By Paul Emanuelli

This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.

In its March 2018 decision in R. v. Carson, the Supreme Court of Canada upheld the conviction of a former senior advisor to the Prime Minister of Canada for influence peddling. As the evidence showed, during the year following his departure from his position as senior advisor to the Prime Minister, Bruce Carson entered into an agreement with H2O, a water treatment company, to use his government contacts to promote the sale of the company’s water treatment systems to First Nations communities in exchange for commissions to be paid to his girlfriend.

Carson defended the charges by arguing that the contracts in question were not government contracts since they were between First Nations and the water treatment company, and that the relevant Criminal Code provisions therefore did not apply to his activities. While the trial court agreed with this argument and dismissed the charges, the Court of Appeal for Ontario overturned that decision and found Carson guilty as charged. Carson appealed to the Supreme Court of Canada, but the Supreme Court upheld the conviction, finding that the contracts in question fell within the scope of the Criminal Code provisions since they were based on funding from the federal department of Indian and Northern Affairs Canada (INAC), and finding that Carson had lobbied officials in that department in relation to those contracts. In its decision, the Supreme Court set out the context as follows:

By criminalizing influence peddling, s. 121(1)(d) of the Criminal Code, R.S.C. 1985, c. C-46, strives to preserve both government integrity and the appearance of government integrity. It helps ensure that government activity is driven by the public interest and promotes confidence in our democratic process. This appeal concerns the interpretation of ss. 121(1)(a)(iii) and 121(1)(d)(i), which criminalize the selling of influence in connection with any matter of business relating to the government.
The appellant, Bruce Carson, agreed to use his government contacts to help H2O Professionals Inc. sell water treatment systems to First Nations. In exchange, H2O promised to pay a commission to his then girlfriend on all sales of these systems to First Nations. After this agreement was made, Mr. Carson spoke to government officials at Indian and Northern Affairs Canada (INAC) in order to promote the purchase of H2O’s products for use in First Nations communities.
He was charged with influence peddling under s. 121(1)(d) of the Criminal Code. At trial, he took the position that his assistance was not “in connection with a matter of business relating to the government”.
The trial judge agreed and acquitted him on the basis that First Nations, rather than government, decided whether to purchase the water treatment systems sold by H2O. The Court of Appeal allowed the appeal and substituted a conviction.
In my view, the offence under s. 121(1)(d) requires that the promised influence be in fact connected to a matter of business that relates to government. Furthermore, a matter of business relates to the government if it depends on or could be facilitated by the government, given its mandate. The phrase “any matter of business relating to the government” therefore includes publicly funded commercial transactions for which the government could impose or amend terms and conditions that would favour one vendor over others. Governments are not static entities — legislation, policies, and structures delimiting the scope of government activity evolve constantly. “Any matter of business relating to the government” must not be considered strictly with reference to existing government operational and funding structures.
Here, Mr. Carson’s promised assistance was in connection with a matter of business relating to the government. While government approval was not required for First Nations to purchase the systems sold by H2O, INAC could have facilitated these purchases, for example, by changing its funding terms and conditions to H2O’s benefit. It also could, and sometimes did, participate in and fund pilot projects involving water treatment systems for First Nations communities. Indeed, Mr. Carson tried to convince the government to create a pilot project to promote H2O’s products.
By demanding a benefit in exchange for his promise to exercise his influence with the government to H2O’s advantage, Mr. Carson undermined the appearance of government integrity. This is exactly the type of conduct s. 121(1)(d)(i) is intended to prohibit.

The Supreme Court then framed the issue of interpretation regarding the scope of the influence peddling provisions of the Criminal Code as follows:

  1. Analysis
  2. Interpretation
Section 121(1)(d) provides that:
121 (1) Every one commits an offence who
. . .
(d) having or pretending to have influence with the government or with a minister of the government or an official, directly or indirectly demands, accepts or offers or agrees to accept, for themselves or another person, a reward, advantage or benefit of any kind as consideration for cooperation, assistance, exercise of influence or an act or omission in connection with
(i) anything mentioned in subparagraph (a)(iii) or (iv), or
(ii) the appointment of any person, including themselves, to an office;
Subparagraphs (iii) and (iv) of s. 121(1)(a) provide as follows:
(iii) the transaction of business with or any matter of business relating to the government, or
(iv) a claim against Her Majesty or any benefit that Her Majesty is authorized or is entitled to bestow [. . .]
The appellant, Mr. Carson, admitted to having influence with the government. He also admitted that he demanded a benefit for another person as consideration for assisting H2O by calling upon his government contacts to promote  the sale of its water treatment systems to First Nations. The sole issue in this appeal is whether the assistance he promised to provide was in connection with “any matter of business relating to the government”.

