Policy to Prevent the Corruption of Foreign Public Officials

Both Canada and the United States have laws making it illegal to corrupt officials of foreign governments or to engage in certain related acts.  In Canada, the law is entitled Corruption of Foreign Public Officials Act and in the United States the law is entitled Foreign Corrupt Practices Act.  In the discussion that follows, we have always adopted the more stringent requirement of the two laws.

Persons to Whom the Laws Apply.  Both laws apply to the Company and its subsidiaries; their employees, officers and directors; and their agents and representatives.  For these purposes, action by a foreign agent or representative is the equivalent of action by the Company.

The laws may apply in whole or in part to foreign companies and joint ventures if a U.S. or Canadian company controls the foreign company or joint venture or otherwise authorizes, directs or participates in activity by the foreign company or joint venture.  Deciding whether activities of a foreign company or joint venture are authorized, directed or participated in by the Company in any particular instance will be an uncertain exercise with uncertain results.  In addition, allegations of illegal conduct by any company or joint venture in which the Company has a significant interest can only cause damage to the reputation of the Company.  For this reason, you should assume that any action of foreign companies and joint ventures in which the Company has a significant interest, including the actions of the employees and agents of such foreign companies and joint ventures, will be attributable to the Company.

Bribery Prohibition. The laws make it illegal to offer or provide money or anything of value for the personal benefit of government officials, political parties or politicians in order to influence governmental action (including causing an official to perform his or her duties) or otherwise to secure an improper advantage in order to obtain, retain or direct business.   The laws may be violated if the Company knows, or if it should have been obvious to the Company, that the payments were made for an illegal purpose.

The laws apply to the offer or providing of money or anything of value to (i) any foreign government official or any official of a public international organization (such as the International Monetary Fund, regional development banks or other multilateral organizations) or (ii) any foreign political party or its officials or any political candidate for the purpose of: influencing that official in the exercise of his or her duties (or non-exercise of those duties); having any such person influence foreign government activity; or otherwise securing an improper advantage for the purpose of aiding the Company in obtaining, retaining or directing business.

The laws also apply to indirect payments, i.e., where the Company offers or provides money or anything of value to any person with the knowledge that the person will make a payment to a foreign government official, official of a public international organization, foreign political party or its officials, or any political candidate for such a prohibited purpose.

The laws also make it illegal to possess property or proceeds from property known to have been obtained as a result of the bribery of a public official or to “launder” (i.e., deal with intent to conceal) property or proceeds from property obtained as a result of the bribery of a public official.

Foreign government-owned corporations and other instrumentalities are generally treated as if they are governments, and their employees, officers and directors are treated as government officials.

Exception to Bribery Prohibition. There is an exception in the laws for “facilitating payments.”  “Facilitating payments” are payments made to expedite routine governmental action that does not involve obtaining, retaining or directing business.  Example include payments to (i) secure processing of papers such as visas, work orders and permits, (ii) induce customs officials to process legally transmitted goods, (iii) obtain police protection, (iv) obtain installation and maintenance of utility connections, and (v) induce minor government functionaries (government employees without discretionary authority over a project or transaction) to complete their jobs in the manner required and where the situation does not involve the securing of business.

There are three additional exceptions:

• It is an affirmative defence if it can be shown that the payment was legal under the written laws and regulations of the foreign country.  As an example, in some foreign countries, the Company may be required by law to hire as an agent a national of that country who also is connected to the government of that country in some way or other.
• It also is an affirmative defence if it can be shown that the payment was a reimbursement of travel, lodging and other reasonable and bona fide expenses directly related to the business promotion, demonstration or explanation of the Company’s business, or the execution or performance of a contract with the foreign government.  As an example, payment of the travel expenses of a foreign government official to visit one of our mines, as a part of an effort to promote the Company in that country, would fit into this category.
• Unconditional gifts having nominal value, when made openly and as a social amenity, or as a token of esteem, regard or gratitude in accordance with local custom, generally will not be regarded as a bribe.

Company Policy. The Company’s policy is firm and unconditional.  Under no circumstances will the Company ever pay a bribe prohibited by the laws.  If you are ever solicited for such a bribe, or if you become aware of any instance where any Company employee, officer, director, agent or representative proposes to offer such a bribe or is otherwise involved in such illegal activity, you are to report the matter to your immediate superior, or directly to the CEO of the Company.  Any employee, officer, director, agent or representative of the Company that participates in any scheme to pay such an illegal bribe will be terminated immediately.

With respect to payments that fall within the exceptions noted above:

• No “facilitating payments” may be made without the prior written approval of the CEO.
• No payment that would otherwise be an illegal bribe may be made on the basis that it is was legal under the written laws and regulations of the foreign country without the prior written approval of the CEO.
• No payment that would otherwise be an illegal bribe may be made on the basis that it is a reimbursement of travel, lodging or other reasonable and bona fide expenses directly related to the business promotion, demonstration or explanation of the Company’s business or the execution or performance of a contract with the foreign government without the prior written approval of the CEO.
• With respect to unconditional gifts of nominal value made openly and as a social amenity, or as a token of esteem, regard or gratitude in accordance with local custom, the CEO will establish a monetary limit on the value of any such gift.  Any gifts with a value in excess of that limit must be approved in advance by the CEO.

Accounting Requirements. The Company and its affiliated foreign companies and joint ventures must:

• Keep financial records which, in reasonable detail, accurately and fairly reflect transactions; and
• Maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i)  transactions are executed in accordance with management authorization, (ii) transactions are properly recorded as needed to permit preparation of financial statements and to maintain accountability for assets, (iii) all assets are recorded on the books of the Company and access to assets is only permitted in accordance with management authorization, and (iv) periodic auditing is done at reasonable intervals and action is taken to resolve discrepancies.

The accounting provisions of the laws require that assets and transactions be properly recorded, that transactions be properly identified, that there be a suitable system of accounting controls, and that there be appropriate and periodic audits and resolution of discrepancies.  As an example, the accounting provisions require that the Company properly record “facilitating payments” as such and prohibit their characterization in some other form.  The accounting provisions also prohibit the Company from maintaining off-record cash “slush” funds or cash that may be accessed without senior management authorization.

Things to Look For. The following is a list of “red flags” that may indicate the possible existence of corrupt practices:

• Foreign agent with a poor reputation or with links to the government.
• Unusually large commission payments or commission payments where the agent does not appear to have provided significant services.
• Cash payments, or payments without paper trail or compliance with normal internal controls.
• Unusual bonuses to foreign personnel for which there is little support.
• Payments to third country accounts.