The interim chief executive of SNC-Lavalin Group Inc. expects police to uncover more improprieties in the engineering giant’s construction division, which is already reeling after the discovery of $56-million in payments to agents that has gone missing.
“It’s just the reality of these police investigations being that they are going to find some other stuff,” Ian Bourne told analysts on a conference call Thursday. “I’d be quite surprised if there weren’t some more things that surfaced through those investigations.”
Montreal-based SNC, one of the largest engineering firms in the world, has been rattled by the growing controversy over payments to unknown commercial agents to help win construction contracts. The company said the cash has vanished and it has largely blamed the trouble on former vice-president Riadh Ben Aissa, who ran the construction division and is under arrest in Switzerland. No allegations have been proven, and Mr. Ben Aissa has denied any wrongdoing. He has left the company along with another vice-president and chief executive officer Pierre Duhaime.
Some analysts and investors have questioned the company’s oversight and raised concerns that the problems run much deeper and that more wrongdoing could be found. The RCMP launched an investigation and raided the company’s head office last month. Questions about oversight were raised Thursday during the company’s annual meeting when a couple of shareholders voiced concern about how management has handled the crisis.
During and after the meeting Mr. Bourne stressed that no other executives were involved in the alleged activity but that police have the power to dig deeper and could uncover more allegations.
Mr. Bourne, an SNC director, took over as CEO but the company hopes to have a new chief in place by summer. He and chairman Gwyn Morgan said an internal investigation by a committee of the company’s board, which cost about $5-million, has largely ended and SNC is co-operating with police.
“By turning everything over to the authorities, our hope is that they have the capability and the means to go much further, and much deeper,” Mr. Morgan told reporters.
Mr. Bourne and Mr. Morgan tried to address investor concerns during SNC’s annual meeting. They said the company is getting back on track despite the allegations and they outlined several measures that have been taken to change business practices and improve reporting by executives.
“It’s now clear that our 101st year, 2012, will be the most challenging year we’ve ever faced,” Mr. Morgan acknowledged.
Mr. Bourne added that despite the controversy, SNC continues to win contracts and that clients remain supportive. SNC is still profitable and has $1.1-billion cash on hand, he noted.
The company reported a first-quarter profit of $67.3-million on Thursday, down from $78.8-million in the same period a year earlier. Revenue climbed to $1.8-billion from $1.6-billion. However, during the call with analysts, Mr. Bourne indicated that some clients have asked for “some additional comfort in some cases.”
During the annual meeting, Mr. Morgan faced questions from a friend of Cynthia Vanier, the mediator who was hired by former SNC executives to travel to Libya and write a report about civilian casualties during the revolution. Ms. Vanier has since been jailed in Mexico, accused of conspiring to help Moammar Gadhafi’s son Saadi escape to the Puerto Vallarta area.
Ms. Vanier’s friend, Catharine Allen, pleaded with Mr. Morgan to help Ms. Vanier and to resolve a contract dispute both parties have had since she was jailed, arguing it was needed to finance her defence.
“You have forgotten her and allowed her to sit in this prison. Shame on you,” said Ms. Allen, who also works as a Toronto-based mediator. “This company is a huge company, 28,000 employees … Are you going to help Cindy? Are you aware of Cindy? You should be.”
Mr. Morgan said he sympathized with her, but added that Ms. Vanier was hired without the knowledge of SNC superiors and by Mr. Ben Aissa and Stéphane Roy, a vice-president who has left the company. “Secondly, it’s the subject of investigations and we’re in a position where we cannot do anything other than helping those investigations,” he added.