SNC–Lavalin

The following commentary appeared in The Hill Times on June 3, 2019:

Lessons from SNC–Lavalin: Prosecute Business Executives, Not Companies

Corruption allegations against two of Canada’s largest companies, SNC–Lavalin and now Bombardier, have important implications for the prosecution of corporate crime. We should put more emphasis on prosecuting business executives rather than whole companies and make the attorney general an independent office, separate from the minister of justice.

In pushing former attorney general Jody Wilson-Raybould to consider a deferred prosecution agreement for SNC-Lavalin, the Prime Minister’s Office argued that such a settlement would spare employees who had nothing to do with the alleged corruption. Whether or not this stated concern for jobs was genuine, it is fair to ask why the government would prosecute a whole company, rather than just the individuals accused of criminal activity.

When corporate officers commit crimes to advance the interests of their corporation, prosecutors can choose to go after the corporation as a “legal person,” the actual people responsible, or both. Imagine an opportunity to bribe foreign officials to win a contract that would yield a billion dollars of corporate profit. If the chance of getting caught were one-in-10, then a penalty of $10-billion against the corporation would deter unscrupulous executives from paying the bribe.

The credible threat of a sufficiently large penalty should motivate companies to establish their own compliance mechanisms and to discipline offenders internally. In theory, a strategy of prosecuting the whole company can efficiently prevent and address corporate crime without police or prosecutors having to get inside the organization and build cases against individual offenders.

This theory breaks down for very large corporations. Deterring bribes for huge international contracts would require multibillion-dollar penalties, which could do significant collateral damage to the wider economy.

The existing policy of banning convicted companies from federal government contracts for a decade may be a laudable attempt to deter misconduct. However, the Canadian government has already signalled an understandable reluctance to apply this huge penalty against SNC-Lavalin and would probably also balk at applying it against Bombardier.

If Canada hobbles our largest construction and aerospace companies, it is doubtful whether other Canadian companies with the capacity to undertake major international projects would spring up in their place. SNC-Lavalin and Bombardier embody national economic assets that would not be easy to replace.

Because SNC-Lavalin and Bombardier executives know their companies are “too big to fail,” the threat of sufficiently large penalties against these companies is not credible. This problem could also make a deferred prosecution agreement (DPA) difficult to enforce.

To deter corruption in very large corporations, a better approach is prosecuting individual executives. A contract worth billions to the company might yield millions in additional executive compensation. Multimillion-dollar fines for executives convicted of bribery would be sufficient to deter the crime without significant collateral damage to the wider economy. Unscrupulous executives could also be deterred by the prospect of incarceration.

If we wish to stop corporate corruption without undermining leading Canadian companies, we should focus on prosecuting the people within those enterprises who commit crimes. DPAs with corporations could support this approach by requiring independent oversight of their internal activities.

The dispute over whether to offer SNC–Lavalin a DPA also highlights the need for a truly independent Attorney General. Wilson-Raybould reasonably thought it would be improper for a cabinet minister to overrule the Director of Public Prosecutions’ decision against a DPA. The Prime Minister’s office reasonably thought such an important decision should not be made by a single official without review.

To avoid a similar debacle with Bombardier or another major company seeking a DPA in future, we could separate the office of attorney general from the minister of justice. A truly independent attorney general could review the director of public prosecution’s decisions without creating the perception of political interference.

The expulsion of Wilson-Raybould and other MPs from party caucuses highlights another role for such an office. Both Prime Minister Justin Trudeau and NDP Leader Jagmeet Singh ignored the Parliament of Canada Act in unilaterally expelling MPs.

This law’s expulsion provisions are explicitly “not subject to judicial review” and the House Speaker ruled he has no role in interpreting or enforcing legislation. A nonpartisan attorney general may be needed to uphold the Parliament of Canada Act, especially since neither the courts nor the Speaker will do so.

Opposition parties have used the SNC-Lavalin scandal to attack a government struggling to suppress the controversy and move past it. Few in the political arena have tried to learn lessons from this episode to strengthen governance going forward. Particularly given recent allegations against Bombardier, we should strengthen the prosecution of business executives and the attorney general’s independence.

– CCF MP Erin Weir represents Regina-Lewvan, Sask.