SNC Lavalin Group Inc. has taken a different approach to the departure of two senior executives amid a scandal that has left the company reeling, giving outgoing CEO Pierre Duhaime nearly $5-million in severance after handing another top official little more than blame.
Mr. Duhaime and Riadh Ben Aissa have both been embroiled in allegations involving $56-million worth of undocumented payments to commercial agents that has now gone missing. Both recently left the company after the allegations surfaced but SNC has handled the departures very differently.
The engineering giant announced last week that Mr. Duhaime, 57, retired from his position as chief executive officer and it offered glowing praise for his contribution to the company. On Tuesday, SNC provided more details in a circular to shareholders for its annual meeting on May 3.
The circular said Mr. Duhaime had been “relieved of his duties” because of the allegations. It added that he will receive $4.9-million as part of a “departure arrangement” and that he will stay on as an employee until June 27 even though he will have “no responsibilities for the management of the business.” SNC declined further comment Tuesday, and Mr. Duhaime couldn’t be reached.
Mr. Duhaime’s retirement was announced on the same day that an internal investigation concluded he authorized some of the agent payments even though he knew they were unusual and despite the objections of the company’s chief financial officer. The probe concluded that Mr. Duhaime had repeatedly violated the company’s code of ethics and business conduct.
Mr. Ben Aissa received much different treatment. The company tersely announced in February that he was “no longer in the employ of the company” and suggested he had violated the code of ethics and business conduct. Tuesday’s circular made no mention of any “departure arrangement” and there was no praise for his work, which included overseeing 10,000 employees and delivering roughly $1-billion in contracts in Libya alone. Mr. Ben Aissa has shot back with a press release saying he resigned from SNC and denying any wrongdoing.
The company’s internal investigation alleged that he hired the agents without proper documentation, directed the payments, lied about the agents’ work in company documents and refused to co-operate with the investigation. Mr. Ben Aissa has been unavailable for comment since he left.
Both men had been with SNC for more than 20 years and each had risen through the company ranks quickly. Mr. Duhaime became CEO in 2009 while Mr. Ben Aissa was given the job of running SNC’s construction operations worldwide and overseeing projects in Libya, which generated roughly 7 per cent of SNC’s total revenue in 2010. The agent payments began the same year Mr. Duhaime became CEO and continued to 2012, according to the company’s probe.
All of this comes as SNC announced Monday that the World Bank temporarily suspended a company subsidiary over allegations it bribed government officials in Bangladesh to win some of the work on a bridge project financed by the bank. The RCMP raided an SNC office near Toronto last September as part of the investigation and SNC has said that it is fully co-operating. The company also said it will appeal the World Bank’s decision, which is not final.
Some investors have begun to shake off the controversies and SNC’s share price has climbed from $36.56 at the end of February to $40.20 Tuesday on the TSX. One of the company’s largest shareholders, Jarislowsky Fraser Ltd., which holds about 14 per cent of the stock, is standing by SNC. Firm president Len Racioppo said Tuesday that he was not concerned about the allegations or the World Bank’s decision.
But one analyst, Trevor Johnson of National Bank Financial, said the controversies are beginning to pile up. “SNC’s credibility has been under fire as stakeholders focus on questionable Libya ties, improper internal controls, unaccounted-for payments and senior management changes (amongst other items),” he said in a report Tuesday.
“The World Bank ruling adds to this list, and while SNC management recently indicated its internal investigation yielded no other questionable contracts or dealings, our view is that it will take time for investors to give SNC the benefit of the doubt.”