Faster than a Hammer Squad

Against a backdrop of massive risks and severe
criticism of the $7.8 billion Muskrat Falls Project, the NL Government has
ignored it all and is pushing full steam ahead. This is despite the fact that a
key player in this development, SNC Lavalin, is under a massive cloud of
suspicion with allegations that several of its senior executives have engaged
in some very dodgy business dealings, misappropriating millions of dollars to
influence big contract awards.

You may well ask: Why should this make
any difference to the NL Government when nothing else seems to slow their
gamble of NL’s future?

SNC Lavalin may book  ±$600 revenue from the Muskrat Falls Project for
engineering, procurement and construction management services (EPCM). EPCM
companies generally take no risk on cost overruns or schedule, but have an
enormous impact on the outcome and success of a project.  No doubt, this is the case with SNC Lavalin
on the Muskrat Falls Project.

Given this situation, trust and
are absolutely vital.

So, is SNC Lavalin a company that we
should trust on the Muskrat Falls Project? Well, let’s look at some of the
recent developments.

·       In March of 2012, SNC Lavalin’s long-time
CEO, Pierre Duhaime, was replaced
after an
independent review conducted by the company discovered he signed off on
$56-million worth of payments to undisclosed agents, breaching the company’s
code of ethics.
His departure from the
company was
referred to as a retirement and was given a 5
million severance. So, instead of just booting him out the door, this company
chose to give him a handsome reward.

 ·       On November 28, 2012, Mr. Duhaime was charged by the ‘Hammer
Squad’, Quebec’s anti-   
       corruption task force with fraud, conspiracy to commit
fraud and using forged documents in       
       connection with the engineering firm’s
contract to design, build and maintain the McGill   
       University Health Centre’s
new $1.3-billion super-hospital. Essentially, Duhaime is charged with
contracts using kickbacks, although yet to be proven in Court.

·       On December 18, 2012 the Globe and Mail reported that,
“Bangladeshi authorities are accusing  
       a senior executive at SNC-Lavalin Group
Inc. (former senior vice-president, Riadh Ben Aissa) of
       conspiring to bribe
government officials, formal allegations that come days after that executive
       left the company”.  The Globe and Mail
noted that “at least six officials have
left the company
       under a cloud…”. How much money is involved? In the case
of Mr. Ben Aissa, who now sits in a
       Swiss gaol, “…Swiss authorities are now
chasing $139-million in suspected illicit payments”,
       according to the

·       Mr. Ben Aissa has also been charged with the same
three fraud charges as Mr. Duhaime related to the McGill University Health
Centre superhospital.

April 2012, Veritas Investment Research, based in Toronto, published a research
report titled Skeletons in the Closet
that was extremely critical of SNC Lavalin. Veritas said that based on SNC
Lavalin’s own public statements, “as many as eight senior executives
appear to have been involved in, or had some knowledge of, certain of the
improper acts.”

In September 2012, an Ontario
judge certified a $1-billion class-action lawsuit against SNC Lavalin on behalf
of investors who saw the value of their investment in the company plummet after
allegations arose regarding payments made by SNC-Lavalin to members,
associates, and agents of the Gadhafi regime to secure contracts for
infrastructure projects in Libya.
This lawsuit came on the heels of another,
a $250-million claim filed in March of 2012 on behalf of investors in Quebec
against the company and some of its former officers and directors. The
nub of the claims are that SNC Lavalin violated securities law by
misrepresenting that it had adequate controls and procedures to ensure accurate
disclosure and financial reporting. Neither of these have claims have yet been
proven in Court.

The Montreal
Gazette noted the full-page newspaper advertisements that SNC had placed last
Fall, announcing that it was bolstering compliance and ethics measures, and is
committed to root out any breaches of corporate policy by its employees. The
Paper noted that the Company is strengthening previously announced enforcement
of business procedures, and is hiring an outside consultant to run a 24
hour-a-day ethics and compliance hotline
. OUCH!  A 24 hour-a-day ethics and compliance hotline
for a single public company.   And, we
think we have problems with Dunderdale and Bill 29!


So what are we to make of all of this? Sure,
nothing has been proven in Court yet. Does that mean we simply ignore it just
like everything else that should be concerning about the Muskrat Falls Project
has been ignored by the Provincial Government?

Given the impact that the Muskrat Falls
Project will have on the Province and its people for decades to come, the fact
that this Project is the largest on SNC Lavalin’s books, and the fact that as
the EPCM for the Project, SNC Lavalin will have huge influence on its success,
isn’t the little matter of trust and integrity something that should be
front and centre?

