GLOBAL CORRUPTION

Law, Theory & Practice

GLOBAL CORRUPTION

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Legal Regulation of Global Corruption under

International Conventions, US, UK and Canadian Law

Third Edition

Published in Canada by the University of Victoria Victoria, BC V8P 5C2

press@uvic.ca

Book design by Yenny Lim, Copyright & Digital Publication Services Assistant, University of Victoria Libraries

This book is released under a Creative Commons Attribution-Non-commercial-Share Alike

4.0 license (CC-BY-NC-SA). See creativecommons.org/ for more information. This book, or

parts of it, may be reproduced for non-commercial purposes, provided that proper attribution is given to the original author.

Ferguson, Gerry. (2018). Global corruption: Law, theory & practice. Victoria, BC: University of Victoria.

To obtain permission for uses beyond those outlined in the Creative Commons license, please contact Gerry Ferguson at gferguso@uvic.ca.

While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by authors, editors or publishers.

Library and Archives Canada Cataloguing in Publication Ferguson, Gerry, author

Global corruption : law, theory & practice / Gerry Ferguson. Issued in print and electronic formats.

ISBN 978-1-55058-574-2 (softcover).--ISBN 978-1-55058-575-9 (PDF) 1. Corruption--Law and legislation. I. University of Victoria (B.C.), issuing body II. Title.

K5261.F47 2018 364.1'323 C2017-907410-5

Images were used in this book under the following applicable Creative Commons licenses. Reuse and attribution should consider the following:

Front cover art (clockwise from top left):

 Man in suit holding with woman's hand reaching to take 50 euro banknotes, (Kiwiev on

Wikimedia Commons, 2014), online: < https://commons.wikimedia.org/wiki/File:6_- _man_in_suit_holding_with_woman's_hand_reaching_to_take_50_euro_banknotes_-_royalty_free,_without_copyright,_public_domain_photo_image.JPG>. Licensed under

Creative Commons CC0 1.0 Universal Public Domain Dedication.

 Developing nation for the past 60 years, (Karthikeyan K on Unsplash.com, 2012), online:

<https://unsplash.com/photos/xOfsosk7rw4>. Licensed under the Unsplash open license.  Marshall Center Workshop examines anti-corruption policies, measures, solutions

160204-A-KT579-291 by Sgt. Amanda Moncada, (Fæ on Wikimedia Commons, 2017), online:

< https://commons.wikimedia.org/wiki/File:Marshall_Center_Workshop_examines_anti-corruption_policies,_measures,_solutions_160204-A-KT579-291.jpg>. Public Domain.  Saigon-slums-asia-vietnam-poor-53144 (Thomas_G on Pixabay.com), online:

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Back cover art:

 Slums built on swamp land near a garbage dump in East Cipinang, Jakarta Indonesia, (Jonathan

McIntosh on Wikimedia Commons, 2003), online:

<https://commons.wikimedia.org/wiki/Poverty#/media/File:Jakarta_slumhome_2.jpg.> Licensed under Creative Commons Attribution 2.0 Generic.

Figure 1.1:

 Scenes from the Kibera in Nairobi by Karl Mueller, (khym54 on flickr.com, October 3, 2005),

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The following organizations have kindly agreed to be web sponsors for this book. The book may be found on their websites.

The United Nations Office on Drugs and Crime (UNODC) is a global leader in the fight against illicit drugs and international crime. It has developed TRACK (Tools and Resources for Anti-Corruption Knowledge)—a web-based anti-corruption portal containing legislation and jurisprudence relevant to the United Nations Convention against Corruption. TRACK also includes the Anti-Corruption Academic Initiative (ACAD), which is a collaborative academic project that aims to promote anti-corruption education in universities and other academic institutions worldwide. Global Corruption is part of the ACAD initiative.

https://track.unodc.org/Academia/Pages/TeachingMaterials/GlobalCorruptio nBook.aspx

The International Centre for Criminal Law Reform and Criminal Justice

Policy (ICCLR) is an independent, international institute whose mission is to

promote the rule of law, democracy, human rights, and good governance in criminal law and the administration of criminal justice, domestically, regionally, and globally.

https://icclr.law.ubc.ca/resources/global-corruption-law-theory-and-practice/

Transparency International Canada (TI Canada) is Canada’s leading

anti-corruption organization. Its mandate involves education and building awareness on the effects of corruption across the country and worldwide.

http://www.transparencycanada.ca/what-we-do/publications/

The Canadian Bar Association (CBA) is the largest professional association for lawyers in Canada. CBA promotes fair justice systems, facilitates effective law reform, upholds equality and the legal profession, and are devoted to eliminating discrimination. They are the premiere provider of quality legal training and information in Canada.

http://www.cba.org/Sections/Anti-corruption/Resources/Resources/Global-Corruption-Law,-Theory-and-Practice-Course

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Sharon, Debbie and Lori

and

TABLE OF ACRONYMS ...xxi

ABOUT THE AUTHOR ...xxix

PREFACE AND ACKNOWLEDGMENTS ...xxxi

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1.1 A Case Illustration of the Impact of Corruption ... 2

1.2 Four Concerns about Corruption ... 8

1.3 Four Other Related Concerns about Corruption ... 11

1.4 Empirical Evidence on the Relationship between Corruption, Reduced Economic Growth and Poverty ... 22

1.5 Poverty and Corruption: A Growing Concern ... 40

2. THE MANY FACES OF CORRUPTION ... 45

2.1 No Universal Definition of Corruption ... 45

2.2 Imposing Western Definitions of Corruption Globally ... 49

2.3 The Prevalence of Corruption ... 50

3. DRIVERS OF CORRUPTION ... 58

4. PERCEPTIONS AND MEASUREMENTS OF CORRUPTION ... 61

4.1 Commonly-Cited Indexes of Corruption ... 61

4.2 Some Limitations Associated with Corruption Indexes Based on Perceptions ... 66

5. MORE ISSUES ON MEASURING AND UNDERSTANDING CORRUPTION ... 68

5.1 What is Corruption? ... 68

5.2 Which Countries Are Most Corrupt? ... 68

5.3 What are the Common Characteristics of Countries with High Corruption? ... 69

5.4 What is the Magnitude of Corruption? ... 70

5.5 Do Higher Wages for Bureaucrats Reduce Corruption? ... 70

5.6 Can Competition Reduce Corruption? ... 70

5.7 Why Have There Been So Few (Recent) Successful Attempts to Fight Corruption?... 71

5.8 Does Corruption Adversely Affect Growth? ... 72

6. HISTORICAL DEVELOPMENT OF INTERNATIONAL CORRUPTION LAWS ... 73

6.1 Early History from Antiquity to the OECD Convention in 1997 ... 73

6.2 International Corruption Instruments Culminating in UNCAC (2005) ... 88

6.3 The Meaning and Effect of International Conventions ... 96

8. ASOCIOLOGICAL PERSPECTIVE ON INSTITUTIONAL CORRUPTION ... 112

9. CORPORATE SOCIAL RESPONSIBILITY AND CORRUPTION ... 117

9.1 What is Corporate Social Responsibility? ... 117

9.2 How Did CSR Develop? ... 118

9.3 Some Current CSR Policies and Initiatives ... 121

9.4 The Need for Increased Trust in Business ... 125

9.5 Concluding Note ... 126

10. SUCCESSES AND FAILURES IN INTERNATIONAL CONTROL OF CORRUPTION:GOOD GOVERNANCE ... 127

10.1 Ten Lessons to Be Learned in Designing Anti-Corruption Initiatives... 127

11. ANOTHER CASE STUDY:BAEENGAGES IN LARGE-SCALE CORRUPTION IN SAUDI ARABIA ... 134

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2. DOMESTIC BRIBERY ... 141 2.1 UNCAC ... 141 2.2 OECD Convention ... 145 2.3 US Law ... 145 2.4 UK Law ... 149 2.5 Canadian Law ... 159

