Stung by accusations of lax oversight, SNC-Lavalin Group Inc. has suspended the controversial $4.9-million severance package awarded to its former chief executive officer Pierre Duhaime, sidelined its chief financial officer and promised to make room for new directors on its board.
The dramatic moves are part of a sweeping offensive to repair the engineering firm’s image after the stunning arrest of Mr. Duhaime and a series of financial scandals in the company’s Montreal hometown and abroad over alleged bribes to clinch contracts.
Quebec’s special anti-corruption squad arrested Mr. Duhaime two weeks ago. SNC’s former president is accused of fraud, conspiracy and forgery in relation to the $1.3-billion contract to build McGill University’s new super-hospital.
“The board was disturbed to learn that former president and CEO Pierre Duhaime has since been charged by authorities. While none of the charges have been proven, this development suggests that there may be additional facts regarding Mr. Duhaime of which the board was not aware at the time of his departure,” SNC said in a news release.
“Accordingly, the board of directors has decided to suspend the payments provided for under Mr. Duhaime’s previously announced departure arrangements. Until the facts surrounding Mr. Duhaime’s situation are clarified or resolved, the payments under these arrangements will be held separately.”
The company also said that “certain current directors will not be standing for re-election in 2013.” It did not say who, or how many directors, will stand down, nor did it provide an explanation for the board changes. Their names and their proposed successors will be known when SNC publishes its proxy circular in March.
Two directors, David Goldman and Lorna Marsden, refused to discuss their reelection to the board when reached by phone. Five other directors did not return the Globe and Mail’s calls. SNC did not comment on the planned changes to its board, and chairman Gwyn Morgan did not return a call /CONFIRM WITH BERT/ .
A number of directors on SNC’s 13-member board are approaching the new 72-year-old age limit and 15-year term limit. Four directors have been on SNC’s board for more than 10 years: Pierre Lessard, with 14 years of service;, Dee Marcoux, 14; Lawrence Stevenson, 13; and David Goldman, 10. Pierre Lessard and Lorna Marsden are both aged 70.
In addition to reshuffling its board, SNC is replacing its chief financial officer, Gilles Laramée.
According to an SNC internal probe, Mr. Laramée refused to sign off on suspect payments ordered by Riadh Ben Aissa, a former SNC vice-president detained by Swiss authorities over tens of millions in alleged illicit payments. Mr. Duhaime went over Mr. Laramée’s head and approved them. However, Mr. Laramée never informed SNC’s board of the incident.
Mr. Laramée is taking over a new business unit as executive vice-president infrastructure, concessions and investments “to provide a top level focus on strategic oversight and more active management of the [industrial, commercial, institutional] business to leverage its full value,” the company said in its release.
SNC has been under fire for the way it handled the financial scandals at the company. Some analysts and institutional investors such as Jarislowsky Fraser and the Caisse de dépôt et placement du Québec have raised questions about the board’s oversight of management.
On Thursday, the Montreal-based company took out full-page newspaper ads – signed by Mr. Morgan and newly installed president and chief executive officer Robert Card – to explain the new measures implemented to ensure no financial impropriety would happen in the future.
For example, SNC updated its code of ethics and posted it online in 12 languages. It also expanded a complaints and reporting process; all employees have a duty to report any violation of the code of ethics and business conduct. A 24/7 ethics and compliance hotline has been outsourced to a third party, EthicsPoint.
SNC created a special committee to review and approve all foreign sales agency agreements. The firm also hired non-profit anti-bribery firm TRACE International to perform integrity checks on new and current agents.
All suppliers, partners and clients must follow the new procedures.
The company hired an independent expert to assess and monitor the implementation of the new measures.
In its open letter, the company said it continues to cooperate with authorities. “The board and management of SNC-Lavalin are determined to see anyone found to be involved in wrongdoing brought to justice and held accountable for their actions. We reserve our rights to assert claims against these individuals, including for the recovery of funds,” the letter reads.
SNC is also dealing with allegations that company employees bribed government officials in Bangladesh in order to win a $10-million contract related to a bridge project in that country.
A committee of SNC’s board that conducted the internal probe concluded the $56-million in suspect payments were related to agents SNC hired to win contracts on two unnamed projects. SNC declined to say where the projects were located but some of the payments are believed to have gone through the Tunisia office.