SNC-Lavalin (Gwyn Morgan is Chairman SNC Lavalin and Director of Encana) paid $160-million in Libyan bribes, RCMP says; SNC-Lavalin hires former Watergate investigator to advise on anti-corruption

SNC-Lavalin paid $160-million in Libyan bribes, RCMP says by Christopher Curtis, January 25, 2013, The Montreal Gazette
Former SNC-Lavalin executive Riahd Ben Aissa had a “friendly” relationship with Saadi Gadhafi, offering him and other Libyan officials $160 million in bribes to secure lucrative contracts for the Montreal-based engineering firm, an RCMP search warrant alleges. The RCMP says Ben Aissa and fellow SNC executive Stéphane Roy played an integral role in trying to extract the son of deposed Libyan dictator Moammar Gadhafi from Libya as the country descended into revolution in 2011. The allegations against Ben Aissa surfaced in a 59-page affidavit used by the RCMP to obtain a search warrant for the company’s Montreal headquarters in April 2012 as part of a wide-ranging, international investigation into SNC-Lavalin’s overseas operations. Investigators had previously claimed Ben Aissa approved of millions in questionable payments to members of the Libyan government but it’s now clear they believe he was at the head of an elaborate system of graft and corruption.

“We cannot establish the veracity of these allegations,” company spokesperson Leslie Quinton said in a statement released Thursday. “(The affidavit) contains unproven information … if the allegations are proven, we will act swiftly and with determination to repair that damage that could have been caused.” Ben Aissa and Roy resigned from SNC-Lavalin in early 2012. Roy was questioned by RCMP detectives but has not been charged with any crime. Ben Aissa has been in a Swiss prison since April, when he was jailed under suspicion of using his Swiss bank accounts to corrupt government officials in several North African nations. Between 2001 and 2011, the Libyan government awarded SNC-Lavalin nearly $2 billion in contracts to oversee the construction of water filtration plants, an airport, a man-made river and a prison. Record show that in 2010, the Libyan contracts accounted for 6.6 per cent of the engineering firm’s $6.3 billion in revenue.

In her sworn statement to the Quebec Superior Court, RCMP corporal Brenda Makkad said she believes that, throughout this period, Ben Aissa actively sought to maintain a friendly relationship with Gadhafi — who was in charge of the country’s major public works projects. Based on information obtained from Switzerland’s anti-corruption task force, Makkad alleges that four branches of SNC-Lavalin funnelled money to Gadhafi through Ben Aissa’s Swiss bank accounts and overseas corporations that the executive owned. The RCMP says 343 bank transfers went from the engineering firm to Ben Aissa and, ultimately, into the hands of Gadhafi or other civil servants. Beyond the alleged payoffs, Ben Aissa is also accused of having lavished the third-born son of Moammar Gadhafi with gifts and luxurious accommodations. SNC-Lavalin money was used to buy Ghadafi yachts, to pay for his Toronto condominium and hotel rooms during an all-expenses-paid trip to the Toronto International Film Festival in 2009, according to the search warrant. Police also believe Ben Aissa arranged a moose-hunting trip and a salmon-fishing expedition for Gadhafi during a 2008 visit to Canada. Gadhafi was also allegedly given his own corporate credit card and a private security staff courtesy of SNC-Lavalin. The search warrant also states that Roy and Ben Aissa were behind an apparent “clandestine” plot to extract Ghadafi from Libya and into Mexico during the 2011 revolution. While rebel fighters continued making gains in Libya during the summer of 2011, receipts show that Roy used $700,000 in company funds to hire Cynthia Vanier for a fact-finding mission throughout the Northern African country.

Vanier was accompanied by Gadhafi’s longtime Canadian bodyguard Gary Peters and an armed security detachment during what investigators say was a mission to find and extract Gadhafi from the war-torn country. Vanier has been in Mexican prison since November 2011, when she was arrested for allegedly trying to sneak Gadhafi into Puerto Vallarta. The president of Niger granted Gadhafi political asylum in 2011 despite an Interpol red notice being issued against him earlier that year. SNC-Lavalin has long claimed that if bribery ever took place, it was the result of a few rogue executives working on the firm’s international operations. But new evidence suggests the company may be facing similar problems at home. This week during the Charbonneau Commission into Quebec’s construction industry, one construction executive said SNC-Lavalin was among a cartel of engineering firms that colluded to raise the price of public works projects in the province. In September, Quebec’s anti-corruption police raided the McGill University Health Centre’s headquarters to probe the company’s bid to obtain the design contract for Montreal’s superhospital. Former SNC-Lavalin CEO Pierre Duhaime was arrested during the ensuing investigation. He resigned from the engineering firm in March 2012.

