Will Canada follow the lead of the United States and introduce deferred and non prosecution agreements to settle major corporate crime cases?

If it were up to Kenneth Jull, Canada would.

Jull is a partner at Baker & McKenzie in Toronto.

He also teaches at the University of Toronto and the Osgoode Hall Law School.

He is co-author of Regulatory and Corporate Liability: From Due Diligence to Risk Management (Canada Law Book, 2013).

“I think we should have deferred and non prosecution agreements in Canada,” Jull told Corporate Crime Reporter in an interview last week.

“Canada is making a mistake not having them. The state only has limited resources. We are a big country. When you go into the area of foreign corrupt practices, you are dealing with the whole world. The big advantage of the deferred and non prosecution agreements is that they significantly assist the state, which has limited resources.”

If it is just a resource question, then more resources for prosecutors in Canada would help solve that problem, right?

“It would,” Jull said. “But it becomes a question of taxpayer dollars. Deferred and non prosecution agreements are cost effective for governments. In effect, industry has to pay a Baker McKenzie to do an internal investigation. We do all the heavy lifting and we bring the product to the government. It is saving the government significant resources.”

In exchange for that, the company gets what?

“In the United States, the company avoids a criminal conviction. They avoid some of the reputational damage. They avoid admissions from convictions. So, the company benefits. And the company also benefits from having their own systems improved.”

Jull is an advocate for the regulatory pyramid as a model of corporate crime enforcement.

“In our book, we try to advance the idea of restorative justice put forth by Australian criminologist John Braithwaite. Braithwaite developed this pyramid theory. I strongly believe in the pyramid theory of enforcement.”

“The pyramid model says we ought to start at the base of a pyramid with improving dialogue between the regulated and the regulator,” Jull said. “Only if there is noncompliance and it continues do you move up the pyramid. Ultimately, there are some bad corporations that will not comply. And you have to prosecute them. And you have to prosecute the directors and the individuals responsible.”

“But what Braithwaite says is — you don’t have to start at the top of the pyramid. You can start with a dialogue.”

“Let me give you an example that illustrates the point. We had a client. The regulator received a complaint about my client. They filed it away. They received a number of other complaints about what my client was doing. They kept filing away the complaints for a period of 18 months until they finally built a case against my client. And they then informed my client that they had a case against them.”

“As it turned out, my client did not believe that the practice they were engaged in was illegal. And we had a good argument that it wasn’t illegal. But when the regulator called and said — we think you are offside – my client said — okay, if you think we’re offside, we’ll stop it.”

“Ultimately, that case was resolved without a criminal conviction. But I remember thinking — why didn’t they just call my client on day one and say — we have a complaint, we don’t think you should be doing this? We would have had a debate 18 months earlier. And ultimately, the client would have said — okay, if you don’t want us to do it, we think we can do it, but we will stop it.”

Why did the government wait?

“It was a new area of enforcement,” Jull says. “They were trying to flex their muscles. They were trying to build a case so they could say — look at us, we are really tough, we took down this big company. A lot of the time, they are in their own world of empire building and career building. The individual prosecutors want to say that they prosecuted such and such corporation, which would help their career. We talk about prosecutors prosecuting big cases, then leaving and going to industry.”

“That was my speculation. The regulator I was dealing with changed their practice. And they now do invite dialogue. And they do invite dialogue that will result in a citation, which is not a violation, but is basically a warning. I’m proud of that because I believe our book had something to do with that. And the head enforcement official came out and did a lecture in my class. And we got to know each other. We became friends. And I see light at the end of the tunnel.”

“But you can’t just give these agreements to everybody. You have to start with the dialogue and not be naive. You need balance.”

“I’m not suggesting that everybody gets a free ticket. The idea is that you start with discussion and dialogue with industry. But if they don’t comply, then you need to move up the pyramid.”

“And Braithwaite’s brilliant point is that the only reason the pyramid works is that ultimately, you move up the pyramid and there is a hammer at the top — the hammer of criminal conviction.”

Are Canadian corporations more ethical than American corporations?

“There is this perception,” Jull said. “We are polite. We are nice people. But to some extent, we have bought our own press a little too much. But how do you measure it? You can’t. There is no way to measure whether Canadian companies are more ethical. There is an argument that, in fact, it’s the other way around. Because the enforcement is so much more aggressive in the United States, companies have more robust compliance programs. Whereas in jurisdictions where the enforcement is not as robust, they may not.”

“We just don’t know the answer. You have to be careful about anecdotal evidence. But generally as a people, we are polite.”

[For the complete q/a transcript of the Interview with Kenneth Jull, see 28 Corporate Crime Reporter 33(12), September 1, 2014, print edition only.]