SNC-Lavalin’s failure to secure deferred prosecution comes after years of legal fights, lobbying blitz
OTTAWA — In October, SNC-Lavalin Group Inc. slammed what it called an “incoherent” ruling by federal prosecutors on its bid to avoid a criminal trial, arguing it would have “dramatic consequences” for its bottom line and for Canada’s national interests.
The comments, part of a federal court filing dated Oct. 19, reveal the Montreal-based engineering giant’s deep frustrations over a years-long legal battle to sidestep charges of bribery and fraud laid in 2015.
The legal fight lies at the centre of a recent political upheaval in Ottawa, encompassing the highest office of the federal government.
Since 2015, SNC has carried out a widespread lobbying campaign to shed its tarnished reputation, tied to criminal allegations that the firm and two of its subsidiaries paid nearly $48 million in bribes to Libyan officials between 2001 and 2011 to win government contracts.
The campaign included pressuring Ottawa to introduce so-called “deferred prosecution agreements,” or DPAs, which allow SNC to avoid criminal prosecution in return for a guilty plea, a sizeable fine,and proof the company has taken actions to prevent future crimes.
But on Oct. 9, the director of public prosecutions rejected the option, saying it “is not appropriate in this case,” court documents show. If the company is convicted it would be barred from bidding on federal contracts for 10 years, potentially costing it billions in foregone revenue.
That same day SNC’s share price plummeted 15 per cent.
Ten days later, lawyers for SNC filed a notice of application to ask the Federal Court to review the decision.
“The applicants are in the dark as to how they failed to meet the requirement of “appropriateness,” or why the public interest requirement, though met, has apparently been ignored,” the company wrote on Oct. 19.
On Thursday, the Globe and Mail reported that members of the Prime Minister’s Office had urged then Attorney General Jody Wilson-Raybould to help SNC avoid prosecution but she refused. The story did not name the PMO staffers. In January, Prime Minister Justin Trudeau demoted Wilson-Raybould to the Veterans Affairs file.
SNC is by extension a major player in Trudeau’s lofty infrastructure ambitions, with plans to spend $186.7 billion over 12 years to expand the country’s roads, bridges and telecommunication lines. The firm is set to build a number of the projects funded under the plan, including the $6.3 billion REM light rail development in Montreal.
The expectation in Quebec is that the PM should have put his oar in. He should have said this is a great company with a proud history
The firm employs 9,000 Canadians, including 3,400 in Quebec, considered to be a crucial region in the upcoming federal election.
The province is also acutely sensitive about losing another corporate headquarters — and associated jobs in law, accounting and consulting — following the exodus of many in the 1970s and later the sale of aluminum producer Alcan to Rio Tinto and Rona to U.S. rival Lowe’s, said Karl Moore, a professor at McGill University’s Desautels Faculty of Management.
“There’s a sense that we don’t want to lose any more corporate headquarters,” he said in an interview with The Canadian Press.
Protecting Quebec business champions is not new. Governments of all stripes have helped companies, including Bombardier Inc.
And so, the reported political pressure from the Prime Minister’s Office on Wilson-Raybould — denied by Trudeau — to help SNC-Lavalin avoid a criminal prosecution is viewed differently in Quebec, said Moore.
“The expectation in Quebec is that the prime minister should have put his oar in. He should have said this is a great company with a proud history in Montreal. You guys are pushing it too much. Let’s be more like the Americans and the Brits and be a little bit less silly about it.”
In its Oct. 19 filing calling on the Federal Court to overrule its rejection, SNC claimed it had “easily met” the requirements to negotiate a deferred prosecution. It called the decision by director of public prosecutions Kathleen Roussel an “unreasonable use of her discretion.”
SNC argued that a prosecution would unduly subject innocent people to injury, including investors, employees, customers and pensioners.