It is not that rare for an executive or
two of a company to engage in illegality; it is rare, though, for people as
senior as a CEO and a Vice-President, among others, of a company as established
and respected as SNC Lavalin, a group fond of boasting a 100 year Corporate
history, to find so many senior people either charged or under a cloud, all at
the same time.

Let’s make one thing clear. The
integrity of SNC Lavalin has been called into question; not by Newfoundlanders
and Labradorians, but by the company’s own former senior officials.  Indeed, based on the company’s need for an
outside consultant to run a 24 hour-a-day ethics and compliance hotline, you
might be forgiven for concluding that its present senior officials continue to
question the company’s integrity.

The fact is, as the EPCM for the Muskrat
Falls Project, SNC Lavalin will have to be relied upon heavily by Nalcor and the
NL Government. From a technical standpoint, SNC Lavalin is the company,
ostensibly at least, bringing the expertise to Muskrat Falls; Nalcor certainly does
not possess the kind of experience or expertise a Project of this size and
complexity demands. Yet, despite all of the allegations swirling around this
company, you have to ask why nobody from Nalcor or the NL Government has even
raised a question about the trust and integrity of SNC Lavalin.

I suppose it should be noted that back
on May 3 of last year, Natural Resources Minister Jerome Kennedy, did offer a
view on the company. However, it is a view that does nothing to shine as much
as a flicker of resplendent glamor upon the diming lights of a corporate
vigil.  Opposition Leader Dwight Ball queried
the Minister on whether he had a Performance Bond in place on SNC Lavalin.  In a quote from Hansard, the Minister replied:
Thank you, Mr. Speaker.  I think the
member opposite misinterprets my confidence. My confidence is not in SNC Lavalin.
I know nothing more than what I read in the papers, what I am told. My
confidence is in Ed Martin….”

How very telling! Our luminous Minister has
no confidence in the company who will have more impact on the success of the
Project than anyone else; but has complete confidence in the CEO of Nalcor, a
man who has never built a hydro dam, even a wee one. Now that should keep the
home lights burning!

All joking aside, given the amount of
money at stake, a prudent Provincial Government would have put a lot of
questions to SNC Lavalin.  And, they
would have informed the Province what these questions were and the standard of
behaviour expected of the company.

Yes, we need to ask some questions of
SNC Lavalin, but we have many for our own Provincial Government as well. Likely,
they have been asked before.  So, today,
we’ll make them more pointed.

Why all the haste to sanction the Muskrat
Falls Project before Christmas, given that the Federal Loan Guarantee and the
Emera Sanction Agreement are so undefined and unfinished that you could drive a
Mack truck through them?

What safeguards has the Premier put in
place to protect us against corrupt practices, whether with SNC Lavalin or with
any other company doing business on the Project?

Has Nalcor considered removing all responsibility
for the Project except for engineering from SNC? If not, why?

Will the Premier permit the Province’s
Auditor General complete access to Nalcor’s accounts including those that deal
with SNC Lavalin? 

Will SNC permit the Auditor General access
to its offices in order to scrutinize every invoice the company sends to

Does the Province have full audit rights
of the SNC Lavalin contract including the procurement and contracting
activities on the Project?

These are important questions.   In the circumstance, SNC Lavalin or any
other legitimate company would expect to be asked these questions and
more.  They would be expected to deal
with them. Still, even these questions won’t get to the bottom of why the
Premier is moving Muskrat Falls forward, faster than the Feds, faster than Emera,
faster even than a Quebec  ‘Hammer Squad’.

But, one thing at a time.

Note: Uncle Gnarley will Post again on Thursday.  
Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.


Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.


This is the most important set of negotiations we have engaged in since the Atlantic Accord and Hibernia. Despite being a small jurisdiction we proved to be smart and nimble enough to negotiate good deals on both. They have stood the test of time and have resulted in billions of dollars in royalties and created an industry which represents over a quarter of our economy. Will we prove to be smart and nimble enough to do the same with the Upper Churchill?


  1. SNC-Lavalin was born in the Three Gorges Dam Mega-Boondoggle. Is it any wonder they have ended up with all this controversy surrounding them at this point in the Great Project? They are setting up around the Site C Dam right now trying to wrestle BC Hydro out of the hands of the people and into the hands of energy barons who are attempting to take over our country. Time to call a spade a spade and demand answers from this crowd. The EMERA deal needs to be reviewed and any and all deals associated with Muskrat Falls, the transmission systems, upcoming pipeline projects and water rights around ALL of this mess. Anything less will be a disservice to this place we so dearly love and every person that calls it HOME.