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A pedestrian walks past the SNC-Lavalin Group Inc., headquarters in Montreal, May 7, 2009. SNC-Lavalin Group Inc reported a nearly 10 percent increase in first-quarter profit on Thursday, as the big Canadian engineering and construction company recorded larger gains from infrastructure concession investments such as toll roads. REUTERS/Christinne Muschi (CANADA BUSINESS) (© Christinne Muschi / Reuters/REUTERS)
A pedestrian walks past the SNC-Lavalin Group Inc., headquarters in Montreal, May 7, 2009. SNC-Lavalin Group Inc reported a nearly 10 percent increase in first-quarter profit on Thursday, as the big Canadian engineering and construction company recorded larger gains from infrastructure concession investments such as toll roads. REUTERS/Christinne Muschi (CANADA BUSINESS) (© Christinne Muschi / Reuters/REUTERS)

SNC's troubles widen as World Bank suspends subsidiary Add to ...

The bad news keeps piling up at SNC Lavalin Group Inc.

The Montreal-based engineering firm is already reeling from a scandal over $56-million in improper payments, missing cash in Libya, and a host of executive departures, including chief executive officer Pierre Duhaime, who left last week.

Now one of the company’s subsidiaries has been temporarily suspended by the World Bank from bidding on bank projects.

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The suspension relates to an ongoing investigation into allegations that SNC officials bribed government officials in Bangladesh to win a $10-million contract related to a massive bridge project in that country. The World Bank, which was providing $1.2-billion in financing for the project, alerted the RCMP about the allegations last summer and the police raided an SNC office in Oakville, Ont., in September. SNC has said it is co-operating with the bank and has launched an internal probe.

On Monday, SNC announced that the subsidiary involved in the Bangladesh project has received a notice from the World Bank that its right to bid on projects had been temporarily suspended. SNC added that the bank is continuing its investigation and has yet to make a final decision on the suspension.

The subsidiary has an opportunity to respond to allegations the bank has made in a confidential report, SNC said, adding that it “intends to provide a comprehensive response to the allegations.” SNC officials declined to name the subsidiary, citing the confidentiality of the report.

“We respect the World Bank’s decision to declare a temporary suspension on the subsidiary affected until this matter is concluded,” SNC’s interim CEO Ian Bourne said in a press release.

“We should be clear, however, that all ongoing projects and new bids by other subsidiaries and divisions will continue as usual.”

The temporary suspension comes a week after SNC disclosed the results of an internal investigation into suspect payments and announced the retirement of Mr. Duhaime.

The payments, totalling $56-million, related to agents SNC hired to win contracts on two unnamed projects. SNC didn’t say where the projects were located but some of the payments went through the company’s office in Tunisia.

Company chairman Gwyn Morgan said he did not believe the payments were for work in Libya, where SNC has run into a series of questions about its operations and close ties to the family of late dictator Moammar Gadhafi.

In its report on its internal probe, SNC alleged that the payments were authorized by former vice-president Riadh Ben Aissa, who ran its construction operations worldwide. SNC also alleged that Mr. Duhaime improperly approved some of the payments over the objections of the chief financial officer.

SNC has said it dismissed Mr. Ben Aissa last month; however, he has insisted he resigned. Another executive, Stéphane Roy, who also worked in the construction division, was also dismissed.

At the time, SNC said it adopted new measures aimed “at reinforcing standards of conduct, strengthening and improving internal controls and processes, and reviewing the compliance environment.”

SNC has also disclosed that it left nearly $23-million cash in Libyan banks last year when the company pulled out because of the escalating rebellion. The company has indicated that it is not sure it can repatriate the money, but hopes it will be there if it returns to complete projects in the country.

All of the scandals have also had an impact on its involvement in a $300-million airport project in the Chicago area. Local politicians opposed to the project have seized on SNC’s troubles to strengthen their case. Mr. Morgan recently played down the opposition, saying it had more to do with protectionist sentiments in the area.

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