SNC-Lavalin sues former CEO for millions over hospital bribery scandal

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This article was published 04/03/2019 (2127 days ago), so information in it may no longer be current.

MONTREAL – SNC-Lavalin Group Inc. is suing its former CEO in connection with a bribery scandal around the construction of a $1.3-billion Montreal hospital as the beleaguered engineering and construction giant continues its effort to distance itself from its former leadership.

The Montreal-based company said in court documents that Pierre Duhaime hurt the company when he helped a public servant commit a breach of trust tied to $22.5 million in bribes that helped rig the McGill University Health Centre (MUHC) project in favour of SNC-Lavalin.

Duhaime, who led the Montreal-based company between 2009 and 2012, is serving 20 months of house arrest after pleading guilty to aiding the hospital’s former senior manager, Yanai Elbaz, in the breach of trust.

The lawsuit, filed in Quebec Superior Court on Friday, came one week after chief executive Neil Bruce spoke out about “innocent employees being used as a puck in a political hockey game.”

Bruce was referring to unrelated corruption charges linked to SNC-Lavalin’s dealings in Libya that have landed the company in the eye of a political firestorm in Ottawa. Since 2015 he has hammered the message that the organization has turned over a new leaf and no longer resembles the firm associated with the Gadhafi regime between 2001 and 2011 and the nearly-decade-old hospital bribery scheme.

Days after Bruce came on board as CEO in October 2015, the company announced an agreement with Ottawa that allows the government to monitor its actions for as long as charges against the company or former employees wend their way through the courts.

None of SNC-Lavalin’s dozen or so senior executives served on the leadership team in the period that continues to overshadow its renewal efforts.

“We’re six, seven years past the events of 2012. It’s highly likely that this is going to go on for another number of years. And frankly, we’ve had enough of all of that,” Bruce said on a conference call with investors Feb. 22.

Only recently did the last vestiges of the old guard make their exit from the board of directors, however. Former chairman Lawrence Stevenson, who had served on the board since 1998, retired on Jan. 1, 2018.

Patricia Hammick was on the board between January 2007 and May 2017, with tenures on the company’s audit committee, according to a proxy circular published last spring.

Bruce says his firm continues to suffer collateral damage following a report by the Globe and Mail that the Prime Minister’s Office allegedly put pressure on former attorney general Jody Wilson-Raybould to steer federal prosecutors toward a settlement with the company and avoid criminal a trial on the charges tied to Libya.

“This overhang continues to be there and competitors in the U.S. are pretty ruthless and they use it against us,” he said last month.

The company has filed for a judicial review of the prosecution’s refusal to negotiate a deferred prosecution agreement that would resolve corruption and fraud charges.

The embattled firm could face a legal battle on yet another front, as Quebec prosecutors work with the RCMP on the possibility of new fraud charges against the company linked to a nearly two-decade-old contract to refurbish Montreal’s Jacques Cartier Bridge, recent court documents show.

SNC-Lavalin’s recent lawsuit states that Duhaime, who stepped down as CEO in March 2012, acted “in bad faith” when he signed a retirement agreement without disclosing his “criminal wrongdoing” in relation to the hospital project.

The agreement saw the company cover Duhaime’s $1.17 million in legal costs during his trial and dole out more than $1 million as part of a larger retirement package, all money that SNC-Lavalin wants back.

“Had SNC-Lavalin known of such criminal wrongdoing, it would have terminated the defendant Duhaime for cause and would never have entered into the March 25 agreement,” the plaintiffs state.

The company is demanding Duhaime and other defendants — whose lawsuit he’s been tacked on to — repay the $22.5 million in bribes and $17.5 million in punitive damages and compensation for reputational harm.

“The embezzlement and the faults committed by defendants … resulted in plaintiffs being linked in the public eye with individuals who have been accused or convicted of criminal offences, thereby tarnishing the excellent reputation enjoyed by the plaintiffs in Quebec and throughout the world and causing plaintiffs to incur significant costs and expenses in order to restore their good names,” SNC-Lavalin and three subsidiaries say in the lawsuit.

Elbaz, a defendant in the lawsuit, pleaded guilty in December to accepting a bribe and was sentenced to 39 months in prison.

Former SNC-Lavalin executive Riadh Ben Aissa, another defendant, pleaded guilty to a charge of using forged documents last July and was sentenced to 51 months in prison.

Companies in this story: (TSX:SNC)