SNC-Lavalin document provides details of alleged bribes to Gadhafi family, Engineering firm accused of paying Moammar Gadhafi’s son $160 million in kickbacks by Canadian Press, January 25, 2013, Calgary Herald
SNC-Lavalin says an unsealed affidavit used to obtain an RCMP search warrant of its headquarters last April contains new details about the company’s alleged ties with Libya’s Gadhafi family. However, the embattled engineering giant says it cannot confirm the veracity of the new information and is reviewing the document to see what actions it may take. It has vowed to act swiftly if the allegations are proven. In the sworn statement unsealed by a Quebec court Friday, former officials with the Montreal-based company are accused of paying the son of the dictator Moammar Gadhafi $160 million in kickbacks to obtain major contracts in Libya, some of which police say paid for luxury yachts. The search warrant document says the bribes were paid to Saadi Gadhafi by former SNC vice-president Riadh Ben Aissa, who is now jailed in Switzerland.

Published reports say the RCMP document also implicated Ben Aissa and former SNC-Lavalin controller Stephane Roy in an alleged effort to smuggle Gadhafi’s son and his family to Mexico as the regime was failing in 2011. SNC-Lavalin (TSX:SNC) says the affidavit contains some unspecified information that it voluntarily provided to authorities in March. “It also contains some information of which we were not previously aware. We cannot determine the veracity of certain allegations in the affidavit,” it stated in a news release. It noted that affidavits contain “unproven information and allegations” gathered by authorities in the context of an investigation that are submitted to a judge in order to obtain a search warrant. SNC-Lavalin has taken a number of steps to improve its governance and requirement that employees adopt ethical behaviour. It hired former Watergate investigator Michael Hershman as an independent compliance adviser to SNC’s president. He will complement the work of former FBI director Louis Freeh’s risk management company, which has been assessing the progress of the implementation of the company’s ethics and compliance program.

SNC-Lavalin hires former Watergate investigator to advise on anti-corruption by Nicolas van Praet, January 24, 2013, Financial Post
Canadian engineering giant SNC-Lavalin Group Inc. has hired Watergate investigator Michael Hershman to advise the company on anti-corruption issues as it takes steps to strengthen its business practices amid ongoing police investigations. Mr. Hershman has been retained as an independent compliance advisor to SNC president and chief executive officer Robert Card, the company confirmed Thursday. He will be part of a group of experts and advisors offering counsel to the CEO on specific procedures related to compliance, governance and anti-corruption. The naming of Mr. Hershman, a former special agent with the U.S. military who later founded his own consultancy specializing in corporate conduct, is likely to reassure investors that SNC is taking the right steps to weed out any corruption that may currently exist, or have existed, within the company. But hiring such a high-profile international expert in the field could also signal just how deep SNC’s board believes its internal ethics problems run.

“It’s good to see that they are hiring someone with, presumably, the right experience to deal with the issues which we believe are endemic,” said Anthony Scilopoti, an executive vice-president at Toronto-based Veritas Investment Research. Mr. Hershman did similar work for German electronics multinational Siemens AG, helping to reverse what insiders described as an extensive environment of corruption in which bribes were encouraged. Siemens ultimately settled bribery charges with U.S. and European authorities in 2008, paying more than $1-billion as Mr. Hershman introduced a complete revamp of compliance controls. There is no evidence to date that SNC-Lavalin’s corporate culture is as broken as that of Siemens. Employees who have spoken privately say the ethics breaches of certain individuals do not reflect the wider integrity of most workers. A one-time a senior staff investigator for the U.S. senate Watergate committee, Mr. Hershman is also currently advising soccer’s world governing body FIFA as it attempts to move forward from its own alleged corruption. SNC separately hired Freeh Group International Solutions, founded by former FBI director Louis Freeh, to help it monitor the progress of changes to its ethics and business practices. Four former SNC executives have been charged under Canadian law in recent months for various offences. The most serious concerns former chief executive Pierre Duhaime. Quebec police allege he and former colleague Riadh Ben Aissa defrauded the McGill University Health Centre as part of SNC’s securing of a $1.3-billion superhospital contract in Montreal. Mr. Duhaime’s arrest in November followed the revelation by SNC of an internal probe that uncovered $56-million worth of undocumented payments to commercial agents. SNC, which dismissed both Mr. Duhaime and Mr. Ben Aissa in the wake of the probe, does not know exactly where the money went and has turned over pertinent information to police.

