As construction of the Heartland power line by AltaLink, EPCOR and Quebec-based SNC-Lavalin approaches completion, we thought it might be appropriate to update our followers on the continuing corruption investigations into AltaLink’s parent company, SNC-Lavalin. Following are just a few highlights since our last post on this subject in mid-April:
Following the World Bank’s 10-year sanction against SNC-Lavalin and 100 of its subsidiaries over alleged bribes by SNC to secure projects in Bangladesh and Cambodia, the Canadian International Development Agency announced it will also bar SNC from bidding on any of the agency’s projects (Globe and Mail).
The World Bank concluded that SNC-Lavalin used the budgeting term “PCC”, which stands for “Project Consultancy Cost”, as a code to indicate the cost of bribes to be paid to secure lucrative contracts (Globe and Mail, FCPA). CBC News listed 10 countries for which SNC used this code or for which questions were raised about SNC’s conduct: Kazakhstan, India, Bangladesh, Cambodia, Ghana, Nigeria, Uganda, Zambia, Malawi and Mozambique. Additional countries where SNC’s conduct is being investigated include: Libya, Algeria, Angola, Tunisia, United Arab Emirates and Canada.
While investigating alleged kickbacks by SNC to Libyan Moammar Gadhafi’s son, Swiss authorities uncovered suspicious Tunisian payments. An RCMP search warrant alleged that SNC-Lavalin paid nearly $6 million to the son-in-law of Tunisia’s President between 2001 and 2010 to win contracts in Tunisia (National Post).
The RCMP Foreign Anti-Corruption Unit accused 2 former SNC executive VPs of fraud, bribery and the illegal laundering of $120 million. The RCMP also accused SNC-Lavalin Group Inc. itself of being party to the crimes of fraud and bribery of foreign officials between 2001 and 2011 (CBC News). As part of their investigations, the RCMP moved to freeze millions of dollars in Montreal and Florida bank accounts and real estate holdings.
Court documents revealed SNC-Lavalin offered an executive post to the son of former Libyan leader Moammar Gadhafi in 2008 in order to win contracts and boost its business across the oil-rich parts of north Africa (Toronto Star). Saadi Gadhafi was apparently offered a $150,000 annual salary and the title “VP-Maghreb”.
Algerian police raided SNC-Lavalin’s offices in Algiers amid allegations of bribery and kickbacks involving public officials hired by SNC to secure a number of large infrastructure projects, including with the state-run oil company Sonatrach (CBC News). The Algerian government later said it would blacklist any foreign companies involved in corruption investigations (Associated Press).
SNC-Lavalin is alleged to have laundered money for the Matala Dam project in Angola (International Rivers). In response to this and many other SNC international corruption scandals, the Democratic Republic of Congo and the World Bank dropped SNC-Lavalin from consideration in proposed work on the Grand Inga Dam Complex on the Congo River.
On the basis of bribery and fraud allegations against SNC-Lavalin around the world, the United Steelworkers asked the Ontario Premier for an investigation into the $1 billion contract for an extension of the 407 Express Toll Route that was awarded to the partnership of SNC-Lavalin and Cintra Infraestructuras (Northumberland View).
Neither the Canadian nor Trinidad and Tobago governments was willing to accept responsibility for the selection of SNC-Lavalin to build the Penal Hospital, even though SNC was in the midst of international bribery investigations (Trinidad and Tobago Guardian).
Police in France launched their own investigation of SNC-Lavalin by executing a search warrant at SNC’s Reims office, which was SNC’s European headquarters until it moved to Paris (Financial Post). The French investigation was linked to corruption investigations of SNC-Lavalin in Canada. French police were also looking into $13.5 million of suspected SNC kickbacks to someone in the United Arab Emirates.
The Canadian Union of Public Employees (CUPE) released a statement to help municipal councils and officials evaluate SNC-Lavalin as a potential public-private partner (P3) (Marketwired). CUPE said scandal-plagued SNC-Lavalin has a long history of troubling controversies – allegations of fraud, money laundering, bribery – but is still courting public money with risky P3s across Canada.
A secret $13.5 million commission, part of $33.5 million that was falsely assigned to certain SNC projects, was linked to a froth treatment plant contract in Fort McMurray secured by SNC (QMI Agency). The contract had been mysteriously terminated just before Christmas 2012.
Maclean’s wrote the following about anti-corruption expert Michael Hershman’s work with SNC-Lavalin: “Hershman’s current Montreal assignment isn’t quite so cheery, however. The 67-year-old anti-corruption expert is helping oversee the rebuilding of SNC-Lavalin as the once-proud Montreal-based engineering firm emerges from the biggest scandal in its 102-year history.”
In response to SNC-Lavalin employees admitting, at the Charbonneau Commission, to billing Montreal for work never done and using the payments to meet financing demands of political parties, the City of Montreal is fighting back. The city appears to be systematically withholding payments to companies like SNC that have been accused of rigging contracts, corrupting municipal officials and making illegal political contributions to ensure a steady stream of work (Toronto Star).
