Nikiforuk Tackles SNC-L's Criminality

"The misuse of public procurement processes in the construction industry, the manipulation of the rules governing the financing of political parties and the infiltration of the industry by organized crime have generated economic costs for society as a whole. They have also undermined its democratic foundations, the rule of law and confidence in public institutions.”

- Charbonneau Report

The company is blacklisted by the World Bank for ten years, a decade in which it may not compete for World Bank-financed projects abroad. The company is facing a similar fate in its Canadian homeland. It says it may have to depart, in disgrace, perhaps for London where Brexit-plagued Britain can't be fussy about who and what it lets in.

The Tyee's petro-scribe, Andrew Nikiforuk, explores why the world of mega-projects seems to breed corruption.

SNC-Lavalin now occupies the centre stage of a national political scandal. It’s but the latest for the engineering giant, whose list of bad behaviours is so long that the magazine L’actualité actually called Canada’s largest engineering construction firm “the shame of Quebec Inc.” 

Company executives bribed officials (the code word was “project consultancy costs”) in several countries to secure contracts and also bribed local officials involving a $1.3-billion Montreal “super hospital.” 

In addition, the firm made illegal political party donations to municipal, provincial and political parties on a massive scale. SNC-Lavalin still faces federal charges it bribed Libyan government officials with $48 million while defrauding Libyan organizations of another $130 million.

...The argument for deferring prosecution is that SNC-Lavalin swears it has changed its stripes, imposed guidelines and taken the right ethical courses. The rogue actors have left the company or faced the courts, pleads the company. Better to salvage jobs and business in Quebec than punish a corporation that has learned its lesson and is ready to play fair like its competitors do. 

But that’s not how corruption works. Especially in the type of business SNC-Lavalin pursues. In fact, construction firms have a global habit of behaving badly from Brazil to Newfoundland.

Corruption in the construction business usually requires a trifecta of conditions: political parties hungry for funds, engineering firms hungry for contracts and governments seduced by the political rewards of large projects with poor oversight. Not all of it is strictly illegal. 

In 2011, Transparency International, an anti-corruption watchdog, laid out the essential details in its latest “Bribe Payers Index” for 19 different business sectors. 

Bribery of various kinds tainted every sector, revealed the watchdog, though agriculture seemed to be the least affected. In contrast, “public works contracts and construction” got the worst score and ranked at the bottom of the list, right next to utilities, real estate and oil and gas firms. 

No huge surprise, given that large public contracts combined with complex engineering frequently make a mockery of schedules and budgets. “This makes it easier to hide and inflate additional expenditure,” explained the watchdog.

...Many Canadians are in denial about how powerfully the mechanism works in our sputtering democracy. But it is alive and kicking wherever political parties fund overscheduled and overpriced construction projects with taxpayers’ money. 

In British Columbia, for example, the BC Liberal Party ordered BC Hydro to buy too much energy from private providers. Then BC Hydro paid too much for the energy it bought by billions of dollars. How much of that money found its way back to the BC Liberal Party? It’s a documented fact that BC Liberal donors tended to get the lucrative contracts to privately provide energy. 

Given that taxpayers pay for the cost overruns and that public employees never get fired for cost overruns, “strong incentives exist for proponents to strategically misrepresent initial budgets to get a project approved, funded and started, knowing that once work begins, few projects are ever halted,” found a University of Toronto report.

...But mega-projects aren’t just unwieldy and overhyped. They can easily incubate corruption. In 2017, a group of University of Leeds researchers called corruption on publicly funded mega-projects “the elephant in the room.” 

...Corruption wasn’t just a matter of rogue individuals; it was contextual, noted the authors, who portray an industry discouraging of whistleblowers. They found engineers didn’t like to talk about mega-projects and corruption in the same sentence. In fact, leading management journals, the very ones engineers read on a daily basis, rarely mentioned the word corruption.

Indignant Liberal partisans struggle to minimize Lavalin's rich history of corruption. It was one deal, a couple of rogue guys, ancient history, a giant nothingburger. Those people ought to read Nikiforuk's account of Lavalin's culture of corruption whether it be in Pakistan, Libya, or at home in Canada. He puts paid to all of the apologists' nonsense.


The Charbonneau Commission, Montreal, 2013.

Over three days of testimony, Yves Cadotte, SNC-Lavalin’s vice president of transportation and infrastructure, explained the intricacies of contributing to political parties. They eagerly solicited cash, said Cadotte, and he would often deliver the money in briefcases containing between $70,000 and $200,000. 

To participate or not participate posed a risk. “That’s the dilemma: not contributing would be a risk that is perhaps intangible,” he said. “Maybe there is no (consequence), but in our mind it’s a risk we don’t necessarily want to take.” 

Cadotte also admitted SNC-Lavalin had broken the law. Given that it is illegal in Quebec for corporations to donate to political parties directly, Cadotte described the company’s “straw men” scheme. Executives would ask middle managers and often their wives to donate $1,000 (the personal limit) to a particular party. The company would later reimburse them come bonus time.

...In 2016, SNC-Lavalin made an interesting deal with Elections Canada called a “compliance agreement.” The agreement noted that SNC-Lavalin illegally donated $118,000 to the federal Liberal and Conservative Parties between 2004 and 2011 using the same straw man scheme. 

The bulk of the money, $100,000, went to the Liberal Party of Canada.

How Lavalin pressured the Liberal government to implement "deferred prosecution agreement" legislation.

Orwellian sounding “deferred prosecution agreements” or “no prosecution agreements” are all the rage in the U.K. and the U.S. When faced with the prospect of prosecuting a large company with many employees for economic crimes, governments can grant leniency with a DPA instead. The company must admit to its wrongdoing and change its behaviour. 

The moral hazard of such agreements is great. “If you do not punish crimes, there’s really no reason they won’t happen again,” Mary Ramirez, a professor at Washburn University School of Law and a former assistant United States attorney told the New York Times.

...A bevy of SNC-Lavalin lobbyists went to work arguing for the addition of a deferred prosecution agreement in Canada’s Criminal Code in 2016. Two years later they got their wish as the Trudeau government included “the SNC-Lavalin clause” in the Criminal Code in an omnibus bill C-74.

Once again Andrew Nikiforuk hits one out of the park while the mainstream media settle for singles.  The Liberal faithful, like their Conservative counterparts, instinctively go into damage control mode, when these scandals erupt. They never turn on the party leadership that has allowed this chicanery to happen. When denial no longer works, there's always somebody else to blame, someone else's reputation to impugn. There's no shortage of that in the effort to smear ex-justice minister Jody.