In a case kept quiet until now, Canada's biggest engineering firm, SNC-Lavalin Group Inc., has emerged as the first major Western firm known to have been punished for fraud by one of the giant international agencies that finance development in poor countries.
For 23 months, two wholly owned subsidiaries of Montreal-based SNC-Lavalin have been barred from bidding on projects funded by the Asian Development Bank, a $53-billion (U.S.) agency based in Manila and bankrolled partly by the Canadian government.
The firm was caught submitting résumés in which it lied about the employment status and work experience of two engineers it supplied under a 1997 contract, a practice comparable to deceptive labelling of goods. It also submitted a fabricated supporting letter.
The deceit, which included passing off outsiders as SNC-Lavalin staff engineers, helped the firm meet staffing requirements on the $3.6-million (U.S.) contract for supervision of road improvements in the Southeast Asian nation of Laos, an SNC-Lavalin official said.
The ADB reprimanded the firm as a whole and blacklisted the subsidiaries, marketing unit SNC-Lavalin International Inc., and Toronto-based SNC-Lavalin Engineers & Constructors Inc., also known as the Ontario division. SNC-Lavalin dealt with the matter partly by holding a divisional vice-president responsible and sending him into retirement six months early.
It has applied to have the bans removed on July 30, the end of a two-year minimum term set by the ADB.
Less than two months after SNC-Lavalin's punishment began, one of its rivals, Acres International Ltd. of Oakville, Ont., became the first prominent Western firm convicted of bribing an official on an internationally funded project.
While the ADB spared SNC-Lavalin from embarrassment, Acres was found guilty in open court in the African kingdom of Lesotho and paid a fine equivalent to $2.8-million (Canadian). It now faces possible blacklisting by the Washington-based World Bank and has accepted a takeover by another firm.
It is not clear why two great names in Canadian engineering should head the dishonour roll in a business in which contractors and consultants have long been suspected of indulging in, even encouraging, Third World-style corruption.
The World Bank, the biggest of the international agencies, has blacklisted scores of obscure firms and posted their names on the Internet, but it has yet to nail a big name unless you count a reprimand issued last year to Schlumberger SA of France for unspecified fraud in a contract to supply water meters to Bulgaria.
The ADB, sensitive to the feelings of the 63 governments that provide its capital, has an anti-corruption apparatus featuring an oversight committee, an auditor-general, an investigation staff and a strict policy of dealing with offenders in private.
It would not confirm that SNC-Lavalin was caught cheating until The Globe and Mail had proof in the form of an internal SNC-Lavalin memo and a heavily censored package of documents prepared within Canada's Department of Foreign Affairs. The documents were obtained under federal access-to-information legislation.
ADB principal investigator Michael Stevens stressed that fraud under bank rules -- defined as "any misrepresentation to influence the selection or execution of a contract" -- is not necessarily the same as under the laws of member countries. He had kind words for SNC-Lavalin. "I do cite them as a positive example, one of the most positive examples we have as to how firms deal with these cases. . . . They were very forthcoming with information when we asked for it."
In a message to more than 10,000 employees in the summer of 2002, SNC-Lavalin president Jacques Lamarre said: "We will not contest the ruling, and will abide by the letter and spirit of its terms. We accept full responsibility for the incidents, but remain more committed than ever to a principle of zero tolerance for dishonesty."
He allocated blame selectively, however.
The résumés were faked by "a small unit" in the Ontario division, he said. "The employees implicated in the wrongdoing were formally reprimanded and informed that their actions were completely unacceptable," he continued, and "the person in charge of the unit is no longer an employee of SNC-Lavalin."
The person who left was Joti Chakraburtty, the division's vice-president of international projects. "SNC-Lavalin extends its best wishes to Joti in his retirement," the firm said in announcing his departure.
Reached in Ontario cottage country, Mr. Chakraburtty said he retired at age 64½ shortly before the ADB verdict because "I was in charge of the international department and so it was in the interest of the company. . . . You know, to me it was like six months early and I had enough vacation to cover for those six months and I have no regrets or no loss or anything."
Marylynne Campbell, SNC-Lavalin's executive vice-president of human resources, responded: "Mr. Chakraburtty received a letter and left the next day. . . . At the end of the day, the most senior person in the unit was held responsible."
She said the unit was caught in three deceptions:
It claimed that the engineers in question were regular SNC-Lavalin employees when in fact they were hired on contract for the job, violating an ADB requirement.
It claimed that one engineer had experience on a previous SNC-Lavalin project he did not work on. She would not name the project.
It backed up the lie with a phony document on SNC-Lavalin letterhead, purportedly signed by a human resources manager but in fact signed by a secretary with no human resources duties.
An internal investigation failed to determine who instructed the secretary to sign it, Ms. Campbell said. "We will never know. The position we took was that ultimately the person that was in charge of the unit is responsible for the activities that go on in that unit."
She said she didn't know whether the engineers whose backgrounds were faked earned less than regular staff.
It wasn't a case of individuals misrepresenting themselves, she specified.
"It was us. SNC-Lavalin submitted the proposal with those people's names in it, and even if, as an engineer, you misrepresent yourself, it's our responsibility to know whether we employed you and in what capacity."
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