MONTREAL—SNC-Lavalin says a gas project in the United Arab Emirates was used as a cover to transfer $13.5 million to unknown agents, a portion of the $56 million in questionable payments identified by the company in an internal investigation last year.
The Montreal-based based company said the amount was falsely attributed to the project even though the money went elsewhere. Another $20 million was also wrongly attributed to another project which SNC-Lavalin is refusing to identify.
“The payment in the UAE never actually happened,” said spokeswoman Leslie Quinton.
The identity of the gas complex in Abu Dhabi surfaced after a French newspaper, L’Union de Reims, this week disclosed that French authorities were investigating the payment.
A French prosecutor launched an investigation last summer after an external auditor found “anomalies” in the accounting books of SNC-Lavalin Europe.
Last November, police raided the SNC-Lavalin Europe headquarters, then in Reims, believing the $13.5 million was a commission paid to the project in Abu Dhabi.
But the money never went there, even though the accounting code for the Abu Dhabi project suggested it had, Quinton said. SNC-Lavalin later reimbursed the amount to correct the error.
She said nobody in that European office knew anything about the payment which was approved by former executive Riadh Ben Aissa.
SNC-Lavalin has said its internal investigation found that $56 million was distributed to what it described as projects A and B. Project A totalled $33.5 million. Project B, which received $22.5 million in payments, was later identified as Montreal’s new super hospital being built by the company.
“It had nothing to do with them, it was related to the ill-begotten gains of Project A,” she said, referring to the mystery project.
The document led to the departure of several senior executives and a string of events that left the company’s reputation in tatters.
Former CEO Pierre Duhaime and Ben Aissa have been charged with fraud over allegations that $22.5 million was used to win the Montreal super-hospital contract. Ben Aissa has been jailed for more than a year in Switzerland on alleged corruption, fraud and money-laundering in North Africa.
Former hospital director Arthur Porter also faces several charges related to alleged scams in awarding a $1.3-billion Montreal hospital contract, one of Canada’s largest public works projects. He remains in a Panamanian prison and is fighting his extradition to Canada on the grounds his arrest was illegal because he has diplomatic immunity.
Porter was never formally employed as a diplomat for his native Sierra Leone, but held the role of a volunteer goodwill ambassador.
Others charged in the superhospital case are McGill University Health Centre executive Yanai Elbaz and his brother Yohann; and Jeremy Morris, the administrator of a Bahamas-based investment company.
SNC-Lavalin’s offices in Algeria were also raided last month. Algerian media said police are investigating an $825-million contract SNC-Lavalin won in 2005 to build the Hadjret Ennous power plant near Algiers.
The RCMP previously raided company offices in Oakville, Ont., related to alleged bribes in Bangladesh, and its headquarters in Montreal at the request of Swiss authorities.
The World Bank barred an SNC-Lavalin subsidiary and its affiliates from bidding on its projects for 10 years as a result of allegations stemming from the Bangladesh bridge project.
The embattled Montreal-based company has said it expected police investigations and searches would come after it handed information to the RCMP in March 2012.
Industry observers believe SNC-Lavalin try to grow by pursuing large acquisitions over the longer term, but only after it is able to put global investigations behind it and pay any fines and settlements.
Sara O’Brien of RBC Capital Markets said the company would be forced to pay a premium for any sizable deal now because of the “investigation overhang” involving the company.
She wrote in a report that she expects any large-sized acquisition will be deferred until settlements are behind the company and its stock price appreciates above its current level of around $43.
“We note over the longer term, we expect acquisitions will be an integral driver of SNC’s earnings growth. We also expect such acquisition plans were likely part of what attracted new executive management to SNC as an opportunity to drive shareholder value over time.”
O’Brien named five firms or divisions of those companies that could be a strategic fit for SNC. They include CEO Robert Card’s former employer CH2M, along with AMERC, Tetra Tech, MWH Global, and S&B Engineers and Constructors.