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Opinion SNC-Lavalin affair shows some companies are more equal than others

Sandy White is a Montreal-based entrepreneur and former adviser to the Conservative government.

The close relationship between the government and the private sector is nothing new in Canada. But one would have hoped that our provincial and federal governments would be somewhat more discerning about the companies they choose to support.

Last week, The Globe and Mail reported that the Prime Minister’s Office put pressure on then-justice minister Jody Wilson-Raybould to abandon the continuing prosecution of beleaguered Montreal-based engineering company SNC-Lavalin Group Inc. and let it reach a ne­go­ti­ated “re­me­di­a­tion agree­ment” in­stead of go­ing to trial.

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The company faces mounting troubles resulting from a fraud and corruption trial surrounding almost $50-million paid to the regime of former Libyan dictator Moammar Gadhafi. It is also being charged for defrauding Libyan investors of $130-million.

This is nothing new to SNC-Lavalin, as for years the company has been accused of habitually stepping over the line into criminality. Earlier this month, its former chief executive officer was sentenced in a $22.5-million fraud case over the construction of a Montreal hospital. Yet rather than receiving jail time, he was given a suspended sentence with community service, and asked to donate $200,000 to charity.

That the Prime Minister’s Office would seek to intervene in any prosecution is deeply unsettling. It is all the more so on behalf of a company with SNC-Lavalin’s reputation. Although Prime Minister Justin Trudeau claims they are unrelated, Ms. Wilson-Raybould’s refusal to end the proceedings supposedly infuriated the PMO, and she has since been removed from her post as justice minister.

On Sunday, the new federal Attorney-General David Lametti said he could still potentially direct the prosecution service to settle corruption charges against SNC-Lavalin out of court.

The revelation of the PMO’s attempted influence in the trial, and the conviction of its erstwhile CEO, come on the heels of the Quebec government voicing its support for SNC-Lavalin. Fearing a possible acquisition as its stock price tumbles, the province’s Economy Minister, Pierre Fitzgibbon – oblivious to any sense of irony – stressed the government’s desire to protect companies such as SNC-Lavalin, viewing them as strategic for the economy, while making clear not to send the “wrong signals to the market”.

However, the signals politicians and the courts are sending are that companies close to the government can lose money, be incompetent and corrupt, receive relative legal impunity, and Ottawa will support them regardless.

Perhaps the most egregious example of this is aerospace company Bombardier, which has received billions in federal and provincial support over its history and is naively viewed as one of Quebec’s economic jewels. Corruption charges are being pursued in Sweden for a re-trial against a former Bombardier sales manager and in Brazil, antitrust regulators have recommended convictions for fixing bids regarding a number of companies including Bombardier.

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Several years ago, while laying off thousands of employees – which the billions of dollars in government support was supposed to help avoid – Bombardier executives substantially increased their salaries for their fine work. Canadian regulators are finally investigating these practices at the company.

To paraphrase political commentator Andrew Coyne, Bombardier is not in the transportation industry; it is in the government subsidies industry.

In Quebec, last week also saw the collapse of provincial Liberal insider Alexandre Taillefer’s Uber competitor, Teo Taxi – which cost the province tens of millions in lost investment dollars after government sages decided to play venture capitalist with taxpayer money.

Following the demise of Teo, Quebec’s Premier casually floated his support for Mr. Taillefer creating a Quebec version of online retail juggernaut Amazon. That it would cost billions of dollars and almost certainly fail seemingly escaped the Premier, who one can only assume, in staying true to his government’s pronouncements to protect Quebec companies, would help pick up the tab.

It would be one thing if these enterprises were showing signs of success. Unfortunately, our governments actually seem to prefer picking losers, with Teo Taxi bankrupt and both SNC-Lavalin and Bombardier stocks flat or down over the past 12 and 25 years, respectively.

We shouldn’t begrudge the corporations hoodwinking our governments into subsidizing their endeavours. It’s innovative, in its own way. Like modern versions of Mordecai Richler’s Barney Panofsky manipulating the state’s largesse to their advantage, they are carrying on an age-old tradition. Few entrepreneurs, in their shoes, would reject the money to test new ideas and the adulation that comes with being a rented success story.

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But Quebeckers, and all Canadians, were supposed to have expected more. Newly-elected Quebec Premier François Legault is a former business person who ostensibly embraced free-market principles and wants to wean Quebec off equalization payments. And wasn’t it Justin Trudeau who routinely accused Conservatives of being too close to big business?

Sadly, however, this story plays out regardless of the party in power, with successive federal and provincial administrations doling out cash in the name of keeping head offices and high-paying jobs in the country.

Until the jobs are slashed, that is.

If Canada really wanted to support quality jobs, it would both reduce corporate welfare and corporate taxes – among the highest in the OECD – thereby helping small and medium-sized businesses, which are by far the largest employers in the country.

Instead, our governments are likely to maintain the status quo that all companies are to be treated equally. But when it comes to friends of the government, some companies are more equal than others.

Editor’s note: An earlier version of this column incorrectly said Bombardier is being investigated or charged in a number of countries on corruption and other charges. Corruption charges are being pursued in Sweden for a re-trial against a former Bombardier sales manager and in Brazil, antitrust regulators have recommended convictions for fixing bids regarding a number of companies including Bombardier.
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