First Jail Term Sentence under Canada’s Foreign Corruption Legislation Sends Clear Deterrence Warning to Corporate Officers

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Introduction

Following the first trial under the Corruption of Foreign Public Officials Act (CFPOA), Nazir Karigar, an agent for Ottawa-based technology company, Cryptometrics Canada, was convicted for conspiring to bribe a foreign public official.1 On May 23, 2014, Mr. Karigar was sentenced to three years in jail at a federal penitentiary, notwithstanding his advanced age of 67 years and failing health.2

Background

The foreign bribery scheme related to attempts by Mr. Karigar to secure a contract for Cryptometrics Canada from Air India for the supply of biometric facial recognition security technology. Mr. Karigar provided Cryptometrics with a spreadsheet listing bribes to be paid to certain Air India officials. In June 2006, Cryptometrics’ U.S. parent corporation transferred US$200,000 to Mr. Karigar’s account, which Mr. Karigar claimed would be used to ensure that only Cryptometrics’ bids qualified under a public tender. Under a later agreement, a further US$250,000 would be transferred to obtain the Indian Minister of Civil Aviation’s approval of the Cryptometrics’ bid.

Ultimately, the Air India contract was not awarded to Cryptometrics, and there was no evidence that Mr. Karigar paid any bribe or the whereabouts of the funds transferred to him.

Sentencing

Mr. Karigar was sentenced under the CFPOA prior to the enactment of recent amendments. The maximum term of imprisonment has since been increased to 14 years, but at the relevant time it was five years.3

The three prior corporate convictions under the CFPOA were achieved by the entering of guilty pleas.4 In those cases, the corporations were subject to monetary fines of up to $10.35 million.  

In the sentencing decision of Mr. Karigar, Hackland R.S.J.’s key findings were:

  • The overarching principle for sentencing under CFPOA is that the consequences for bribing foreign public officials should be similar to that for bribing Canadian public officials.
  • The primary objectives for sentencing are denunciation and deterrence; a substantial penalty is appropriate even where a guilty plea was entered and the accused cooperated with authorities.
  • American and British sentencing guidelines and commentary on the enforcement of the CFPOA are not directly relevant to sentencing.
  • The decision noted a number of aggravating factors. First, the bribery conspiracy was sophisticated, carefully planned, and would have involved the payment of millions of dollars in bribes. Second, Mr. Karigar orchestrated a fake bid to create the illusion of competition and used confidential insider information to prepare the bid. Third, Mr. Karigar behaved with “a complete sense of entitlement.” Finally, Mr. Karigar personally conceived and orchestrated the scheme.
  • Several mitigating factors were also noted. The bribery scheme was unsuccessful. In addition, Mr. Karigar helped to shorten the trial by cooperating in the prosecution. Indeed, it was his exposure of the bribery scheme after a falling out with his co-conspirators, and his inability to secure an immunity agreement, that led to his prosecution. Mr. Karigar’s prior clean record, his 67 years of age and his failing health were also considered mitigating factors.

Future Lessons

The conviction of Mr. Karigar demonstrates a number of important lessons for Canadian companies that do business overseas:

  • Sentences for bribery of foreign public officials will be similar to those for bribery of Canadian public officials.
  • Offenders will face substantial penalties because of the seriousness of offences under the CFPOA. Denunciation and deterrence are the primary considerations for sentencing.
  • Parties considering a voluntary disclosure with the expectation of immunity or other plea bargain, or if being investigated, should seek experienced legal counsel before approaching enforcement authorities.
  • Individuals sentenced under the CFPOA are likely to face incarceration in a federal penitentiary.

Conclusion

As the first sentencing of an individual under the CFPOA and the first sentence following a trial, Mr. Karigar’s jail term sets a clear precedent for future convictions. The Court clarified that offences under the CFPOA will carry heavy sentences and cited several domestic criminal law cases where incarceration sentences have been imposed for serious fraud.

The decision highlights the risks Canadian executives and companies face when conducting business in jurisdictions where corruption is prevalent. This decision also confirms that Canadian businesses operating abroad will not be shielded from being found guilty of an offence under the CFPOA, by attempting to excuse their conduct based on purported claims of business imperatives and conditions for succeeding in foreign markets.


1 See Osler Update First Trial under the Canadian Corruption of Foreign Public Officials Act Leads to Conviction dated August 21, 2013.

 

Topics:  Board of Directors, Canada, CFPOA, Chief Compliance Officers, Compliance, Corruption, Foreign Official, Officers

Published In: General Business Updates, Criminal Law Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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