“Regardless of the outcome of the investigations, this company must reform,” Mr. Hershman told Montreal’s The Gazette newspaper. “It’ll be a lengthy process. You cannot make the necessary changes overnight.”The engineering firm, which is involved in thousands of infrastructure projects around the world at any given time, has put in place several new measures to strengthen its business practices in recent weeks, including hiring external firm EthicsPoint to run a 24-hour ethics and compliance hotline. It says it intends to implement the highest standards in governance and ethics with a view to becoming the benchmark against which other companies are measured. SNC itself has not been charged with any wrongdoing in the police probes. There is “high degree of likelihood” that it will face charges eventually under Canada’s Corruption of Foreign Public Officials Act, Canaccord Genuity analyst Yuri Lynk wrote in a Jan.9 report. Calgary oil company Griffiths Energy International Inc. pleaded guilty to bribery this week under the act, becoming the third company convicted under the legislation. It agreed to pay a $10.3-million fine.

SNC-Lavalin’s new CEO shakes up management by Nicolas van Praet, January 19, 2013, Financial Post
SNC-Lavalin Group Inc. is shaking up its management ranks as it seeks to rebuild a credible slate of executives amid continued allegations of corruption enveloping the company. Three months into the job after the sudden departure of his predecessor, Pierre Duhaime, SNC chief executive officer Robert Card is hiring an outsider to lead a new business unit called resources and environment, the biggest and most diverse division within the company with activities in most of the 100 countries in which SNC does business. Neil Bruce, a 30-year energy and mining veteran who most recently worked for British-based project management consultancy Amec Plc, will lead the unit. Mr. Card is also creating a new unit called the global operations group, naming the head of SNC’s European operations, Christian Jacqui, to steer it out of London, U.K. And he’s giving Montreal-based executive Michael Novak new responsibilities as executive vice-president for global government, aboriginal and economic affairs. Patrick Lamarre, SNC’s current head of global power and son of former CEO Jacques Lamarre, is resigning to be replaced on an interim basis by Scott Thon, the current president of the company’s Altalink subsidiary.

“These changes represent part of our ongoing effort to further strengthen the company’s management structure and extend its scope,” Mr. Card said in a statement Friday. “[It’s] an opportunity to unroll some of the company’s preliminary strategic orientation, of which there will be more to follow in the months to come.” SNC-Lavalin has for more than a year been ensnared in allegations of corporate misconduct that has pounded its market value and public reputation. Last spring, it disclosed the results of an internal probe into $56-million in undocumented payments to commercial agents and dismissed Mr. Duhaime for approving the monies. The SNC executive who allegedly requested the payments, former head of construction Riadh Ben Aissa, was also asked to resign. Mr. Duhaime has since been arrested by Quebec’s anti-corruption police squad and arrested on charges of fraud, conspiracy to commit fraud and using forged documents related to SNC’s contract to build and maintain the McGill University Health Centre’s $1.3-billion superhospital in Montreal. Mr. Ben Aissa faces the same charges and possible extradition from Switzerland, where he is being detained as part of that country’s criminal investigation into suspicion of corruption, fraud and money laundering in northern Africa. None of the allegations have been proven in court. SNC has been cooperating with police. There is a “high degree of likelihood” that SNC itself will face criminal charges under Canada’s foreign corruption laws, Canaccord Genuity analytst Yuri Lynk said in a Jan. 9 report. Though the fallout from the police investigations continue, SNC has nevertheless managed to keep winning new contracts, including a high-profile win to helm Ottawa’s new Confederation Line light rail transit project. It has spent millions on a special compensation program to retain employees so it can properly execute existing contracts.

The fact it can attract top-calibre executive talent like Mr. Card and Mr. Bruce bodes well for the company’s prospects, said AltaCorp Capital analyst Maxim Sytchev. “In order to reinvigorate SNC’s business, everything needs to start with leadership,” Mr. Sytchev said Friday in a note to clients. “Given the number one and number two executive pedigree that now resides at SNC-Lavalin, investors should feel increasingly more comfortable with the turnaround and strengthening potential of the company’s engineering and construction business.” The analyst rates SNC-Lavalin shares “outperform” with a price target of $57. The stock Friday was roughly unchanged at $43.82 in morning trading on the Toronto Stock Exchange. What strategic changes Mr. Card has in store for SNC largely remains unclear. Much of the company’s value currently lies in its infrastructure concessions business, namely stakes in Toronto’s Highway 407 toll road and Calgary-based power distributor Altalink. Former chief financial officer, Gilles Laramée, now leads a business unit that oversees concessions.

