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Paul Bagnell

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At the peak of the national furor over SNC-Lavalin and the handling of its legal crisis by the federal cabinet and Prime Minister Justin Trudeau, it seemed to many like a scandal that could sink the federal Liberals when they next faced voters at the polls — reminiscent, perhaps, of the sponsorship scandal of the early 2000s that contributed to the demise of the Paul Martin Liberal government in the 2006 federal election.

And yet, during the recent campaign, opposition attacks on Trudeau for the way he and his office handled the SNC file gained little traction, never really putting the Prime Minister on the ropes. It was a striking turn of events, given that only nine weeks earlier the federal Ethics Commissioner had said Trudeau broke the law in pressuring his Justice Minister to keep the SNC case out of the courts and instead allow the company and prosecutors to negotiate a deferred prosecution agreement.  The SNC controversy had quickly faded, overshadowed alternatively by the Trudeau brownface scandal and the unexpected surge in popularity of both the Bloc Quebecois and Jagmeet Singh.

That may be the way voters feel, but in the minds of investors, the SNC issue remains very much alive. Look no further than the nearly 14-per-cent surge in SNC shares on the day after the election. Investors who bought the shares (and there were many of them — 2.5 million shares traded hands that day, about one million more than on an average day) are clearly betting the tortured story of SNC-Lavalin and how it faces justice for acts of corruption by ex-employees and executives is not over yet. Still in play, they believe, is the option of a deferred prosecution agreement, and more modest penalties than likely would be handed out in court.

But is this realistic?

Maxim Sytchev, an analyst who covers SNC for National Bank Financial, was doubtful about this optimism when he spoke to Amber Kanwar and Jon Erlichman on The Open two days after the election.

True, he noted, the Justice Minister when Parliament was dissolved — David Lametti  — is a Montrealer, and perhaps more sympathetic to SNC’s argument that thousands of jobs should not be put at risk for crimes committed by people who are long gone from the company.

But Sytchev doubted the SNC file will rise swiftly to the top of the new cabinet’s agenda.

“No one will touch this file anytime soon,” Sychev said.

He may be right. With not a single Liberal seat in Alberta or Edmonton, and talk of western alienation at a full boil again, the new Liberal cabinet may decide to leave SNC alone and let the court do its work.

The fate of SNC — and SNC shares — may depend on how much sway the resurgent Bloc Quebec can wield.  If there is one certainty in all of this, it’s that the Bloc will want SNC to be given the chance to negotiate a settlement on the charges. Like so much else in the new Parliament, the Bloc has emerged with unexpected nd outsized influence.

Considering the uncertainty in this story, Sytchev advises investors to focus more on how SNC can execute on contracts already in its backlog, and on its new lower-risk, lower-return business model, rather  than the question of whether the company can avoid a court date. The new dynamics of the minority-governed parliament will likely make avoiding court a long shot for SNC.