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SNC-Lavalin: How Canada tilts the law toward protecting capitalists

Canadian PoliticsCanadian Business

SNC-Lavalin headquarters in Montréal. File photo courtesy of the Canadian Press.

SNC-Lavalin got the deal it had been gunning for since 2016.

By then it knew that the RCMP, embarrassed by the fact that the World Bank had already decided that this Quebec corporation was a rogue one, was prepared to lay a number of criminal charges against it.

The end result is well-known: SNC-Lavalin was allowed to plead guilty and to agree to pay a fine roughly equivalent to the gross profits it had made on one of the crimes which it now publicly acknowledges it had committed. Its lawyers looked happy as the verdict was announced.

The political verdict is in.

This piece is not intended to be a rehash of the scandalous behaviour of the participants. Rather it focusses on the way the legal and political manipulations it generated demonstrate how corruptible and corrupted major institutions and functionaries of our legal and political system are.

Politicians

After they stopped lying about their attempts to help SNC-Lavalin out (because the lies were no longer plausible, not because they were ashamed of them), the defence that Prime Minister Justin Trudeau and his allies raised when questioned about their behaviour had four major limbs:

  1. SNC-Lavalin is a large corporation and that matters;
  2. SNC-Lavalin is a large Quebec corporation and that matters even more;
  3. SNC-Lavalin has a large number of employees and they should not be punished for SNC-Lavalin’s many criminal acts; and
  4. SNC-Lavalin was, like so many other well-meaning Canadian and Quebec corporations, a victim of the low standards prevailing in the foreign countries with which it had to do business.

It would be irresponsible for political leaders—these leaders said—not to protect SNC-Lavalin. So, they did.

There was already work going on to introduce Deferred Prosecution Agreement (DPA) provisions into the Criminal Code. Relying on the record in the United States, the first Trudeau government knew that this mechanism is a sure fire way to hold out to the public that corporate wrongdoers will be sanctioned, at no risk to the corporations. They will have to admit their guilt and will be subjected to cultural re-education. In no way is the DPA intended to impair their capacity to continue their single-minded pursuit of profits. Unsurprisingly, SNC-Lavalin had begun to push for this kind of cozy arrangement shortly after it was charged by the RCMP in 2015. The prodded Trudeau government pushed even harder than ever toward the enactment of these provisions.

Not only did public officials meet with fiercely lobbying SNC-Lavalin representatives, but they even gave them advice on how best to present their case. The politicians, their advisors and bureaucrats did not think it troublesome to accord respect, or to offer a hospitable speakers’ podium, to people accused of serious crimes. This gives us an indication of the true nature of our legal/political milieu.

So also does the fact that the Trudeau government always knew that to introduce DPA provisions for corporations was not going to be popular. This kind of legislation is an adaptation of a policy used to deal with juvenile delinquents. The justice system sets out to prevent young offenders from falling into a life of crime. This is why it offers them a chance to learn from their mistakes by having them admit their wrongdoing and then subject them to programmes that will set them on the path to righteousness. It is doubtful whether the public would see this as an appropriate model for rich actors and their corporations who have behaved anti-socially. Cleverly, the Trudeau forces buried the provisions in an omnibus bill. They were, very deliberately, diverting attention by sandwiching these unappealing provisions between house-keeping laws on pensions and marijuana. This kind of stealth, this kind of contempt for the public, governed the conduct and thinking of the politicians, their advisors and bureaucrats throughout the whole sorry affair.

For instance, it turned out that, when SNC-Lavalin was due in court to respond to the criminal charges the RCMP had laid, the DPA provisions were not in force. Somehow, SNC-Lavalin got an agreement to have this initial hearing adjourned until the corporate-friendly provisions became enforceable law. It is impossible to say how this “lucky” break came about. SNC-Lavalin had another piece of “luck”. The Trudeau government had given the newly passed DPA provisions retroactive force. This meant that SNC-Lavalin could ask to have them apply to the crimes it was alleged to have committed a decade earlier. Their only “bad luck” was Wilson-Raybould. They sought to have her neutred.

