A brief version of this article that focusses specifically on the legislation and recommendations for policy is available on the Institute for Public Policy Magazine site, Policy Options. Reading the short version first will help readers follow this somewhat more extensive argument that also deals with the accusations of the former Attorney General and their reception in the public square. Find the Policy Options version here.
The SNC-Lavalin (SNC) controversy has received extensive coverage in the press, much of it misleading. The distortion arises because it has been presented as an issue about the independence of prosecutors. A related factor arises from new legislation that enables companies to avoid prosecution under certain limited circumstances. Prosecutors now have a responsibility to incorporate the intent of the new legislation in their deliberations.
The company is accused of bribery and fraud in Libya over the period 2001-2011. Legislation passed with broad political support in June 2018 established an alternative to prosecution whenever that is in the public interest. That alternative, a Remediation Agreement, more commonly known as a Deferred Prosecution Agreement (DPA), was added to the criminal code and this is the first case in which the new option was available. The Director of Public Prosecutions (DPP) decided not to offer the new option to SNC. Instead she embarked on a criminal prosecution and the former Attorney General (AG) accepted that decision. Other members of government initiated discussions about that choice to determine why it was made and whether the newly available alternative had been appropriately considered. Those discussions continued through the fall of 2018. In December 2018, Minister Scott Brison retired from politics triggering a cabinet shuffle that led to changes including Jody Wilson-Raybould being moved to Veterans Affairs in early January 2019. On January 15th 2019 the former AG resigned from the Cabinet. Later, appearing before the Commons Justice Committee, she publicly accused her government colleagues of putting inappropriate pressure on her to change the decision so that SNC would be offered an opportunity to negotiate a DPA. The ensuing controversy has caused public opinion to turn against the government.
I begin with the new legislation and how it is intended to be applied in the case of SNC. That leads to an interpretation of these matters that differs from that of the former AG and most media accounts. While independence of the prosecutor is important, the prosecutor also has an increased responsibility to assess the effect on the public interest of each alternative in making her decision. I then consider the evidence provided through testimony on both sides of the “undue pressure” accusation. The conflicting stories compel further analysis and eventually a judgement about who to believe. My conclusion is that the former AG’s accusation and version of events is highly doubtful. As well, the initial decision to not consider a DPP is likely incorrect. I then try to determine why the initial decision was made. This is somewhat speculative since the reasoning has not been made public. However, the legislation itself provides a possible answer. My interpretation of the legislation not only reveals that answer, but also supports my contention that the decision was mistaken. And finally, the legislation has an inherent conflict that should be resolved to prevent future recurrences of this unfortunate event.
Legislation enabling DPAs is new to Canada but is in place in several other countries, including the United States and the United Kingdom. These agreements enable a stay of proceedings and have several purposes, summarized as follows: a) denounce wrongdoing; b) levy penalties and fines; c) ensure internal corrections; d) encourage voluntary disclosure; e) ensure reparations to the community; and, most relevant here so cited in full,
f) to reduce the negative consequences of the wrongdoing for persons —employees, customers, pensioners and others —who did not engage in the wrongdoing, while holding responsible those individuals who did engage in that wrongdoing.
A negotiated DPA would forestall a criminal conviction, thus averting a possible 10 year ban on Federal contracts. DPAs must be approved by a relevant court, can be terminated if conditions aren’t met and are burdensome, costly, and include financial penalties. They are clearly not a “get out of jail free” card as some have characterised them. Note that purposes a) to e) of the act that established DPAs could also be met through a judgement following a successful criminal prosecution. Objective f) stands apart as an element of a DPA not achievable by prosecution. It differentiates the two options with respect to assessing the public interest.
There is common ground that the decision whether to prosecute wrongdoers must reside with the Prosecutor. In this case that means the DPP with approval of the AG. That is intended to preclude the possibility of interference in the justice system to serve political interests. The new legislation does not change that principle. However, it does introduce an alternative to prosecution that increases the onus on prosecutors to compare the public interest implications of each option.
