THE BLOG

Does SNC-Lavalin Deserve a Clean Bill of Health?

02/04/2014 04:29 EST | Updated 04/06/2014 05:59 EDT

SNC-Lavalin, the graft-tainted engineering giant, has cleaned up its act and tackled its corrupt business practices, according to a 2013 internal review done by the Canadian Commercial Corporation (CCC), a Crown corporation.

The "privileged and confidential" review, released to Probe International under the Access to Information Act, was part of CCC's due diligence to determine whether to award a multimillion-dollar contract to SNC-Lavalin to build a hospital in Trinidad and Tobago (T&T).

Yet CCC's review is neither thorough nor independent, leaving a cloud over SNC-Lavalin.

In 2013, SNC-Lavalin completed the design phase of the $163-million hospital project and was hoping to land a contract to build and equip it. But law-makers in T&T were nervous about dealing with SNC-Lavalin, which faced a growing list of corruption charges in Canada and elsewhere, and had been blacklisted for 10 years from World Bank contracts for "a conspiracy to pay bribes" on Bank projects.

Enter CCC. To enable the deal to proceed, CCC decided to review SNC-Lavalin's involvement "including its revamped compliance policies, procedures and practices. A positive conclusion to this review was seen as a prerequisite for CCC's ongoing support to SNC-Lavalin as the Canadian supplier of the project." The review would determine whether Canada's largest engineering firm had used unethical business practices on the project so far, and if its new internal controls would stop them from happening in future. CCC's internal review team talked to senior SNC-Lavalin officials and key federal government organizations, and reviewed best practices for ethical business standards with the help of Bennett Jones, a law firm.

Its conclusion? There was "no evidence of any unethical business practices on the part of SNC-Lavalin in the development portion of this project," said CCC's review team. It evinced "a high degree of confidence" that SNC-Lavalin's new internal controls and "genuine shift in culture" would ensure that "the Penal Hospital construction will be well managed and delivered with respect to ethical business practices."

Though the report is heavily redacted, it appears that an independent audit was never done, and that CCC relied on assurances from SNC-Lavalin that "to the best of [its] knowledge, no officials involved in the project has been accused or admitted to engaging in corrupt activities in respect of other SNC-Lavalin projects."

The review also cleared up a controversy regarding Philip Buxo, a former SNC-Lavalin contract employee and now T&T's High Commissioner to Canada. SNC-Lavalin confirmed that it had made no additional payments to him and he left the company a full year before negotiations for the hospital began.

Lawmakers in Trinidad and Tobago, in meetings with the Canadian High Commissioner and a delegation from CCC, were told verbally about the results of the due diligence review. They remained unconvinced and subsequently pulled out of the planned arrangement. Politicians in Trinidad and Tobago had publicly questioned the negative impact to the country's reputation if it did business with the graft-tainted company.

Ironically, as part of its due diligence exercise, CCC also investigated the business environment in Trinidad and Tobago, and noted that T&T ranks among those countries with "a serious corruption problem." It has a Transparency International Corruption Perceptions Index "score of 39 (along with Serbia and China)."

SNC-Lavalin, like corporations everywhere, is embracing corporate social responsibility codes to demonstrate its virtue, and elaborate compliance procedures to convince customers that their employees won't be able to abuse contracts in future. But the lost hospital contract in T&T suggests that may not be enough to restore confidence in a corporation's business practices.

Public financiers such as CCC don't help the cause of rebuilding corporate reputations either when their due diligence reviews lack rigour and independence.

The real proof of a country's corporate anti-corruption bona fides remains clear laws and rigorous enforcement to punish bribery of foreign officials.

Patricia Adams is executive director of Probe International. Brady Yauch is executive director of Consumer Policy Institute.