3. BRIBERY OF FOREIGN PUBLIC OFFICIALS ... 175

3.1 UNCAC ... 175

3.2 OECD Convention ... 177

3.3 US Law ... 182

3.4 UK Law ... 190

3.5 Canadian Law ... 192

4. FACILITATION PAYMENTS AND THE OFFENCE OF BRIBERY ... 195

4.1 Arguments for and Against Facilitation Payments ... 197

4.2 Facilitation Payments and Culture ... 201

4.3 The Economic Utility of Facilitation Payments ... 202

4.4 UNCAC and OECD Convention ... 204

4.5 US Law ... 205

4.6 UK Law ... 209

4.7 Canadian Law ... 211

4.8 Eliminating Facilitation Payments ... 213

5. ACCOUNTING (BOOKS AND RECORDS)OFFENCES RELATED TO CORRUPTION ... 218

5.5 Canadian Law ... 226

APPENDIX 2.1 ... 228

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1.1 Overview ... 236

1.2 UNCAC ... 238

1.3 OECD Convention ... 240

1.4 Other International Anti-Corruption Instruments ... 241

1.5 Corporate Entities ... 241

1.6 Overview of OECD Countries Jurisdiction ... 242

1.7 US Law ... 245

1.8 UK Law ... 253

1.9 Canadian Law ... 256

1.10 Concerns with Expanded Jurisdiction ... 262

2. CRIMINAL LIABILITY OF CORPORATIONS AND OTHER COLLECTIVE ENTITIES ... 264

2.1 Introduction ... 264

2.2 UNCAC ... 267

2.3 OECD Convention ... 269

2.4 Overview of Corporate Liability in the 41 State Parties to the OECD Anti-Bribery Convention ... 270

2.5 US Law ... 277

2.6 UK Law ... 279

2.7 Canadian Law ... 284

3. PARTY OR ACCOMPLICE LIABILITY ... 289

3.1 UNCAC ... 289 3.2 OECD Convention ... 290 3.3 US Law ... 290 3.4 UK Law ... 291 3.5 Canadian Law ... 292 4. INCHOATE OFFENCES ... 293 4.1 Attempts ... 293 4.2 Conspiracy ... 297

2. THE ESSENTIAL ELEMENTS OF MONEY LAUNDERING ... 308

3. THE MOST COMMON METHODS OF MONEY LAUNDERING ... 308

3.1 Use of Corporate Vehicles and Trusts ... 311

3.2 Use of Gatekeepers ... 314

3.3 Use of Domestic Financial Institutions ... 317

3.4 Use of Nominees ... 320

3.5 Use of Cash ... 321

4. INTERNATIONAL STANDARDS FOR PREVENTION AND CRIMINALIZATION OF MONEY LAUNDERING ... 323

4.1 UNCAC ... 323

4.2 OECD Anti-Bribery Convention ... 338

4.3 FATF Recommendations ... 339

5. STATE-LEVEL AMLREGIMES:US,UK AND CANADA ... 343

5.1 Introduction to the Essential Elements of AML Regimes ... 343

5.2 Financial Intelligence Units ... 344

5.3 Regulation of Financial Institutions and Professionals ... 348

5.4 Money Laundering Offences... 354

5.5 The Role of Legal Professionals ... 366

6. EVALUATING THE EFFECTIVENESS OF AMLREGIMES ... 371

6.1 Introduction... 371

6.2 The Basel AML Index ... 372

6.3 FATF Mutual Evaluations ... 373

6.4 Other Evaluations ... 378

6.5 Barriers to Creating Effective AML Measures ... 382

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2. ASSET RECOVERY CONCEPTS AND TOOLS ... 387

2.1 Asset Recovery Steps ... 387

2.2 International Asset Recovery Agencies ... 394

2.3 State-Level Financial Intelligence Units (FIUs) ... 395

2.4 Types of Tools for Asset Recovery ... 399

3. INTERNATIONAL CONVENTION OBLIGATIONS ... 417

3.1 UNCAC ... 417

3.2 OECD Anti-Bribery Convention ... 420

3.3 Other Instruments ... 421

4. STATE-LEVEL ASSET RECOVERY REGIMES ... 423

5. EFFECTIVENESS OF ASSET RECOVERY REGIMES ... 483

5.1 Overview of Existing Data ... 483

5.2 Continuing Challenges to Effective Asset Recovery ... 486

5.3 Emerging Tools in Asset Recovery ... 501

6. INTERNATIONAL MUTUAL LEGAL ASSISTANCE AGREEMENTS ... 506

6.1 Introduction to Mutual Legal Assistance Agreements ... 506

6.2 Legal Basis for MLA ... 507

6.3 Mutual Legal Assistance under UNCAC ... 508

6.4 Mutual Legal Assistance under OECD Anti-Bribery Convention ... 510

6.5 Request Processes and Procedures ... 510

6.6 Request Process in the United States ... 513

6.7 Request Process in the United Kingdom ... 521

6.8 Request Process in Canada ... 522

6.9 Request Process for Asia-Pacific Countries ... 527

6.10 Grounds for Refusal of Mutual Legal Assistance Request under UNCAC and OECD Anti-Bribery Convention... 528

6.11 Barriers to MLA ... 531

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2. INTERNATIONAL OBLIGATIONS TO INVESTIGATE AND PROSECUTE CORRUPTION ... 538

