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Canadian Court Sentences Individual to Three Years in Prison for Violating Canada’s Foreign Corruption Laws

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White Collar Crime, Investigations and Compliance / Corporate Social Responsibility Law Bulletin

On May 23, 2014, the first individual in Canada ever convicted of violating Canada's Corruption of Foreign Public Officials Act (the "CFPOA") was sentenced to three years in prison. The individual, Nazir Karigar, was convicted of offering or agreeing to bribe a foreign official in contravention of the CFPOA on August 15, 2013, following a contested trial. Please see our previous bulletin regarding the conviction and the interpretive guidance provided by the Court regarding the jurisdictional and conspiracy elements of crimes under the CFPOA.

The sentence demonstrates that Canadian Courts will treat bribing foreign public officials as a  serious crime in Canada. The sentence also more closely parallels the consequences imposed elsewhere for similar violations, including under the U.S. Foreign Corrupt Practices Act ("FCPA").

Salient Facts

Mr. Karigar was hired by Cryptometrics Canada, a subsidiary of Cryptometrics US, based in New York.  Mr. Karigar was to offer strategic advice on winning a bid issued by Air India to provide the airline with a facial recognition security system. Cryptometrics, US, in an attempt to secure this contract, transferred $450,000 from its US account to the account of Mr. Karigar who, in turn, offered this amount in bribes to the Indian Minister of Civil Aviation and officials of Air India, which is owned and controlled by the Government of India.

In the end, Cryptometrics Canada's bid for the supply contract was unsuccessful. There was no evidence of what became of the $450,000 transferred to Mr. Karigar. Accordingly, there was no evidence that a bribe was actually accepted by a foreign public official. The Court nevertheless convicted Mr. Karigar because he agreed with others to offer a bribe to a foreign public official, and the CFPOA makes it a criminal offence if one "agrees to give or offer…an advantage or benefit of any kind."  In other words, it was sufficient for the Crown to prove only that Mr. Karigar believed that a bribe was paid to a public official.

Key "Take-Aways"

(a) High Stakes Consequences

In sentencing Mr. Karigar, the presiding judge, Justice Hackland, emphasized general deterrence and the seriousness of crimes under the CFPOA. The CFPOA came into force in 1999. Until this sentence, however, the penalty Canadian Courts were prepared to impose on individuals for CFPOA violations was unclear (in this case, the defence sought a conditional discharge; the Crown, a four year prison term). The maximum prison sentence that Mr. Karigar could have received was five years in prison.

It is further noteworthy that the CFPOA was amended in June 2013, raising the maximum prison term for CFPOA crimes to 14 years. In contrast, the current maximum prison term for bribery of foreign public officials under the FCPA is 5 years; the U.K. Bribery Act, 10 years.  Mr. Karigar was sentenced under the older version of the CFPOA given the time period his crimes were committed. It is unclear whether the Crown would have sought a longer prison term, and whether the Court would have granted a longer prison term, had the current version of the CFPOA applied to Mr. Karigar's case. This is particularly noteworthy for pending CFPOA cases where individuals are charged.

(b) Formal CFPOA Leniency Program

The significant sentence also raises the issue of whether Canada should have a more formal leniency process to encourage cooperation by rewarding companies and individuals for self-reporting transgressions under the CFPOA. Currently, no formal, transparent process exists as compared to the voluntary disclosure mechanisms set out by other government agencies, such as the Competition Bureau, the Canada Revenue Agency and the Customs Border Services Agency.  Mr. Karigar may have availed himself of such a program had one existed in Canada.

An anti-corruption leniency program, however, is not without difficulty. For example, under the FCPA, a common reward for voluntary disclosure is a deferred prosecution agreement, whereby the prosecution files criminal charges in court against the cooperating entity together with a concurrent request to defer the prosecution.  If the cooperating entity fails to comply with the deferred prosecution agreement, the prosecutor can proceed with the charges. If the cooperating entity fully complies, the charges would be dismissed. Deferred prosecution agreements afford cooperating entities an opportunity to avoid prosecution.  However, they can also expose these entities to broad ongoing investigations disproportionate to the self-reported offence, significant monetary penalties and potential follow-up civil litigation. Deferred prosecution agreements are, to date, not available in Canada. However, leniency programs, in whatever form, raise similar challenges, and a formal CFPOA leniency program, if implemented, would be no exception.

(c) Proactive and Comprehensive Compliance is Increasingly Important

It is increasingly clear that companies, including multi-national and U.S. companies, and the individuals employed by them, are well advised to review their internal compliance policies.  They are also well advised to implement CFPOA corporate compliance programs that are comprehensive and meet the best practices standards. 

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