Tuesday, October 11, 2011

The Long Arm of U.S. Law Grabs Canadian Executive

This posting was written by Michael Osborne, a partner with Affleck Greene McMurtry LLP of Toronto, Ontario, Canada.

Doing business in the U.S. can be very lucrative. But Canadian (and other foreign) companies and their executives that engage in corrupt practices there can expect to face serious penalties there.

Former Bennett Environmental, Inc. executive Robert Griffiths is a case in point. On September 12, 2011, he was sentenced to serve 50 months in a U.S. jail, after pleading guilty to participating in fraud and money-laundering conspiracies.

Bennett Environmental is an environmental soil remediation company. Beginning in 2001, it won a series of contracts to remediate soils at a major environmental cleanup in the U.S. known as the Federal Creosote site.

An investigation by the U.S. Justice Department’s Antitrust Division revealed that bidders on the project, including Bennett Environmental, had conspired in the bidding process, fraudulently inflated the price of certain subcontracts, and paid kickbacks.

To date, three companies and ten individuals have been charged. Bennett Environmental is one of the three companies: in 2008 it pleaded guilty to one count of conspiracy to defraud the U.S. Environmental Protection Agency and was fined $1 million.

Bennett Environmental’s woes in the U.S. are not over. Its founder, John Bennett, was indicted in 2009 and faces charges of conspiracy, fraud, and money laundering in relation to the Federal Creosote site. Mr. Bennett has recently succeeded in obtaining orders from Ontario courts that Bennett Environmental pay his legal bills.

Controversy over the Federal Creosote contracts has also led to trouble at home. An OSC investigation determined that Bennett Environmental failed to disclose disputes over Federal Creosote contracts in 2003 until about one year later.

In a series of settlements, Mr. Bennett was prohibited by the Ontario Securities Commission from acting as an officer or director of a public company for ten years, and ordered to pay an administrative monetary penalty (“AMP”) of $250,000.

Mr. Griffiths was barred from trading in securities or acting as a director or officer of a public company for 15 years, and ordered to pay an AMP of $150,000. Another Bennett Environmental executive, Rick Sterns, was prohibited from acting as an officer or director for five years and ordered to pay an AMP of $490,000.

Further information regarding the 2008 criminal charges against Bennett Envronmental, Inc. appears in an August 1, 2008 posting on Trade Regulation Talk.

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