Are you looking for a stock?

Try one of these

Related Videos

SNC chief resigns after review

Tags: SNC-Lavalin

SNC-Lavalin Group Inc. (SNC-T) has announced the departure of chief executive officer Pierre Duhaime amid allegations he allowed a series of unauthorized payments totalling $56 million US to be made by a former vice president.

SNC chairman Gwyn Morgan also said during a call with analysts that the company is turning over information to the RCMP related to the payments and the company's work in Libya.

The company's review outlined a series of findings from an internal review headed by the company's board of directors.

The review concludes that the company cannot properly account for $56 million in payments, some of which went to "agents" working on various projects. The payments were directed by former executive vice president Riadh Ben Aissa, who headed the company's operations in Libya and elsewhere. SNC dismissed Ben Aissa in February although he has insisted he resigned.

The company said, however, it did not believe the payments in question were related to its Libyan operations.

"The company intends to separately report these matters to the appropriate authorities and to co-operate fully with such authorities with respect to these or any other matters," it said.

"In the absence of direct and conclusive evidence, the use and purpose of the payments or nature of the services rendered or actions taken under the agreements cannot be determined with certainty," SNC added in a statement.

"However, the absence of conclusive findings does not exclude the possibility that, if additional facts that were adverse to the company became known, sanctions could be brought against it in connection with possible violations of law or contracts."

According to the report, Duhaime - who became CEO in 2009 and has been with the company more than 20 years - authorized some payments over the objections of the company's chief financial officer and chairman.

"The matter was brought to the CEO, who authorized or permitted [Ben Aissa] to make the payments through his division," the company said.

"While the CEO thought he had the authority to do so, he should have confirmed his authority but did not. The CEO's authorization of these payments did not comply with the agents policy and therefore was in breach of the [company's ethics] code."

The company added that Ben Aissa has not co-operated with the review. Another former executive, Stephane Roy, who was also dismissed has not met with the board committee overseeing the review.

SNC said Ian Bourne, a director, will serve as interim CEO while a search begins.

"The Board has accepted [Duhaime's] decision to step down, and we wish him well in the future," Morgan said in a statement.

The company also reported that its profit in the fourth quarter fell to $76 million Cdn from $158.7 million in the same quarter a year earlier.

The company said the review started after it received information about two agency agreements in January as part of an accounting review. Payments under those agreements totalled $33.5 million US and had been made in the fourth quarter of 2011, the company said Monday.

The reviewed expanded in February after the committee learned about $22.5 million in payments under separate arrangements one dating back to 2009.

None of the payments had been properly authorized, the company said, and they did not relate to the projects.

SNC said the committee's review was hampered by a number of factors beyond Ben Aissa's lack of cooperation.

It said some of the third parties identified by its investigators also refused to cooperate and some former employees, unnamed, used non-company email addresses with passwords that the committee couldn't access.

While Ben Aissa directed the agency payments, the company said the committee "has found no direct and conclusive evidence establishing the nature of the services or actions undertaken by, or the true identity of, any presumed agent."

When Ben Aissa tried to get approval for the $33.5 million in agency payments, SNC's chief financial officer and company chairman refused. However, Duhaime signed off on the payments and allowed Ben Aissa to make them through his division.

The payments were supposed to help secure contracts but the board committee said it "found no direct and conclusive evidence establishing the exact use, purpose or beneficiaries of payments made under the [agreements]".

The identities of the agencies were also never disclosed, the company said in its report.

SNC also said it had received an invoice for $8.25 million US in 2011 from an agent related to a project, but it refused payment.

On March 21, 2012, SNC said lawyers for the company that sent the invoice demanded payment. SNC has said it cannot find any proper documentation for the invoice or how it related to the project.

"The independent review has found no direct and conclusive evidence establishing the nature of the services or actions undertaken by, or the true identity of, the presumed agent. From the business intelligence gathered, the named counterparty appears to be without substance, and the true principal involved in the transaction does not appear to be an individual named on the public registers relating to the counterparty."

Some of the payments appear to be related to a project in Tunisia. According to SNC, Ben Aissa hired an agent in 2009 to help secure work for an undisclosed project. The agent was to be paid $30 million under the agreement, the committee said. SNC did pay out $22.5 million in 2010 and 2011 through a subsidiary in Tunisia, the report said.

The committee said the payments were improperly approved and that it could not establish the true identity of the agent or what work was performed.

The company the payments were not detected until the review began in February 2012.

The report also indicated that SNC's chief financial officer, Gilles Laramée, knew about some of the arrangements in 2010 and 2011 and objected to them.

The report said Ben Aissa told Mr. Laramée during one meeting in 2010 that an agent had been hired to secure work on a project and that the agent's fee would be charged to other projects.

"The CFO objected to this at the meeting," the company said Tuesday. It's not clear why the payments were made or if Laramée told anyone else about the payments.

The two had another meeting in late 2011 about the hiring of another agent to secure work on a different project. "The CFO objected to any involvement," the report said.

The company also alleged that Duhaime knew the payments to the agents were not properly disclosed internally or to company auditors and he "permitted this course of action until 2012, which did not comply with the [company's code of ethics and conduct]"

Duhaime also knew that Ben Aissa had been hiring agents "in unusual circumstances" and that the agent fees were not being charged to the specific projects involved, the company said. Duhaime didn't see the agreements or accounting entries, "but should have known that contractual documents would refer to projects other than projects A and B and that incorrect entries would be made, which did not comply with the code," the company said.

On a conference call with analysts, Morgan said the board is confident that it has reviewed all of the agency agreements at issue.

He also said he was unaware of any criminal probe over the payments and he reiterated that the investigation did not involve Libya.

However, he said the company is learning more about SNC's activities in Libya through media reports as the company's main player in that country is no longer with SNC.

The company said it has no plans to back away from Africa and hopes to find new opportunities in Libya. Morgan also said the company has been unable to trace where money from the payments ended up. That makes recouping the money difficult he added.

Morgan added that the use of agents is common among engineering firms around the world. He said agents are often used as consultants and to help win contracts, and they must adhere to all laws and company policies. He said in this case that system broke down.

Morgan said Duhaime cooperated fully with the investigation and praised the former CEO for his 23 years of service with SNC.

He said Duhaime committed some "errors" and that he should have asked the board about the payments before authorizing them. He would not say if the company will be paying him any severance.

Morgan added that the company has not been able to determine where the payments ended up, but the board committee is confident none of the money went into Libya. CTV Two CTV News CTV News Channel BNN - Business News Network CP24