SNC-Lavalin: When Did the Moral Compass Break?by
As engineering giant SNC-Lavalin Group struggles to contain a growing scandal about its links to Libya’s Qaddafi family, it’s fascinating to consider the tipping points. Investors have long accepted the fact that SNC made good money under the Qaddafi regime—some 6 percent of sales, or C$440 million ($445 million), came from Libyan projects in 2010. That meant SNC’s decision in 2011 to suspend those projects amid the revolt that led to dictator Muammar Qaddafi’s death in October was bound to affect its bottom line.
Yet it was a Feb. 28 announcement that the $6.3 billion-a-year company is investigating some $35 million in mysterious payments that sliced off almost a quarter of SNC’s stock price. Are investors suddenly shocked that doing business with the Qaddafis might mean dubious payments changed hands? Was SNC’s admission that 2011 net income might be 18 percent lower than forecast such a shock to the system? The bigger worry may be that the ongoing trickle of bizarre news points to a deeper moral corrosion that extends beyond the company’s dealings in North Africa.
SNC spokeswoman Leslie Quinton said in a March 1 e-mail that the company has no comment on the matter for now, beyond its press release.
The current scandal didn’t start in Libya, where Montreal-based SNC had operated for more than three decades and was working on such Qaddafi-backed projects as a prison it defended as “the first to be built according to international human rights standards.” Instead, the process began in Mexico on Nov. 10 of last year, when a Canadian consultant was arrested for allegedly leading a plot to smuggle members of Qaddafi’s family into the country. SNC had hired Cyndy Vanier, a self-employed mediator from a tiny town in Ontario, paying her more than $100,000 to travel to Libya and act as a third-party adviser on SNC’s operations. Never mind that Vanier, who is still jailed in Mexico, specialized in handling disputes among Canada’s indigenous groups. Somehow, SNC executives decided she was the right person to defend the company’s interests amid Libya’s violent civil war.
That has since led to the firing of a few executives and Tuesday’s cryptic announcement from the company that it is investigating $35 million in irregular payments and “certain other contracts.” Certain other contracts? Like, say, the links that SNC might have with Syria? Among those who have been fired in recent weeks is Nawaf Al Dandachi, an estimator who sent an invitation to a rally last June in support of Syrian leader Bashar Assad. While SNC has no projects in Syria, a spokeswoman says the company has a $13.5 million contract to design a pipeline that will run through the country. Then there’s the news, reported by CBC, that an additional SNC executive had been given power-of-attorney over some property held by the son-in-law of Tunisia’s deposed president, Ben Ali. Investors have also learned, courtesy of the CBC, that Canada’s former ambassador to Tunisia now works for SNC, while the husband of the country’s ambassador to Libya was hired to work on the human-rights-friendly prison.
Taken together, this paints a picture that many investors might find too grim. Whether SNC and its executives broke any laws is a matter for the courts. But investors have enough information to wonder how far the company is willing to go to drum up business with dubious regimes.