2.1 Overview ... 538

2.2 UNCAC and OECD Provisions and Their Implementation by the US, UK and Canada .. 539

3. ENFORCEMENT BODIES ... 559

3.1 UNCAC and OECD Provisions ... 559

3.2 Varying Levels of Independence in Anti-Corruption Enforcement ... 568

3.3 Investigative and Prosecutorial Bodies ... 570

3.4 Cooperation Agreements between State Parties and between Enforcement Bodies ... 580

4. INVESTIGATING CORRUPTION:INTERNAL AND EXTERNAL INVESTIGATIONS ... 581

4.1 Sources of Internal Investigations ... 582

4.2 Internal Investigations by Corporations: Five Basic Steps ... 585

4.3 Sources of External Investigations ... 587

4.4 An Overview of the Essential Elements of an External Investigation ... 591

4.5 Investigation Strategy in Corruption Cases ... 598

5.3 Civil Options and Procedures ... 608

5.4 Comparative Data on the Use of Different Remedies in Bribery of Foreign Officials ... 608

6. CHARGING POLICIES ... 610

6.1 US ... 610

6.2 UK ... 620

6.3 Canada ... 626

7. ISSUES OF CONCURRENT JURISDICTION... 638

7.1 Parallel Proceedings ... 638

7.2 Risks of Parallel Proceedings ... 640

7.3 Approaches to Multijurisdictional Enforcement ... 642

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2. UNCAC ... 647

3. OECDCONVENTION ... 647

4. USSENTENCING LAW ... 648

4.1 Federal Sentencing Guidelines ... 648

4.2 Sentencing Procedure and Guiding Principles ... 651

4.3 Specific Corruption Related Guidelines ... 652

4.4 Imposition of Fines ... 658

4.5 Sentencing Corporations and Other Organizations ... 659

4.6 FCPA Sentencing ... 662

4.7 Other Financial Consequences ... 668

4.8 Comments on FCPA Enforcement ... 668

5. UKSENTENCING LAW ... 671

5.1 General Principles of Sentencing ... 671

5.2 Sentencing Cases before the Bribery Act 2010 ... 671

5.3 Sentences under the Bribery Act 2010 (Pre-Guidelines) ... 673

5.4 Sentencing Guidelines for Corruption-Related Offences by Human Offenders ... 678

5.5 Sentencing Guidelines for Corporate Offenders ... 684

5.6 Deferred Prosecution Agreements in the UK ... 689

6. CANADIAN SENTENCING LAW ... 690

6.1 Sentencing Principles in General ... 690

6.2 Sentencing Principles for Corporations and Other Organizations ... 692

6.3 Sentencing Cases for Domestic Corruption and Bribery ... 694

8.2 OECD ... 712

8.3 The World Bank ... 713

8.4 US Law ... 717

8.5 UK Law ... 718

8.6 Canadian Law ... 720

8.7 Applicability of Integrity Provisions to Other Government Departments ... 730

9. DISQUALIFICATION AS COMPANY DIRECTOR... 731

9.1 Introduction ... 731

9.2 US Law ... 731

9.3 UK Law ... 733

9.4 Canadian Law ... 737

10. MONITORSHIP ORDERS ... 737

10.1 UNCAC and OECD ... 737

10.2 US Law ... 738

10.3 UK Law ... 738

10.4 Canadian Law ... 739

11. NON-CONVICTION BASED FORFEITURE ... 741

12. CIVIL ACTIONS AND REMEDIES ... 741

13. INTERNATIONAL INVESTMENT ARBITRATION ... 741

13.1 Introduction ... 741

13.2 International Arbitration Explained ... 743

13.3 Why Parties Agree to Arbitrate ... 746

13.4 Treatment of Allegations of Corruption in International Investment Arbitration ... 753

13.5 Conclusions: International Investment Arbitration and the Global Fight against Corruption ... 767

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2. ROLES OF LAWYERS IN BUSINESS ... 771

2.1 Multiple Roles ... 771

2.2 Who Is your Client? ... 771

2.3 In-House Counsel and External Counsel ... 772

2.4 The Lawyer as a Corporate Gatekeeper ... 775

3. LEGAL AND ETHICAL DUTIES OF LAWYERS ... 778

3.1 Conflicts of Interest ... 779

3.2 Duty to Not Advise or Assist in a Violation of the Law ... 783

3.3 The Duty of Confidentiality and Solicitor-Client Privilege ... 786

PROGRAMS AND RISK ASSESSMENTS... 801

6. ANTI-CORRUPTION COMPLIANCE PROGRAMS ... 802

6.1 Introduction... 802

6.2 International Framework for Anti-Corruption Compliance Programs ... 804

6.3 US Framework ... 814

6.4 UK Framework ... 818

6.5 Canadian Framework ... 822

6.6 Critiques of Compliance Programs ... 824

7. RISK ASSESSMENT ... 825

7.1 What is a Risk Assessment? ... 825

7.2 What Risk Areas Are Being Assessed? ... 827

7.3 Conducting an Effective Risk Assessment ... 828

7.4 US Law ... 830

7.5 UK Law ... 830

7.6 Canadian Law ... 830

8. DUE DILIGENCE REQUIREMENTS ... 831

8.1 Third Party Intermediaries ... 832

8.2 Transparency Reporting Requirements in Extractive Industries ... 833

8.3 Mergers and Acquisitions ... 839

9. INTERNAL INVESTIGATION OF CORRUPTION ... 845

10. CORPORATE LAWYERS’POTENTIAL LIABILITY FOR A CLIENT’S CORRUPTION ... 845

10.1 Introduction... 845

10.2 Criminal Liability ... 846

10.3 Accessory Liability in Civil Actions ... 846

10.4 Tort of Legal Malpractice... 848

10.5 Shareholders’ or Beneficial Owners’ Actions Against the Corporation’s Lawyer ... 849

10.6 Lawyers’ Civil Liability under Securities Acts ... 851

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2. AN OVERVIEW OF CONFLICTS OF INTEREST ... 855

2.1 Conceptualizing “Conflict of Interest” ... 855

2.2 Enforcement Mechanisms: Historical Foundations and Contemporary Tensions ... 860

2.3 Political Culture and Conflicts of Interest ... 862

3. ACOMPARISON OF INTERNATIONAL STANDARDS AND NATIONAL REGIMES IN THE US, THE UK, AND CANADA ... 864

3.1 International Law, Standards and Guidelines ... 864

3.2 General Structure of National Conflict of Interest Regimes: Statutes, Policies and Guidelines ... 866

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1. INTRODUCTION ... 890

2. TERMINOLOGY ... 892

2.1 Defining Lobbying ... 892

2.2 Terminology in a Comparative Context... 894

3. LOBBYING AND DEMOCRACY ... 895

3.1 Democracy as an Indicator of Transparency ... 895

4. REGULATORY SCHEMES ... 897

4.1 Lobbying and the Broader Regulatory Framework ... 897

4.2 Principles of Lobbying Regulation ... 897

5. COMPARATIVE SUMMARY ... 903

6. REGULATORY FRAMEWORK AND CONTEXT FOR LOBBYING ... 905

6.1 US: Framework and Context ... 906

6.2 UK: Framework and Context... 907

6.3 Canada: Framework and Context ... 910

7. MAIN ELEMENTS OF LOBBYING REGULATION ... 911

7.1 Definition of Government Officials ... 912

7.2 Definition of Lobbyist ... 913

7.3 Definition of Lobbying Activity ... 914

7.4 Exclusions from the Definitions of Lobbyist and Lobbying Activities ... 916

7.5 Disclosure Requirements ... 919

7.6 Codes of Conduct ... 927

7.7 Compliance and Enforcement ... 931

8. COMPARISON WITH LOBBYING REGULATION IN EUROPEAN UNION INSTITUTIONS 938 9. CONCLUSION ... 939

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1.1 Adverse Consequences of Corruption in Public Procurement ... 943

1.2 How Much Money Is Spent on Public Procurement? ... 946

1.3 Public Procurement Corruption within Developed Countries ... 947

1.4 The Importance of Maintaining a Low-Risk Environment ... 949

2. RISKS AND STAGES OF CORRUPTION IN PUBLIC PROCUREMENT ... 949

2.1 Risk of Corruption by Industry and Sector ... 949

3.1 P3s... 957

3.2 Sole Sourcing ... 962

3.3 Competitive Bidding ... 964

4. HALLMARKS OF A GOOD PROCUREMENT SYSTEM ... 966

4.1 Transparency ... 966

4.2 Competition... 968

4.3 Integrity ... 968

5. PRIVATE LAW ENFORCEMENT OF TENDERING FOR PUBLIC CONTRACTS ... 970

5.1 US Private Law ... 970

5.2 UK Private Law... 971

5.3 Canadian Private Law ... 972

6. PUBLIC LAW FRAMEWORK ... 974

6.1 International Legal Instruments ... 974

6.2 US Law and Procedures ... 983

6.3 UK Law and Procedures ... 986

6.4 Canadian Law and Procedures ... 991

7. EVALUATION OF PROCUREMENT LAWS AND PROCEDURES ... 1001

7.1 OECD Review of Country Compliance ... 1001

7.2 Other Procurement Issues and Concerns ... 1003

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2. WHAT IS WHISTLEBLOWING? ... 1009

