Update on SNC-Lavalin Corruption Scandals

Since our September 11, 2014 update on scandal-plagued SNC-Lavalin, the Quebec-based engineering giant has sold AltaLink to U.S. energy behemoth Berkshire Hathaway Energy, owned by billionaire Warren Buffett. Part of the sale deal ensures that SNC will continue to manage construction of, and build, AltaLink’s electricity transmission infrastructure in Alberta. So what’s the latest on SNC’s Canadian and international corruption scandals?

Arthur Porter’s wife, Pamela Mattock Porter, will formally plead guilty to money laundering and sentencing on December 18, 2014. Arthur Porter was director of the Montreal superhospital (MUHC) when SNC-Lavalin allegedly gave millions of dollars to Porter in order to secure the lucrative hospital construction contract. Mattock Porter said she knew the money deposited in a Bahamian holding company under her name was illegal. Arthur Porter, who is currently in a Panamanian prison, continues to deny he ever received this money.

Riadh Ben Aissa, a former senior SNC-Lavalin VP who had been held for some time in a Swiss prison, was recently granted bail in Canada on fraud-related charges in connection with the $1.3 billion Montreal superhospital corruption scandal. Ben Aissa has to wear an electronic bracelet pending his next court appearance. He faces 16 charges in connection with the alleged $22.5 million bribe paid by SNC-Lavalin to secure the hospital construction contract. Ben Aissa arrived in Montreal in October after his extradition from Switzerland where he had accepted a deal that sentenced him to the 29 months he had already served in jail on fraud-related charges in relation to SNC’s business dealings with the tyrannous Gadhafi regime in Libya. Ben Aissa acknowledged in court that he bribed Saadi Gadhafi, son of Moammar Gadhafi, so SNC could win Libyan contracts. He also admitted to pocketing commissions.

Former SNC Vice-President Normand Morin, who was appointed to Montreal’s port authority, was allowed to remain on the public payroll for months, despite known links to an illegal fundraising scheme. Morin has confirmed to police that his unofficial job was to arrange and monitor political financing in Quebec. The Charbonneau Commission – a public inquiry into widespread corruption within Quebec’s construction industry – had been told earlier by SNC VP Pierre Cadotte that SNC illegally contributed more than $1 million in donations to Quebec’s political parties between 1998 and 2010. The Prime Minister’s Office recently announced that Morin is no longer a member of the port authority board.

New portions of a sealed police affidavit recently released by a Quebec court indicate that former SNC-Lavalin VP Pierre Anctil also had the unofficial responsibility of arranging and monitoring illegal political financing. Both Anctil and Morin told police that former SNC CEO Jacques Lamarre had given them this responsibility, and that they were in contact with businessman and Liberal bag man Marc Bibeau to arrange for donations to the Quebec Liberals. SNC employees acted as straw man donors, Morin and Anctil confirmed, and SNC reimbursed them.

Quebec’s anti-corruption police unit is investigating the possibility of former Quebec Premier Jean Charest’s involvement in a financing campaign with SNC-Lavalin. The allegations suggest that in 2002 Charest approached then-SNC-Lavalin chairperson Guy Saint-Pierre in an attempt to collect $50,000 from SNC’s employees. Before joining SNC, Saint-Pierre was a Liberal Party member and minister during the mid-1970s. Charest has since denied the allegations.

Bob Mackin has recently written an excellent article in Straight.com on the extent to which SNC-Lavalin continues to be awarded many construction and other contracts in British Columbia, despite “cascading headlines alleging international bribery and corruption”. The article provides a history of some of the multitude of international allegations of bribery, fraud and money laundering against SNC and many of its executive members, but points out that SNC continues to be very successful winning contracts awarded by B.C.’s Liberal government. SNC has made substantial political donations to the B.C. Liberal party. The article cites Burnaby Mayor Derek Corrigan, who said the following at a City Council meeting earlier this year, “SNC-Lavalin has done more to bring Canadian engineering into disrepute than any company has ever had the misfortune to do in the history of Canada. This is one of the few Canadian companies who could attain the high goal of being banned for 10 years by the World Bank for corruption. This is a company that is up to its earlobes in corruption in Montreal.”  