This is the essential background. I will now consider the implications of the public interest test, the charges made by the former AG, the reception of those in the media, and some discrepancies in her account. That discussion challenges the former AGs version of what happened. It also reveals possible deficiencies in the new legislation that could be resolved by Parliament.
The prosecutor’s choice between negotiation and prosecution is intended to be based on a comparison of the net effect on the public interest of each alternative. This is not always a trivial exercise. The benefits of a DPA mainly come from avoiding the negative impact of prosecution. That requires understanding how a criminal conviction might affect the company and the society in which it operates. The benefits of a criminal prosecution are to impose punishment on the company and responsible employees in order to send a strong message that will deter future transgressions. However, all of the individuals involved in the transgression are no longer with SNC. There is a new CEO, a new Board of Directors, and senior executives involved in the alleged activities are gone. As well, the company has already taken measures to change its culture and implement procedures to prevent future transgressions. So although there is some benefit from criminal proceedings in sending a message to deter bribery and fraudulent practices, the benefit is much smaller than it would be if blameable parties were still guiding the company. This smaller benefit of prosecution must then be compared with its effect on innocent parties. Put another way, pretty well all of the net benefits available from a criminal prosecution can be achieved through a properly negotiated DPA without incurring any adverse impact on innocent parties. This is precisely the situation for which the DPA legislation was intended.
The requirement to compare prosecution versus a DPA led to a politicized public debate about whether there really would be an adverse effect on SNC from a criminal conviction. That debate stressed things like job losses including demands to “prove it”. More realistically the question is whether criminal conviction would not have a significant adverse effect on the company, its employees and others. Since a criminal conviction could lead to a 10 year ban on Federal Contracts some adverse effect would be inevitable. The size of that effect is uncertain because SNC operates internationally and also across Canada. It’s possible they could replace lost Federal contracts with provincial or international contracts. However, practically speaking, much harm is done by reducing their potential client base significantly. Moreover, at least some, if not all provincial and foreign governments, would likely decide that if this company is not even welcomed by their own home government why should it even be considered by other governments? Alternatively, other governments might allow SNC to bid on projects, but if the company’s bid earned it a place in the top tier of candidates, the likelihood of them being awarded the contract would be much lower than it would be without the criminal conviction. Since such companies usually have contracts for future work in hand, the impact might not be immediate. But soon, if many governments disqualified the company, it could be forced to shrink, or conceivably go out of business, significantly affecting existing supply chains and other dependant businesses. That would have a multiplied effect on economic activity. Depending on how fragile the Canadian economy was when that happened the impact could reverberate. The possibility of, say, tipping Canada into recession would seem to be small but also highly uncertain and dependent on the economic environment at the time. This uncertainty about the company and the economy is itself an adverse effect that would affect the public interest and should be included in any comparison. In summary, the new legislation introduced an alternative to prosecution. That required the DPP to compare the effect on the public interest of each alternative. That comparison, in some circumstances, may be fairly complex.
So there was a legitimate public policy issue that justified participation of others in government. That leaves open the question as to whether or not the attempts by colleagues to engage that discussion became undue pressure. Dialogue between colleagues and the AG is acceptable, as long as it does not become an attempt to direct a specific decision. In this case, we have to consider not only what was said, but how it was said and in what forum.
The colleagues of the former AG testified they were trying to clarify the basis of the decision and gain comfort that it was consistent with the objectives of the legislation. In direct testimony, the former AG stressed her concern that colleagues were raising things of “partisan political interest”. Gerald Butts, former Principal Secretary to the Prime Minister, and Michael Wernick, Clerk of the Privy Council (a non-partisan group that provides advice to the PM and Cabinet) instead, focussed on their desire to ensure that relevant matters of “public policy” were considered. Those two things are very different—partisan political interests being unacceptable but relevant objectives of public policy being unquestionably critical to a proper decision. Given the framework of this legislation, it is simply wrong to say the debate is only, or even mainly, about possible interference with the prosecutor’s decision. It is equally about the fact that this new legislation imposed a duty on the prosecutor to understand the policy related public interest aspects of each alternative and properly compare them. Because policy issues may be complex and extend across departmental boundaries, broad consultation with others in government would likely enhance that process.
