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Engineer Mohammad Ismail, pictured, and executive Ramesh Shah were identified by the RCMP in a bribery scandal. (CBC)
Engineer Mohammad Ismail, pictured, and executive Ramesh Shah were identified by the RCMP in a bribery scandal. (CBC)

SNC division created web of illicit payments, documents show Add to ...

In September, 2010, an SNC-Lavalin project manager walked into a Nigerian bureaucrat’s office and handed him 1.2 million naira in cash – equivalent to nearly five times the average annual salary in that country.

The SNC engineer, Chalamakunta Muralidhar Reddy, said he was acting on instructions from his home office in Oakville, Ont. “It was definitely not proper,” Mr. Reddy said in an interview, explaining that the payment – worth about $8,000 – was arranged by Ramesh Shah, a former SNC vice-president in Canada.

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“I am just a courier, that’s all I can say.”

According to a trove of internal documents, the engineering firm did not record the transaction as a cash payment. Nor was there mention that the recipient, Usman B. Alhaji, is a Nigerian bureaucrat in the state of Bauchi. Rather, the company used a common SNC shorthand for the transaction: “consultancy cost.”

That term and its variations at SNC – project consultancy cost, project commercial cost, or PCC and CC – appear throughout hundreds of pages of internal documents obtained by The Globe and Mail and the CBC.

The joint investigation uncovered instances of PCC or CC in connection with 13 international development projects.

It also revealed how the breakdown in controls that has shaken the highest orders of the blue-chip firm extends even to one of its smallest divisions – an Ontario-based unit that routinely incorporated illicit payments into its bookkeeping.

Whether the division was designing a highway in Kazakhstan, planning new bridges in rural Nigeria or supervising plans for a 75-kilometre road in Uganda, a portion of its costs, usually between 5 and 10 per cent, was recorded as PCC or CC. Leslie Quinton, a spokeswoman for SNC, told The Globe and the CBC that the term was “not legitimate” and that it was used only by this particular division, which has been largely disbanded since the company reviewed its code of ethics.

For more than a year, the 102-year-old company has been besieged with allegations of corruption and fraud, sparking an overhaul of its executive ranks. Quebec’s anti-corruption task force has laid more than a dozen criminal charges against the firm’s former chief executive, Pierre Duhaime, alleging that he was involved in a scheme to funnel $22.5-million to health-care administrators to secure a construction contract for a new hospital in Montreal.

A former executive vice-president, Riadh Ben Aissa, has been jailed in Switzerland for more than a year while prosecutors there trace an estimated $160-million that allegedly flowed from SNC to Saadi Gadhafi, son of the late Libyan dictator.

The cache of records shows that this alleged culture did not apply only to high-stakes construction deals involving far-flung dictators and billion-dollar projects. The Oakville office of SNC-Lavalin International employed about 20 people worldwide and bid primarily on engineering consulting jobs funded by development agencies such as the World Bank. SNC was unable to say how much the division earned, but sources estimated that on average, the unit booked about $12-million worth of jobs per year – about 0.15 per cent of SNC’s 2012 revenues.

But even though the division had almost no impact on the company’s bottom line, and its contracts aim to improve life in impoverished African and Asian countries, it still regularly let suspicious payments through – even when supporting documentation made it clear that some of the money was intended for government officials, or in one specific transaction, when the money took a circuitous route to the personal bank account of an SNC vice-president.

The RCMP charged that executive, Ramesh Shah, and an engineer who reported to him, Mohammed Ismail, with violating Canada’s foreign bribery law over an alleged conspiracy to bribe their way to the top of a competition to oversee one of the most important infrastructure projects in Bangladesh, the six-kilometre Padma bridge. That alleged scheme, and SNC’s use of the term PCC, was first exposed by the World Bank, which has pulled its $1.2-billion loan for the project. The bank alleged in a letter sent to the Bangladeshi government in January that Mr. Shah had demanded to know from his employees the details of the PCC in connection with the bridge project. “PCC is a euphemism used by SNC-Lavalin to indicate the cost of the bribes to be paid,” wrote Luis Moreno Ocampo, the chairman of a World Bank panel of experts.

The details of the Bangladesh case were recently aired publicly as part of a preliminary inquiry in Toronto and are subject to a court-ordered publication ban. But the documents obtained by The Globe and CBC, as well as interviews with sources from the firm, show that the use of CC and PCC was widespread within the division.

Despite facing criminal charges, Mr. Ismail agreed to an interview about the division’s practice of paying CC or PCC on the condition that he not be asked about the allegations in the Bangladesh bridge case.

He said he first heard the abbreviations from Mr. Shah, his superior at the time, when he moved to the division in February, 2008. “Well, he always instructed people not to use [the word] ‘bribe.’ Just to say PCC, commercial cost, this cost, that cost,” Mr. Ismail said.

