SNC Charged With Corruption, Fraud in Qaddafi-Era Libya Case

SNC-Lavalin Group Inc. was charged with attempted bribery and fraud related to construction projects in Libya as Canada cast a wider net in a corruption probe that already had ensnared former executives.

The shares slid the most in three months Thursday after the Royal Canadian Mounted Police said SNC and two units were charged with one count of corruption and one count of fraud. SNC, Canada’s largest construction and engineering company, vowed to “vigorously defend itself,” saying that the case involves former employees who left “long ago.”

The charges complicate SNC’s attempts to distance itself from a scandal over improper payments that led to the departure of Chief Executive Officer Pierre Duhaime three years ago. Since then, several former executives have been charged individually in Canada and Switzerland, while SNC and more than 100 of its units were barred for 10 years from World Bank projects after “misconduct” in relation to bridge work in Bangladesh.

“The market will treat the information as yet another cloud over the company’s head,” Maxim Sytchev, an analyst at Dundee Securities in Toronto, said in a note to clients. Charges and a possible settlement “is a process that will take time and something that SNC does not control,” he said.

SNC fell 7 percent to C$40.63 at the close in Toronto, the biggest daily decline since Nov. 6. Earlier the stock tumbled as much as 8.8 percent, the most intraday since February 2012, when the company disclosed the probe into incorrectly booked expenses.

Any penalties for less than C$300 million ($240 million) would be viewed positively by investors, Sytchev said.

Bribe Offers

SNC and two of its units offered to bribe “one or several” Libyan officials “in order to obtain or retain an advantage in the course of business” between 2001 and 2011, the RCMP said in a statement. The attempts involved at least C$47.7 million, the police agency said. The fraud charge involved a value of about $C130 million, the RCMP said.

The company spent years trying to win business in North Africa before a rebellion ousted dictator Muammar Qaddafi in 2011. Libyan projects on SNC’s books at the time of Qaddafi’s ouster included an airport, a prison and a water line network known as the Great Man-Made River, according to the company’s 2010 annual report.

Work in Libya accounted for about 7 percent of SNC-Lavalin’s backlog at the time of the uprising, and all work was suspended as employees were evacuated. SNC-Lavalin posted a C$39.3 million loss in 2011 on projects in the North African country, according to a March 2012 filing.

Company Cooperation

The charges against SNC “stem from the same alleged activities of former employees from over three years ago in Libya, which are publicly known, and that the company has cooperated on with authorities since then,” Chief Executive Officer Robert Card said Thursday in a statement.

Duhaime stepped down in March 2012 after the company opened a probe into inaccurate documentation of payments at its construction unit and eventually concluded that $56 million in expenses were posted to projects to which they weren’t related. Riadh Ben Aissa, SNC-Lavalin’s former vice president of infrastructure and construction, was later arrested amid a criminal probe into North African operations.

Three other men have already been charged by the RCMP as part of its four-year-old investigation into SNC, police said. They include a former vice president of the company, the former head of SNC’s construction division and a Montreal lawyer, said Brigitte Mineault, an RCMP spokeswoman, by phone from Ottawa.

‘Financial Damage’

While SNC “has already incurred significant financial damage and losses as a result of actions taken prior to March 2012, we have always been and remain willing to reach a reasonable and fair solution that promotes accountability, while permitting us to continue to do business,” Card said a statement Thursday.

Since taking over in October 2012, he has named a new team of executives, including SNC’s first-ever chief compliance officer.

SNC said that “if charges are appropriate, we believe that they should be correctly applied against the individuals in question and not the company.”

The Thursday announcement by the RCMP doesn’t affect the company’s right and ability to bid or work on any public or private projects, SNC said. Quebec’s financial markets authority last year allowed SNC to bid on public contracts in the province after reviewing the company’s ethics and compliance system.

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