Canada: Canada's First Foreign Bribery Trial Results In First Conviction Of An Individual

Introduction

On August 15, 2013, the Ontario Superior Court of Justice convicted Nazir Karigar of offering bribes contrary to section 3(1)(b) of the Corruption of Foreign Public Officials Act (CFPOA). This is the first trial decision of a charge under the CFPOA, and the first conviction against an individual. In the course of convicting Mr. Karigar, the Court affirmed a number of interesting and potentially important points that are discussed further below.

Facts

This case concerns an agreement to pay approximately US$450,000 in cash, as well as certain shares, to Air India officials and the Indian Minister of Civil Aviation to secure a contract for the provision of facial recognition software and related equipment. At the material time, Mr. Karigar was acting as a paid agent for Cryptometrics Canada (Cryptometrics), a Kanata-based technology company.

The evidence at trial disclosed that in 2005 Mr. Karigar contacted an executive of Cryptometrics. Mr. Karigar held out that he had contacts at Air India, and that he could assist Cryptometrics in obtaining work from Air India for its biometric facial recognition technology. An agreement was subsequently entered into whereby Mr. Karigar and others would help the company obtain work from Air India in exchange for 30% of the expected revenue stream from the work generated.

On February 24, 2006, Air India released an official Request for Proposal and shortly after, under the direction of Mr. Karigar, the company submitted a bid. A separate bid was also submitted by another company controlled by Mr. Karigar, to create the appearance of a competitive tendering process. In conjunction with submitting the bid, US$200,000 was transferred from Cryptometrics U.S.A. to Mr. Karigar, purportedly for the purpose of bribing Air India officials, though the Court noted there was no evidence that the money was actually paid to Indian officials. This first payment was to make sure only two companies would be deemed to have submitted technically qualified bids in response to the Request for Proposal.  

As the process continued, further funds in the amount of US$250,000 were transferred from the company to Mr. Karigar that were purportedly destined to be paid to the Indian Minister of Civil Aviation. The evidence indicated that the purpose of this payment was for the Minister to support Cryptometrics' bid and have the contract awarded, though ultimately the company was never successful in obtaining the award of the contract.

Based on these circumstances, the Court found that Mr. Karigar had agreed with others to offer bribes to foreign government officials contrary to s. 3(1)(b) of the CFPOA, and convicted him accordingly. Mr. Karigar has not yet been sentenced for this offence.

Key Points

In the course of its decision, the Court made a number of points that are worth noting:

• The Court accepted that officials from Air India constituted "foreign public officials" for the purposes of the CFPOA as Air India was a corporation owned and controlled by the Government of India. This case reinforces the potential breadth of persons who may be treated as government officials for the purposes of foreign corrupt practices legislation. In particular, the class of persons to whom bribery is prohibited under the CFPOA is not limited to government officials in the traditional sense, but also includes directors, officers and employees of state-owned/controlled corporations.
• The case notes that Mr. Karigar was initially not an employee of the company, but rather was engaged as an agent and was to be compensated on a success fee basis. In addition, the case disclosed the use of further sub-agents, which the evidence suggested were used potentially for the purposes of transferring funds to government officials. The use of agents, particularly in countries where there is a higher incidence of corruption, remains a higher-risk practice and is at the heart of the majority of enforcement actions to date in Canada and a number of proceedings under the U.S. Foreign Corrupt Practices Act.
• The Court held that the CFPOA offence includes a conspiracy offence such that an agreement to pay a bribe is enough to constitute an offence, even without proof that the bribe was actually offered or paid to a foreign official. The Court convicted Mr. Karigar on the basis that there was evidence of an agreement between him and his business associates to pay bribes to Indian officials, and that he believed that such bribes would be paid. The Court was clear that the agreement to pay a bribe does not need to be between the individual paying the bribe and the foreign official. Rather, the agreement to pay a bribe to a foreign official between business associates constituted an offence. Moreover, the Court explicitly rejected that any evidence of proof of the offer or receipt of a bribe, or the identity of the recipient of the bribe, was required for a conviction.
• While the CFPOA has recently been amended to extend the jurisdiction of Canada to prosecute offences involving Canadian corporations or citizens worldwide, this case was tried prior to those amendments coming into effect. Of note, the Court confirmed that the current amendments did not apply retroactively, and only applied to offences committed after June 19, 2013. The Court also confirmed that for offences occurring prior to June 19, 2013, a connection to the physical territory of Canada was required. The Court found that there was a connection in this case because at the material times Mr. Karigar was employed or acting as an agent of a Canadian company, the purpose of the scheme was to obtain an unfair advantage for a Canadian company, and had the contract been awarded, a significant amount of work would have been done by Cryptometrics' employees in Ottawa.
• It is important to note the role that co-operation with government authorities played in securing the conviction of Mr. Karigar. Notably, the key witness at trial for the Crown was a company executive who was also involved in the bribery scheme, although was granted immunity in this matter, in exchange for his testimony.
• This case demonstrates the potential benefit of co-operation with authorities, although it also demonstrates its potential pitfalls, as some of the evidence used to convict Mr. Karigar was his own. Mr. Karigar was actually his own "whistle blower"; he was the anonymous informant who tipped off the U.S. Department of Justice to allegations against Cryptometrics. Consistent with what we have seen in practice, the U.S. authorities then shared the information with Canadian enforcement authorities. Accordingly, while there can be benefits to self-disclosure and co-operation, it should be carefully considered and managed, and pursued only in appropriate circumstances and based on all available information.

Conclusion

Nazir Karigar's conviction demonstrates the continued dedication of Canadian enforcement authorities to pursue charges under the CFPOA. It also demonstrates the ability of Canadian authorities to secure convictions, not only by guilty plea, but through the more rigorous trial process. This case underscores the need for a robust compliance program, including conducting a risk assessment, implementing appropriate policies, training employees and agents, implementing a governance structure aimed at preventing anti-corruption violations, using protective contractual terms, engaging in due diligence, and engaging in ongoing monitoring to guard against these types of matters.

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