SNC-Lavalin Group Inc. settled criminal charges related to work the company did in Libya Wednesday, with its construction division pleading guilty to a single count of fraud and bringing the company a step closer to ending a long-standing scandal that tarnished its reputation and ensnared the highest office of the Canadian government.
Under the deal, it pleaded guilty to a charge of fraud over $5,000, will pay a $280-million penalty and will be subject to a three-year probation order.
“In 2015, SNC-Lavalin Group Inc. and two of its affiliates, SNC-Lavalin Construction Inc. and SNC-Lavalin International Inc., were charged with corruption of a foreign public official and fraud. The remaining charges were stayed against all three defendants as a result of the resolution,” said the Public Prosecution Service of Canada.
The deal also stipulates that SNC-Lavalin will engage an independent monitor who will release regular reports, executive summaries of which will be posted on the company’s website, and “make any changes to its compliance and ethics programs that are identified by the independent monitor and are required.”
The conviction represents a new beginning for the company and removes an enduring element of risk that has contributed to significant financial losses since questionable practices first surfaced in 2012 and prompted the departure of former chief executive Pierre Duhaime.
“I apologize for this past misconduct and welcome the opportunity to move forward,” said CEO Ian Edwards, in a statement. “We are beginning an exciting new chapter that is focused on our future growth and further de-risking our business. I want to thank all of our stakeholders, and especially our employees, for their continued dedication and support.”
SNC-Lavalin shares soared on the news, jumping $6.98, or 28.94 per cent, to $31.10 on the Toronto Stock Exchange. Shares had been halted prior to market open.
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The charges had centred on allegations that the company paid nearly $48 million to public officials to influence government decisions under the late dictator Moammar Gadhafi’s regime between 2001 and 2011.
SNC-Lavalin had also faced charges of fraud and corruption for allegedly defrauding various Libyan organizations of roughly $130 million.
The plea deal comes on the heels of the conviction of a former top SNC-Lavalin executive last Sunday.
On Sunday, a jury found former SNC-Lavalin executive Sami Bebawi guilty of paying off foreign officials and pocketing millions as he worked to secure contracts for the Canadian company in Libya.
One of the biggest risks faced by the company in the event of a criminal conviction was its ability to bid for construction projects in Canada and abroad.
Under federal law, a conviction could result in a bidding ban for federal projects for up to 10 years. It could also prompt a ban on bidding for projects backed by the World Bank.
“The company does not anticipate that the guilty plea by a construction subsidiary (which has not bid on any new contracts since it was charged in 2015) will affect the eligibility of SNC-Lavalin Group companies to bid on future projects that are aligned with the SNC-Lavalin Group’s newly announced strategic direction, and continuing to serve its strategic clients here and abroad,” said the company, in a statement.
Nearly one-third of SNC-Lavalin’s $9.3 billion in revenue in 2017 came from Canada, down from roughly a 60 per cent share of revenue in 2014. Analysts estimate that up to half of SNC-Lavalin’s Canadian revenue stems from federal contracts.
The SNC-Lavalin case became a crisis for the governing Liberals after then-attorney general Jody Wilson-Raybould claimed she was pressured by people in Prime Minister Justin Trudeau’s inner circle to settle criminal charges against the company through a new legal tool comparable to a plea deal.
Trudeau and his aides had argued that a criminal trial could trigger the company’s exit from Canada and the loss of thousands of jobs – a sentiment that was later contradicted by SNC-Lavalin’s then-CEO Neil Bruce, who told The Canadian Press that he never cited the protection of up to 9,000 Canadian jobs as a reason it should be granted a remediation agreement.
That claim was later contradicted by an internal SNC-Lavalin document obtained by The Canadian Press. It outlined a “Plan B” that the company presented to federal prosecutors in the fall of 2018 in which, absent a remediation agreement, it would split the company in two, move its offices south of the border and chop its Canadian workforce to 3,500 from 8,700 before eventually shuttering its domestic operations.
Edwards said in October that he did not expect a plea deal on the criminal charges in the wake of the Liberal election victory.
“We kind of remain focused on defending ourselves through a court process,” he told investor on an Oct. 31 conference call.
“Obviously if there were opportunities for settling this in another way, we’d be open to that. But we don’t expect it.”
Attorney General David Lametti had refused to shut down the possibility of such an agreement, which would drop the charges against the firm in exchange for SNC admitting responsibility for breaches and agreeing to conditions such as a fine and third-party oversight.
SNC-Lavalin announced in July that it was moving away from construction and oil projects to double down on engineering, just days after Quebec’s Caisse de depot – SNC’s largest investor at nearly 20 per cent – took the rare step of publicly rebuking the firm, saying the situation “requires decisive and timely action” by the board.