Of the 250 global companies blacklisted by the World Bank under its new fraud and corruption policy, 117 are from Canada, and a whopping 115 of those are SNC-Lavalin or its affiliates, including AltaLink Management Ltd. and AltaLink Investment Management Ltd. in Alberta. In other words, 46% of all the companies in the entire world that have been placed on the World Bank’s no-bid list under its fraud and corruption policy are SNC-Lavalin or its affiliates. Many high-profile Canadians have called this one of the worst national embarrassments in our history.

About 200 people who own businesses and commercial property on Vancouver’s Cambie Street are suing SNC-Lavalin and others, arguing that SNC chose a cheaper construction method, known as cut-and-cover, over a tunnel-boring method, and as a result business and property owners suffered significant financial losses. The plaintiffs argue the cut-and-cover method saved the project about $35 million, in a $2 billion project. One of the business owners said, “We’re looking for compensation. It’s really unfair a private company like SNC-Lavalin can profit by harming over 200 businesses.”

An access to information request filed by an Ottawa researcher recently revealed that RCMP spent $1.27 million of taxpayer funds investigating SNC-Lavalin in the last fiscal year on allegations of bribery and fraud in procuring contracts in Libya, Tunisia and Bangladesh. The RCMP initiated their investigations into SNC-Lavalin and its affiliates in April 2012, when officers raided SNC’s Montreal headquarters. Since that time, many former SNC executives have been charged and arrested.

A report into one of Canada’s signature development projects in Afghanistan says dozens of irrigation canals in Kandahar, once clogged with silt, are now brimming with water and helping to improve the livelihoods of local farmers. But the project was not without its problems. Initially, SNC-Lavalin was contracted to do the work, but 3 years into the project had only fixed 8 secondary canals. In order to get the work finished on budget and on time, the Canadian government ended up relying on the Central Asian Development Group. The report says there were other problems with SNC-Lavalin. Afghan officials disputed SNC’s claims of setting up training and crop diversification programs, and SNC also failed to take measurements at the canal that would have helped judge the effectiveness of the improvements. An irrigation system SNC had set up at Tarnak Farms, toured by Prime Minister Stephen Harper in 2011, was judged to be neither practical for small Afghan farms nor efficient in the extremely dry Afghan climate. There were also allegations of SNC-Lavalin spending millions on security for the project, with funds given to a controversial private security firm with ties to former Afghan President Hamid Karzal.

Quebec’s Order of Engineers has recently filed disciplinary complaints against 2 SNC-Lavalin engineers in connection with the collapse of the Ville Marie Expressway Tunnel in Montreal more than 3 years ago. The 2 engineers were involved with preparation of the plans and specifications for repair work on the walls in the tunnel. On July 31, 2011, a 20m-by-20m section above where the repairs had been made came crashing down onto the roadway below. Fortunately, there were no cars passing underneath at the time. The Order of Engineers has complained the 2 SNC engineers violated the Professional Code and Code of Ethics of Engineers.

The Canadian and international corruption scandals, coupled with questionable contract performance by SNC-Lavalin, appear to be catching up with the engineering giant. In addition to the 10-year World Bank ban, some governments around the world, including our own federal government, are not awarding new contracts to, or renewing contracts with, SNC-Lavalin. One recent example – the Canadian federal government has chosen to replace embattled SNC as its property manager. Public Works and Government Services Canada announced it had awarded contracts worth $9.6 billion to Brookfield Johnson Controls Canada to manage about 3,800 federal government buildings, facilities and properties across the country. The contracts are for an initial 8-year period, with options to extend the deal, rendering its total value at about $22.8 billion. In response to decreasing contracts, SNC-Lavalin recently announced a restructuring plan that would result in about 4,000 layoffs, or about 9% of its global workforce (about 1,000 layoffs in Canada).

This blog is based, in part, on news coverage by: Montreal Gazette 1CTV News Straight.comCBC News 1Montreal Gazette 2CBC News 2Canadian PressGlobe and MailMontreal Gazette 3Montreal Gazette 4Calgary Sun, and Montreal Gazette 5. For more information on SNC-Lavalin’s corruption scandals, some of which have been ongoing for the past 3 years, see this link.

~ by RETA on December 7, 2014.

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