The government’s own Ethics Commissioner, Mario Dion, found that Trudeau had violated the ethics standards by unduly pressuring the Attorney General to do his bidding. She was holding fast to her decision to support the autonomously made decision by the Director of Public Prosecution to proceed with criminal charges. These attempts by Trudeau and his hangers-on to influence the usually segregated decisions in the justice system and then their reluctance to co-operate with the Ethics Commissioner (it took 109 days for Trudeau to release requested documents), had prompted the RCMP to launch an investigation into possible criminal misconduct by the government. Obstruction of justice was a possible count, the sort of thing that is driving Trump’s enemies to push for impeachment. An election was called and the RCMP announced that, given this, it would halt its investigation for the moment. This might have been a “lucky” break for Trudeau and his allies. So much good fortune for all these powerful people! If only the poor caught-up in the justice system could have but a sliver of it!

Thus far, it is clear that leading politicians and their supporting caste were eager to come to the aid of an economic powerhouse. This only came into public view because of an unusual intra-party wrangle. This is the importance of Wilson-Raybould’s resistance to Trudeau’s blatant efforts to interfere with her much-touted independence as the chief guardian of the justice system. For whatever reason—her integrity, her anger, hostility to her comrades in cabinet, her sense that she was leaned on because of her gender or race—she stood on the supposedly sacred principle that the prosecuting office (the DPP) should be allowed to make its decisions independently and that she should only exercise her veto power in extremely unusual circumstances and that, in turn, her autonomy should not be subjected to any outside influence.

Trudeau, his Privy Council and a host of others were shocked that one of their own would refuse to be a team player and to refuse to do so merely to uphold a principle. They knew that the principle was to be ignored, was to be sacrificed when a realpolitik problem confronted politicians.

In short, they knew their duty; Wilson-Raybould didn’t. That duty is to help large capital to flourish. If this requires riding roughshod over principles which politicians purport to embrace, so be it. This is normal. The trick is not to get caught. The consensus within the political class about ensuring that capital gets the protection it needs is so solid that being caught is a remote possibility.

This is why Wilson-Raybould was treated so harshly: her stance had made public what the political class tries to keep hidden, namely, its corruptibility in the name of pragmatism. And when they are caught, as they were, they rationalize their conduct. It is likely that they truly believe that it was right and proper to accept, unquestioningly, the claims that SNC-Lavalin was too big to fail, that they truly believed that they were protecting workers (even though the SNC-Lavalin CEO, at one point, was at pains to deny he had ever said they would close down). These compliant politicians undoubtedly felt that negation of the principles of openness, of the protection of the independence of the justice system and of integrity in government, could be justified. After all, these kinds of ‘compromising’ of principle is what they do all the time. They live, in the ‘real world’, that is, a capitalist world. On with the story.

Trudeau, according to his own Ethics Commissioner, engaged in unethical and improper practices to get his Attorney General to agree to his demands and, when she still hung tough, forced her to resign. He had violated section 9 of the Conflict of Interest Act. There was no punishment. Of course not. And the Liberals were returned to government.

It may be that the SNC-Lavalin scandal may have been a big reason why the Liberals lost a spectacular number of seats. Yet, their new Minister of Justice let it be known that he might still allow SNC-Lavalin to get the benefit of a DPA. In the shadow of this posturing, the Crown reached an ‘independent’ decision to give SNC-Lavalin the same deal it would have got under the DPA legislation. This time no one pushed the Director of Public Prosecutions (DPP) around. The Minister of Justice says he had nothing to do with the deal and has no wish to interfere with this sovereign decision by prosecutors.

As “luck’ would have it, this time the to-be-respected decision gave SNC-Lavalin everything it had wanted. The deal did require that one of its senior officers be sacrificed and sent to jail. Someone had to be seen to be paying for years of criminal wrongdoing—just as long as it was not a major corporate actor or its powerful investors.

