The Precarious DPA: A Canadian Scandal and Corporate Prosecution

By Alex Simard (PO’22)

While the media centered its attention this week on the mounting scandals and investigations engulfing the Trump Administration, a Canadian scandal grew in scope and scale. On Monday, the Trudeau ministry faced its third major resignation in less than a month. Conservative opposition leader Andrew Scheer called again for the Prime Minister’s resignation, citing a loss of “moral authority.” These developments might seem surprising considering Justin Trudeau’s reputation as a young, open-minded, and traditionally liberal politician, but his rhetoric of openness and transparency in government now seems overshadowed by the reality of scandal. This case is more than a routine tabloid romp; rather, it gets to the heart of how a government is expected to prosecute corporations.  

These are the facts. SNC-Lavalin is a Quebec-based engineering and construction giant. In February of 2015, the Canadian Justice Department brought criminal charges against the firm. The Justice Department alleged that between 2001 and 2011, SNC-Lavalin spent 47.7 million Canadian dollars in bribes to Libyan government officials in order to secure contracts in the country. The department further alleged that the company defrauded the Libyan government of 129.8 million Canadian dollars. Those charges don’t exist in a vacuum. SNC-Lavalin’s business practices leave a trail of corruption, including a 2012 plot to smuggle former Libyan dictator Muammar Gaddafi’s son into Mexico.

In November of 2015, the case fell on the desk of newly appointed Justice Minister Jody Wilson-Raybould. In Canada, the Minister of Justice is kept separate from federal prosecutors and only in exceptional cases is the Minister supposed to intervene with ongoing prosecutions. In this case, Wilson-Raybould saw no exceptional circumstances that would warrant interference. It’s evident now that the Prime Minister disagreed.

In March of 2018, tucked into a federal spending bill, Trudeau passed a fundamental change to the country’s criminal code. The change, now in effect in Canada, permits the use of deferred prosecution agreements (DPAs), sometimes called remediation agreements. The DPA has long been used in the U.S. and U.K., and the Canadian practice is modeled closely on its Western counterparts. In short, a DPA lets a company avoid criminal prosecution and the harmful consequences such a prosecution might bring by using fines, oversight, and other tools to rehabilitate the company.

According to the testimony of Wilson-Raybould, members of the Trudeau ministry, including Trudeau himself, pressured Wilson-Raybould over the course of several months to direct prosecutors to use the new DPA procedures instead of the planned criminal prosecution. Canadian legal experts disagree on the severity of these allegations, but Trudeau’s engagement in obstruction of justice is not out of the question. In January, Wilson-Raybould changed posts in the Ministry, a change widely viewed as a demotion. A few weeks later she resigned. Shortly after, top Trudeau advisor Gerard Butts left and this week, President of the Treasury Board Jane Philpott followed suit.

But what was the impetus for Trudeau’s alleged interference? If the prosecution were to succeed, SNC-Lavalin would be banned from federal contracts for a decade, crippling the company and subjecting it to a possible foreign takeover. SNC-Lavalin employs thousands in Trudeau’s home province of Quebec. If Quebec were to face job loss because of the prosecution, it could damage Trudeau’s foothold in a province that voted overwhelmingly for the Prime Minister’s Liberal Party in the last elections. The potential consequence of a criminal approach prompted SNC-Lavalin to lobby for the creation of DPA procedures and motivated Trudeau’s eventual approval of the new practices.

Central to Canada’s scandal is the question of whether a DPA is a bargain meant to strip corporations of responsibility or an effective way to mitigate the economic consequences of criminal prosecution. What makes the Canadian scandal so important is its unique position between these two questions. On one hand, SNC-Lavalin has an extensive history of corrupt practices; and on the other, the community it employs stands to lose significantly if the firm is prosecuted. Canada’s DPA system is modeled on a U.S. system that gives broad discretion to prosecutors when it comes time to weigh those factors. Because Canada’s system is so new, I’ll rely on the U.S. model to explain the rise of the DPA and why its use is so significant in the SNC-Lavalin case.

The U.S. model of deferral is a consequence of the prosecutorial trend away from criminal proceedings and towards settlement and negotiation. The practice began in 1914 when the Chicago Boy’s Court chose to employ deferrals for juvenile defendants, a practice that gained widespread use by the 1960s. The 1962 Supreme Court Ruling in Robinson v. California extended the practice to some drug offenses. In 1975, the Congress officially endorsed the practice. For juveniles and drug offenders, deferral meant avoiding the life-altering consequences of conviction while being forced along a path to rehabilitation. The practice of deferral was criticized as a violation of due process, but the 1982 case of United States v. Hicks ruled that a deferral constitutes an enforceable contract. In the early 1990s, prosecutors began extending the practice to corporate defendants. For years, prosecutors were given near-complete autonomy on deferral proceedings, but in 1999 then-Deputy Attorney General Eric Holder announced a new set of prosecutorial guidelines for deferrals. Prosecutors were to consider eight main factors, among them the history and extent of the company’s wrongdoing and potential harm a traditional prosecution could cause innocent third parties. In the U.S., it’s the prosecutor who weighs those factors, and a judge has an almost nonexistent role.

A DPA is used in clear-cut cases in which the evidence favors a conviction. As such, commentators have noted that in deferral cases, prosecutors hold the “sword of Damocles” over the head of corporate defendants. The sword of criminal consequence gives prosecutors ample freedom when conceiving a rehabilitation plan. But prosecutors also dangle the sword, if inadvertently, over the head of political figures who bear the economic consequences of a company’s conviction.

If consideration of economic consequence is key to corporate prosecution, then why are Trudeau’s actions being scrutinized? In the U.S., prosecutorial discretion is broad and centered on Holder’s guidelines. In Canada, prosecutors face more explicit limitations. When prosecutors consider cases of bribery, like the one against SNC-Lavalin, they are forbidden from taking into account the national economic impact of criminal prosecution. That provision is aimed at removing political influence from the ultimate prosecutorial decision, forcing prosecutors to found their prosecution on the company’s actions alone. So when the Trudeau ministry allegedly pressured Wilson-Raybould and asked her to take into account the significant economic loss SNC-Lavalin’s conviction would cause, it engaged in the very behavior the provision is meant to prevent.

DPAs by their nature toe a precarious line. By making the prosecutor the sole arbitrator when a corporation is charged, they are embodiments of the prosecutor’s growing independence in Western systems of justice. But unlike a judge, who rules only on matters of law, a prosecutor exists in a charged political sphere, one in which the desires of politicians and corporations are interwoven with pure considerations of law. So how should DPA procedures reckon with the realities of a complex system of influence? In Canada, the bribery provision sought to make the prosecutor more like a judge by isolating them from political considerations. That provision stems from Canada’s long tradition of prosecutorial independence, the same tradition that limited Wilson-Raybould’s influence on the SNC-Lavalin case. In the U.S., Holder’s guidelines embraced the interwoven nature of prosecutorial negotiation and drew from precedent like Hicks to make prosecutors flexible contract negotiators rather than isolated judges. If Canada’s scandal is evidence, it’s difficult to separate prosecutors from the political sphere in which they exist. It’s yet unclear what a solution might be, but the approaches of Canada and the U.S. present two paths: either further separate prosecutors from political influence or embrace the interwoven nature of corporate prosecution.

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