Criminal charges brought by the Canadian government last month against Montreal-based engineer-construction giant SNC-Lavalin Group Inc., linked to past bribes on Libyan projects, have sparked a national debate over whether the firm should pay for departed executives' misdeeds or face a lesser penalty because new management instituted sweeping ethics changes beginning in 2012.

Industry participants and other business groups are also raising concern that new "integrity" rules for federal contractors are too tough.

Canada's Royal Canadian Mounted Police on Feb. 19 charged SNC- Lavalin and its construction and international units with corruption and fraud related to the estimated $142-million bribe scheme on projects that included Benghazi's airport and a huge water irrigation program.

These are the first official charges against the firm itself, although some former execs have pleaded guilty or face hearings in the Libya scheme and alleged hospital-contract corruption in Montreal.

Implicated parties include former CEO Pierre Duhaime, who left the firm in early 2012.


Media reports say the firm anticipated that cooperation would have preempted charges. Some observers speculate the government brought criminal charges in order to justify a three-year probe, but others see an attempt to address corruption at the highest levels and send a message.

Richard Leblanc, a governance and ethics law professor at York University, Toronto, credits the ethics overhaul under Card but notes the cultural underpinnings. He points to prior alleged use by SNC-Lavalin's international unit, based on letters from the World Bank and Canadian media probes in 2013, of a "bribery code" in its accounting, "a signal to senior management that [funds] were for that purpose." Leblanc added, "This was not just a rogue employee. It signals how serious this was." He also supports a need for stronger corporate board oversight, including more directors from emerging economies.

In its Feb. 19 statement, SNC- Lavalin says the charges do not now preclude it from working or bidding on "any public or private project" in Canada. Units of SNC-Lavalin also remain eligible to bid on World Bank-funded work under a 2013 settlement related to separate bribery allegations in Bangladesh, despite a 10-year debarment. The firm has said such work accounts for 1% of its revenue. SNC-Lavalin also was certified last year to bid on Quebec public work after the province's corruption hearings.

Experts say corporate criminal convictions are rare, but the fallout for SNC-Lavalin and other firms could be major. Canada's 2013 so-called integrity guidelines automatically bar firms from bidding on federal work for 10 years if criminally convicted in Canada or in any other nation. SNC-Lavalin reported two-thirds of its 2013 revenue from work in Canada.

Business groups and even watchdog organizations such as Transparency International say the guidelines are too inflexible and lack due process procedures that are in debarment statutes in other countries.

Terming them "well-intentioned but a blunt instrument," Canadian consulting engineers' association CEO John Gamble says changes are likely in Canada's rules. The impact on SNC-Lavalin could put thousands of employees at risk and hamper Canada's economy and badly needed infrastructure rebuilding.