3. INTERNATIONAL LEGAL FRAMEWORK ... 1010

3.1 UNCAC ... 1010

3.2 The OECD Convention ... 1012

3.3 Other Regional Conventions and Agreements ... 1014

4. “BEST PRACTICES” IN WHISTLEBLOWER PROTECTION LEGISLATION ... 1018

4.1 Limitations of Best Practices ... 1018

4.2 Sources for Best Practices ... 1020

4.3 General Characteristics of Best Practices ... 1021

5. WHISTLEBLOWER PROTECTION IN THE US:APATCHWORK OF LEGISLATION ... 1030

5.1 Whistleblower Protection in the Public Sector ... 1030

5.2 Encouraging Whistleblowing through Rewards: The False Claims Act ... 1035

7.1 The Development of the Common Law Defence ... 1044

7.2 Federal Legislation: The Public Servants Disclosure Protection Act ... 1045

7.3 Securities Regulation in Canada: The Ontario Securities Commission Whistleblower Program ... 1059

8. CONCLUSION:WHERE DO WE GO FROM HERE? ... 1067

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2. HOW ELECTION CAMPAIGNS ARE FINANCED ... 1074

2.1 Direct Contributions or Loans to Candidates and Political Parties ... 1074

2.2 Public Funding ... 1074

2.3 Independent Expenditures by Third Parties ... 1074

2.4 Self-funding ... 1075

3. OVERVIEW OF TYPES OF CAMPAIGN FINANCE REGULATION ... 1075

3.1 Transparency Requirements ... 1075

3.2 Spending and Contribution Limits ... 1076

3.3 Public Funding ... 1076

4. RATIONALES FOR CAMPAIGN FINANCE REGULATION ... 1077

4.1 Corruption and the Appearance of Corruption ... 1077

4.2 Equality, Fairness, and Participation ... 1080

4.3 Informed Voting ... 1082

4.4 Public Confidence ... 1082

4.5 Other Rationales ... 1083

5. OVERVIEW OF CHALLENGES IN REGULATING CAMPAIGN FINANCE ... 1084

5.1 Freedom of Expression and Association ... 1084

5.2 Entrenching Incumbents and Differential Impacts on Different Political Parties ... 1085

5.3 Loopholes ... 1086

5.4 Circumscribing the Scope of Regulated Activities... 1086

5.5 New Campaigning Techniques ... 1087

6. THE REGULATION OF THIRD-PARTY CAMPAIGNERS ... 1088

6.1 The Role of Third-Party Campaigners ... 1088

6.2 Regulating Third-Party Campaigners to Reinforce other Campaign Finance Controls .. 1089

6.3 The Regulation of Third Parties and Freedom of Speech ... 1090

6.4 Third-Party Spending and Corruption... 1090

6.5 The Regulation of Institutional Third Parties ... 1091

8.2 Regulatory Regime in the US ... 1109

8.3 Criticisms of Campaign Finance Regulation in the US... 1112

9. UKLAW ... 1115

9.1 Freedom of Expression and Campaign Finance Regulation in the UK ... 1115

9.2 Regulatory Regime in the UK ... 1118

9.3 Criticisms of Campaign Finance Regulation in the UK ... 1135

10. CANADIAN LAW ... 1139

10.1 Constitutional Rights and Campaign Finance Regulation in Canada ... 1139

10.2 Regulatory Regime in Canada ... 1144

10.3 Criticisms of Campaign Finance Regulation in Canada ... 1154

AAA American Arbitration Association

ABA American Bar Association

ABMS ISO 37001 Anti-bribery Management System standard for

organizations

ACA Anti-corruption agency

ACC Association of Corporate Counsel

ACC Bangladesh, Anti-Corruption Commission

ACoBA UK, Advisory Committee on Business Appointments

AECA Arms Export Control Act

AFAR Arab Forum on Asset Recovery

AFMLS Asset Forfeiture and Money Laundering Section

AIT Agreement on Internal Trade

ALACs Transparency International, Advocacy and Legal Advice Centres

AMF Quebec, Canada, Autorité des marchés financiers

AML Anti-Money Laundering

APEC Asia-Pacific Economic Cooperation

APPC UK, Association of Professional Political Consultants

ASEM Asia-Europe Meeting

ASMLS Asset Forfeiture and Money Laundering Section

AU African Union

AU Convention African Union Convention on Preventing and Combating

Corruption

BITs bilateral investment treaties

BSA US, Bank Secrecy Act

BOTA BOTA Foundation

BOO build-own-operate

BPI Bribe Payers Index

CBA Canadian Bar Association

CBA Code Canadian Bar Association Code of Professional Conduct

CCIR EC, Code of Conduct for Interest Representatives

CDA US, Contract Disputes Act of 1978

CED Committee for Economic Development

CETA Canada-European Union, Comprehensive Economic and Trade

Agreement

CIPR UK, Chartered Institute of Public Relations

COC UK, Code of Conduct (for Members of Parliament)

COE Council of Europe

COIA Canada, Conflict of Interest Act

COIC Canada, Conflict of Interest Code (for Members of the House of

Commons)

CPI Corruption Perceptions Index

CPS UK, Crown Prosecution Service

CSC UK, Civil Service Commission

CSP corporate social performance

CSPL UK, Committee on Standards in Public Life

CSR corporate social responsibility

CTRs currency transaction reports

CUSAGP Canada-US Agreement on Government Procurement

DAEO US, designated agency ethics official

DFAIT Canada, Department of Foreign Affairs and International Trade

DFID UK, Department for International Development

DNA Romanian Anti-Corruption Authority

Dodd-Frank Act US, Dodd-Frank Wall Street Reform and Consumer Protection Act

DOJ US, Department of Justice

DOJ-AFF US, Department of Justice Asset Forfeiture Funds

DPAs US, UK, Deferred Prosecution Agreements

DPOHs Canada, designated public office holders

DPP Canada, Director of Public Prosecutions

DTR5 UK, Transparency Directive Review

EA Canada, Evidence Act

EBOs US, Executive Branch Officials

EBRD European Bank for Reconstruction and Development

EC European Commission

ECHR European Court of Human Rights

ECNEC Bangladesh, Executive Committee of National Economic Council

ECT Energy Charter Treaty

EFCC Nigeria, Economic and Financial Crimes Commission

EGA US, Ethics in Government Act

EITI Extractive Industries Transparency Initiative

Officials of Member States

EU Directive EU Directive on Public Procurement

FACFOA Canada, Freezing Assets of Corrupt Foreign Officials Act

FAIR Canada, Federal Accountability Initiative for Reform

FAR US, Federal Acquisition Regulation

FATF US, Financial Action Task Force

FCA US, False Claims Act

FCPA US, Foreign Corrupt Practices Act

FDI Foreign Direct Investment

FAA Canada, Federal Accountability Act

FIFA Fédération Internationale de Football Association

FinCEN US, Financial Crimes Enforcement Network

FINTRAC Financial Transactions and Reports Analysis Centre of Canada

FIU Financial Intelligence Unit

FLSC Federation of Law Societies of Canada

FLS Model Code Canada, Federation of Law Society’s Model Code of Professional

Conduct

FIPPA Ontario, Canada, Freedom of Information and Protection of Privacy Act

FRO UK, Financial Reporting Order

FTC US, Federal Trade Commission

GAO US, Government Accountability Office

GCB Global Corruption Barometer

GDP Gross Domestic Product

GOPAC Global Organization of Parliamentarians Against Corruption

GPSA Gas Purchase and Sales Agreement

GRECO Group of States against Corruption

HCE US, House Committee on Ethics

HKIAC Hong Kong International Arbitration Centre

HLOGA US, Honest Leadership and Open Government Act

IACU International Anti-Corruption Unit

IBRD International Bank for Reconstruction and Development

ICAC Hong Kong, Independent Commission Against Corruption

ICAR International Centre for Asset Recovery

ICC International Chamber of Commerce

ICDR International Centre for Dispute Resolution

IG US, Inspector General

IIA Interinstitutional Agreement on the Transparency Register

IIAs international investment agreements

ISO International Organization for Standardization

ITAR International Traffic in Arms Regulations

ITO Information to Obtain

ITT Invitation to Tender

JITs UK, Joint Investigation Teams

JVA Joint venture agreement

KLRCA Kuala Lumpur Regional Centre for Arbitration

LA Canada, Lobbying Act

LBOs US, Legislative Branch Officials

LCC Canada, Lobbyists’ Code of Conduct

LCIA London Court of International Arbitration

LDA US, Lobbying Disclosure Act

LRA Canada, Lobbyists Registration Act (renamed the Lobbying Act)