SNC-Lavalin, a corporate group whose business model, for lo these many years, has been a complex of bribes (McGill University Hospital), peddling of influence and fraud (illegal political party donations—not in foreign lands), was, from this day of approval of its deal, like Arnold Schwarzenegger, back. It had taken a lot of plotting and deception by the political class.

Judges

In good part, the legitimacy of the justice system depends on the independence and incorruptibility of the judiciary. Judges are expected to be above partisanship; they are to leave their personal preferences out of their decision-making; they are to abide by the law as they find it. It is a system of rational decision-making, not one based on economic or political power.

To sustain all this, we give judges security of tenure, immunity from public criticism and all the trappings of respect that our social system can accord. That it works is reflected in the fact that the judiciary is considered the best forum within which to determine whether elected politicians abuse their powers. Courts pronounce definitively on the constitutionality of government initiatives (say, a carbon tax, or a pipeline), or the scope of our rights and freedoms when it is argued that an elected government has violated our Charter rights.

Our belief in the impartiality of judges is so strong that governments frequently appoint senior judges as commissioners of inquiry into difficult social problems.

The SNC-Lavalin affair illuminates the fraught nature of these sacred ideas when corporate capital puts pressure on politicians.

As SNC-Lavalin pressed the Trudeau government for the enactment of the DPA legislation, it did so through its lawyer, Frank Iacobucci, a former member of the Supreme Court of Canada. It is clear why they were willing to pay him handsomely for these services. Like all judges of the Supreme Court his views and proposals carry heft with members of the legal profession. More so in his case. Iacobucci has been much favoured by government to sit as a prestigious, legitimacy-bestowing, commissioner in many inquiries since his retirement. Obviously, using him as their battering ram was a clever move by SNC-Lavalin. But, what made Iacobucci a willing partner in the obvious machinations to have his credentials deployed to persuade the government and lawyers inside the Justice Department (who had in the immediate past paid him homage) to do his paying client a favour? He should have seen this as an ethically troubling task: after all, much of his ‘street cred’, and that of all other judges, came from warding off abuses by unfair or insensitive governments. Now he would be using that credibility to get the very opposite result.

Unquestionably, this kind of former judges’ conduct speaks to how little their claimed neutrality and above-the-fray posturing actually ever means. It was made worse. Iacobucci actually reached out to another retired Supreme Court of Canada justice, John Major, to give him a legal opinion (apparently not trusting his own knowledge that much) as to whether the Director of Public Prosecutions had breached the rules by not giving reasons for its refusal to give SCN-Lavalin the DPA it wanted so badly. What’s more, it was reported that Iacobucci had suggested to the government that yet another retired Supreme Court of Canada judge, Chief Justice Beverley McLachlin, be proffered as an influential go-between the offices of the Attorney General, prosecutors and the government. To her credit, she refused the opportunity to sell her influence.

And to nail down the case as to how former guardians of justice will sell their principles short, note that the Iacobbucci-inspired negotiations began before the decision not to grant the DPA was made and continued after it. SNC-Lavalin had launched a process called judicial review to have the DPP decision reversed. When litigation has proceeded that far, it is common for politicians to say that everything should be on hold; the papers are full with quotes by harrassed politicians who say “no comment because the matters are sub judice”. This respectful approach to legal processes was unsighted this time.

Again: the importance of Wilson-Raybould’s stance is that it has brought out the crass contempt the governing class has for the principles it says it will defend to the death.

Tilting the law toward capitalists

What worried SNC-Lavalin (and therefore, Trudeau) most was that a conviction for fraud, bribery or laundering, would disqualify it form obtaining contracts with our domestic governments and subsidies for winning projects in other countries. A DPA would have them treated as a juvenile delinquent: they would have to express sorrow and then would be allowed to get on with normal life. This is exactly what, in the end, it won, even though the DPA had not been obtained. This was done through a sleight of hand, a trick that is made available to all corporations, and only to corporations, by our courts.

