SNC-Lavalin Group Inc. and two of its former executives are facing criminal charges related to a bridge contract in Montreal nearly two decades ago, plunging the Canadian engineering giant into another legal maelstrom as it tries to rebuild its business after years of crisis.
Quebec’s chief prosecutor’s office said on Thursday that two of the company’s business entities – SNC-Lavalin Inc. and SNC-Lavalin International Inc. – and former vice-presidents Normand Morin and Kamal Francis have been charged in relation to a long-standing RCMP investigation into bribes paid on a $128-million contract for the refurbishment of Montreal’s Jacques Cartier bridge in 2002.
The SNC units and the two former executives face charges of forgery, conspiracy to commit forgery, fraud, conspiracy to commit fraud, fraud against the government and conspiracy to commit fraud against the government, the RCMP said in a separate statement. The police force said the two men were arrested Thursday and released ahead of a scheduled court appearance on Monday.
The prosecutor’s office, the Director of Criminal and Penal Prosecutions, said it invited the company on Thursday to negotiate a deferred prosecution agreement (DPA), also known as a remediation agreement, without providing any details about its potential contents. Such an agreement would allow the company to avoid a trial in exchange for paying a fine and third-party monitoring of its activities.
Deferred prosecution agreements do not apply to individuals.
SNC said it welcomes the opportunity to negotiate a DPA, adding it is the first time a Canadian company has received such an invitation. The Montreal-based company said it takes the charges seriously and the police investigation was “facilitated by its own self-reporting” and co-operation with authorities.
“These charges stem from events that took place nearly 20 years ago, involving former employees who left the company years ago and who no longer have any involvement with our organization,” SNC-Lavalin chief executive officer Ian Edwards said in a statement. “We have said repeatedly that the past behaviour of a select group of former individual employees does not represent the values and ethical standards of SNC-Lavalin today.”
Reached at his home on Thursday evening, Mr. Francis, 76, told The Globe he had “nothing to say” about the matter. Mr. Morin, 79, did not return a call seeking comment.
SNC-Lavalin was denied a DPA two years ago in a separate case in which it was charged with violating Canada’s Corruption of Foreign Public Officials Act, as well as fraud related to its business dealings in Libya when Moammar Gadhafi was in power. Kathleen Roussel, director of federal prosecutions, told The Globe and Mail last year a DPA in that case was inappropriate because of the “severity and breadth” of the offence.
Quebec’s chief prosecutor’s office did not give specific reasons for its openness to a deal, beyond a few general statements. It said a DPA would help avoid a “long and costly trial” through “effective financial penalties, including reimbursement to victims, which is proportionate and dissuasive.”
A DPA would allow SNC to continue to do business and bid on public calls for tenders with governments in Canada and abroad, the prosecutor’s office said. Such a deal also “reduces the negative consequences for employees, retirees, clients and shareholders” of organizations, it said.
A specialist on corporate corruption in Canada contacted by The Globe noted that the opportunity to negotiate a DPA is being offered by Quebec prosecutors, who by convention handle criminal code offences such as the new charges. By contrast, federal prosecutors handle cases under the Corruption of Foreign Public Officials Act.
“I really think, honestly, that they got [invited to make] a deal here because it’s different prosecutors making a decision on different offences,” said Jennifer Quaid, an associate professor of law at the University of Ottawa.
She added that the prosecutors’ “end game” is likely to pursue convictions against the executives.
Dr. Quaid said part of the reason prosecutors have enough evidence to proceed may be because some of it has come from the company. In that sense, dangling a DPA negotiation becomes “a carrot to get them to participate,” she said.
The Jacques Cartier bridge investigation, dubbed Project Agrafe (staple), has been a potential time bomb for SNC-Lavalin for some time. The company has acknowledged the probe in corporate filings, noting that other investigations into its past business dealings may be ongoing, including in Algeria.
SNC shares fell 2.3 per cent to close at $36.10 in trading Thursday on the Toronto Stock Exchange. The stock has nearly doubled in value since last October.
The new charges involve events that took place between September, 1997, and March, 2004.
Michel Fournier, the former head of the Federal Bridge Corp., pleaded guilty in 2017 to fraud-related charges for accepting more than $2.3-million in kickbacks from SNC-Lavalin in the Jacques Cartier bridge case and laundering the funds. He was sentenced to 5½ years, and has since won full parole. Police have been trying to determine who arranged the bribes.
