Law Times

PAGE 10 FOCUS September 19, 2011 • Law timeS Compliance a key job for in-house counsel Foreign corruption rules among big issues facing company lawyers BY JULIUS MELNITZER For Law Times umerous surveys have demonstrated that regulatory compliance engages in-house counsel more than any other area of the law. In fact, the 2011 In-House Coun- sel Barometer, a joint project of the Canadian Corporate Coun- sel Association and Davies Ward Phillips & Vineberg LLP, found compliance issues engaged 43 per cent of respondents. "We spend an inordinate amount of time navigating the regulatory environment as a precondition to doing our business," says Bob Aziz, chief legal counsel at Oxford Proper- ties Group Inc. Fortunately, there are com- mon themes running through many compliance requirements that make the challenges facing in-house counsel in this area somewhat less daunting. "Companies often treat anti- N bribery, export controls, eco- nomic sanction, anti-money laundering, and anti-terrorist fi - nancing laws separately in terms of their internal compliance programs," says John Boscariol of McCarthy Tétrault LLP. "In some organizations, you'll fi nd the general counsel dealing with money laundering and bribery and an export-import person, perhaps even a clerk, in charge of dealing with export controls." Th e basic tenets of compli- ance in these areas, however, are very much the same. "Ulti- mately, companies face two key questions," Boscariol notes. "With whom are they doing business and where and how are their products being used?" According to Boscariol, tak- ing a more holistic approach to regulatory compliance with these questions in mind would have a unifying impact on in- ternal compliance, training, audits, and monitoring. Th e upshot is a uniform approach producing economies of scale and cost savings. "A simple example would be with regard to background checks, which can be used for anti-laundering and anti-terror- ist purposes in the same way they could be used for export controls monitoring," Boscariol says. Indeed, a holistic approach engenders an understanding of an organization's policy frame- work, and that in turn provides a perspective on the multiplic- ity of complicated laws and regulations invoking principles around knowing who you're dealing with. "Th ere's a grid of overlap- ping domestic and foreign leg- islation, and if you don't see the grid properly, you're more likely to miss something," says Cliff Sosnow of Blake Cassels & Graydon LLP. Enforcement eff orts in the United States under the For- eign Corrupt Practices Act, the implementation of whis- tleblower bounty rules by the U.S. Securities and Exchange Commission, the enactment of Britain's Bribery Act, and the increase in Canadian regu- latory practices all highlight the importance of meeting the compliance challenge in these interrelated areas. In June, for example, Cal- gary-based Niko Resources Ltd. pleaded guilty to an of- fence under the federal Cor- ruption of Foreign Public Offi cials Act. In addition to a $9-million fi ne, the court imposed three years of oner- ous probation conditions on the company. Th e probation order re- quired Niko to make broad document disclosure to the RCMP and implement a detailed compliance, record- keeping, and monitoring pro- gram subject to review by an independent auditor. All of this was because Niko provided Bangladesh's junior energy minister with a $190,000 SUV for his per- sonal use and with trips to Cal- gary and New York. Th ere was no cash transfer, but at the time the minister was investigating Niko's liability to Bangladeshi villagers aff ected by explosions at a company operation. After the country's Daily Star reported the gifts, how- ever, Canada's head of mission, David Sproule, had a meeting with Qasim Sharif, who head- ed Niko's operations in Ban- gladesh. Th e agreed statement of facts that formed the basis of Niko's guilty plea indicates that Sharif initially dismissed what he called the "gift" as a "commonplace part of doing business in Bangladesh." According to Sproule, Sharif also stated that "these things are done all the time," that 'There's a grid of overlapping domestic and foreign legislation, and if you don't see the grid prop- erly, you're more likely to miss something,' says Cliff Sosnow. "they give these sorts of things in these situations," and that making payments to ministers was a "cost of doing business." But that's no longer the case, Boscariol says. "Th e Niko prosecution and fi ne send a strong signal from the Cana- dian government that business as usual is not good enough anymore, that Canadian com- panies are obligated to ignore this kind of pressure, and that they should have systems in place that identify and address this behaviour," he says. Indeed, the RCMP had more than 20 cases under in- vestigation at press time amid persistent reports that there will be at least one more charge before the end of the year. Although Canada has been late to the game in international THE RIGHT MIX OF RESOURCES FOR YOUR EMPLOYMENT LAW PRACTICE EMPLOYMENT SPECTRUM AN ONLINE RESEARCH SERVICE Get online access to our leading authored works, covering everything from wrongful dismissal to occupational health and safety — all integrated with case law and legislation. 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For pricing information, contact an information solutions specialist today at 1-866-609-5811. CANADA LAW BOOK® www.lawtimesnews.com anti-corruption enforcement — so much so that Transpar- ency International has criti- cized Canada as the only G7 country with "little or no en- forcement" of its laws — Ca- nadian companies are particu- larly vulnerable in this arena. "A factual feature of our economy is that we have a lot of resource exploration com- panies that are based and fi - nanced in Canada but operate abroad," says Paul Lalonde of Heenan Blaikie LLP. "Th ese are the companies that have a high-risk profi le, and it's quite natural that the RCMP would focus on them." Aggravating the situation is the fact that extractive in- dustries are very dependent on government permissions because they deal with public lands and resources by necessity. "Th ese companies have no choice but to have relation- ships with governments who see nothing wrong with the kind of conduct that got Niko into trouble," Lalonde says. And now that the SEC has adopted rules that implement the provisions of the Dodd- Frank Wall Street Reform and Consumer Protection Act au- thorizing what amount to large bounty payments to whistle- blowers for information about violations of U.S. securities laws, it's becoming apparent that the program could have serious implications for Cana- dian companies doing business in the United States whether or not they're listed on an Ameri- can exchange. "Any Canadian company that does business in the U.S. or partners with a U.S.-listed com- pany is exposed," says Amar Sarwal, the Association of Cor- porate Counsel's vice president and chief legal strategist. "It's all in the weeds out there because the SEC just hasn't thought through the implications on an international level." And we're not just talking theory here. "Having been directed by Congress to put the Dodd-Frank program in place, the SEC will be under a great deal of pres- sure to ensure that whistleblower complaints are fully investigat- ed," says Cornell Wright of Torys LLP. "And, of course, there will be lawyers representing the com- plainants who will also be pres- suring the SEC to pursue their clients ' information." Th e silver lining in the whis- tleblower scenario is that the SEC has provided incentives to encourage people to use inter- nal compliance systems before or simultaneous to reporting to the regulator. Still, it's clear that what people previously perceived as business as usual has become high risk. "We're telling all our clients to get a compliance and implemen- tation program in place as soon as possible," Boscariol says.

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