Quebec Enacts Tough Anti-Corruption Rules
Quebec’s construction industry watchdog has won new powers to root out corruption, a move that comes three years after a government probe found widespread graft in the award of public contracts in the province.
Under new regulations that took effect last month, the provincial construction oversight agency Régie du bâtiment du Québec, or RBQ, gained wider authority to conduct investigations and audit construction businesses.
Contractors in the province will also face tougher licensing requirements.
The RBQ will now be able to refuse a license to a contractor that has an officer or shareholder either convicted or imprisoned during the previous five years for drug offenses, money laundering, fraud, bid-rigging and conspiracy, according to Maude Brouillette, an attorney at Stikeman Elliott LLP, a corporate law firm based in Montreal.
The agency can also pull the license of a contractor after the conviction of an officer or shareholder for the same offenses.
To win RBQ approval, contractors will also have to put up a performance bond to ensure that payments to creditors and others will continue if the company loses its license.
The new rules come as the city of Montreal filed an $11-million civil lawsuit in Quebec Superior Court on Sept. 26 against a former top city official, two construction executives and other individuals and businesses in the 2007 award of a large water-management contract. The city seeks to recover penalties paid to the firms when the contract was cancelled amid bidding improprieties.
“The act has generally been well received by the construction industry, with the exception of the new financial guarantees required by the act,” Brouillette notes, adding that some construction observers predict the bonding requirement could impede industry access by small and medium-sized firms that will not be able to comply. "Only time will tell whether the bonding requirement does have this type of effect," she says.
The regulations also are intended to ensure transparency among owners and investors at construction sector firms.
The new law, which cleared the Quebec National Assembly in May and went into effect in September, defines an officer of a contracting firm as any person or corporation with 10% or more of the voting shares.
Straw officers or faux guarantors, who agree to act as cover for a company’s true owners, who might, in turn, may be trying to hide criminal backgrounds or organized crime connections, face stiff fines.
Penalties under the new law range up to $165,700, depending on the power or legal responsibility of the position in question.
The new anti-corruption rules have their genesis in the Charbonneau Commission, which, led by Justice France Charbonneau, produced a 1,700-page report in 2015 detailing abuses after three years of hearings . The document, which cost tens of millions to produce, detailed pervasive corruption in Quebec’s construction industry, with contractors linked to mafia and other criminal groups and some public officials who helped steer contracts based on gifts and campaign cash.
Quebec’s new, anti-corruption rules also include protections for whistleblowers who report alleged instances of construction corruption.