RCMP officers guard the lobby of the SNC-Lavalin head office in Montreal as a raid is carried out the company, April 13, 2012. John Mahoney/Postmedia News
The company said it had asked to meet with federal prosecutors in April 2018, and even offered a sit-down with its CEO Neil Bruce in an effort to “better explain the materials and submissions” of its application. It said such a meeting might help the firm avoid the “extremely negative consequences” of the ongoing legal proceedings.
The company also launched a widespread lobbying and marketing blitz, aimed firstly at introducing DPAs into Canadian law, and then at earning a right to negotiate a deferred prosecution.
Representatives for SNC met with Gerald Butts, senior political adviser to Trudeau, in February 2017 in part to discuss deferred prosecution agreements, according to the federal lobbying registry.
The company has lobbied 80 times at the federal level on the subject of “justice and law enforcement” since 2016. Those meetings include high-level talks with Finance Minister Bill Morneau, Economic Development Minister Navdeep Bains, Infrastructure Minster Francois-Philippe Champagne, as well as regular interactions with Mathieu Bouchard, another senior adviser to Trudeau.
Prospectus Associates lobbyist William Pristanski, who represents SNC, met in 2017 with Catrina Tapley, deputy secretary for the Privy Council Office.
On Oct. 17, 2018, just days after the federal prosecutor’s rejection, Pristanski lobbied the Ontario premier’s office and provincial attorney general to “support the new Deferred Prosecution Agreement Framework recently established by the Canadian government,” according to the provincial registry.
In November, the company registered a lobbyist in B.C., Richard Prokopanko, to “provide an understanding of the professional capabilities and expertise of SNC Lavalin.”
A man walks past the headquarters of SNC-Lavalin in Montreal. Paul Chiasson/The Canadian Press/File
SNC also took its plea to the public sphere, buying full-page advertisements in four newspapers across Canada. The ads conveyed a distinctly personal appeal: “As a company cannot be put in jail, the impact of the wrongdoing that took place only affects current employees,” they read. It said its 52,000 employees worldwide “continue to bear all the brunt” of uncertainty tied to the ongoing legal case, and said a DPA would lead to increased trade and tax revenue for all Canadians.
In the ads, CEO Neil Bruce apologized for wrongdoing prior to 2012 that has tarnished the company’s reputation and said it has made “fundamental changes” in its culture and governance.
In a separate criminal case, two former Lavalin executives, including former CEO Pierre Duhaime, pleaded guilty in a bribery scandal involving the construction of a $1.3-billion hospital in Montreal.
The company has also faced legal scrutiny overseas. The World Bank debarred the company and more than 100 affiliates in 2013 for up to 10 years following misconduct in relation to projects in Bangladesh and Cambodia.
The corruption case involving Libya has been in preliminary hearings since October, and no trial date is scheduled.
The looming prosecution has cast a pall over Canada’s largest engineering and project consultancy company. SNC recently cut its guidance for fiscal 2018 by 50 per cent over problems at a mining project awarded in 2016. Its revenues are expected to be around $10.1 billion, up from $9.3 billion in 2017. Analysts have begun to discuss the possibility of a hostile takeover bid for the company’s assets.
As a company cannot be put in jail, the impact of the wrongdoing that took place only affects current employees
In December, Quebec Premier Francois Legault told a local radio station he would do whatever he could to stop such a takeover, including an intervention by the provincial investment agency.
“In the future, when it comes time to protect head offices, I would like the leader to be Investissement Quebec,” he said.
SNC representatives have also lobbied the Quebec government with high frequency in recent years, including regular meetings with the provincial justice ministry, according to the public registry.
SNC will continue to argue that, due to the existence of DPAs in the U.K. and U.S., its competitors have been able to continue with business as usual as the company faces repercussions for actions it has since corrected.
In court filings, SNC’s legal team said the new remediation regime in Canada was “considerably influenced” by the U.S. and U.K.
In its response to SNC, filed Jan. 8, the director of public prosecutions laid out a stern estimation: “The application is bereft of any possibility of success,” it said.
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