On June 24, Calgary-based Niko Resources Ltd. pleaded guilty to an offence under the Corruption of Foreign Public Officials Act. In addition to a $9.5-million fine, the court imposed three years of onerous probation conditions on the company.
All of this was because Niko provided Bangladesh’s junior energy minister with a $190,000 SUV for his personal use and trips to Calgary and New York.
No cash transfer was involved, but at the time the minister was investigating the company’s liability to Bangladeshi villagers affected by explosions at a Niko operation.
Although Canada has been late to the game in international anti-corruption enforcement, observers saw the prosecution and a statement from the RCMP that the force had more than 20 cases under investigation as a sign that Canada was finally taking anti-corruption enforcement seriously.
But unlike the United States, where the Securities and Exchange Commission has recently implemented the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that authorize what amount to large bounty payments to whistleblowers for information about violations of securities laws, there are no similar regulations in Canada.
“Canadian whistleblowing laws tend to be very specific and pinpointed,” says Rachel Silver, who until recently worked at Norton Rose OR LLP.
Most provincial occupational health and safety laws protect employees from statute-related reprisals. For example, Ontario’s Occupational Health and Safety Act prohibits employers from retaliating against workers who have complied with the legislation’s provisions.
The Canada Labour Code contains similar provisions but provides for a maximum fine of only $15,000 for a contravention. Many of the country’s human rights codes contain protections that prohibit threatening, intimidating or discriminating against someone because that person is enforcing rights under the legislation.
Environmental protection legislation also has whistleblowing provisions. Ontario’s Environmental Protection Act and Environmental Bill of Rights prohibit reprisals against employees complying with certain legislation, including the Environmental Assessment Act, the Nutrient Management Act, the Ontario Water Resources Act, the Pesticides Act, the Safe Drinking Water Act, and the Toxics Reduction Act.
Offenders are subject to prosecution; employees have a right of complaint to the Ontario Labour Relations Board, which has wide remedial powers including reinstatement with back pay; and dismissed whistleblowers have a civil claim for lost wages and punitive damages if the termination flows from an attempt to have an environmental law enforced.
At the federal level, the Canadian Environmental Protection Act prohibits employers from retaliating against employees who report offences, refuse to conduct illegal activities or declare their intention to comply with the law. The statute also permits whistleblowers to request that their identities remain confidential.
Section 425.1 of the Criminal Code prohibits employers from retaliating or threatening to take action against employees who provide information to a federal or provincial law enforcement official. Sanctions include imprisonment for up to five years.
“The broadest whistleblower protections in Canada, however, are found in the criminal rather than the regulatory context,” Silver says. “But the government doesn’t appear to have been using this provision too often.”
Allan Cutler, the former bureaucrat who unveiled the sponsorship scandal under the former Liberal government, was demoted for speaking up, and eventually transferred from his position for his trouble, says self-regulation doesn’t work in the private sector.
“Without oversight, there’s no accountability,” he says. “And no matter what industry sector you’re talking about, they start with good intentions, but sooner or later an embarrassing case emerges or senior management knows the wrongdoer and someone says, ‘Let’s go a little easier.’ And that’s where the straight and narrow ends.”
Susan Hackett, who led the charge against the Dodd-Frank whistleblower rules during her time as general counsel for the Association of Corporate Counsel, says there are serious pressures for whistleblower legislation in Canada.
“Look at the influence of groups like FAIR [Federal Accountability Initiative for Reform] and institutional shareholder groups,” she says. “There’s no reason why what’s going on in Australia, New Zealand, and Europe shouldn’t come to Canada.”
But even if legislation isn’t imminent, change on the regulatory level is.
“One of the fallouts of Dodd-Frank and the SEC’s response is that a whole bunch of other agencies like the Commodity Futures Trading Commission are going to be very interested in passing their own version of whistleblower rules,” Hackett says.
“It’s one of those bandwagons that leads me to believe that Canadian institutions like the TSX might not be far behind, especially because it’s a way of placating people who ask what regulators are doing to stop the rampant misconduct that’s perceived.”
However that may be, virtually everyone is in agreement that one of the best ways to ward off some aspects of whistleblower legislation is to establish effective internal compliance systems.
“Canadian companies need to ramp up their compliance programs very significantly,” says Riyaz Dattu of Osler Hoskin & Harcourt LLP.
But only widespread adoption of such policies will deter governmental action. “Corporate Canada must recognize that there’s movement afoot that includes bounties and a private right of action for whistleblowers, so it has to put itself in a position where it can demonstrate that effective internal whistleblowing programs are embedded in the ordinary course of business,” says Eric Block of McCarthy Tétrault LLP.
“We don’t want any government to be in a position where it feels compelled to advance a more draconian position.”
TD Bank is an institution that’s done exactly that. The organization has a hotline for whistleblowers and a web site presence that allow information to come forward anonymously. It also gives independent directors access to the web site to ensure that management can’t bury complaints.