As the Supreme Court noted, for the influence peddling offence to apply to the contracts, there needs to be a nexus between the contract in question and the government that the offender is attempting to influence in exchange for a payment:

For the reasons that follow, I conclude that the promised influence must be actually connected to a matter of business relating to the government for the offence to be made out. Accordingly, the relevant constituent elements of the offence in this case are:
  1. having or pretending to have influence with the government, a minister, or an official;
  2. directly or indirectly demanding, accepting, or offering or agreeing to accept a reward, advantage or benefit of any kind for oneself or another person;
  3. as consideration for the cooperation, assistance, exercise of influence, or an act or omission;
  4. in connection with a transaction of business with or any matter of business relating to the government.

For the reasons that follow, I conclude that the promised influence must be actually connected to a matter of business relating to the government for the offence to be made out. Accordingly, the relevant constituent elements of the offence in this case are:

  1. having or pretending to have influence with the government, a minister, or an official;
  2. directly or indirectly demanding, accepting, or offering or agreeing to accept a reward, advantage or benefit of any kind for oneself or another person;
  3. as consideration for the cooperation, assistance, exercise of influence, or an act or omission;
  4. in connection with a transaction of business with or any matter of business relating to the government.

Given the important public policy objectives of maintaining the integrity of government, the Supreme Court ruled that “government business” should be interpreted broadly beyond specific contracts to also include government decisions made to change or expand government spending programs:

I also conclude that the phrase “any matter of business relating to the government” must be interpreted broadly. A matter of business relates to the government if it depends on government action or could be facilitated by government, given its mandate. Thus, s. 121(1)(d) captures promises to exercise influence to change or expand government programs.

The Supreme Court elaborated on its broad interpretation as follows:

For these reasons, “any matter of business relating to the government” is not limited to matters in which government plays a direct approval role. It includes a matter of business in which government could play a role even if it does not do so at the time the offence is committed. A matter of business relates to the government if it depends on government action or could be facilitated by the government, given its mandate. Therefore, it includes purchases funded by the government for which the government could impose or amend terms and conditions that would promote a specific transaction. As counsel for the appellant recognized before this Court, s.  121(1)(d)(i) captures agreements whereby the accused, having or pretending to have influence with the government, accepts a benefit as consideration for exercising his influence to change an agency’s operational structure in order to facilitate a transaction or result.
In sum, the phrase “any matter of business relating to the government” must not be restricted to matters of business that depend on some government action or can be facilitated by government under its existing operational structure. But while the phrase “any matter of business relating to the government” must be interpreted broadly, this is not to suggest that the scope of s. 121(1)(d) is without limits. While we need not determine the exact limits of the phrase in this case, it would clearly exclude matters that have no plausible connection with the government’s mandate. Furthermore, the fact that an entity receives government funding for some purpose completely unrelated to the matter of business at issue does not suffice to show that a business transaction with that entity constitutes a “matter of business relating to the government”. The fact that First Nations receive government funding does not, in itself, render all commercial transactions with First Nations “matter[s] of business relating to the government”. However, as indicated, for the purpose of s. 121(1)(d), the law of attempt ensures that those who are paid to exercise influence in connection with a matter of business that they believe relates to the government, even if it does not, will not escape criminal liability.

As the Supreme Court concluded, “Mr. Carson is guilty of influence peddling contrary to s. 121(1)(d) of the Criminal Code. I agree with the majority of the Ontario Court of Appeal that the acquittal should be set aside, a guilty verdict should be entered, and the matter should be remitted to the trial judge for sentencing”.

As CBC News subsequently reported on May 3, 2018, “defence and Crown lawyers agreed the circumstances of Bruce Carson’s case do not warrant imprisonment, even though the fraud offence carries a potential prison term of up to five years”. On July 10, 2018, in an article entitled Former Harper aide gets suspended sentence, ordered to do community service, CBC News reported that the “one-time senior aide to former prime minister Stephen Harper has been given a suspended sentence with 12 months’ probation and must do 100 hours of community service for committing a fraud against the government”. As this case illustrates, the improper attempt to influence decision-making in relation to government contracting can attract significant consequences.