SNC in November hired outside advisors to help examine those concession investments. Concessions are “critical” to SNC’s business, Mr. Card has said, “[But] how you handle that asset base is an open question.” Analysts including those at Desjardins Securities believe SNC could be exploring whether to sell certain non-core assets. Mr. Card has also indicated that SNC will deploy more of its top bosses overseas in the future as it executes an effort to become a more “global company.” There’s a big opportunity for the firm to extend further internationally and develop into a truly global company like Coca-Cola Co. or General Electric Co. – firms that have forward bases with significant high-level decision-making power and are viewed as local in the areas in which they operate. One of the many benefits of such an approach is reducing the need for commercial agent representation – the people SNC hires in places it isn’t that familiar with to help it win business. Billing to such agents was at the centre of the $56-million payments probe.

Business world people to watch in 2013 by David Olive, January 4, 2013, The Toronto Star
In the week following the arrest in November on fraud charges of Pierre Duhaime, relieved of his post as CEO of SNC-Lavalin Group Inc. eight months earlier over $56-million in unauthorized payments, the Montreal engineering giant bagged four plum contracts. On its own or as part of consortia including respected partners like General Electric Co., the Saudi oil Leviathan Aramco, and large private equity funds worldwide, SNC was tapped to build state-of-the-art power stations in Poland and Newark, N.J., to manage oilfield services in Saudi Arabia, and to build a $1.5-billion, 350-kilometre power transmission line in Alberta.

It seemed that the “division of labour” credo of Duhaime’s permanent replacement, Robert Card, was working like a charm. Card and SNC’s board had agreed he should focus on day-to-day business while the board dealt with a scandal over alleged bribes at home and abroad that just wouldn’t quit. It might have seemed to Card, 59, a U.S. native and 38-year veteran of leading U.S. engineering firm CH2M Hill, that outsourcing SNC’s corrupt-culture issues to his board was both novel and efficacious. But it’s neither. The chief ethics officer of any enterprise is the CEO, by choice or default. CEO since October, Card has learned the hard way that the continuing probes into alleged episodic moral failure at SNC (principally suspicions of bribery and other improper payments) now underway by Montreal’s anti-corruption squad, by the RCMP, and by Swiss authorities, have intruded upon his efforts to manage the basic business. Renowned Montreal billionaire investor Stephen Jarislowsky, largest SNC shareholder with 14 per cent of the stock, had counseled that it’s important for Card “not to waste his time on old problems.” But the “old” problems, including suspicions of wrongdoing in SNC’s success in winning a huge, $1.3-billion contract to build a “superhospital” in its Montreal hometown, don’t carry an expiry date.

And so, scarcely a month on the job, Card faced up to reality, becoming hands-on with the ethics deficiencies at his new firm. … Scandals have a life of their own, well beyond the control of CEOs and boards. As 2012 unfolded, SNC found it appropriate to part with four top officers, and to demote chief financial officer of whom vice-chair and acting CEO Ian Bourne earlier said: “We have complete, absolute confidence in our CFO.” The board has abruptly decided some of its directors should not stand for re-election in 2013, without naming them. The board has also acknowledged “material weaknesses” in its practices, without naming them, either, and the role they played in a $1.2-billion Bangladesh bridge project where bribery may have been involved, or an alleged scheme in which unidentified agents associated with SNC were supposed to spirit one or more members of Muammar Gaddafi’s family out of Libya.

With considerable fanfare, the firm detailed its new ethics-compliance hotline, its new committee to vet contracts sourced from foreign reps, or “agents”; and integrity checks on new and current SNC agents that it has hired the non-profit anti-bribery TRACE International to perform. Fair enough, except that all these protections and additional safeguards should have been in place decades ago. Investors have launched the inevitable class-action lawsuits against SNC over its governance, actions that will be tough to defend since none other than Jarislowsky has faulted the board. The Caisse de dépôt et placement du Québec, also a big long-term SNC investor, has publicly seconded Jarislowsky’s criticism.

A growth-oriented Card is also determined to bolster SNC’s capabilities and client roster in hydrocarbon, water and environmental projects, where the firm has a weak presence, and to more vigourously exploit a massive U.S. market that currently accounts for just 4 per cent of SNC revenues. … Card and SNC’s board would be well-advised to speak about what lies behind the many allegations over its conduct. And they should replace a chair dating from 2007, Gwyn Morgan, who green-lighted Duhaime’s appointment in 2009, and on whose watch SNC has lost $1.1 billion in shareholder value since Duhaime’s departure. [Emphasis added]

[Refer also to: How Alberta Will Fight Fracking Folk Hero Jessica Ernst, In famous flaming water case, regulator to argue ‘no duty of care’ to landowners or groundwater ]

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