A government agency is proposing changes to an obscure policy that could help SNC-Lavalin Group Inc., the embattled-Montreal engineering and construction firm, move past a national political scandal and survive any potential federal conviction on looming fraud charges.
Public Services and Procurement Canada is reviewing and finalizing changes to the ‘Ineligibility and Suspension Policy’ under the Integrity Regime — which governs whether corporations convicted of crimes can bid on federal projects. The proposed changes would give the government greater discretion to decide on whether a ban makes sense, and if so, an appropriate length of time.
Under current policy, SNC faces a possible 10-year ban from bidding on federal projects if convicted on charges it sent tens of millions of dollars in bribes and gifts to Libyan officials, including the son of former dictator Muammar Gaddafi, to win lucrative contracts in that country. Because the giant engineering and construction firm derives significant revenue from federally funded infrastructure projects, any ban could have crippling consequences.
The media relations office of the PSPC said the updated policy is “being studied and finalized” and acknowledged there was no minimum period of suspension mandated under the proposed changes.
That could provide SNC-Lavalin — whose efforts to settle its criminal charges have led to a national furor about whether Prime Minister Justin Trudeau improperly pressured former attorney general Jody Wilson-Raybould — an alternative way to escape the potentially debilitating effects on its infrastructure business that a conviction would bring.
“Theoretically, they could propose … that ineligibility be six months, a year or no debarment at all,” said Timothy Cullen, an Ottawa-based lawyer at McMillan, about the proposed changes. “Whether they (the government) will feel that’s appropriate, we don’t know because it’s never been done before.”
Cullen, who advises corporate clients on the government procurement process, said a contact in the registrar’s office of Public Services and Procurement Canada suggested enactment of the changes is imminent.
A draft of the proposed changes was released several months ago, and they were scheduled to take effect in January, he added. Although the proposed changes could face further revisions, Cullen said it is likely the draft will not feature any substantial changes.
If so, it marks a significant change from the current policy, which mandates an automatic 10-year suspension for any corporation that violates the Integrity Regime, which could be reduced under certain circumstances to five years.
Some lawyers said there may have been ways to negotiate with the registrar and find loopholes to reduce a 10-year, or even five-year penalty, but the perception of the policy has been that it was inflexible.
“It was very much intended to be a strict regime,” said Gerry Stobo, a procurement lawyer with Cassidy Levy Kent. “If you were convicted of one of the (qualifying) offences, the government of Canada would not be doing business with you.”
Records indicate that SNC lobbied Public Services and Procurement Canada, including assistant deputy minister Barbara Glover eight times between 2016 and 2017, although no detail is provided about the substance of these meetings.
It was very much intended to be a strict regime
Gerry Stobo, procurement lawyer with Cassidy Levy Kent
The company is the only entity that currently has an administrative agreement with PSPC that allows it to continue bidding and working on federal contracts despite the pending charges against it.
SNC-Lavalin declined to comment for this article.
Lawyers who practice in the procurement area said corporate suppliers have long expressed concerns that the current debarment and ineligibility system is inflexible in that it automatically mandates 10-year suspensions.
PSPC initiated a public consultation on its ‘Ineligibility and Suspension Policy’ in the fall of 2017, and incorporated feedback such as the need for “greater flexibility in debarment decisions” in its proposed changes.
The proposed changes have other effects, including to widen the scope of what can lead to debarment to include human trafficking, environmental crimes and labour violations.
Still, it would mark the second recent change in policy or law, which could potentially help SNC-Lavalin, one of Canada’s oldest and largest companies, as it battles the fallout from its overseas bribery scandal.
Last May, a provision added to the federal budget enabled prosecutors to strike a remediation agreement with corporations. In essence, it allows prosecutors to defer prosecuting companies that can show over an extended period of time that they have rooted out the causes of the crime. This means the companies may need to acknowledge culpability, make retributions, install corporate compliance monitors and remove individuals linked to the crime.
Earlier this month, a scandal erupted after the Globe and Mail reported the Prime Minister’s Office had pressured Wilson-Raybould to abandon charges against SNC-Lavalin and instead pursue a deferred prosecution agreement. Wilson-Raybould was moved to another ministry and, subsequently, resigned from cabinet.
The result of a bar from bidding on federal projects could be crippling for SNC-Lavalin, though probably not a death blow: Last October, the company announced a remediation agreement was not likely.
Afterwards, Devin Dodge, a BMO analyst, noted about 15 per cent of its $9 billion in revenue in 2017 derived from the Canadian government fall within the company’s infrastructure business. The risk of a guilty verdict and the resulting 10-year debarment, plus any fines, creates “a significant burden” on the value of the segment, he wrote, estimating its enterprise value at between $276 million and $414 million.
But its other business segments, including its nuclear facilities maintenance, mining and metallurgy, oil and gas and others could also suffer from a finding that the company violated Canada’s Integrity Regime.
“The fact that we’ve not been invited to negotiate a remediation agreement makes no sense,” Neil Bruce, chief executive of SNC-Lavalin, wrote in a letter to shareholders last October.
He argued that because a corporation cannot be put in jail, the prosecution of SNC will only hurt the company’s 9,000 employees in Canada who may lose their jobs if the company is convicted. Instead, he argued prosecutors should target the individuals involved in the alleged bribes, which took place between 2001 and 2012.
“The truth is, the events prior to 2012 that led to the federal charges should have never taken place,” Bruce wrote.
The arguments apparently did not persuade prosecutors who continue to move the case closer to trial. Whether the changes Bruce argued have taken place at the company will satisfy government officials responsible for deciding who can bid on contracts remains open, if the proposed changes to the Integrity Regime are enacted.