BUSINESS

World Bank adds Cambodia to list of SNC-Lavalin problem countries

04/18/2013 02:28 EDT | Updated 06/18/2013 05:12 EDT
MONTREAL - The World Bank has added Cambodia to the list of countries where SNC-Lavalin is alleged to have committed misconduct, as the Montreal-based company agreed to the longest bidding ban in the global agency's history.

The bank didn't provide details of the Cambodia project in question, but SNC-Lavalin was awarded a $5-million contract in late 2009 to design and build an energy management system and control centre in Phnom Penh.

The project was part of a World Bank-financed project completed in 2011 that provided electricity to a large portion of Cambodia’s rural population.

The World Bank initially suspended SNC-Lavalin (TSX:SNC) from bidding on projects it finances over allegations of bribery involving a bridge contract in Bangladesh.

The agency said it learned of misconduct in Cambodia during its investigation.

The World Bank said SNC-Lavalin's misconduct were related to a conspiracy involving bribes and misrepresentations when bidding on bank-financed contracts.

As part of a deal involving the two countries, subsidiary SNC-Lavalin Inc. and more than 100 affiliates are barred from bidding on World Bank Group-financed projects for 10 years.

However, the suspension could be lifted after eight years if the terms and conditions of the settlement agreement are complied with fully.

"This represents the longest debarment period that has ever been agreed to in a World Bank settlement," the bank said in a statement Wednesday.

No financial penalty was imposed and other SNC-Lavalin Group subsidiaries will be able to bid on such contracts if they meet the terms of the agreement, SNC said in a news release.

The company is obliged not to do anything to evade the sanction.

The World Bank said the barred SNC subsidiaries account for 60 per cent of the company's overall annual revenues that reached US$8.09 billion last year.

The company said revenues to the affected subsidiaries that are financed by the World Bank and other multilateral development banks have historically represented about one per cent of annual revenues.

SNC-Lavalin said the Cambodia allegations involve a bribe supposedly paid on a "relatively small project" that is no longer being worked on.

"No employees have been named in the case and no charges have been laid on this matter," she wrote in an email.

"We have investigated this internally and are satisfied it is resolved."

Pierre Lacroix of Desjardins Capital Market said the settlement puts this case to rest but doesn't eliminate the risk that SNC-Lavalin could eventually be barred from bidding on contracts by other agencies or governments.

Quebec's anti-corruption legislation calls on the province's securities regulator, the AMF, to vet companies vying for any provincial and municipal contracts.

Lacroix said the settlement doesn't handicap SNC because it represents a small part of its revenues.

"It's obviously not good news to be excluded from bidding for 10 years but the good news there is that it didn't cost anything," he said in an interview.

The RCMP raided a SNC-Lavalin office in Oakville, Ont., in September 2011 at the request of the World Bank, which was investigating a bridge contract that was never awarded in the South Asian country.

The accusations of bribery prompted the World Bank to suspend a US$1.2-billion loan and temporarily barred the SNC-Lavalin subsidiary from bidding on other contracts in the country.

A Bangladesh newspaper has reported that the country's anti-corruption commission was investigating allegations that SNC-Lavalin Inc. offered "huge bribes" to at least six influential Bangladeshi officials, including two former government ministers, to obtain the lucrative bridge contract.

Allegations of impropriety have been levelled against the engineering giant's role in projects in Algeria, Libya and Montreal.

Quinton said the company said SNC-Lavalin said it continues to take steps to ensure rigorous compliance and control procedures are in place.

"We believe that the measures we have in place and the compliance environment we are building will make us one of the strongest companies in Canada in terms of ethics and governance," she added.

SNC-Lavalin CEO Robert Card said the company's decision to settle "signals our determination as we go forward to set standards for ethics in business conduct and for good governance that are beyond reproach."

The World Bank said the case against SNC-Lavalin is "testimony to collective action against global corruption."

"Going forward, I hope that SNC-Lavalin’s commitment under this agreement represents meaningful action in deterring the risks of fraud and corruption to development projects," stated Leonard McCarthy, World Bank integrity vice-president.