. Trip, including researching flights and available hotels. As such, the judge held that arranging and paying for the flights, hotels, food, attractions and possibly some shopping for the Official and his family, even if the Official later reimbursed the Accused for a portion of the cost, conferred a material or tangible benefit to a foreign public official.

3. The Interpretation of “Obtain or Retain an Advantage in the Course of Business.” This is the first case to set a materiality standard for a business advantage under the CFPOA. The judge held that contravening the CFPOA required that the benefit be given in order for the business to receive a “material economic advantage” (regardless of whether a business advantage was actually realized). In this case, the judge determined that the Letters requested by the Accused did not amount to a material economic advantage, as they were letters either routinely provided by the Government to successful bidders or that resulted in no material economic advantages to the Company. The judge further commented that it is not enough that the “advantage” in the course of business is “generally helpful” to a business, in contrast to seeking to gain an advantage by securing a signed contract with finalized terms and values.

4. Is a Quid Pro Quo Arrangement Always Required? The judge determined that the “as consideration for” language in section 3(1)(a) of the CFPOA means the benefit must be a “something for something” or quid pro quo for the actions to be undertaken by the foreign official. In contrast, the judge said that section 3(1)(b) of the CFPOA is potentially broader in nature and does not require a quid pro quo, instead requiring only that the accused induces or attempts to induce a foreign official to use their position to influence the acts of a foreign state regardless of whether the foreign official ultimately took any action. This is potentially important as it may open the door for broader liability even in the absence of a quid pro quo type arrangement. However, because the Accused was specifically charged under section 3(1)(a) of the CFPOA, the Court did not analyze this broader theory of liability under section 3(1)(b), except to note that the conduct in the case might be captured by section 3(1)(b)’s broader scope. 

KEY TAKEAWAYS

Businesses can learn many lessons from this decision — including several important compliance lessons — even though the Accused was ultimately not convicted.

First, while bribery is always illegal, even for well-intentioned arrangements, the timing between gifts and hospitality given to a government official and a sensitive business decision made by the government affecting the business is key context. It is important for businesses to exercise considerable caution regarding the provision of benefits to government officials with whom they interact (regardless of any quid pro quo arrangement), especially during a period when officials are making decisions related to the business. Caution is particularly warranted given the potential lower standard for liability in section 3(1)(b) of the CFPOA that was raised in this case.

Second, an advantage or benefit given to a government official can take various forms, including ancillary advantages or benefits, such as the planning and coordination of logistics for a government official or their family and pre-paying expenses.

Third, the incomplete reimbursement of funds used to provide benefits to a government official does not erase the fact that benefits or advantages were provided.  

Finally, this case highlights an important distinction between funding bona fide business travel for government officials and providing improper non-work trips or other benefits. Notwithstanding this case, circumstances continue to exist where companies can provide travel and hospitality to government officials for legitimate business purposes, provided appropriate compliance steps and controls are implemented.

For further information, please contact:

Michael Dixon                 +1-403-260-9786
Mark Morrison, K.C.       +1-403-260-9726
Iris Fischer                       +1-416-863-2408
Liam Kelley                      +1-416-863-3272
John Fast                          +1-416-863-4270
Robel Sahlu                     +1-403-260-9604

or any other member of our Business Crimes, Investigations & Compliance group.