Amnesty Programs

06 Mar 2014

The adoption of an amnesty program by AG Siemens in 2008 and more recently by SNCLavalin in 2013 demonstrates the potential benefits such programs may have for corporate entities. In both cases amnesty programs have been used to cooperate with investigating authorities; however, such programs also have potential to be used for pre-emptive measures.

The term “amnesty” refers to pardoning wrongdoers for their wrongful acts. Amnesty programs are often used by governments to pardon certain criminal acts, and more often by tax agencies for incorrect returns. The Canadian Revenue Agency (CRA), for example, runs the Voluntary
Disclosure Program which permits taxpayers to amend or correct their previous tax filing, or reveal information to the CRA not previously provided in their tax return. The program allows taxpayers to avoid penalties by paying only the extra taxes and interest that they owe on their amended return. At the same time the program allows CRA to collect revenue without expending its funds on investigations.

Similar programs have also been used by police departments. In the past, Ottawa, Toronto, Halifax, and Winnipeg police departments have all run an amnesty program called “Pixels for Pistols”, which incentivized people to turn in guns in exchange for cameras. During this amnesty period, unlicensed or improperly stored firearms were allowed to be turned in without fear of charges. The program was a success with over 4,500 firearms being collected.

Siemens AG Amnesty Program
The amnesty program run by Siemens AG from October 31, 2007 to February 29, 2008, in light of a worldwide bribery scheme investigation, is arguably the first corporate use of its kind. Siemens AG was involved in a long-running bribery and corruption scandal in which approximately €1.3 billion was used to win overseas contracts between 2001 and 2007. The amnesty program offered immunity to employees below senior management level who were willing to cooperate fully with the investigation and disclose corrupt practices. Immunity included a waiver of claims for damages and a waiver of unilateral termination of employment. A total of 123 employees responded to the program, and most were granted amnesty.

SNC-Lavalin Amnesty Program
The SNC-Lavalin amnesty program ran from June 3, 2013 to August 31, 2013. The purpose of the program was to encourage employees to report corruption and anti-competition matters in which they had been directly or indirectly involved. The program would assist the company with
gathering facts regarding its corporate ethics. The program did not extend to members of the Office of the President or the members of the Management Committee, but the company still considered them for leniency.

Amnesty was defined in the policy to mean protection from certain unilateral disciplinary actions, including termination and/or claims for damages by the company. Further, the definition included that amnesty did not restrict the company from prescribing less severe disciplinary measures, nor did it protect employees against potential law enforcement actions or civil litigation. To be eligible, employees had to file a voluntary request with the Chief Compliance Officer during the amnesty period, including a complete and accurate report of the corruption or anti-competition matters in which the employee was directly or indirectly involved. Decisions were made by the Chief Compliance Officer, and if amnesty was granted, the requesting employee had to cooperate fully and transparently with the company’s investigation of the matter.

The program attracted 32 employees and the company received information that confirmed its previous assessment of corruption risks and uncovered $56 million worth of improperly-booked payments widely believed to be bribes.

Implications of Amnesty Programs
By adopting an amnesty program, the aforesaid corporations are in effect fully cooperating with authorities to get all the facts regarding their wrongdoings. The result of full cooperation is that the corporation should be considered for leniency when facing penalties. As the allegations against SNCLavalin are still to be proven and penalties are still to be decided upon, the full implications in that scenario are still to be seen. In the case of Siemens Ag, the company once feared that it would have to pay a penalty of up to $5 billion, but after cooperating with the US authorities and initiating the amnesty program, the company was fined only $800 million by US authorities. In addition, the company reported that as a result of its extraordinary co-operation with authorities, the US Defence Logistics Agency, the leading body awarding federal contracts, had reaffirmed Siemens Ag as a
responsible contractor.

While amnesty programs have been used primarily by government agencies, such programs can be very beneficial for corporate entities. As portrayed by Siemens AG, adopting an amnesty program to cooperate with the investigation of authorities will allow the company to be considered for leniency
in penalties and possibly in reputation. As Siemens AG was the first corporation to adopt an amnesty policy, the benefits of such program will be confirmed once the SNC-Lavalin investigation is complete and the penalties are set. In the meantime, corporate entities should consider amnesty
programs as a preventative measure to allow the company to rectify any wrongdoings before they are uncovered by the authorities.

The foregoing comments are of a general nature, and are not intended nor should they be used as a substitute for legal advice or legal opinions which can be rendered only when related to specific situations. Please contact the author should you wish to learn more about Amnesty Programs.

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