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The head office of SNC Lavalin are seen Thursday, February 19, 2015 in Montreal. The RCMP has laid fraud and corruption charges against Montreal-based engineering firm SNC-Lavalin and two of its subsidiaries.Ryan Remiorz/The Canadian Press

Political and business leaders in Quebec are questioning the rationale for criminal corruption charges against SNC-Lavalin Group Inc., saying the past actions of a handful of former employees shouldn't be held against the engineering giant given it has overhauled its ethics practices and senior leadership.

"I don't like what I'm seeing," said Jacques Daoust, Quebec's economy minister.

"[This is] a company that's completely changed its management, that's put in place governance standards that are remarkable, that's co-operated with the RCMP in its investigations, ending up with criminal charges against it."

The minister's remarks foreshadow a potential clash between Ottawa and Quebec over a company considered one of the province's few big multinational champions. While the Canadian government has won plaudits in some quarters for its hardened stance against corporate corruption, Mr. Daoust said federal integrity rules go too far.

A source familiar with the police investigation into the company said SNC and prosecutors were close to a settlement in October but that a deal appears to have been scuttled by the possibility that a guilty plea could automatically trigger a decade-long ban on winning Canadian government contracts. Such work represents a significant portion of the company's current revenue.

Asked Friday whether the federal rules banning companies convicted of corruption are too harsh, Mr. Daoust said the 10-year punishment "seems very long."

Said the minister: "In 10 years a company might not be the same. Everything can change. And in the case of SNC, they've decided to make drastic changes already over a short time [to improve ethics and compliance]."

The future of Montreal-based SNC-Lavalin, Canada's largest engineering firm, was thrown into doubt Thursday after the RCMP laid rare corporate fraud and bribery charges against the company related to its business in Libya between 2001 and 2011. SNC chief executive Robert Card rejected the charges, saying the company remains willing to reach a fair solution with authorities that promotes accountability while allowing it to continue to do business.

Mr. Daoust said it's the individuals who've committed the wrongdoing that should be punished, not the company. Three former SNC-Lavalin executives already face charges in relation to bribing Libyan officials, including former head of construction Riadh Ben Aissa. "Let's not destroy our companies in this process," Mr. Daoust said. "This is a flagship firm in our economy. We have few truly global companies based here and we have to conserve them at all cost."

Quebec business leaders echoed that sentiment. "I am really concerned about the impact that [this development] could have on the business environment over all and on the stakeholders related to this company," said Yves-Thomas Dorval, president of the Conseil du Patronat, which represents Quebec's largest employer associations. "I consider [SNC] a victim and not necessarily as the beneficiary."

The Federation of Quebec Chambers of Commerce said that while the actions of certain individuals in the past certainly warrant charges, they can't be allowed to harm SNC's overall business, noting the engineering giant employs 5,000 people at its Montreal headquarters alone.

"SNC has been co-operating with authorities since the beginning," said federation president Françoise Bertrand. "We have to stop collectively knocking ourselves down and move to a reconstruction phase."

Quebec has spent years dealing with its own widespread corruption scandal, which ripped through its construction industry and also caught up SNC-Lavalin. The province set up an anti-corruption police squad, enacted a public inquiry that aired years of testimony on dirty business dealings, and set up a new process where companies involved in government business must seek a stamp of ethics approval.

Quebec's securities regulator, the Autorité des marchés financiers, awards those ethics certificates after a applying an integrity test. It has credited SNC-Lavalin for putting in place new governance measures and what it calls "robust" controls to prevent corruption. SNC won its certificate last year.

With a file from Les Perreaux

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