M&A Mergers and Acquisitions

MACCIH Support Mission Against Corruption and Impunity in Honduras

MASH Municipalities, Academic Institutions, Schools and Hospitals

MDBs Multilateral Development Banks

MIGA Multilateral Investment Guarantee Agency

MLA Mutual Legal Assistance

MLACMA Canada, Mutual Legal Assistance in Criminal Matters Act

MLAT Mutual Legal Agreement

MLPP Model Law on Public Procurement (UNCITRAL)

MOJ UK, Ministry of Justice

MOUs memoranda of understanding

MPs Members of Parliament

MSG UK, Multi Stakeholder Group

NAFTA North American Free Trade Agreement

NCA UK, National Crime Agency

NCB Non-Conviction Based (forfeiture)

NGO Non-Governmental Organization

NILE US, National Institute for Lobbying and Ethics

NORAD Norwegian Agency for Development Cooperation

OCE US, Office of Congressional Ethics

OCHRO Canada, Office of the Chief Human Resources Officer

OPCS UK, Office of the Parliamentary Commissioner for Standards

OECD Organisation for Economic Co-operation and Development

OGE US, Office of Government Ethics

OM operate and maintain arrangement

OSC US, Office of the Special Counsel

OSC Ontario Securities Commission

P3s Public-Private Partnership

PACI World Economic Forum Partnering Against Corruption Initiative

PATT Proactive Asset Targeting Team

PCA Permanent Court of Arbitration

PCR UK, Public Contracts Regulations

PEPs Politically exposed persons

PIDA UK, Public Interest Disclosure Act

PIM System Public investment management system

POCA UK, Proceeds of Crime Act 2002

POs US, Public Officials

POHs Canada, public office holders

PPP Canada Public Private Partnership Canada

PPSC Public Prosecution Service of Canada

PQ Canada, Parti Québécois

PRCA UK, Public Relations Consultants Association

PRII Public Relations Institute of Ireland

PSA UK, Public Services (Social Value) Act 2012

PSCs People who have significant control over the company

PSDPA Canada, Public Servants Disclosure Protection Act

PWGSC Public Works and Government Services Canada

RCMP Royal Canadian Mounted Police

RFP Request for Proposal

RFQ Request for Quotation

RFQu Request for Qualifications

RFSO Request for Standing Officer

RICO US, Racketeering Influenced and Corrupt Organizations Act

SARs Suspicious Activity Reports

SEC US, Securities and Exchange Commission

SEMA Special Economic Measure Act

SFO UK, Serious Fraud Office

SIAC Singapore International Arbitration Center

SMEs Small and Medium Sized Enterprises

SOCA UK, Serious Organised Crime Agency

SOCPA UK,Serious Organised Crime and Police Act

SOX US, Sarbanes-Oxley Act of 2002

SPV Special Purpose Vehicle

SRA Code UK, Solicitor Regulations Authority Code of Conduct

STRs suspicious transaction reports

StAR Stolen Asset Recovery Initiative (WB/UNODC)

TFF US, Treasury Forfeiture Fund

TI Transparency International

TI Canada Transparency International Canada

TI UK Transparency International United Kingdom

TIPs treaties with investment provisions

TLA UK, Transparency of Lobbying, Non-Party Campaigning and Trade

Union Administration Act 2014

TR EC/EP, Transparency Register

TRO Temporary restraining order

UEFA Union of European Football Associations

UKFIU UK, Financial Intelligence Unit

UKLR UK Lobbying Register

UNCAC United Nations Convention against Corruption

UNCITRAL United Nations Commission on International Trade Law

UNDP United Nations Development Programme

UNODC United Nations Office on Drugs and Crime

UNTOC United Nations Convention against Transnational Organized

Crime

UPAC Quebec, the Unité permanente anticorruption / Permanent

Anticorruption Unit

USC United States Code

US DOJ United States Department of Justice

UKFIU UK, Financial Intelligence Unit

WGI Worldwide Governance Indicators

WJP US, World Justice Project

WPA US, Whistleblower Protection Act

WPEA US, Whistleblower Protection Enhancement Act

WTO-AGP World Trade Organization Agreement on Government

Gerry Ferguson is a University of Victoria Distinguished Professor of Law who specializes

in criminal law. He is also a senior associate with the International Centre for Criminal Law Reform and Criminal Justice Policy in Vancouver. Professor Ferguson is a member of the United Nations Office on Drugs and Crime Anti-Corruption Academic Development Initiative (ACAD) devoted to the creation of anti-corruption academic materials and the teaching of university courses on global corruption. He is co-editor and co-author (with Douglas Johnston) of Asia-Pacific Legal Development (UBC Press, 1998), was a co-leader of the CIDA-funded Canada-Vietnamese Legislative Drafting and Management Program, 1994-95, and a team member of the CIDA-funded Canada-China Procuratoracy Project, 2003-2008, under the direction of the ICCLR. He is the co-author, with Justice Dambrot, of the annually updated two-volume book, Canadian Criminal Jury Instructions and co-author of the Annual Review of Criminal Law. Professor Ferguson has taught criminal law as a Visiting Professor at the University of Hong Kong, the University of Auckland, Monash University, the University of Malaya and the University of Airlangga in Indonesia. He has given guest lectures at various law schools in South Africa, China, Vietnam, Thailand, Singapore, Australia, New Zealand, Ireland and Europe. Professor Ferguson is a former member of the National Advisory Council of the Law Commission of Canada and an active participant in the Canadian Bar Association, Law Society, and Continuing Legal Education Society activities. His teaching and scholarly interests include transnational and comparative criminal law and procedure, sentencing and mental health law. Professor Ferguson may be contacted at gferguso@uvic.ca.

I am most grateful to Inba Kehoe, Copyright Officer & Scholarly Communication Librarian at the University of Victoria Libraries, for suggesting that I produce an open-access print version of my 2017 electronic version of Global Corruption: Law, Theory and Practice. This edition includes a number of significant anti-corruption developments that have occurred in the past year, but not all changes and developments. Thus this edition is comprehensively updated to January 2017 and selectively updated to February 2018. This edition also adds a new Chapter 13 entitled “Campaign Finance Laws: Controlling the Risks of Corruption and Public Cynicism” and a Table of Acronyms.

Gerry Ferguson

February 2018

A

CKNOWLEDGMENTS

I am deeply indebted to Mary Wallace for her dedication and diligence in helping to transform the electronic version to this print version and to Leyla Salmi for her research assistance on various topics in the early stages of producing this edition. Likewise, I am equally indebted to Inba Kehoe, Stephanie Boulogne and Yenny Lim for the care and attention that they have put into the editorial production and the design, including cover, of this version.

It has only been 18 months since the first edition of this book was published. But the frequency of corruption and the social, legal, economic and political responses to corruption continue to increase at a dizzying pace.