Since a decision to prosecute can be altered at any time, even during a trial, the fact that colleagues persevered in their attempts to address these matters with the AG should not be surprising. The policy wonks among the staff would have viewed it as their duty to pursue the matter. Because the political actors involved were in essence a high level team with broadly similar political outlooks and objectives they were probably comfortable with an in-house discourse. Suddenly the SNC matter comes to a head, and the DPP and former AG surprise their colleagues by deciding against the negotiation alternative. It would be a surprise, given the analysis above, because this looks like an ideal candidate for a DPA. In those circumstances, it would be understandable if high level staff tried to come at things from many different directions in order to understand the rationale for the decision and ensure it was properly made. If each time they hit a brick wall that was simply explained as, “I thought about it and made my decision”—they might be tempted, in individual conversations to try on innovative arguments, occasionally straying close to or over the boundary between policy and politics. Given the somewhat imprecise nature of the accepted constraints around exerting “undue pressure” the subsequent complaint of the former AG that such pressure was applied is not easy to assess. The actual words may have occasionally crossed some relatively undefined line, but not necessarily in a way that would realistically have put undue pressure on the former AG.
Even a secretly recorded conversation with Mr. Wernick, though it supported the former AGs initial testimony about actual words spoken, did not support her interpretation about pressure and veiled threats. The tone was non-threatening and Mr. Wernick emphasized the decision was hers to make. He was clearly struggling to engage a line of conversation that might uncover the rationale for the decision. Part of his job, as Clerk of the Privy Council, is to help resolve differences within the Cabinet. In his effort to persuade the former AG to provide a clear explanation of the decision or consider adopting a more flexible review, Mr. Wernick did convey concern about the Prime Minister and the former AG being at odds. That may have been unwise—it allowed her to make a claim of “veiled threats” (although again, I believe the tone contradicts that interpretation). Moreover, Mr. Wernick thought he was having a private conversation with a member of a team he was supporting, someone with whom he could be open, and have a frank exchange about an important policy disagreement. Such exchanges are an integral and ongoing part of the work of the Privy Council.
The fact that the former AG was recording that call without the knowledge of Mr. Wernick means she was in a position to affect the course of the conversation in a subtly strategic way, for example through words or hesitations that might draw Mr. Wernick into questionable areas, and more directly by enabling her to put on the record a claim that she was uncomfortable with the discussion and it was inappropriate. She did not appear intimidated in the least. Rather she sounded more aggressive than one might expect, given the hesitant tone of Mr. Wernick and his assurances that they weren’t asking her for a specific decision. Her follow-up email to her Deputy, to the effect that the “s… was about to hit the fan” loses all significance when linked to this engineered conversation. Furthermore, Mr. Wernick is an advisor not a decision-maker: any truly worrisome uncertainty could have been resolved by a conversation with the Prime Minister.
And finally, a lawyer taping a conversation with their own client without advising that client is, of course, a major breach of ethics and a personal betrayal. The willingness to overlook or rationalize that in the media and by political opponents of the government is startling. Such behaviour calls into question the reliability of everything Jody Wilson-Raybould has said in her allegations against her colleagues. How can one now ignore the possibility that all of her recollections have been coloured to strengthen her desired interpretation of what was happening? Additionally, she had previously instructed staff on September 17th 2018 to maintain a detailed chronology on all meetings about SNC. As discussed further below, she later instructed staff not to forward a report requested by the Privy Council assessing the possible effects on SNC of a criminal conviction. All of these things reveal a frame of mind that might easily be taking everything in with an inordinate degree of suspicion. This inappropriate recording does not support her allegations, it raises questions about them.
Vested interests have been a major force in intensifying the controversy. The political opposition have a clear interest in characterizing the events as showing ineptitude and possible misbehaviour on the part of senior government staff and then linking that to the Prime Minister. The Conservative Leader even charged that this was corruption and called for the resignation of the Prime Minister. Clearly premature and unwarranted, such charges appeal to supporters and possibly influence more balanced observers who don’t have time to check the facts. The longer political opponents can keep the controversy distorted and in the public eye the better for them in an election year. The media, with few exceptions, have also taken a highly critical stance: unquestioningly accepting the former AGs version of events with its implied indictment of the Prime Minister. Controversy is good news for some. The company involved, its employees, pensioners and associated firms are innocent pawns, put in a position of uncertainty; precisely opposite to the intent of the DPA legislation.