“We do everything we can to encourage employees to report misconduct and to let them know that we are highly supportive of any source of information that helps us uncover wrongdoing,” says Chris Montague, the bank’s general counsel.
All of this was because Niko provided Bangladesh’s junior energy minister with a $190,000 SUV for his personal use and trips to Calgary and New York. No cash transfer was involved, but at the time the minister was investigating the company’s liability to Bangladeshi villagers affected by explosions at a Niko operation.
Although Canada has been late to the game in international anti-corruption enforcement, observers saw the prosecution and a statement from the RCMP that the force had more than 20 cases under investigation as a sign that Canada was finally taking anti-corruption enforcement seriously.
But unlike the United States, where the Securities and Exchange Commission has recently implemented the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act that authorize what amount to large bounty payments to whistleblowers for information about violations of securities laws, there are no similar regulations in Canada.
“Canadian whistleblowing laws tend to be very specific and pinpointed,” says Rachel Silver, who until recently worked at Norton Rose OR LLP.
Most provincial occupational health and safety laws protect employees from statute-related reprisals. For example, Ontario’s Occupational Health and Safety Act prohibits employers from retaliating against workers who have complied with the legislation’s provisions.
The Canada Labour Code contains similar provisions but provides for a maximum fine of only $15,000 for a contravention. Many of the country’s human rights codes contain protections that prohibit threatening, intimidating or discriminating against someone because that person is enforcing rights under the legislation.
Environmental protection legislation also has whistleblowing provisions. Ontario’s Environmental Protection Act and Environmental Bill of Rights prohibit reprisals against employees complying with certain legislation, including the Environmental Assessment Act, the Nutrient Management Act, the Ontario Water Resources Act, the Pesticides Act, the Safe Drinking Water Act, and the Toxics Reduction Act.
Offenders are subject to prosecution; employees have a right of complaint to the Ontario Labour Relations Board, which has wide remedial powers including reinstatement with back pay; and dismissed whistleblowers have a civil claim for lost wages and punitive damages if the termination flows from an attempt to have an environmental law enforced.
At the federal level, the Canadian Environmental Protection Act prohibits employers from retaliating against employees who report offences, refuse to conduct illegal activities or declare their intention to comply with the law. The statute also permits whistleblowers to request that their identities remain confidential.
Section 425.1 of the Criminal Code prohibits employers from retaliating or threatening to take action against employees who provide information to a federal or provincial law enforcement official. Sanctions include imprisonment for up to five years.
“The broadest whistleblower protections in Canada, however, are found in the criminal rather than the regulatory context,” Silver says. “But the government doesn’t appear to have been using this provision too often.”
Allan Cutler, the former bureaucrat who unveiled the sponsorship scandal under the former Liberal government, was demoted for speaking up, and eventually transferred from his position for his trouble, says self-regulation doesn’t work in the private sector.
“Without oversight, there’s no accountability,” he says. “And no matter what industry sector you’re talking about, they start with good intentions, but sooner or later an embarrassing case emerges or senior management knows the wrongdoer and someone says, ‘Let’s go a little easier.’ And that’s where the straight and narrow ends.”
Susan Hackett, who led the charge against the Dodd-Frank whistleblower rules during her time as general counsel for the Association of Corporate Counsel, says there are serious pressures for whistleblower legislation in Canada.
“Look at the influence of groups like FAIR [Federal Accountability Initiative for Reform] and institutional shareholder groups,” she says. “There’s no reason why what’s going on in Australia, New Zealand, and Europe shouldn’t come to Canada.”
But even if legislation isn’t imminent, change on the regulatory level is.
“One of the fallouts of Dodd-Frank and the SEC’s response is that a whole bunch of other agencies like the Commodity Futures Trading Commission are going to be very interested in passing their own version of whistleblower rules,” Hackett says.
“It’s one of those bandwagons that leads me to believe that Canadian institutions like the TSX might not be far behind, especially because it’s a way of placating people who ask what regulators are doing to stop the rampant misconduct that’s perceived.”
However that may be, virtually everyone is in agreement that one of the best ways to ward off some aspects of whistleblower legislation is to establish effective internal compliance systems.
“Canadian companies need to ramp up their compliance programs very significantly,” says Riyaz Dattu of Osler Hoskin & Harcourt LLP.
But only widespread adoption of such policies will deter governmental action. “Corporate Canada must recognize that there’s movement afoot that includes bounties and a private right of action for whistleblowers, so it has to put itself in a position where it can demonstrate that effective internal whistleblowing programs are embedded in the ordinary course of business,” says Eric Block of McCarthy Tétrault LLP.
“We don’t want any government to be in a position where it feels compelled to advance a more draconian position.”
TD Bank is an institution that’s done exactly that. The organization has a hotline for whistleblowers and a web site presence that allow information to come forward anonymously. It also gives independent directors access to the web site to ensure that management can’t bury complaints.
“We do everything we can to encourage employees to report misconduct and to let them know that we are highly supportive of any source of information that helps us uncover wrongdoing,” says Chris Montague, the bank’s general counsel.
