Embattled SNC-Lavalin Files Ethics Appeal, Realigns Structure
Even as Montreal design-build giant SNC-Lavalin Group Inc. faces corporate bribery charges on old Libya contracts, the firm now seeks, in an April 4 federal court appeal, to reverse Canadian prosecutors’ 2018 rejection of a negotiated settlement.
The firm claims there are “new and troubling facts” in the politically charged case and a “clear abuse of process” by officials. The new legal move comes as the firm realigns management and seeks to ease bottom-line pressures.
A lower court rejected SNC-Lavalin’s attempt to reverse the federal stance on a “deferred prosecution agreement” so the firm could avoid trial and possible government contract debarment. But the firm now contends that subsequent public statements by justice officials indicate that their reasons for opting to prosecute were not made public and that details provided by the firm to bolster its defense were not shared by prosecutors.
SNC-Lavalin contends that among prosecutors’ reasons for no deal was the firm’s “failure to self report” the alleged bribes. But in its appeal, the firm says prosecutors did not consider new material supporting evidence of self-reporting, adding “there is simply no basis for [their] concern.”
The appeal contends that the main prosecutor “based her decision on erroneous findings of fact” and that she “never intended” to negotiate an agreement. The charges were filed against SNC-Lavalin and two units in 2015. The firm terminated alleged perpetrators, paid fines and revamped its ethics management.
Observers note some flaws in the settlement tool, enacted just last year. These “point to an urgent need for cabinet-created guidelines to keep deferred prosecution cases like the SNC-Lavalin affair from turning into political crises,” says Toronto attorney and risk management specialist Kenneth Jull.
Meanwhile, SNC-Lavalin is grappling with the March 25 decision by Chile copper giant Codelco to cancel its $260-million mine renovation and expansion contract due to what the owner said were delays and quality issues. “We are appalled and surprised by the decision,” said SNC-Lavalin CEO Neil Bruce in a statement, adding that Codelco had agreed in February to complete work and arbitrate labor issues.
Among other management shifts and unit streamlining announced late last month, SNC-Lavalin is creating a “project oversight function,” reporting to Bruce, “to foresee and fix project-related issues in a timely fashion,” it said. A spokesman says “the position has yet to be filled.”
The firm also announced April 5 that it will sell a 10% stake in the Highway 407 electronic toll road in Toronto for about $2.43 billion to Canadian municipal pension fund giant OMERS to repay a loan to investor pension fund Caisse de Depot and to bolster its bottom line in the wake of overseas market gyrations and the lingering criminal case.
CEO Bruce termed the toll road, which it helped build, "a truly unique and exceptional asset that we believe has been undervalued by the market for many years." SNC-Lavalin will retain a 7% stake.
But some analysts speculated whether the asset was worth more and how much it will help SNC-Lavalin, which reported two profit warnings in recent months.