This brings us to the inevitable question of who to believe. The former AGs testimony came first and was initially accepted without question in most reporting. The other side of the story was relayed somewhat later by Gerald Butts, Michael Wernick, and to some degree, the Deputy Minister of Justice, Natalie Drouin. The former AG’s testimony was well organized and well presented. She is a lawyer and former prosecutor so that is not surprising, though it certainly impressed political commentators. Gerald Butts’ testimony to the committee was also credible, well organized and presented a very different interpretation of the events in question. I highly recommend readers listen to the testimony and some subsequent questioning of each to inform their own judgement about credibility. Michael Wernick was treated as a hostile witness. I believe that was unfair, put him on the defensive, and resulted in his testimony, which also differed markedly from the former AG, being somewhat less compelling than Mr. Butts’. Natalie Drouin was not taking sides but did confirm a revealing incident that is included in the discussion below. Developing a reliable judgement on these matters requires effort and care. I hope this review persuades some readers to adopt an impartial approach in forming their opinion.
Initially I was puzzled as to what the former AG expected to accomplish by making public accusations of wrongdoing within her own government given her decision was still in place. She indicated that her motivation was to deter such things from happening in the future. But a closer look casts a shadow on the former AGs version of events and her interpretation of the intent of her colleagues. A few selected points are set out below.
• The Shawcross doctrine sets out principles of prosecutorial independence and how Attorneys General should interact with associates . The doctrine envisions that if an AG finds herself under too much pressure to make a specific decision, the ultimate remedy is for her to resign and make the issue public. The former AG did not do that at the critical time these events were occurring and also later offered her opinion that the exchanges did not rise to illegality. It was only after she had been moved to another role in Cabinet, accepted that role, and then soon after resigned from Cabinet, that she engaged in a public critique of her colleagues, alleging she had been subjected to sustained pressure to enable a DPA. It is hard to ignore the possibility that her action was triggered by the Cabinet move and was retaliatory in nature while providing an interpretation of that move more favourable to her. The other interpretation, embraced by the political opposition and by default most in the media, was that she was attempting to support a principle that prevents political interference in the justice system. That would be much more believable if it had happened when the events were occurring instead of after what she considered a punitive transfer.
• The initial move within Cabinet offered by the Prime Minister was to Indigenous Services. She refused this role on grounds that she had opposed the Indian Act her entire career and could not now head that up. This seems surprising since she could have likely demanded, and received, resources and funding to undertake an extensive review of that Act and remake it to something more acceptable to the indigenous community and to herself. She had a unique opportunity to shape the future for indigenous people across Canada and she turned it down. The implication that she viewed this assignment as a demotion is another possible factor in her decision to air these matters publicly, regardless of the implications for her party and her community.
• Although there are a number of areas where her account differs from that of the other participants, some are especially revealing. One relates to when her colleagues should have known that she had made a final decision and therefore stopped raising the matter with her. She asserted that was on September 17th 2018. Mr. Butts testified she raised the issue on December 05th at a dinner meeting. The fact that she raised it, and the nature of the discussion, implied she did not, at that time, view it as set in stone. The supporting exchange of post-dinner emails does not include reference to the alleged pressure she was receiving. In contrast it is friendly, including a reference to conveying a greeting to the Prime Minister. This point may seem minor, but clearly a September 17th date would support a concern about “sustained pressure” more than some date after early December. Mr. Butts even testified he had been unaware of when she thought a final decision had been made until he saw her testimony before the Justice Committee. And of course, the legal fact that she could change her mind and choose to negotiate at any time, even during a trial, bolsters the view of Mr. Butts.
