On December 17th, 2018, Quebec’s Superior Court of Justice sentenced Yanaï Elbaz, a former senior manager of the McGill University Health Centre (MUHC), to a three-year prison term for his involvement in a bribery scheme in which SNC-Lavalin secured a $1.3 billion contract to build MUHC. The trial and sentencing of Mr. Elbaz is one of the most significant corruption convictions in Canadian history, and may mark a shift in Canada’s enforcement of its anti-bribery legislation.
The bribery conviction
Elbaz pled guilty in November to several charges for accepting a $10 million bribe to help SNC-Lavalin win a multi-billion dollar contract to build and maintain the new hospital facilities in Montreal. Elbaz admitted that he supplied SNC-Lavalin with inside information that allowed it to adjust its building proposals to secure the contract. The conviction comes in the midst of broader anti-corruption proceedings against SNC-Lavalin and its executives, which we have written on in previous posts.
In sentencing Elbaz, the court accepted the three-year prison term agreed upon by Crown prosecutors and Elbaz’s lawyer. It did not order disgorgement or repayment of the $10 million bribe, finding that this was a matter better dealt with in civil court. The hospital has sought compensation for its losses that resulted from the bribery in a lawsuit against Elbaz, SNC-Lavalin and others, in which it alleges that it was swindled out of nearly $1 billion due to unanticipated development costs stemming from the appointment of SNC-Lavalin.
Development in anti-corruption enforcement in Canada
The sentence represents significant progress for Canada’s anti-corruption enforcement regime, which has faced criticism in recent years for lack of enforcement, particularly with respect to its foreign bribery statute, the Corruption of Foreign Public Officials Act (CFPOA). Over the past decade, only four bribery convictions have been secured under the CFPOA. In September, international watchdog Transparency International downgraded Canada in its annual progress report from “moderate” to “limited” enforcement of its obligations under the OECD Anti-Bribery Convention, putting it on par with countries such as Hungary, Greece and Argentina and two levels out of four below international leaders such as the United States and the U.K.
Elbaz’s conviction may serve as a demonstration that Canada intends to strengthen the enforcement of both its domestic anti-bribery legislation and the CFPOA. The three-year sentence imposed is on par with that meted out to Nazir Karigar in a separate 2016 case, which was before the Elbaz case the only conviction of an individual under the CFPOA.
The advent of the deferred prosecution agreement regime in Canada
The major sentence to Elbas was handed down in the same year in which Canada took action to strengthen its white collar crime enforcement regime with the September implementation deferred prosecution agreements (DPAs). A DPA is an agreement entered into between a prosecutor and a company alleged to have engaged in economic crimes, and is commonly used in the United States and U.K. The effect of the DPA is to suspend the outstanding prosecution while simultaneously establishing specified undertakings that the organization must fulfill in order to avoid facing the potential criminal charges. Read more here.
In a separate investigation into SNC-Lavalin for its alleged corrupt dealings in Libya, discussed in an earlier post, the Director of Public Prosecution Service of Canada elected not to pursue a remediation agreement with the company.
By Lawrence E. Ritchie and Malcolm Aboud, Osler