SNC -Lavalin cleared for public bids
Deal with Ottawa amid corruption, fraud charges
MONTREAL• While the storm of legal difficulties hasn’t yet passed for SNC-Lavalin Group Inc., it is seeing a ray of sunlight after signing an agreement with the federal government allowing it to continue bidding on public contracts while the company remains on trial for fraud and corruption charges.
Canada’s largest engineering firm confirmed Thursday that it has signed an administrative agreement with Public Services and Procurement of the government of Canada under the new Integrity Regime that allows companies with charges pending against them to continue to obtain federal contracts and provide supplies.
“For us, it’s really good news because it’s a recognition of the efforts we’ve made over the last three years,” said CEO Neil Bruce in an interview with the Financial Post. “From our perspective it is a morale boost for the 40,000 people who have done nothing wrong in this whole process and, frankly, it’s an indication from a third party that we are making significant progress.”
The SNC- Lavalin agreement is the first reached under the new regime, and allows the company to continue with existing contracts and pursue future work with the federal government. As part of the deal, the company must adhere to strict conditions and third- party oversight of its business practices.
Investors also seemed pleased with the agreement, with stock price closing up two per cent at $ 40.91 in Toronto Thursday.
The charges stem from an RCMP investigation alleging SNC- Lavalin paid $ 47.7 million in bribes to public officials during Moammar Gadhafi’s rule in Libya.
It also charged the company, its construction division and its SNC-Lavalin International subsidiary with one charge each of fraud and one of corruption for allegedly defrauding various Libyan organizations of about $129.8 million.
Likelihood of debarment for SNC in Canada is small
So far the charges haven’t stopped SNC from bidding on — and winning — some of the largest contracts in the country, such as managing the consortium that will build the $ 4.2 billion Champlain Bridge replacement in Montreal.
However, the company is not quite out of the woods when it comes to bidding on contracts after the trial.
The risk still remains that SNC could be found guilty on the corruption charges and a possible 10- year ban from bidding on public contracts that would come with that verdict still looms over the company.
“We still believe that the likelihood of debarment for SNC in Canada is a small probability, especially when the Federal government continues to award multi- billion dollar contracts to the company,” said D undee Capital Markets analyst Maxim Sytchev in a research note Thursday.
The previous Conservative government did soften anticorruption rules last July by eliminating the inflexible 10- year ban on companies charged with a long list of offences anywhere in the world, in favour of a possible five years if the firm co- operated with authorities.
Under the new rules, the government could also immediately suspend any company charged, so SNC says it wanted to be sure it wouldn’t be suspended and entered into talks on an administrative agreement.
SNC wants to take these changes further and has been advocating for a Deferred Prosecution Agreement that would include replacing the bidding ban with an option to pay a fine.
“Prior to the admin agreement SNC faced uncertainty regarding being able to bid on government work post the implementation of the new procurement guidelines as discussed in prior publications,” Sytchev said. “Now we at least have the intermediate visibility on ‘ business as usual’ when it comes to procuring government contracts for SNC.”
SNC -contests the charges, saying the entire company should not be held responsible for the actions of a few individuals, including former vice- president Riadh Ben Aissa.
The case will be back in court on Feb. 26, 2016.