Canadian Manufacturing

SNC-Lavalin CEO says criminal charges could force firm to close

Top executive Robert Card said any criminal charges against SNC-Lavalin would jeopardize 5,000 jobs at its Montreal headquarters



MONTREAL—SNC-Lavalin says its CEO wasn’t attempting to intimidate authorities by suggesting that the engineering giant could be forced to close or sell its operations if it faced criminal charges.

“As managers of a public company, you have to always examine all alternatives, all scenarios, because we need to do what is best for our shareholders,” said Eric Ryan, vice-president marketing of strategy and external relations.

The Globe and Mail reported October 7 that Robert Card told its editorial board that any move to lay criminal charges against the Montreal-based company in connection with a bribery scandal could force its closure or sale.

Ryan said SNC-Lavalin always prepares for any possible outcomes and Card merely discussed hypothetical possibilities any public company would have to consider if it faced serious sanctions that could impede its ability to win contracts and compete in Canada.

Card said charges would severely hurt SNC’s business while a sale to a foreign owner would jeopardize the 5,000 jobs at its global headquarters.

SNC-Lavalin’s reputation has been tarnished by the alleged crimes of former employees in Libya, Algeria, Bangladesh and in relation to a $1.3 billion Montreal hospital contract.

Several ex-officials, including former CEO Pierre Duhaime and construction vice-president Riadh Ben Aissa, face fraud charges in Canada. None of the allegations have been proven in court.

Ryan said the sale or closure of the company is not a scenario that SNC is exploring. He added that the company continues to collaborate with federal, provincial and other authorities that are investigating past events and still hopes to have any fines that may be imposed wrapped up by year-end, even though the election of a new Quebec government may delay that timeline.

Since his appointment in 2012, Card has overhauled the company by restructuring the executive team and overhauling its compliance efforts. It also concluded two large deals to sell parts of its lucrative infrastructure concessions business to focus on growing its core construction and engineering operations especially in oil and gas.

It reached a deal in May to sell Alberta electricity transmission company AltaLink to a Warren Buffett subsidiary for $3.2 billion. It then spent $2.1 billion to purchase London-based oil and gas services company Kentz Corp.

Maxim Sytchev of Dundee Securities said Card’s comments should be interpreted as positioning by the company as the decision on fines approaches. He said a penalty will cause short-term pain, but is already expected by investors.

The analyst said similar cases in the past only resulted in companies facing relatively small financial penalties rather than being barred from competing.

In accepting Ben Aissa’s guilty plea last week for fraud, corruption and money laundering, the Swiss court recognized SNC-Lavalin as “an injured party” that will be able to recover $16 million. The company also received certification in February from Quebec’s securities regulator to bid on government contracts.

“We don’t see how the Canadian authorities would not take all of these factors into account when deciding the nature and extent of the penalty (not to mention the political implications from ‘shuttering’ the largest Canadian engineering and construction firm),” Sytchev wrote in a report.

With files from Julian Arsenault

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