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Billions at stake for SNC-Lavalin – a corruption charge will deprive the firm of federal contracts for 10 years



OTTAWA – A looming criminal process may circumvent the SNC-Lavalin Group Inc. billions of federal contracts, depriving Prime Minister Justin Trudeau of a key player in the infrastructure ambitions, and possibly risking a number of jobs in Quebec, analysts say.

SNC has a long history of building large infrastructure projects in Canada, including a $ 6.3 billion REM railway in Montreal, which is currently under construction. This railway project remains the only investment made so far by the Canadian Infrastructure Bank, a body introduced by the Trudeau government in 2016 and aimed at investing $ 35 billion. United States in various infrastructure projects over a 10-year period. SNC is also on the short list to build the 3.6 billion-wide expansion of Ottawa's high-speed train system.

But financial analysts and legal experts say that a charge of bribery and fraud against the company will prevent it from bidding on any federal contracts for 10 years and even allow federal authorities to cancel the company's current infrastructure contracts, if deemed necessary.

The Montreal-based company under the Foreign Public Officials Corruption Act (CFPOA) is accused of sending $ 48 million in payments to Libyan government officials, including the son of the former dictator Moammar Gaddafi, Saadi, to secure government contracts. The case is at a preliminary hearing since October, and there is currently no trial date.

The depth of SNC's presence in Canada points to the overall objectives of the company and Ottawa as the government gradually implements its infrastructure program worth $ 186.7 billion, aimed at improving Canadian roads, bridges, clean energy facilities and telecommunications lines.

Frederic Bastien, an analyst at Raymond James, said that SNC currently has planned infrastructure projects worth about $ 8.6 billion, most of which are in Canada. This represents more than half of the company's total global backlog of $ 15 billion.

“If they are found guilty, they will be barred from bidding on federal contracts. It is very important for business that this does not happen, ”said Bastien.

"Most of the work they do in Canada is for the government."

The SNC also employs thousands of workers in Montreal, where Trudeau Papino drives. Quebec is expected to be very popular in the upcoming federal election.

Most of the work they do in Canada is for the government.

The possibility that the SNC could be removed from federal contracts was a shock to the financial community, which widely expected the company to postpone prosecution.

“To call it unprecedented would be an understatement,” said Maxim Sychev, an analyst at National Bank Financial.

SNC has sought to avoid criminal proceedings for bribery and fraud since the RCMP filed charges against the firm in 2015.

The company's request for negotiation of a deferred prosecution agreement, or DPA, was in the spotlight after a Globe and Mail report on Thursday suggested that the Prime Minister’s Office called on former Attorney General Jody Wilson-Reybould to issue such a deferral . In October 2018, the federal director of public prosecution effectively denied the company a deferred prosecution. Wilson-Reybould was implicated in the veterans file in January.

DPA effectively allows corporations to pay a fine in lieu of criminal charges, which, in turn, allows them to continue their business as usual, provided they introduce corporate compliance measures.

SNC, led by CEO Neal Bruce, said that Ottawa should allow the company to justify its opinion on DPA. According to Bruce, the company replaced its top management and board of directors and introduced reporting standards aimed at eliminating corruption.

The political coup in Ottawa on Thursday took place against the backdrop of the corporate upheaval of Bruce, who in recent years pushed the company to infrastructure projects, and not to oil and gas.

SNC-Lavalin CEO Neil Bruce.

Kristin Muski for the National Post / File

In an interview with the Financial Post in 2018, Bruce said that infrastructure and nuclear energy are the two main driving forces of a company that is moving forward. He said that plans for spending Liberals on infrastructure have allowed a number of new projects to be promoted, providing some cushion to engineering, purchasing and construction companies, such as SNC.

“Companies do not view individual contracts as“ must win, ”because there are a number of projects that will be launched,” he said in an interview in May 2018.

The company has teamed up with Aecon Group Inc. on contracts for the reconstruction of two nuclear facilities in Ontario for a total of $ 3.2 billion. He also has a long-term maintenance contract for a significant portion of the SkyTrain system in Vancouver.

The prosecution of the company on bribery charges in Libya since 2012 has already cast a shadow on the company's ability to enter into government contracts.

Announcing the charges in February 2015, the company sought to distance itself, calling it "the reprehensible act of former employees who had long since left the company."

At that time, he told shareholders that the charges would not formally change his ability to participate in public projects.

Chris Burkett, a former Crown Attorney, who is currently attorney for corporate defense at Baker McKenzie, speaking generally about the law, said that a conviction under federal bribery laws would actually result in a 10-year ban on federal contracts. The federal government can also terminate any existing contracts, and provincial and foreign governments can follow suit, Barkett said.

During the last decade, two other companies were charged under the CFPOA, and both paid fines of $ 10 million. In contrast, in the US, corporate defendants accused under anti-bribery laws paid fines of hundreds of millions of dollars.

Barkett, who wrote about deferred prosecution agreements, said that they were criticized a lot, because convictions could have such serious consequences.

“Some people see deferred prosecution agreements as a way for state lawyers to put pressure on companies in the settlements,” said Barkett. "But, on the other hand, other people say that corporations see this as a" prison exit card. "

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