SNC-Lavalin to keep police posted on internal inquiry

Montreal-based engineering giant SNC-Lavalin plans to inform police and other authorities about the results of an internal investigation that failed to determine the use of $56 million US in payments that resulted in the resignation of its CEO.

Pierre Duhaime resigned after a probe revealed that he signed off on payments to undisclosed agents, breaching the company's code of ethics.

"The company is in the process of contacting and will be passing along the information that we have with regards to the payments, the inconclusive results of our investigation to the relevant authorities," board chairman Gwyn Morgan said in a conference call Monday.

Thefirm saidDuhaime authorized the paymentsdespite the objections of the company's chief financial officer.

Duhaime's resignation comes amid allegations he allowed payments to "agents" in Libya and Tunisia.

Based on the results of the investigation, Morgan said, the board doesn't believe the money was used for bribes or wound up in Libya.

However, heacknowledged the companywasn't "able to really determine the use of those payments."

"We did our best to find out everything we could about the course of those payments and haven't been able to do so. At this point there is no further action we can take."

Company unwilling to say where payments went

The company was unwilling Monday to talk about payments made toagents on two large projects, or rule out if they involved construction projects in Canada.

SNC-Lavalinsimply said the payments were made to "Projects A and B"though it did say that it doesn't believe the payments in question are related to its operations in Libya.

The company said Duhaime co-operated with the investigation but couldn't provide details about the payments.

Morgan acknowledged that the need for an investigation tarnishes the reputation of the company and perhaps the construction industry.

But he urged people to put thematter in perspective given the overall size of the company, whose revenues exceeded $7 billion US last year.

"We have operated 100 years and we haven't had this kind of problem and we've retained lots of agents and done thousands and thousands of projects around the world, so I think we have to put this into perspective."

Maxim Sytchev of Alta Corp Capital, said Duhaime's departure shows that the board acted decisively to deal with anyissues plaguing the company.

Departure speaks volumes about board

"It's a bit of a surprise to see that it's the top guy leaving, but that really speaks volumes to how the board wanted to position itself in the market and that's the right signal that they're sending out right now," he said in an interview.

Duhaime helped to build SNC's mining business during his 23 years with the company.

"It's always a big blow when you have a very senior executive leavingbut at the same time, SNC has 29,000 employees and a lot of depth on the board and within the company, so it's a blow, but nobody's irreplaceable," saidSytchev.

The resignation announcement comesafter a difficult financial quarter for the company as net profits fell 52 per cent to $76 million.

SNC-Lavalin board member Ian Bourne will assume the function of vice-chairman and interim CEOofthe company until a new chief executive is hired. He has been on the company's board since 2009.

After shares fellfour per cent at the open of Monday trading, they closedwith a gain of more thanfive per cent at $41.31 on the Toronto Stock Exchange. However,the stock is still downmore than25 per cent over the past year and nearly15 per cent lower since allegations about the payments were first made in February.

SNC-Lavalin launched an internal investigation into the payments that month, saying at the time that some payments had not been properly accounted for. At the time, the investigation related to about $33 million in improperly accounted funds. Now, SNC-Lavalin says the investigation has expanded to include payments of $56 million.

The review concluded that SNC-Lavalin could not properly account for the funds, or specifically how much went to which projects. A former executive vice-president, Riadh Ben Assa, who headed the companys Libyan division, directed the payments.

Ben Assa left the company in February for undisclosed reasons.

On Monday,Ben Assa's legal counsel declined to comment on Duhaime'sdeparture.

SNC-Lavalin says that despite not knowing where the money was spent, it is confident it was not related to its Libyan operations.

Investigating ties to Gadhafi

SNC-Lavalin has also beeninvestigating tiesbetween senior executives and the regime of former Libyan leader Moammar Gadhafi.

On that front, the company's troubles began when its name surfaced in connection with a Canadian consultant, Cynthia Vanier, who wasarrested in Mexicoon suspicion she had tried to smuggle members of the late Libyan dictator's family into Mexico.

A CBC investigation revealed that Vanier had consulted for SNC-Lavalin on the Libyan situation and that the company's financial controller, Stphane Roy, was invited to Mexico by Vanier to explore possible work for SNC on water-treatment projects. While there, Roy met with one of Vanier's co-accused in thealleged Gadhafi plotand was with her at the time of her arrest.

CBC News has alsolearned the RCMP is investigating former SNC-Lavalin executives in the Vanier case.

Two officers from the RCMP's commercial crimes office travelled to Mexico last Thursday to question Vanier. Sources tell CBC news that officers questioned Vanier until 4 a.m.Friday, asking questions about her dealings with SNC-Lavalin. In particular, they wanted to know her connections to a couple offormer vice-presidents with the company.

SNC-Lavalin says it has no obligation to Vanier because she was hired without the company's knowledge and by an employee no longer with the company.

No wrongdoing has been proven in connection with SNC-Lavalin's business in Libya, and no executives or employees of the company have been charged with any crimes.

SNC-Lavalin is Canada's largest engineering firm and has almost a $10-billion backlog in contracts on its books.

Send tips toDave SeglinsandJohn Nicol.