“They interchangeably used the word: sometimes project consultancy cost; sometimes project commercial cost; sometimes only CC, commercial cost. But the real fact is [the] intention of that, PCC or CC, is a bribe,” he said.

(Mr. Shah declined to respond to a list of questions, and his lawyer, David Cousins, said he had advised his client not to speak with the media.)

Nowhere was the use of PCC more prevalent, the records show, than in the company’s operations in Nigeria, which is regularly ranked by Transparency International as one of the world’s most corrupt countries. Over the past five years, SNC secured more than $3.3-million in consultancy contracts for World Bank-funded projects in the impoverished West African country. In each of these projects, some in rural states such as Kaduna and Bauchi, and one in the capital city of Lagos, internal company expense sheets include PCC as a line item.

But the real purpose of such payments become clear in the email exchanges between SNC officials and the Nigerian firms the company enlisted. In 2009, the company became embroiled in a dispute with its Nigerian agent, Chief Lucky Egwakhide, over the amount of PCC owed for the Bauchi contract. Chief Egwakhide, who has since died, insisted that SNC had agreed on paying “the client” – the Nigerian government – 15 per cent of the contract and that SNC was going back on its word by reducing the payment to 10 per cent.

“My agreement with the client is [15 per cent],” Chief Egwakhide wrote in an email dated May 20, 2009. “However, if you insist on [10 per cent] work out the difference between what you have sent to date and send the balance urgently. I will have to find a way to pay the difference to the client.”

Other emails from SNC were written to notify the company’s Nigerian partners that a PCC or CC cheque had been sent to them, along with a reminder to “kindly… pay the concerned.” Other times, the division was less discreet; one internal spreadsheet was used to calculate how the company was splitting up its PCC costs with one of its Nigerian partners, a firm called Yaroson & Partners. At the bottom of the spreadsheet is a notation that 366,117 Naira had already been “paid to Musa Tete through Yaroson.” Musa Tete is the Nigerian bureaucrat overseeing the World Bank-financed project to improve road access in the state of Kaduna.

In a telephone interview, Mr. Tete denied receiving a payment from SNC or Yaroson. The Globe e-mailed him the spreadsheet and the note about him being paid, but he declined to address it in his written response.

In the case of a 2010 Ugandan road project financed by the African Development Bank, an internal spreadsheet shows how the company attributed an additional cost of exactly 7.5 per cent for each of its four engineers, as well as its Ugandan staff – a line item titled “PCC for the project.”

But not every suspicious payment from the division ended up in the hands or bank account of a government official. In an interview, Verona Parkinson, the managing director of a consulting company in Mozambique called AGEMA, described how the company had partnered with SNC to help it with a road project funded by the African Development Bank. On one of Mr. Shah’s visits to Mozambique in 2011, he asked Ms. Parkinson to prepare two invoices for SNC, totalling more than US $50,000, for a “geophysical survey,” she said.

Ms. Parkinson acknowledged that her company had never completed such a survey, but she said Mr. Shah told her a different subcontractor performed the survey and he paid for it out of his own personal funds. She said he told her he needed invoices in order to be paid back. “I was doing him a favour,” she said.

Ms. Parkinson drafted the invoices and directed SNC to send the money in two chunks: one transfer to a bank account in the name of her daughter, an actress in Los Angeles, and the other transfer to an account in the name of her ex-husband in Houston. After receiving the money, her daughter and ex-husband wired the funds to Mr. Shah’s personal bank account, she said. She supplied to The Globe and CBC a wire transfer form that showed her daughter signed a request for the funds to be sent to a bank account in Mr. Shah’s name at a branch of the ICICI bank in Mississauga.

She said Mr. Shah never explained why he had to use his own funds to pay for a geophysical survey, nor why the subcontractor who performed the work could not issue him an invoice. “There were many things that happened that weren’t the normal conventional ways of doing business,” she said.

The former senior vice-president who oversaw the division, Kevin Wallace, declined to be interviewed for this article, citing the ongoing criminal case against Mr. Shah and Mr. Ismail. Mr. Wallace was not included in any of the email exchanges obtained by the media outlets, but his signature was on the cheque labelled “consultancy costs” that was sent to Mr. Reddy before he paid the Nigerian official. Mr. Wallace left the company in December, and is suing for wrongful dismissal. The RCMP has not charged him with any crime. Patrick Lamarre, the executive vice-president who oversaw Mr. Wallace, left the company for personal reasons. In a statement he said: “Based on the current accusations of wrongdoing of some ex-employees working in a small sub business unit ultimately reporting to me, I am outraged that they were engaged in such operations. I find it unacceptable and if I had known this, it would have never been tolerated.”

With reports from freelance journalist Yinka Ibukun in Lagos

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