Our courts reason that a corporation is a separate legal person from all other persons in the world. Separate from the people who run it, work for it, lend it capital, provide it with equity capital and from any other corporation with which it has close operational relations. It does not matter to the courts that those who run the corporation or who invest in it, do not take this argument very seriously. Those profit-seekers often use this notion of legal separateness to avoid regulations and taxation and responsibility to people injured by their for-profit corporate activities. They create a corporation which, being a person, can create another or many others, each of which, in turn, can create more corporations. A whole family, parents, children, siblings, can be spawned. Functionally, they are, like all families, closely integrated. Riskier business can be lodged in one member of the family, a separate corporation. All too often, it will not have been assigned the assets needed to meet any obligations that may arise when the risk materializes. The other family members, being separate, will be off the hook. Or corporations can be created to ‘live’ in other jurisdictions where assets will not be taxed, or even more simply, parents can pretend that abuses of people elsewhere done by actors hired by separate corporations in a long, integrated chain of operations, have nothing to do with them, even as they sell the goods produced by the most vulnerable of the vulnerable for a profit.

Think Rana Plaza. Or SNC-Lavalin. Those who ran the bribery of foreign officials’ scams on behalf of SNC-Lavalin, set up a series of corporations in foreign parts, had monies transferred, via devious routes, to them and, eventually paid those to be bribed out of these fast moving, hard-to-trace funds. Note this requires planning, bankers, lawyers and accountants. They participate because the use of corporate shells (as they are rightly named) to hide actors and activities, is lawful. The judges say so, again and again.

Judges have laid the groundwork for all these cost-saving, risk-shifting, avoidance of responsibility, strategies. They are complicit in the establishment of a system where all the values and norms of social and personal responsibility are jettisoned when it is capitalists who have violated the values and norms we supposedly share. The judges give implicit support to politicians who want to bend the rules on behalf of big capital.

The judicially approved SNC-Lavalin deal relies on this systemic tilting of the playing field. Initially, charges of corruption of foreign officials and fraud had been laid against SNC-Lavalin Group Inc. (the parent of this extended family), SNC-Lavalin Construction Inc. and SNC-Lavalin International Inc. Note the names: those who ran the firm were not secretive about the tight relations between these corporations. The deal was that, in return for a guilty plea of having committed fraud over $5,000 by the construction firm, all other charges against all the other players (being separate persons in law) would be dropped. Only SNC-Lavalin Construction Inc. has pled guilty; only it will have to pay the fine; only it has been disqualified from bidding on future government contracts and applying for export subsidies.

It is not surprising that no one in the new Trudeau government wanted to object to the independent decision by prosecutors to enter into this deal. No wonder the SNC-Lavalin lawyers looked happy when the verdict was announced.

Capitalists

One of the immediate results of the verdict was that the value of SNC-Lavalin shares soared. They jumped $6.98, a mouth-watering 28.94%. SNC-Lavalin is back in business and capitalists do not mind associating with criminals as long as there is a buck in it. Moreover, the outcome signified that everything was back to normal. After a few hiccups, the system had delivered. Corporate wealth was safer than ever from those who did not understand that, to make the world richer, it is always necessary for those who own the means of production to engage in some shady, often anti-social, even criminal behaviour. This must be tolerated, say the rich and powerful.

After all, had not the Prime Minister himself said it was necessary to save corporations which are too big to fail as they provide work and, eventually, some of us ingrates with the food we need? Leave corporate criminals alone; it is for our own good.

Corruptible and corrupt—this is our system of government.

Harry Glasbeek is a Professor Emeritus and Senior Scholar, Osgoode Hall Law School, York University. His latest books are Class Privilege: How Law Shelters Shareholders and Coddles Capitalism (2107) and the follow-up, Capitalism: A Crime Story (2018) both published by Between the Lines, Toronto. Professor Glasbeek is a frequent contributor to Canadian Dimension.

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