While organized on the same model as the first edition, the second edition includes references to up-to-date anti-corruption laws, policies, best practices and excellent research resources such as books, articles and reports by NGOs, government bodies, academics and practitioners. In addition, several topics have been either introduced or significantly expanded in each chapter. The detailed Table of Contents following the Preface to the first edition indicates the scope of the topics covered in this book.

Gerry Ferguson

January 2017

A

CKNOWLEDGMENTS

As with the first edition, this book would not have seen the light of day without the contributions of a dedicated team of legal research assistants. This is especially true in the case of the chief editor, Mary Wallace, who painstakingly reviewed and edited the entire book. I am deeply indebted to the following students who researched and updated various chapters: Connor Bildfell, Sarah Chaster, Dmytro Galagan, David Gill, Laura Ashley MacDonald, Madeline Reid and Matthew Spencer. I am also very grateful to Dmytro Galagan and Jeremy Henderson who added new sections to Chapters 7 and 12 and to Victoria Luxford, Joseph Mooney and Jeremy Sapers who updated their Chapters (9, 10 and 12). Finally I am very grateful to the CBA Law for the Future Fund, the Law Foundation of British Columbia and the Foundation for Legal Research who generously funded my research assistants for this book.

In the beginning there was no corruption but Adam got greedy, abused his position of privilege by going for the apple and things have gone downhill ever since. Corruption is now an inescapable reality of modern life.

Purpose of this Book

No Canadian law school (prior to UVic Law in September, 2015) had a course on global corruption, and relatively few law schools around the world have such a course. This book has been specifically created to make it easier for professors to offer a law school course on global corruption. This book is issued under a creative commons license and can be used for free in whole or in part for non-commercial purposes. The first chapter sets out the general context of global corruption: its nature and extent, and some views on its historical, social, economic and political dimensions. Each subsequent chapter sets out international standards and requirements in respect to combating corruption – mainly in the UN Convention Against Corruption (UNCAC) and the OECD Bribery of Foreign Officials Convention (OECD Convention). The laws of the United States and United Kingdom are then set out as examples of how those Convention standards and requirements are met in two influential jurisdictions. Finally, the law of Canada is set out. Thus, a professor from Africa, Australia, New Zealand or English speaking countries in Asia and Europe has a nearly complete coursebook – for example, that professor can delete the Canadian sections of this book and insert the law and practices of his or her home country in their place. While primarily directed to a law school course on global corruption, I expect that this coursebook, or parts of it, will be of interest and use to professors teaching courses on corruption from other academic disciplines and to lawyers and other anti-corruption practitioners.

Genesis of this Book

The United Nations Office on Drugs and Crime (UNODC) is responsible for promoting the adoption of and compliance with UNCAC. Chapter II of UNCAC is focused on Prevention of Corruption. Educating the lawyers, public officials and business persons of tomorrow on anti-corruption laws and strategies is one preventative strategy. Recognizing this, the UNODC set up an Anti-Corruption Academic Initiative (ACAD) to promote the teaching of corruption in academic institutions by collecting and distributing materials on corruption. As a member of the ACAD team, this coursebook is my contribution to that worthy goal.

Where to Next

As a first edition, there is room for improvement in this book. I hope to update and repost this book annually. In future editions, I would like, for example,

 and perhaps to add a few chapters on corruption in specific business sectors such as extractive industries, infra-structure projects etc.

I would be very pleased to hear from users of this book especially in regard to the inevitable errors and omissions that I have made in trying to describe and comment on the vast field of global corruption under UNCAC and the OECD Anti-Bribery Convention, and the laws of United States, United Kingdom and Canada.

Finally, I would like to thank the many NGOs and government agencies that have produced an incredible volume of excellent studies and reports on corruption/anti-corruption issues and for making those studies and reports, many of which are used in this book, publicly available.

Gerry Ferguson

September 2015

A

CKNOWLEDGMENTS

This book would not have been completed without a host of angels and archangels and a few generous funders to keep them fed. All these angels provided excellent, high quality research and writing assistance and I am most grateful to all of them. Some of the angels became archangels due to the extent of their research and writing contributions to this book. The archangels include Katie Duke for her work on chapters 1 to 3, Ashley Caron and Martin Hoffman for their work on chapters 4 and 5, James Parker for his work on chapters 1 and 6 and Madeline Reid for her editing contributions to the whole book. Chapters 9 to 12 would not have been possible without the excellent research and writing of Joseph Mooney, Jeremy Sapers, Mollie Deyong, Erin Halma and Victoria Luxford. Other indispensable angels included Laura MacDonald, Courtney Barnes, Lauryn Kerr and Ryan Solcz. I would like to sincerely thank the following organizations for helping to fund the research students: Law Foundation of British Columbia, University of Victoria Learning and Teaching Centre, Canadian Bar Association Law for the Future Fund, the Foundation for Legal Research and Dentons LLP.

I am also grateful to the following lawyers, professors and anti-corruption practitioners who have made valuable comments on parts of this book: Noah Arshinoff, Sean Burke, Roy Cullen, Alan Franklin, Dr. Noemi Gal-Or, Professor Mark Gillen, Steven Johnston, Selvan Lehmann, Richard Lane, Professor Andrew Newcombe, John Ritchie, and Graham Steele.

C

1

C

ORRUPTION IN

C

ONTEXT

:

S

OCIAL

,

E

CONOMIC AND

C

ONTENTS

1. WHY CORRUPTION MATTERS: THE ADVERSE EFFECTS OF CORRUPTION 2. THE MANY FACES OF CORRUPTION

3. DRIVERS OF CORRUPTION

4. PERCEPTIONS AND MEASUREMENTS OF CORRUPTION

5. MORE ISSUES ON MEASURING AND UNDERSTANDING CORRUPTION 6. HISTORICAL DEVELOPMENT OF INTERNATIONAL CORRUPTION LAWS 7. DIVERGENT POLITICAL AND ECONOMIC VIEWS ON CORRUPTION 8. ASOCIOLOGICAL PERSPECTIVE ON INSTITUTIONAL CORRUPTION 9. CORPORATE SOCIAL RESPONSIBILITY AND CORRUPTION

10. SUCCESSES AND FAILURES IN INTERNATIONAL CONTROL OF CORRUPTION:GOOD

GOVERNANCE

11. ANOTHER CASE STUDY:BAEENGAGES IN LARGE-SCALE CORRUPTION IN SAUDI ARABIA

1. W

HY

C

ORRUPTION

M

ATTERS

:

THE

A

DVERSE

E

FFECTS OF

C

ORRUPTION

1.1 A Case Illustration of the Impact of Corruption

The TV report noted below investigates the cancellation of World Bank funding ($1.2 billion loan) for a major bridge proposal (worth nearly $3 billion) in Bangladesh. The bridge is critical to both the economic growth of the country and the safety of hundreds of thousands

of poor Bangladesh citizens who cross the Padma River daily in crowded, unsafe boats.1 The

World Bank cancelled funding for the bridge project because very senior politicians and officials in the Bangladesh government allegedly solicited bribes from bidding companies. SNC-Lavalin allegedly agreed to pay those bribes in order to get the engineering contract (worth $50 million) to supervise the bridge construction. SNC-Lavalin is one of the five

1 _{“SNC and a Bridge for Bangladesh” CBC, the National, Investigative Report (15 minutes), aired}

largest international engineering firms in the world. It is based in Canada and operates in over 100 other countries.

