SNC-Lavalin’s stock drops after RCMP raid

As a dozen RCMP officers raided SNC-Lavalin headquarters in Montreal Friday morning, it became clear that the investigation into the Quebec engineering giant was international in scope – and distancing itself from a few rogue executives wasn’t going to solve all the company’s problems.

Within 45 minutes of the news hitting Twitter, the already battered stock had lost more than five per cent, and had fallen seven per cent before it began to bounce back.

By 7 p.m. it had returned to $38.40, down $1.67, or 4.17 per cent since the start of the day.

Apart from the bad optics, however, of having investigators armed with a search warrant descend on the headquarters of a company with more than 35 offices worldwide, the raid was a “non-event,” said Neil Linsdell, an analyst with Versant Partners.

“On their last conference call, they made it very clear they were handing over the results of their internal investigation to police. We didn’t know it was to the RCMP, but when some of the (dubious) payments were made in Tunisia, it was bound to be an international investigation,” Linsdell said.

“It shouldn’t be a surprise to anyone, but when the company has police pulling up outside its office doors, people get nervous.”

Linsdell was referring to the company’s disclosure March 26 that $56 million had been paid to unnamed “agents” in North Africa to help secure contracts for two projects, and that CEO Pierre Duhaime had approved the payments. That included a payment of $22.5 million made through SNC-Lavalin’s office in Tunis.

SNC-Lavalin would not say which projects the payments related to, only that the company “does not believe” they are related to the firm’s contracts in Libya, where the company had close ties to the former Gadhafi regime.

The company’s investigative report further stated the payments were disguised by channelling them through unrelated projects, violating the company’s accounting and documentation procedures as well as its code of ethics.

By this point, Riadh Ben Aissa, SNC-Lavalin’s former executive vice-president – and the company’s point man in North Africa – had already left the company. According to the report, Ben Aissa had “direct and significant knowledge about most of the investigated transactions.”

As for Duhaime, he decided to retire, the company announced, effective June 28, and received a $4.9 million severance package.

As the raid on the executive floor of SNC Lavalin headquarters continued Friday, RCMP Sgt. Marc Ménard would not provide details on the basis for the warrant or make any further comment.

But SNC-Lavalin issued a statement which said it was co-operating fully with the investigation, and that the warrant “relates to an investigation of certain individuals who are not or are no longer employed by the company.”

Other signs also point to a long, international investigation in several countries.

SNC-Lavalin’s troubles began when it was revealed that vice-president Stéphane Roy – who has also left the company, and has not been heard from since – had sent a consultant, Cynthia Vanier, to Libya during the uprising last year, supposedly on a fact-finding mission.

SNC-Lavalin had contracts worth more than $1 billion to build an airport in Benghazi and a prison in Tripoli, and to continue work on a water pipeline across the country. Vanier returned with a report that instead painted a favourable portrait of the Gadhafis, for which Roy commended her.

Then in November, Vanier, a mediator from Mount Forest, Ont., was arrested in Mexico, where she remains incarcerated on charges of organized crime, falsifying documents and attempted human trafficking in an alleged plot to bring Moammar Gadhafi’s 38-year-old son Saadi to Mexico from Libya over the border of Belize. There was a UN travel ban on the Gadhafis at the time, making it illegal for anyone to help members of the family cross international borders.

Roy arrived in Mexico the next day and was with Vanier’s alleged co-conspirator, Gabriela Davila Huerta, when she was arrested Nov. 11. Roy was questioned and released, however.

In an interview with the CBC this week, Vanier said two officers from the RCMP’s Commercial Crimes section visited her in her Mexican prison in mid-March.

She said they told her she was a witness not a suspect, as they asked dozens of questions about her business dealings with SNC-Lavalin, specifically the two executives who hired her, Roy and Ben Aissa.

The RCMP would not say whether their investigation into SNC-Lavalin would also take them to Tunisia. Gary Peters, a bodyguard of Saadi Gadhafi who lives in Canada, said he participated in a conference call at SNC-Lavalin’s office in Tunis with the younger Gadhafi and Ben Aissa, just before Peters went to Libya to escort Gadhafi to the border of Niger.

Another SNC-Lavalin executive vice-president, Kebir Ratnani, who worked under Ben Aissa, had ties to the regime of deposed Tunisian president Zine El-Abidine Ben Ali. He had been given power of attorney over the Westmount property of Sakher el Materi, Ben Ali’s son-in-law.

The investigation and associations are all bad news for the company’s employees. An SNC-Lavalin technician, who had left the company’s headquarters before the raid began Friday and returned to find all the doors locked, said the ongoing drama and fluctuating stock price have made some colleagues worry about their jobs.

“This is not about SNC-Lavalin or its employees,” said the man, who would not give his name. “It’s about one or two people. But the whole company’s suffering.”
(Source: The Gazette)

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