Guilty Plea in Bid-Rigging Case Highlights Competition Bureau's Ongoing Procurement Focus, Federal Employee Whistleblowing Obligations

by Practical Law Canada Competition
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This Legal Update discusses a recent whistleblower related case, in which a former federal employee pleaded guilty for failing to report wrongdoing under the Financial Administration Act, R.S.C. 1985, c. F-11. This Update discusses this case, relevant legislation and the whistleblowing provisions of the Competition Act, R.S.C. 1985, c. C-34.
In a recent bid-rigging related case, the Competition Bureau (Bureau) announced on December 2, 2016 that a former federal Library and Archives Canada manager pleaded guilty for failing to report wrongdoing under the Financial Administration Act, R.S.C. 1985, c. F-11 (FAA). See News Release, Public servants who turn a blind eye to wrongful activities will be held accountable, Competition Bureau, December 2, 2016 and Criminal Charges Laid Against a Company and Six Individuals Involved in Bid-rigging Scheme, Competition Bureau, May 2, 2014.
The FAA is legislation that provides for the financial administration of the Federal Government, establishment and maintenance of Federal Government accounts and control of Crown corporations.
In this case, which is the first time that a Bureau bid-rigging investigation has led to FAA charges, the federal employee received a conditional discharge, including 15 months' probation and 100 hours of community service.
Section 80(1) of the FAA makes it an indictable offence for officers or employees connected to the collection, management or disbursement of public money to, among other things:
  • Conspire or collude to defraud the Crown (section 80(1)(b)).
  • Make an opportunity for another person to defraud the Crown (section 80(1)(b)).
  • Fail to report in writing any knowledge or information about the violation of the FAA or fraud committed against the Crown to a superior government officer (section 80(1)(e)).
The potential penalties under section 80(1) of the FAA are a fine of up to $5,000 and imprisonment for up to five years. While rarely invoked in the past, one section 80 FAA case involved a military officer who falsely certified that work for the government had been completed (R. v. Gaudreau, 2008 CarswellNat 1275 (Can. Ct. Martial)).
Conviction for certain FAA offences can result in losing the capacity to contract with the Federal Crown, receiving any benefit under a contract between the Crown and another person, or holding Crown office (section 750(3), Criminal Code, R.S.C. 1985, c. C-46).

Whistleblowing Under the Competition Act

There is significant potential risk for directors, officers and employees that participate in criminal competition law matters. Aside from the specific provisions of the FAA, liability under the Competition Act, R.S.C. 1985, c. C-34 (Competition Act) can arise by being a party to an offence or merely aiding or abetting an offence (for example, assisting with the formation of a price-fixing or other conspiracy agreement). For more information, see Practice Notes, Canadian Bid-Rigging Law, Canadian Conspiracy (Cartel) Law, Competition Bureau Investigations and Criminal Competition Law Enforcement.
The Competition Act does, however, include several specific whistleblower provisions, which:
  • Protect the identities of people who report Competition Act violations to the Bureau (section 66.1(2), Competition Act).
  • Prohibit employers from retaliating against employees who, in good faith and on the basis of reasonable belief, report potential competition law offences to the Bureau (section 66.2, Competition Act).
Unlike section 80(1) of the FAA, however, whistleblowing under the Competition Act is voluntary and does not include any financial rewards (in contrast to, for example, the Ontario Securities Commission's (OSC) recently launched whistleblower program that offers monetary payments for tipsters).
To strengthen these voluntary whistleblowing provisions, in 2013, the Bureau launched a whistleblowing initiative to encourage the public to disclose potential Competition Act violations, including price-fixing and bid-rigging. See Announcement, Competition Bureau Launches Whistleblowing Initiative, Competition Bureau, May 31, 2013.
Part of this Bureau initiative was to assure whistleblowers that the Bureau would take steps to protect their identities if information was provided to other enforcement agencies. Given the Bureau's interest in increasing its criminal enforcement in the procurement area, it will be interesting to see whether it will follow the OSC's lead and incentivize whistleblowers to provide tips relating to potential Competition Act violations.
In addition to these whistleblower provisions, the Competition Bureau has also established Immunity and Leniency Programs that are its leading tools for detecting and enforcing criminal competition law matters. The Bureau's Programs, which are also voluntary, can significantly reduce the exposure for parties that have committed criminal competition law offences. For more information, see Practice Note, Competition Bureau Immunity and Leniency Programs.

Implications of FAA Case

This recent FAA case has several implications, which include that:
  • The public procurement area remains an enforcement priority for the Bureau given, among other things, the potential consumer impact and new Federal Government's increase in infrastructure spending. For more information, see Remarks by John Pecman, Commissioner of Competition, Strengthening Competition: Innovation, Collaboration and Transparency, Competition Bureau, October 6, 2016. See also CTV article, Competition Bureau ups bid-rigging work to protect federal infrastructure cash, The Canadian Press, December 5, 2016.
  • The case is a reminder that criminal liability in competition investigations can arise outside the Competition Act (for example, under the aiding and abetting or fraud provisions of the Criminal Code or, as in this case, under stand-alone legislation governing public sector employees).
  • While the Competition Act does not obligate whistleblowers to report competition law violations, there may be duties to report illegal activities under other legislation.
  • This case may also signal that the Bureau and prosecutors are looking for new (or less historically used) avenues to pursue government officials that are involved in or have facilitated or failed to report fraud against the Federal Government.
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Published on 08-Dec-2016
Resource Type Legal update: archive
Jurisdiction
  • Federal (Canada)
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