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Sep 23, 2021

RCMP lay fraud, corruption charges against SNC, former VPs

Investors are viewing the SNC-Lavalin charges as a diamond in the rough situation: Analyst


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SNC-Lavalin Inc.’s checkered history came back to haunt it Thursday morning as dozens of charges were announced after a years-long probe by the Royal Canadian Mounted Police.

In a release, the RCMP announced it arrested and charged former vice-presidents Normand Morin and Kamal Francis. They, along with SNC and SNC-Lavalin International Inc. were charged with forgery, conspiracy to commit forgery, fraud, conspiracy to commit fraud, fraud against the government, and conspiracy to commit fraud against the government.

The RCMP said its probe, which was dubbed Project Agrafe, was “lengthy and comprehensive” and focused on bribes that were allegedly paid in exchange for being awarded a contract.

In a separate release, a spokesperson for the Quebec Crown said the contract at issue was worth $128 million and was tied to work on the Jacques-Cartier bridge in Montreal. According to the Crown, a $2.23-million bribe was paid to Michel Fournier, the former head of the agency that’s responsible for the Jacques Cartier and Champlain bridges, in exchange for being awarded the work. Fournier was sentenced to five and a half years in prison after he pleaded guilty in 2017 to accepting bribes.

"We remain committed to disrupting, deterring and preventing both domestic and foreign corruption, and aim to bring individuals and companies involved in these types of crimes to justice, regardless of when they were committed,” said Insp. Denis Beaudoin of the RCMP Sensitive and International Investigations section’s National Division.

No allegations relating to the RCMP’s charges have been tested or proven in court. In its release, the Quebec prosecutor’s office said it has invited SNC to negotiate a remediation agreement. 

In a statement Thursday afternoon, SNC said it welcomed that opportunity, and underscored that it was the first time a Canadian company had been invited to enter negotiations for what’s otherwise known as a deferred prosecution agreement.

“We have said repeatedly that the past behaviour of a select group of former individual employees does not represent the values and ethical standards of SNC-Lavalin today,” said SNC President and Chief Executive Officer Ian L. Edwards in the release.

The RCMP said it released Morin and Francis from custody. They, along with representatives from SNC, are scheduled to appear in a Montreal court on Sept. 27.

While SNC-Lavalin’s shares came under some pressure Thursday, at least one analyst is working under the assumption this latest legal setback will not weigh heavily on the company.

“We think the most likely outcome is that the company agrees to pay a fine – likely materially less that the $280 million it agreed to pay to settle charges with the Federal Government (re: the company’s dealings in Libya) – and to comply with certain conditions,” said Scotiabank Analyst Mark Neville in a report to clients.

“We would hope this is settled expeditiously.”