Background on the Padma Bridge Corruption Scandal

When allegations of bribery concerning the awarding of the engineering contract to SNC-Lavalin arose, the World Bank (WB) instituted an investigation by an external evaluation panel in the Fall of 2012. According to the report of the WB Panel, there was evidence that in late March of 2011 two members of the Bangladesh Bridge Project Evaluation Committee (BPEC) unlawfully informed senior SNC-Lavalin officers in Bangladesh that SNC-Lavalin was currently second behind another firm, Halcrow, in the bidding process, but that no final recommendation had been made. In addition to BPEC’s recommendation, the awarding of the engineering contract would also have to be approved by Minister Syed Abul Hossain of the Bangladesh government. SNC-Lavalin officers allegedly took several steps to improve the company’s ranking on BPEC’s list. Mohammad Ismail, Director of an SNC-Lavalin subsidiary in Bangladesh was the main representative in the bidding process, along with SNC-Lavalin local consultant Md Mostafa. Ismail and Mostafa dealt directly with Zulfiquar Bhuiyan, the Secretary of the Bridge Authority and also a member of BPEC, and Minister Hossain. Bhuiyan indicated that he and the Minister expected to have a face-to-face meeting with a top SNC-Lavalin executive to “seal the project.” Ramesh Shah was Vice-President of SNC-Lavalin International Inc. (SLII) and reported to Kevin Wallace who was Senior Vice-President of SLII and the senior SNC-Lavalin executive assigned to the Padma Bridge project. SLII was a relatively small subsidiary or division of the SNC-Lavalin Group of companies. Its head office was located in Oakville, Ontario.

In May 2011, Ramesh Shah and Kevin Wallace flew to Bangladesh for a face-to-face meeting with Buiyan and Minister Hossain. The meeting was facilitated by an influential government Minister, Abul Hasan Chowdhury, whom the prosecution alleges was also an agent of SNC-Lavalin. After the meeting, Ramesh Shah wrote in his notebook, “PADMA PCC…4% Min…1% Secretary.” “PCC” was SNC-Lavalin’s internal notation for “project consultancy or commercial costs” which apparently was used in SLII’s accounts to refer to bribery payments. “Min” presumably referred to Minister Hossain and “Secretary” presumably referred to Secretary Buiyan. Two weeks later, SNC-Lavalin International Inc. was awarded the contract.

As noted, the World Bank “suspended” its funding for Padma Bridge in 2012 pending an external evaluation of alleged corruption by a WB Investigative Panel. After completing its initial evaluation, the WB panel recommended corruption charges be laid against several persons, including Minister Hossain. Bangladesh’s Anti-Corruption Commission (ACC) laid conspiracy to bribe charges against seven persons, but they adamantly refused to include Minister Hossain. The World Bank threatened to cancel the Padma Bridge loan agreement due to this refusal to conduct a “full and fair” corruption inquiry of all suspects. In January 2013, before a formal cancellation occurred, Bangladesh “withdrew” its formal request to the World Bank for funding of the bridge.

The bridge was scheduled for completion in 2014. According to Bangladesh news sources, work on the bridge began in 2015 using domestic financing and apparently a $2 billion investment from China. The government of Bangladesh initially claimed the bridge would be complete by 2018. In January of 2016, the Executive Committee of National Economic Council (ECNEC) approved a third revision to the Padma Bridge project raising the total project cost to more than Tk 80 billion (roughly US $1.02 billion) over budget. The Bangladesh Bridge Authority claimed that the increased budget is due to delayed implementation and associated factors including rising costs for construction materials,

consultancy services, and land, as well as recruiting more people to speed up the process.2

Independent sources have suggested that the climbing costs were also at least in part due to further bribery and corruption, and that in order to fund the project the Bangladeshi

government had to divert resources from essential services like health care.3 Meanwhile, a

hundred or more citizens continue to die yearly crossing the river on overcrowded and unsafe boats.4

The World Bank alerted the RCMP to evidence of possible corruption it had uncovered. After investigating, the RCMP initially laid bribery charges against two top SLII executives, Mohammed Ismail and Ramesh Shah. They are both Canadian citizens. Then, in September 2013, the RCMP laid bribery charges against three more persons: Wallace and Bhuiyan, both Canadian citizens, and former Minister Abul Hassan Chowdhury, who is a Bangladeshi national. A preferred indictment was filed on October 28, 2013, alleging one count of bribery by all five men committed between December 1, 2009 and September 1, 2011, contrary to s. 3(1)(b) of the Corruption of Foreign Public Officials Act. Chowdhury brought an action to stay the proceedings against him on the grounds that there was no jurisdiction to prosecute him, a Bangladeshi citizen who had never been in Canada, and whose alleged unlawful conduct occurred in Bangladesh. Canada has no extradition treaty with Bangladesh and had not attempted to have Bangladesh surrender Chowdhury for prosecution in Canada. Chowdhury was successful in his court challenge and the charges against him were stayed: Chowdhury v The Queen.5 Charges against Mohammed Ismail were subsequently dropped,

and the remaining three continued to await trial on the bribery charge.

In an important pre-trial issue in World Bank Group v Wallace, the Supreme Court of Canada unanimously ruled that the World Bank does not have to disclose its investigative reports

2 _{“Tk 8,286cr Rise in Padma Bridge Cost Okayed”, The Independent (6 January 2016), online:}

<http://www.theindependentbd.com/printversion/details/29269>.

3 _{Daniel Binette, “When Should Corruption Be Tolerated? The Case of the Padma Bridge”, The Global} Anticorruption Blog (6 November 2016), online:

< https://globalanticorruptionblog.com/2015/11/06/when-should-corruption-be-tolerated-the-case-of-the-padma-bridge/>.

4 _{See e.g., “Bangladesh Ferry Disaster Death Toll Reaches 70”, Daily Mail Online (23 February 2015)}

and US Today (23 February 2015).

and similar matters to the four accused.6 Any other result would have hampered the

investigation and would have been a significant blow to future cooperation from agencies such as the World Bank.

Based on the evidence of alleged corruption collected by the World Bank, SNC-Lavalin Group Inc. and the World Bank signed a Negotiated Resolution Agreement in which SNC-Lavalin International Inc. (SLII) and over 100 SNC-SNC-Lavalin Group Inc. affiliates have been debarred from bidding on World Bank funded projects for 10 years. The remainder of SNC-Lavalin Group Inc. will also be debarred if SNC-SNC-Lavalin does not comply with the terms of the settlement in regard to improving their internal compliance program. It is hard to determine what portion of total SNC-Lavalin work is likely to be affected by the World Bank debarment, although by some estimates it is thought to be less than two percent.

Meanwhile the Bangladesh ACC continued to investigate the charge of conspiracy to bribe by seven persons: three Bangladesh officials (including the Prime Minister’s nephew, Ferdous, Zaber and Bhuiyan), three SNC officials (Wallace, Shah and Mohammed Ismail), and SNC’s local agent Mostafa. Remarkably, the ACC, in its final report in September 2014, concluded that there was not sufficient evidence to proceed with a charge of conspiracy to bribe against any of these men. The ACC also reported that Ministers Hossain and Chowdhury had no involvement in the alleged bribery scheme [See Chapter 6 at Section 3.2 for further discussion of the Bangladesh ACC]. The ACC report was then filed with the Bangladesh court and on October 30, 2014, the Court acquitted all seven persons of conspiracy to bribe.