In an attempt to take the focus away from the many corruption allegations against SNC-Lavalin, the company has begun suing some of its former employees for allegedly conspiring to commit illegal actions involving company funds (Montreal Gazette). Individuals accused by SNC of these and similar actions have indicated they had the full support and encouragement of SNC management.
Garfield Emerson, governance advisor and director of Canadian Tire Corp. and CAE Inc., wrote an open letter criticizing Gwyn Morgan, former chairman of SNC-Lavalin (Financial Post). Specifically, he criticized Morgan’s public attempts to defend himself against SNC’s ballooning corruption scandal, by calling Morgan’s comments “weak, defensive and unpersuasive”. Emerson wrote that it was Morgan’s job as chairman to establish and maintain the right corporate culture and management based on strong ethical values.
A second quarter loss of $37.7 million, lower-than-expected net income projected for 2013, and the growing number of corruption allegations and charges, have punished SNC-Lavalin’s share price (Financial Post). Many stock analysts have been suggesting that investors put their money elsewhere, considering the unpredictability of SNC’s situation and as confidence in the company has decreased.
It’s been difficult to keep track of all the executive and other staff who have resigned from, or who have been fired by, SNC-Lavalin during the company’s widespread corruption scandal (Montreal Gazette). To date, the list includes: Pierre Duhaime (former CEO), Riadh Ben Aissa (former VP), Stephane Roy (former VP & comptroller), Ric Sorbo (former VP), Yves Cadotte (former VP), Michael Novak (former VP), Gilles Laramee (former VP), Patrick Lamarre (former VP), Andy Mackintosh (former VP), Kevin Wallace (former VP) and Feroz Ashraf (former VP). Other staff who have left the company under questionable circumstances include: John Brown, Jean-Pierre Mourez, Mohammad Ismail and Joseph Salim. SNC continues to shuffle its executive and other management (Canadian Press).
Some analysts have suggested that SNC-Lavalin is vulnerable to takeover based on a number of factors including its cheap valuation (Financial Post).
A former director of international projects at SNC-Lavalin, Mohammad Ismail, has sued the company for wrongful dismissal, claiming that he refused to use a “bribery” code in a project proposal, even though he was ordered to use it (CBC News). Ismail also claimed he was forced to sign fake agreements.
John Baird, Canada’s Foreign Affairs Minister, recently distanced himself from SNC-Lavalin when he spoke at a joint news conference in Algiers, Algeria (Canadian Press). He said, “This company does not represent all Canadian businesses, which give huge importance to ethics…It is obvious that they must pay for their actions through the courts.” SNC-Lavalin has been charged with receiving contracts in Algeria in exchange for bribes.
Canada’s corporate image has been severely damaged, and Canada now dominates the World Bank corruption list, thanks to SNC-Lavalin (Financial Post). “Out of the more than 250 companies year to date on the World Bank’s running list of firms blacklisted from bidding on its global projects under its fraud and corruption policy, 117 are from Canada – with SNC-Lavalin and its affiliates representing 115 of those entries…”
Kevin Wallace, a former senior SNC-Lavalin executive, has recently been charged criminally under Canada’s foreign bribery law (Globe and Mail). He was arrested and released under conditions. Wallace is the third former SNC official to be charged under the Corruption of Foreign Public Officials Act for his alleged involvement in a bribery conspiracy related to the Padma Bridge project in Bangladesh.
A Surrey, British Columbia resident recently suggested SNC-Lavalin is a bad choice to assess the health and environmental impacts of a new coal terminal in Surrey, because of the company’s current corruption scandal and bias in the coal industry (Vancouver Sun).
The National Post recently wrote, “After 17 months in Swiss custody, former SNC-Lavalin executive Riadh Ben Aissa is to return to Canada to face fraud, bribery and money laundering charges in relation to a Montreal hospital contract…Mr. Ben Aissa is wanted by Quebec’s anti-corruption unit over his suspected role in an alleged scheme to win the contract to build the McGill University Health Centre.”
Most of 824 homeowner plaintiffs in one of Canada’s largest construction lawsuits are suing SNC-Lavalin, alleging negligence on the part of the construction giant (Montreal Gazette). The plaintiffs are seeking a combined $200 million in over 50 lawsuits against contractors and construction firms for failing to detect that crushed rock containing the mineral pyrrhotite caused cracking in their home foundations when exposed to humidity.
The Trinidad and Tobago government voted September 26 to terminate all contractual arrangements with SNC-Lavalin in relation to its Penal Hospital project, and to not enter into any future contracts with the company or any of its subsidiaries (Trinidad and Tobago Newsday). The government made the decision in light of the many international corruption allegations and charges against SNC-Lavalin.
SNC-Lavalin announced September 30 that it will sell an equity stake in its subsidiary, AltaLink (CBC News). Although the company provided few details, it said the sale was part of a broader strategy of reducing its investments in infrastructure assets. SNC will apparently explore all options including a private sale, strategic partnership or public market alternatives. Speculation suggests SNC may sell a 20% to 25% stake in the electricity transmission company.