• Nathalie Drouin testified that the Privy Council Office had requested a report on the potential impacts on SNC-Lavalin if a criminal prosecution was successful. The report, characterized as legal advice, was prepared but before sending it she consulted the former AG. “I was instructed not to send it,” said Drouin. Responding to this in her second submission to the Justice Committee, the former AG said, “I have no recollection nor do I have any notes of having given this instruction to my Deputy Minister.” She then describes how normal her note taking activity was. This seems to be a careful way to imply that she did not issue this instruction without actually saying so. The Deputy Minister is more reliable on this point: she had no reason to lie, her response was definite, and she had to take subsequent action to prevent the report from being sent. This adds to skepticism relating to the former AGs version of events.
• The former AGs description as to how the alleged “sustained pressure” was exerted relies to a considerable extent on conversations at the staff level. Not only are such conversations hearsay in nature, it does not seem reasonable that anything discussed at that level could put undue pressure on a Cabinet Minister. Such pressure could come, say, from one or several other Ministers or more certainly from the Prime Minister, who was the only person who could have crossed the definite red line of directing a change in the decision. But even someone as senior as the Clerk of the Privy Council, Michael Wernick, would only be able to exert indirect pressure. The former AG has confirmed that the Prime Minister did not cross the clear line of directing her to do anything. The case for sustained undue pressure seems to be very weak.
• The press emphasized the resignation of Jane Philpott as having some significance. It’s not just one it’s two, they exclaimed! However, Ms. Philpott had no direct involvement or knowledge of the events. She simply chose to believe and support her friend with a significant sacrifice. That is superficially admirable except at the same time she was betraying the Prime minister, who had given her the honour and opportunity in the first place, her colleagues in cabinet and caucus, and her constituents. Another contention widely cited was that the SNC conflict explained the Cabinet shuffle that moved Ms. Wilson-Raybould to another role. This is simplistic because the DPP decision still stands—a new AG will have to decide whether to intervene. A legitimate issue will only arise if the new AG is directed to decide differently. As well, Mr. Butts explained that the retirement from politics of Minister Scott Brison triggered the cabinet shuffle and he convincingly clarified how they arrived at the specific changes. He also defended his own decision to resign so the Prime Minister would not have to choose between a 30-year friend and a current Minister. These peripheral issues coloured the drama, appeared to alter public opinion against the government, but were misleadingly emphasized and did not justify the former AG’s public accusations.
This review suggests there is a reasonable basis for treating the former AGs allegations with skepticism. Whether the DPA option was properly analysed is harder to assess from outside. However, this examination suggests a DPA would have been the proper choice. So why did the Director of Public Prosecutions reach a different conclusion?
The reasoning has not been made public, and the testimony of Messrs. Butts and Wernick suggested it had not been made clear to them. SNC appeared to be in the dark as well. More recently, SNC has filed an appeal of the court decision that supported the DPP, to the Federal Court of Appeal. In that recent appeal they disclose that they had been informed that the initial decision to prosecute was based on three things:
1. Nature and gravity of the Charge
2. Level of Senior Executives Implicated
3. Failure to self-report
Reasons two and three seem questionable since the entire senior management and governance group in SNC has changed. The first reason appears to be the main justification of the decision, and it seems directly related to Section 715.32 (3) of the Criminal Code which reads as follows:
Despite paragraph (2)(i) ,if the organization is alleged to have committed an offence under section 3 or 4 of the Corruption of Foreign Public Officials Act, the prosecutor must not consider the national economic interest, the potential effect on relations with a state other than Canada or the identity of the organization or individual involved.
During questioning, there was some question about whether this clause was intended to apply to foreign economic interests. However, in her decision on SNC’s initial appeal of the prosecutor’s choice, the Honourable Madam Justice Kane referred to that clause “as in this case” so she interprets it as applying to Canada. If that is the basis of the decision to not offer a DPA, the DPP may have believed there was no choice in the matter. In that case, it should have been easy to communicate the reasoning to others. Nevertheless, it raises a number of questions.