6 _{World Bank Group v Wallace, 2016 SCC 15. The World Bank received emails from tipsters suggesting}

that there had been corruption in regard to the bridge supervision contract. The World Bank did its investigation and found evidence of corruption. After debarring SNC-Lavalin Group Inc. from bidding on World Bank-sponsored projects for 10 years, the World Bank shared the tipsters’ emails, its own investigative reports and other documents with the RCMP. The RCMP used that information to obtain a warrant to intercept private communication (a wiretap warrant) and a search warrant to obtain certain documents from SNC-Lavalin offices. After the conspiracy to corrupt charge was laid, the accused person brought an application before an Ontario Superior Court trial judge to quash the wiretap authorization and thereby exclude from trial the evidence collected by wiretap. As part of the wiretap challenge, the accused sought an order requiring production to them of certain World Bank investigative documents. The trial judge concluded that certain World Bank documents were “likely relevant” to the accused’s right to a fair trial and therefore ordered those documents be produced for review before the court. The SCC quashed the production order on two grounds. First, the World Bank was granted immunity from such disclosure under the Articles of Agreement setting up the World Bank, Articles which Canada and some 185 countries have agreed to. Second, even if the World Bank did not have immunity, the documents sought did not pass the “likely relevant” test, and therefore a court could not lawfully order their disclosure.

Criticism of the World Bank

It should be noted that some commentators are highly critical of the World Bank’s lending

practices. For example, Paul Sarlo7 argues that the World Bank facilitates large scale

corruption by making huge development loans to notoriously corrupt governments without imposing a regime of due diligence to ensure the loan is used for the intended project.8 This

lack of due diligence opens the door to theft of 20-40% of loans by corrupt leaders or through the companies they hire to complete the project. Ultimately it is the citizens of the corrupt borrowing country who pay, since they are responsible for full repayment of the loan with interest even if part of the loan is stolen.

A Shocking Conclusion

On January 6, 2017 the trial judge, Justice Nordheimer, threw out all the wiretap evidence in the case on the basis, amongst others, that the information provided in the Information to

Obtain (ITO) was nothing more than “speculation, gossip and rumour”.9 If that was true,

what does that say about the experience and competence of the senior RCMP officers who

sought the wiretap, and of any prosecutor who may have assisted in obtaining it?10 _{If the}

trial judge’s overall characterization of the ITO was incorrect, why didn’t the Public Prosecution Service of Canada (PPSC) appeal that decision? Barely one month later, on February 10, 2017, the Crown elected to call no witnesses at the trial on the grounds that “we

7_{Paul Sarlo, “The Global Financial Crisis and the Transnational Anti-Corruption Regime: A Call for}

Regulation of the World Bank’s Lending Practices” (2014) 45 Geo J Intl L 1293.

8 _{For example, the World Bank lent Indonesia $30 billion during the thirty-year rule of notoriously}

corrupt General Suharto. The International Monetary Fund has been subject to similar criticism related to irresponsible lending. For example, a portion of an IMF loan to Russia was used by Boris Yeltsin for his re-election campaign in 1996: Clare Fletcher and Daniela Herrmann, The

Internationalisation of Corruption (Burlington, VT: Ashgate, 2012) at 68.

9 _{“The fact that a particular investigation may be difficult, does not lower the standard that must be}

met in order to obtain a Part VI authorization. Reduced to its essentials, the information provided in the ITO was nothing more than speculation, gossip, and rumour. Nothing that could fairly be referred to as direct factual evidence, to support the rumour and speculation, was provided or investigated. The information provided by the tipsters was hearsay (or worse) added to other hearsay.” (R v Wallace, 2017 ONSC 132 at para 71).

10 _{For more details concerning allegations of SNC-Lavalin’s involvement in corruption of}

Bangladeshi public officials, World Bank’s investigation and subsequent withdrawal from funding the project, and RCMP investigation into this matter, see World Bank, “World Bank Statement on Padma Bridge” (29 June 2012), online: <

http://www.worldbank.org/en/news/press-release/2012/06/29/world-bank-statement-padma-bridge, and World Bank> and World Bank Group v

had no reasonable prospect of conviction based on the evidence”.11 If the wiretap evidence

was as legally suspect as Justice Nordheimer found, why didn’t the PPSC pursue the other available evidence before the trial began that would have supported the continuation of the prosecution, including the possibility of a plea agreement or a non-prosecution agreement with one of the original conspirators in exchange for their cooperation and testimony? It is in the public interest to ask whether the RCMP officers and prosecutors were up to the task of investigating and prosecuting this foreign bribery case? An inquiry and subsequent public explanation of why this important CFPOA case fell apart will be helpful for future investigations and prosecutions and may help reduce the damage done to Canada’s reputation.

Corruption is “public enemy no. 1” in the developing world, according to World Bank President Jim Yong Kim, and “every dollar that a corrupt official or corrupt business person puts in his or her pockets is a dollar stolen from a pregnant woman who needs healthcare, or from a girl or boy who deserves an education, or from communities that need water, roads and schools.” Recently, it has been estimated that as much as $1 trillion annually is siphoned off from developing countries by corruption, tax evasion and other large financial crimes. The World Bank has estimated that as much as $40 billion in foreign aid to the world’s poorest countries has been lost to corruption in recent years. And 3.6 million people die from inadequate health care and living conditions each year in part because corruption has stolen away development aid. UN Development Programme Administrator Helen Clark stated that “corruption can stand in the way of people getting basic services,” while UK Prime Minister David Cameron said “don’t let anyone keep corruption out of how we tackle poverty.” In 2008, the US Assistant Attorney General warned that “corruption is not a gentleman’s agreement where no one gets hurt. People do get hurt. And the people who are hurt the most are often residents of the poorest countries on earth.”

The remainder of Section 1 will look at the nature, causes and consequences of corruption that have motivated such strong condemnation of corruption by world leaders.

11 _{Jacques Gallant, “Judge acquits SNC-Lavalin execs, says RCMP relied on ‘gossip’”, Toronto Star (10}

February 2017), online: < https://www.thestar.com/news/gta/2017/02/10/judge-acquits-snc-lavalin-execs-says-rcmp-relied-on-gossip.html>, and Janet McFarland, “Former SNC executives,

businessman acquitted in corruption case”, The Globe and Mail (10 February 2017), online:

< http://www.theglobeandmail.com/report-onbusiness/former-snc-lavalin-executives-businessman-acquitted-in-corruption-case/article33979762/>.

1.2 Four Concerns about Corruption

The Organization for Economic and Cooperative Development (OECD) prepared a Background Brief in 2013 entitled “The Rationale for Fighting Corruption” as part of the organization’s CleanGovBiz: Integrity in Practice Initiative.12 The initiative seeks to involve

civil society and the private sector in anti-corruption strategies. The brief provides an overview of the reasons why everyone should be concerned about corruption. The text of this brief is set out below:

12 _{“The Rationale for Fighting Corruption” (OECD, 2013), online:}

<http://www.oecd.org/cleangovbiz/49693613.pdf>.

BEGINNING OF EXCERPT

The Rationale for Fighting Corruption

The costs of corruption for economic, political and social development are becoming increasingly evident. But many of the most convincing arguments in support of the fight against corruption are little known to the public and remain unused in political debates. This brief provides evidence that reveals the true cost and to explain why governments and business must prioritise the fight against corruption.

What is Corruption?

Corruption is the abuse of public or private office for personal gain. It includes acts of bribery, embezzlement, nepotism or state capture. It is often associated with and reinforced by other illegal practices, such as bid rigging, fraud or money laundering. [Transparency International describes corruption as “the abuse of entrusted power for private gain.”]

What does Corruption Look Like?

It could be a multinational company that pays a bribe to win the public contract to build the local highway, despite proposing a sub-standard offer. It could be the politician redirecting public investments to his hometown rather than to the region most in need. It could be the public official embezzling funds for school renovations to build his private villa. It could be the manager recruiting an ill-suited friend for a high-level position. Or, it could be the local official demanding bribes from ordinary citizens to get access to a new water pipe. At the end of the day, those hurt most by corruption are the world’s weakest and most vulnerable.