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Corruption charges could cost SNC-Lavalin tens of millions in federal contracts
Published Tuesday, February 26, 2019 5:46PM EST
From studies on northern transportation systems, to helping protect whales from toxins, to window washing -- SNC-Lavalin has extensive federal ties amounting to tens of millions of dollars in contracts, big and small.
The Montreal-based engineering and construction firm could see its revenue stream from federal contracts dry up if it's convicted on corruption charges and subsequently ruled ineligible to receive federal work -- a possibility under the government's integrity regime.
SNC-Lavalin also finds itself at the centre of a raging political controversy in Ottawa.
The company has pushed unsuccessfully for a special remediation agreement -- a type of plea bargain -- that would allow it to avoid a criminal prosecution.
The Trudeau government faces accusations that prime ministerial aides improperly pressured former attorney general Jody Wilson-Raybould to overrule the public prosecutor and make such an agreement happen.
Wilson-Raybould did not overturn the prosecutor's decision and was shuffled in January to a new cabinet portfolio, though the government denies it inappropriately leaned on her to help SNC-Lavalin.
If SNC-Lavalin is eventually barred from bidding on federal contracts, it would prevent the company's involvement in projects that touch numerous federal departments and agencies.
The company's known for its work on major infrastructure projects in Canada, such as the design, construction and maintenance of the new Champlain Bridge in Montreal.
A document made public last month provides a list of far smaller examples of the company's reach when it comes to government contracts.
For instance, SNC-Lavalin has been awarded contracts with the Transportation Safety Board of Canada to inspect fire systems for $1,119, wash windows for $506 and disconnect electrical wires for $372, say documents tabled in Parliament in response to a written question from New Democrat MP Charlie Angus.
The federal procurement website contains more examples -- it currently shows more than 100 additional contracts awarded to SNC-Lavalin.
Last month, the company was hired to study whether certain contaminants that have leached from landfills are in large enough quantities to harm endangered whales, including the southern resident killer whales, St. Lawrence beluga and North Atlantic right whales.
SNC-Lavalin has been fighting for the right to keep bidding for this kind of work -- but the company also risks losing out on potentially lucrative contracts related to the federal government's commitment to spend $186 billion over 11 years on infrastructure.
In making its case to the public prosecutor's office for a remediation agreement, SNC-Lavalin stressed the steps it had taken to foster a strong sense of ethics among employees. It also underscored "the negative impact of the charges," and the resulting uncertainty, on the company's business, including employment levels in Canada.
Under current federal rules, SNC-Lavalin could be prohibited from getting federal contracts -- a process known as debarment -- for as long as 10 years if convicted of the corruption charges.
Bloc Quebecois MP Rheal Fortin urged the Liberals in the House of Commons on Tuesday to ensure a remediation agreement is worked out, saying Ottawa's lack of action is "jeopardizing thousands of jobs in Quebec."
The revenue generated by federal contracts only makes up a small portion of SNC-Lavalin's business, said Michael Willemse, a senior research analyst for Taylor Asset Management.
Willemse, whose firm is a shareholder in SNC-Lavalin, referred to recent research that estimates about three per cent of the value of the company is tied to its business from federal contracts.
The company's interests in the Toronto-area 407 toll highway are far more significant, he added.
"I think most of the people following this story are missing the fact that the majority of the value of this company is related to their ownership stake in the 407," Willemse said.
"The Canadian business is immaterial to the company and to its shareholders, but it is very material to the employees in that division."
On top of potential job losses in Canada, he argued taxpayers could end up paying more for infrastructure projects if the government has to find new contractors to do the work.
If the company is banned from public contracts, the outcome could also have international ripple effects, suggested Jennifer Quaid, an assistant professor of law at the University of Ottawa.
"The big financial consequences may not be the loss of federal contracts for them," she said. "It might be the loss of contracts in other jurisdictions who will say, 'Well, you're debarred in Canada, so you're not eligible for us."'