First, there seems to be some conflict within the act. A key purpose is to avoid injustice to innocent parties. Yet the clause above precludes consideration of the national economic interest. Recall that all of the purposes that justify the act can be met by either a successful prosecution or a DPA, with one exception; avoiding negative consequences for innocent parties. So a reasonable analysis might conclude that even if the national economic interest is ignored in a general sense, a proper assessment of the broad public interest would justify a DPA because it avoids the injustice of penalizing innocent parties. Again, I am assuming that the deterrent effect of a criminal prosecution’s message has little weight, given that all of the individuals who were responsible for the transgression have left the company. So in this case, the deterrent message seems overshadowed by the injustice prosecution would cause to innocent parties. If that argument is accepted, the DPP and the former AG probably made the wrong decision. If that argument is not accepted, precluding consideration of economic impacts suggests that the legislation would never be applicable to a transgressor under the Corruption of Foreign officials act. If that had been the intent of Parliament, a direct exclusion clause could have been included instead.
The Prime Minister has said that as this legislation is new, he will seek to learn from the recent experience. This review leads to two suggestions. First, the clause that relates to the Corruption of Foreign Officials Act should be removed from the Act and the criminal code. This is an exclusion of one type of wrongdoing that, I contend, is not warranted for a National government. It is one thing for an agency like the World Bank to have an extremely strong deterrent in the form of a 10 year ban on contracts with misbehaving organizations. They are, after all, providing financial support to many developing countries where such transgressions might be more likely and would severely reduce the effectiveness of their programs. A national policy intended to reduce international transgressions might seem to require the same approach. But a national government imposing a suspension of contracts for 10 years inflicts a much more severe penalty. The loss of business would be greater and more likely to cause the company to shrink or possibly even close down. That is an inordinate penalty that could multiply through the national economy affecting innocent individuals. As well, singling out one criminal offense in this way suggests that other offenses, for example fraud, are somehow acceptable for purposes of deciding eligibility for a DPA whereas bribing a foreign official is not. In fact, both are bad behaviour, yet fraud could be much more serious in terms of losses to victims. Another consideration is that international agreements may emphasize deterring bribery, but again, the way in which Canada achieves deterrence should be in the interest of Canada. A DPA in such situations accomplishes all the deterrent objectives and should not be precluded. Parliament could resolve this if desired.
The other suggestion relates to the fact that a prosecutor is not required to justify each decision to prosecute cases. As argued in the SNC appeal, Courts have generally ruled that if there was such a requirement the administration of justice would be overburdened. That seems reasonable when the total number of prosecutorial decisions across Canada is considered. However, for the limited number of cases where a DPA is possible it might be practical to require the basis of each decision to be provided. Parliament’s intent was to enable a specific alternative to criminal prosecution. The choice requires a comparison of the public interest under each option. Leaving that decision up to one or two individuals does not foster the kind of diverse and extensive analysis and scrutiny that could increase the likelihood of correct decisions and improve decision-making over time. I must note, with respect, that courts have ruled that prosecutors commonly consider the public interest so lawyers may be skeptical of this suggestion. However, the specific alternative of a DPA means considering the public interest is more complex than in most criminal cases. While the ultimate decision may have to be left to the Prosecutor, to avoid interference based on political interests, the system would benefit from a process that includes analytical input from a variety of sources in the complex calculation of the relative impact on the public interest of each option.
I began by challenging the characterization of this issue by the former AG, the political opposition, and the preponderance of media commentary, as relating only to Prosecutorial independence. Another important dimension is how the public interest is factored into the choice between a prosecution and a DPA, as envisioned in the new legislation. That increases the obligation to analyse options. The support of other departments of government in carrying out or commenting on that analysis would have been helpful. Therefore, what the former AG claims was undue pressure was more likely reasonable diligence.
It’s also possible the wording of the legislation was interpreted as implying that SNC was ineligible for a DPA. However, a thorough analysis might have reasonably concluded that even if “the national economic interest” is ignored, the potential harm to many innocent parties would mean that the broad public interest would support a DPA. Given that this was the first case under the new legislation, greater involvement of both experienced people in other departments of government and perhaps outside expertise in law and economics could not have been legitimately criticised. This not only suggests the former AGs charges of undue pressure are inappropriate, they also may have led to the wrong decision. The structure of the legislation may have contributed to both the miscommunication and an incorrect decision. That should be resolved to avoid future problems.