Epiq Systems, Inc.

Cartel cases face new scrutiny post-'Chocolate'

More than a year after the stay of proceedings in R. v. Nestle Canada Inc., — known as the Chocolate case as it involved criminal allegations of price fixing of chocolate bars — fundamental changes to investigations and prosecutions of cartels in Canada are underway, Toronto criminal lawyer John Rosen writes in Lawyers Weekly.

So far, Rosen, founder of Rosen & Company Barristers, explains, the debate within the competition bar has centred on the correctness of the ruling by the Ontario Superior Court of Justice in R. v. Nestle Inc. 2015 ONSC 810 that required the Competition Bureau to disclose to the accused the information proffered by the co-operating parties, and the subsequent decision of trial judge Ian Nordheimer to sign Criminal Code production orders directed at the co-operating parties and their lawyers to produce the fruits of their internal investigations.

However, he writes, “Little consideration has been given to the real issue raised by the case, namely whether co-operating parties in competition cases ought to be treated any differently than co-operating parties in other criminal cases.

“These so-called ‘Rat’ programs are not new to criminal law. They have been used successfully in a variety of criminal cases, including murder, fraud and terrorism cases. As Justice Nordheimer noted, providing incentives to parties engaged in criminal activity to ‘rat’ out others is said to be ‘distasteful on one level’ but serves the public interest by permitting successful investigations and prosecutions,” says Rosen.

Although the Chocolate case did not go to trial, Rosen explains that the disclosure produced to the defence and the limited litigation that followed demonstrated “the potential exposure of the lawyers for the co-operating parties to an involvement beyond their expectations and to possible criticism in jeopardizing their clients’ continued entitlement to immunity or leniency.”

Some examples, he says, include the fact that, during their internal investigations, the lawyers for the co-operating parties apparently failed to video or audio record witness interviews, thinking their notes would not be subject to production.

“This left them exposed as potential witnesses at trial to prove witness inconsistencies and to answer defence suggestions of improper threats or inducements made to employee/witnesses before their contact with bureau investigators,” writes Rosen.

“The apparent close working arrangement between the lawyers and bureau investigators raised questions of whether the lawyers crossed a line and became agents of the state. If so, their interaction with employee/witnesses and their handling of documents potentially tainted the prosecution’s case.”

In addition, Rosen says their resistance to turning over all of their interview notes and acquired information “exposed their clients to a potential breach of the co-operation contract and the resulting loss of immunity or leniency, although the remedy for such a breach currently remains unclear.”

In terms of lessons for the bureau and its investigators, Rosen says the bureau now understands that investigations of cartel cases require the same investigative steps as any other criminal investigation.

“Full and accurate investigative notes are essential. Witness contact must be carefully documented. All witness interviews must be video and audio recorded. Continuity of all documents seized or received from co-operating parties must be maintained and memorialized. All communications and dealings with experts must also be documented without gaps. These are just some of the basic police methods that were lacking in Chocolate.”

In addition, Rosen says investigators must maintain complete objectivity and distance themselves from the lawyers for the co-operating parties. They must treat all co-operating parties as untrustworthy and suspect.

In the post-Chocolate world, says Rosen, fundamental changes to investigations and prosecutions of cartels in Canada are in progress and the Competition Bureau is currently reviewing and overhauling its Immunity and Leniency Programs.

“The attorney general, through its Public Prosecution Service of Canada, is routinely subjecting cartel cases to the same scrutiny as any other criminal case before undertaking a prosecution. Lawyers advising potential co-operating parties must accept this new reality and advise their clients accordingly,” he writes.

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