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Bridging the Two Worlds

In: Business and Management

Submitted By baishuyi
Words 1289
Pages 6
Improbable Plot Casts Unflattering Light on SNC-Lavalin
In October of 2012, one of Canada’s largest engineering companies, which was also one of the world’s five largest, hired a new CEO in what looked like the next chapter of an ongoing attempt to put a series of revelations about unethical and potentially illegal dealings around the world behind them. While the company had fired some key people who were connected with the scandals, there were those who publicly mused that the reported unethical and illegal dealings weren’t just the work of a rogue international VP, Riadh Ben Aissa, but that Mr. Ben Aissa’s way of doing business was well-understood within SNC. While Mr. Ban Aissa was detained in jail in Switzerland on suspicion of paying bribes in order to get contracts in North Africa, including Libya, the new CEO, Robert Card, stated that sorting out the payments scandal would be the job of the company’s Board of Directors and his job would be to reassure investors by growing the business. At that time, investor concerns had caused the stock price to fall to $35 from $60 18 months earlier. Over the past three years the company had reported strong financial results. In 2010, SNC-Lavalin’s revenues had been $6.0 billion and profit reached a record $477 million. In 2011, revenues had grown to $7.2 billion but profit declined to $379 million, partly as a result of the pullout from Libya, but still the second highest in company history. In 2012, the revenues were again trending up with an expected total of over $8 billion and profit of around $300 million. The creation of a Canadian champion SNC-Lavalin was a 101-year old Montrealbased company with offices in 36 countries and contracts with about 100 countries. With 34,000 employees worldwide, the company was involved in designing, building and operating power facilities, irrigation systems, upgrading mines, providing building maintenance and constructing sulphuric acid plants. SNC-Lavalin had been formed by a

merger of two Montreal-based engineering firms in 1991. SNC was established by Arthur Surveyer in 1911 while Lavalin’s precursor company was crated by two engineers in 1936. Bernard Lamarre was named President and CEO in 1962, and still led Lavalin when the merger happened. During the late 1980s it was Mr. Lamarre’s projects that a young Riadh Ben Aissa worked on—and the two of them became know as the “firemen” for their abilities to handle complicated situations successfully. Stories of illegal dealings arise It was a strange start to what became an even stranger story and an embarrassing episode for the major Canadian company. In November 2011, Cynthia Vanier, a Canadian woman from mount Forest, Ontario, was included in a group of people arrested in Mexico and later jailed for 18months, for allegedly trying to smuggle Saadi Gaddafi, son of Muammar Gaddafi, the President of Libya, and his family into Mexico on false passports. Authorities claimed that part of the plot included the purchase of a condo and house for the Gaddafi family by Ms. Vanier, a contractor for SNC-Lavalin. Ms. Vanier denied the charges saying that the condo was for her and her husband. She said she had been hired by the company to report on the security situation in Libya where SNCLavalin had significant investments. Saadi Gaddafi also had connections to SNC-Lavalin and to Canada. He was hosted by the company when he traveled to Canada for English classes, and he also bought a condo in Toronto. SNC-Lavalin initially denied they had hired Ms. Vanier, but later admitted they had asked her to assess whether company employees, who had been evacuated during the civil war in Libya, could return to their jobs in the country. Matters only got worse for the company when it came to light that $56 million dollars were missing and that mystery payments were made to an unnamed agent of the company.

At that time, the CEO, Pierre Duhaime, abruptly resigned and the Board of Directors called in the police to investigate. The Company Chairman, Gwyn Morgan, stated that the missing funds weren’t related to the earlier firing of senior executive, Riadh Ben Aissa, who had been the head of the company’s operations in Libya. Mr. Ben Aissa had been very successful at winning large contracts there apparently due to his relationship with Saadi Gaddafi. In 2010, the company earned $418 million for its projects in Libya, which was approximately seven percent of the overall revenue for the year. In 2011, the Libyan revenue dropped to $86.2 million when SNCLavalin pulled out of Libya due to the civil was that broke out in the country. Following its own investigation, the board explained that the missing funds were paid to commercial agents who were hired to help the company get two major construction contracts, although they also admitted that the proper procedures weren’t followed in those cases. Many international companies hired local agents to help them get contracts in foreign countries. In some instances, the agents paid bribes in order to help the company win a contract. Canadian companies did business in places where bribes were demanded and where some competitors paid them. Canada had taken a stand against Canadian companies paying bribes overseas, but was criticized for not aggressively prosecuting cases. Although SNC-Lavalin claimed that it had policies in place to prevent paying bribes, it wasn’t clear whether the policies were taken seriously inside the company. Even given the problems the company was having finding the missing money, a spokesperson for one of SNC’s largest shareholders, Jarislowsky Fraser Ltd, with about 14 percent of the stock, publicly complimented the company for doing a thorough investigation of the missing funds. In addition to the company’s attempts to get to the bottom of the missing money, the RCMP began its own investigation searching for documents related to the $56 million in improper payments, at the company’s

headquarters and also in other countries as a result of allegations that the company was paying bribes to win contracts. The company said it was cooperating with all the investigations. The future SNC-Lavalin’s new CEO, Robert Card, was committed to getting the company refocused on its engineering businesses and proving to the world that it was a company that could be counted on.

Discussion Questions: 1. What is the communication problem(s) SNC-Lavalin is facing? What are the causes and symptoms of this problem? 2. Who are the key stakeholder groups and what are they going to be concerned about? 3. Discuss how SNC-Lavalin could use all the steps in the communication model to address the concerns of the stakeholders?

Sources
Clark, C. “SNC-Lavalin’s murky affair shows need to tighten bribery law.” The Globe and Mail, March 29, 2012, pg. A17 Cousineau, S. “As scandal simmers at SNC, a new CEO looks to the future.” The Globe and Mail Report on Business, October 2, 2012, pg.1 Reguly, E. McArthur, G., Smith, G. Waldie, P. “The combustible fortunes of SNC-Lavalin’s man in the Middle East.” The Globe and Mail, April 21, 2012, pg. A4 Reguly, E. “New allegations arise in SNC-Lavalin probe.” The Globe and Mail, April 23, 2012, pg. A3. SNC-Lavalin Annual Reports as retrieved from http://www.snclavalin.com on January 23, 2014 Waldie, P., Silcoff, S. “Mystery fund put CEO out, police in.” The Globe and Mail, March 27, 2012, pg. 1 Waldie, P. “SNC’s Libyan mystery deepens: It left $23-million behind.” The Globe and Mail, Report on Business, March 28, 2012, pg. 1 Waldie, P., Peritz, I. Smith, G. “RCMP makes second search of SNC-Lavalin.” The Globe and Mail, April 14, 2012, pg. A4

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