An independent review of a mysterious $56 million in payments made by SNC-Lavalin, the big, Canada-based engineer-contractor, has concluded the company’s chief executive officer authorized or permitted another executive to make a $33.5-million payment, which constitutes a large part of the unaccounted-for amount.
But the review, released on March 26, failed to determine what the money was used for or to whom it was paid.
SNC-Lavalin issued the report concurrently with the announcement that CEO Pierre Duhaime had resigned.
Ian Bourne, a director of SNC-Lavalin, will serve as interim CEO.
Chairman Gwyn Morgan said, “The board has accepted [Mr. Duhaime’s] decision to step down, and we wish him well in the future.”
The review investigators, hired by the company, learned only that some or all of the $56 million was paid to agents. The review report stated that the inquiry was hampered by the investigators’ inability to meet with Riadh Ben Aissa, the former head of construction operations whom the company says it dismissed several weeks ago, and Stephane Roy, the construction unit’s chief financial officer. He also had been dismissed.
Part of the mystery surrounding the $33.5 million payment as well as another $22 million payment is that they were made to appear as if they were associated with specific construction projects. The company declined to identify the projects but said none of the payments appear to be related to projects in Libya.
The current scandal initially was triggered by the arrest of a woman, still being held in jail in Mexico City, in connection with an alleged plot to smuggle into Mexico a son of late Libyan dictator Mu'ammar Gadhafi.
SNC-Lavalin officials say they are turning over information about the payments to the Royal Canadian Mounted Police.
Jatinder Mall, a Toronto-based analyst who covers SNC-Lavalin for Standard & Poor’s (like ENR, a unit of The McGraw-Hill Cos.), says there "needs to be more clarity” about the missing millions. “SNC has not identified projects involved or payments given,” Mall adds.
Profits Fall Sharply in Q4
SNC-Lavalin also reported that its fourth-quarter profit fell to $76 million, down from $158.7 million in the same quarter a year ago.
Meanwhile, the province of Ontario selected on March 21 a joint venture that includes SNC-Lavalin as preferred bidder for one of Ontario’s largest construction projects: a contract to finance, design, build and maintain the 10-lane, 22-kilometer-long first phase of the new Highway 407 East electronic toll road.
The firm is teamed with Madrid-based Cintra Infraestructuras S.A.
Cost, the construction start time and other details have not been released. Infrastructure Ontario, the agency that oversees the province’s Alternative Financing and Procurement delivery system, and the Ministry of Transportation expect to conclude negotiations with the consortium later this spring.
Intended to relieve the congestion in Ontario’s sprawling Greater Toronto Area, the project will extend the highway into neighboring Oshawa from Pickering, the city where the roadway currently terminates; it also will include a 10-km-long link with Highway 401, Canada’s busiest highway.
"We are not discussing the value of this project and have no further information until the project is awarded," said Leslie Quinton, SNC-Lavalin vice president of communications, in a statement.
Standard & Poor’s Mall says the scandal over the payments and executive departures don’t put any current government contracts held by SNC-Lavalin at risk, but he believes "there will be more scrutiny of their practices on government work."