According to a statement of facts read into the court record at the Montreal courthouse at the time and reported by the Montreal Gazette, Mr. Fournier went to great lengths to hide where the $2.3-million came from, and created an offshore shell company in the Virgin Islands to direct the funds back to Canada. He lost most of the money through risky investments, and the federal government was able to confiscate only $775,000.
“This was a lengthy and highly complex investigation and I’m proud of the consistent and professional work of our team,” Inspector Denis Beaudoin of the National Division RCMP Sensitive and International Investigations section said in a statement on Thursday. “As a result of their continued dedication, evidence was identified and gathered over a number of years, which has ultimately resulted in the charges announced today.”
Mr. Edwards is trying to rebuild the company after corruption allegations that plagued the engineering firm for years, crushing its reputation and forcing it to bring in new leaders. The company says it is not the same as the one involved in wrongdoing years ago, in terms of the tone set by top executives and internal controls.
This year, the World Bank gave SNC-Lavalin an early reprieve on a decade-long ban for corruption tied to contracts in Bangladesh and Cambodia. The ban was part of a negotiated settlement between the company and the financial group, which investigated allegations of bribery involving SNC-Lavalin and officials in Bangladesh on a project to build the Padma Bridge and elevated expressway connecting the country’s southwest to northern and eastern regions.
The biggest case for SNC-Lavalin erupted in early 2012, after Swiss and Canadian police discovered mysterious payments from the company running through bank accounts in Switzerland and other countries that were later discovered to be bribes to win projects in Libya.
Mr. Gadhafi was an international pariah over human-rights abuses, provoking military conflict and backing terrorism, including the 1988 Lockerbie airliner bombing that killed 270 people. In 2015, the RCMP laid bribery and fraud charges against SNC-Lavalin Group Inc., SNC-Lavalin Construction and subsidiary SNC-Lavalin International. Police and prosecutors alleged the company was part of a complex scheme to pay bribes in Libya between 2001 and 2011 to secure contracts while participating in a $130-million fraud.
SNC-Lavalin undertook an intense lobbying campaign with the federal government to get a DPA. Allegations that Prime Minister Justin Trudeau and other members of his government improperly pressed then-justice minister and attorney-general Jody Wilson-Raybould to order a settlement dogged the Liberals for months.
SNC-Lavalin struck a deal with prosecutors in December, 2019, in which the company’s construction division pleaded guilty to a single charge of fraud and the potentially more-damaging bribery charge was dropped. The company agreed to pay a $280-million fine and received a three-year probation order, which includes oversight by an independent monitor. The Quebec judge who approved the agreement called it “reasonable” and said that, without such plea deals, Canada’s justice system “would collapse under its own weight.”
The SNC-Lavalin saga was a key talking point for Liberal Party opponents during the 2019 federal election. It came up again during this year’s campaign, when Ms. Wilson-Raybould published a book in which she recounted detailed private conversations with Mr. Trudeau in the days before she resigned from cabinet, and months of intense lobbying by senior advisers in the Prime Minister’s Office to drop the prosecution of SNC-Lavalin.
Ms. Wilson-Raybould called on the Liberal government to remove roadblocks to an RCMP inquiry into obstruction of justice.
Mr. Trudeau told reporters earlier this month that he had “no information to share” when asked if cabinet confidences prevented the RCMP from accessing information to finish its investigation. He also said he has not been personally contacted by the RCMP on the SNC-Lavalin matter.
This isn’t the first time Mr. Morin has been charged with a crime in his capacity as an SNC-Lavalin executive. In 2019, he pleaded guilty to two of five charges of violating Canada’s election financing rules in a scheme where the company’s employees were encouraged to donate to federal political parties and then get reimbursed via bogus personal expense claims, bonuses or benefits.
Under Canadian law, businesses cannot make financial contributions to political parties or candidates.
The company, which acknowledged the scheme and entered into a compliance agreement with the Commissioner of Canada Elections in 2016, admitted to an inquiry in Quebec that it used the same strategy for donations to the province’s political parties.
Speaking through his lawyer at the time, Mr. Morin expressed frustration that he was made a scapegoat. “The evidence assigns him a certain role, but he’s certainly not the person who reaped the benefits from this contribution,” lawyer Christiane Filteau said.
National Bank analyst Maxim Sytchev said investors do not appear to view the new charges as a threat to SNC’s business prospects.
“We believe it will be relatively straightforward to resolve as the company has been invited to negotiate via DPA,” Mr. Sytchev said in a research note, estimating that SNC could be fined $15-million. “[We’re] looking for a much quicker legal resolution here” than last time.
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