SNC-Lavalin says corruption charges weighing on its competitiveness

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SNC-Lavalin Group Inc. is pressing Canada's new Liberal government to adopt corporate corruption settlement deals like those in place in the United Kingdom and the United States, saying federal charges laid against the company are hurting its ability to compete against rivals in Group of 7 countries.

"With the great strides we have made in our goal to be both a Quebec and Canadian player on the global stage, nevertheless we still have to deal with the reality of the current business environment in Canada, which presents real challenges to a company like ours," the engineering giant's chief executive, Neil Bruce, said in prepared comments he made to the Montreal Council on Foreign Relations Tuesday.

"This [legal] action limits our competitiveness versus our peers in many of the G7 countries, which are our core target market," Mr. Bruce said in the text of the speech. He said the company remains willing to reach a "reasonable and fair solution" to past ethics issues.

SNC is expending significant effort explaining its situation and Canada's legal system to potential clients, Mr. Bruce added in an interview with The Globe and Mail. He said although those conversations are getting easier over time, ongoing reputational issues continue to affect the company's ability to bid for work.

"Effectively, we are locked in the court system," he said, "[It's] by trial until you're either found guilty or not guilty."

The company booked $2.7-billion of new work in its most recent quarter. Its revenue backlog at the end of September was a record $12.7-billion.

Mr. Bruce has been at the helm of SNC-Lavalin for about a month. With these comments, he continues a push started by his predecessor, Robert Card, to win a settlement with Ottawa without going through a prolonged legal battle. The issue could a key early file for Prime Minister Justin Trudeau and his minister of justice, Jody Wilson-Raybould.

Differing interests are at play. SNC wants to resolve the matter without admitting guilt, which could damage its ability to bid for contracts internationally and at home. Ottawa has been trying to get tougher on companies involved in corruption after being rebuked for years on the international stage for its perceived failure to take the matter seriously.

Prosecutors in February laid rare corruption and fraud charges against Montreal-based SNC, Canada's largest engineering firm, related to its business in Libya. The company says there was wrongdoing by executives who have since left the company and says it has since reformed ethics and compliance procedures to among the toughest in the world. It is suing those same executives, namely former vice-president Riadh Ben Aissa, to recoup the allegedly embezzled funds and maintains the company itself did nothing wrong and should never have been charged.

SNC management wants Ottawa to consider letting federal prosecutors make so-called "deferred prosecution agreements" (DPAs) with companies accused of corruption. These are deals by which prosecutors can obtain multimillion-dollar fines from companies facing bribery allegations while sparing them a criminal conviction that would trigger other consequences such as violating covenants signed with lenders or joint-venture partners.

The idea is that the company is held accountable for past actions while not being permanently crippled.

In the United States, which has a history of aggressively pursuing companies whose staff pay bribes, DPA agreements are standard and overseen by the U.S. Department of Justice. The United Kingdom also uses similar mechanisms but Canada has refused to adopt them.

Officials from Ms. Wilson-Raybould's office did not answer questions Tuesday. The minister was sworn in less than a week ago after the Liberals won a majority government on Oct.19.

Milos Barutciski, a lawyer with Bennett Jones LLP in Toronto familiar with the SNC-Lavalin affair and who has co-operated with authorities on certain aspects of the case, said he believes the Trudeau government will study both allowing deferred prosecution agreements and changing the mandatory blacklist provisions in the Conservatives' controversial government procurement rules.

It's those rules that raised the stakes for SNC because it faces being blocked automatically from bidding on lucrative Canadian government contracts for at least five years if it is found guilty. Other countries have more discretionary rules in place.

Mr. Barutciski said DPAs would also be good for Canada, as they provide an incentive for companies to come forward after they discover wrongdoing through internal investigations.

So far, both the RCMP and the Public Prosecution Service of Canada have maintained that these agreements are not available under current Canadian law, a position Mr. Barutciski dismisses. He said prosecutors could actually start offering them now with no legislative changes.

"I think the government will have a very close and hard look at DPAs," Mr. Barutciski said.

In Canada, the notion of plea bargains or immunity deals in exchange for co-operation are well-established in criminal law in cases facing individuals. And the federal Competition Bureau, which investigates price-fixing cartels, offers companies or individuals immunity for being the first conspirator to come forward, and leniency for the second conspirator.

Critics in the U.S. charge that the Department of Justice is able to cook up "secret deals" to extract large fines from major companies for wrongdoing, without ever having to submit its actions to the authority of a court. Mr. Barutciski said Britain, in devising its own new policy for deferred prosecution agreements in foreign bribery cases, allows these deals but says they must be submitted to a judge for approval.

Riyaz Dattu, a Toronto lawyer with Osler Hoskin & Harcourt LLP who advises companies on anti-corruption policies, said if Canada is truly serious enforcing its anti-corruption law, resource-strapped prosecutors will eventually need to enter into deferred prosecution arrangements just to keep up.

"Canada doesn't have a well-developed system of prosecution of white-collar crime and I think, quickly, the government will find itself overwhelmed," Mr. Dattu said, as trials in such cases are inevitably lengthy and expensive.

The Ontario Securities Commission has recently moved to allow what are known as "no-contest settlements," another U.S. practice, which allow companies to pay fines but neither deny or admit wrongdoing.