SNC-Lavalin viewed as jewel of Quebec Inc. that needs to be protected: professor

Ross Marowits, The Canadian Press</span>
Published Friday, February 8, 2019 4:13PM EST

TORONTO -- For more than a century, SNC-Lavalin has been viewed with pride in Quebec as it grew from a small firm specializing in hydraulics into a global engineering and construction giant.

Founded in 1911, it gained a reputation for building a large dam in Quebec that spearheaded the province's development of hydroelectricity and developing the skill sets for thousands of Quebec workers.

Today the company has 50,000 employees around the world, after adding 18,000 with the acquisition of WS Atkins in 2017. However, its head count in Canada has fallen to 9,000 -- including 3,400 in Quebec -- from 20,000 in 2013.

For that, the Montreal-based company is seen as a provincial crown jewel that needs to be protected despite having its reputation tarnished in 2012 over bribery allegations that led to convictions of several senior executives, says an industry observer.

The province is 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.

The new provincial government appears ready to assist SNC-Lavalin from any takeover attempt by reportedly putting it on a list of 10 "strategically important" companies.

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 former attorney general Jody Wilson-Raybould -- denied by Prime Minister Justin 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."

SNC-Lavalin has declined to comment on the latest imbroglio, but took out full-page ads in four of Canada's most influential newspapers in October in a bid to rally public support after federal prosecutors refused to negotiate a compensation agreement.

In it, 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.

SNC and two of its subsidiaries were charged in February 2015 with paying nearly $48 million to public officials in Libya between 2001 and 2011 to influence government decisions.

The RCMP has also charged the company, its construction division and a subsidiary with one charge each of fraud and corruption for allegedly defrauding various Libyan organizations of roughly $130 million. If found guilty, it could be barred from bidding on federal contracts for a decade.

A former CEO, Pierre Duhaime, is serving 20 months of house arrest after pleading guilty to a single charge in connection with a bribery scandal around the construction of a $1.3-billion Montreal hospital.

Yanai Elbaz, a former MUHC senior manager, pleaded guilty in December to accepting a bribe and was sentenced to 39 months in prison. Former SNC-Lavalin executive Riadh Ben Aissa pleaded guilty to a charge of using forged documents last July and was sentenced to 51 months in prison.

SNC-Lavalin 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.

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.

Oil and gas is the largest business segment, accounting for 36 per cent of 2017 revenues, infrastructure 23 per cent, Atkins 19 per cent, power 14 per cent, mining and metallurgy five per cent and capital three per cent.

More than half of its revenues came from the Americas, 23 per cent the Middle East and Africa, 14 per cent Asia-Pacific and 11 per cent Europe.

Its tentacles are very broad, having worked on the Canada Line rapid transit extension in Vancouver, Confederation Line in Ottawa, the Champlain Bridge in Montreal and electric train network in Montreal. It is a member of a consortium that owns the 407 ETR toll road in Toronto and owns Candu Energy.

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