In 2008 and 2009, as the one of the largest-ever global financial recessions kicked into high gear, SNC-Lavalin Construction Inc. was paying for Saadi Gadhafi, son of then-Libyan dictator Muammar Gadhafi, to take lavish trips to Toronto where it covered not only the cost of his hotel, but for private parties, training and security services.
The subsidiary of Montreal-based SNC-Lavalin Group Inc., one of Canada’s largest engineering and construction firms, which is currently involved in building light rail in Toronto, Ottawa and Montreal, even paid to decorate a condo in downtown Toronto owned by the younger Gadhafi.
In total, SNC Lavalin Construction Inc. sent around $47 million to Gadhafi between 2001 and 2011, and prosecutors say the money essentially came from Libyan government coffers because when SNC won contracts for public projects, for example, to make improvements to the Benghazi airport, it showered part of the money on Gadhafi. In turn, he used his influence to ensure the company kept winning when it bid on such contracts.
Those details come from a statement of facts entered in a Quebec court on Wednesday, where SNC-Lavalin Construction Inc. pleaded guilty to defrauding Libya through its scheme.
The document explains how in exchange for keeping Gadhafi well-greased — helping to finance his purchase of a yacht from a Monaco dealer, for example — the company secured contracts and businesses in Libya over a decade that generated more than $1.7 billion in revenue and $103.8 million in pre-tax profit.
“As the son of the Libyan dictator Muammar Gadhafi (Saadi was) capable of influencing the award of public contracts in Libya, he did influence the award of contracts in favour of SNC-Lavalin Construction Inc. in exchange for payments made to his ultimate benefit,” the statement of facts notes.
By the time the scheme ended in 2011, Libya had descended into civil war, in which the younger Gadhafi would serve as a commander of the country’s special forces, and would later face charges for his role in suppressing an uprising against his father, who was killed by a militia group in Libya later that year.
Meanwhile, according to the statement of facts filed by Crown prosecutors as part of the plea agreement with SNC-Lavalin, two former senior executives at SNC-Lavalin Construction Inc., received $73 million in illegal payments as a result of the scheme to defraud Libya.
The document details how the two executives, Sami Bebawi, president of the subsidiary from 1999 to 2006, and then his successor Ben Aissa, used a Swiss lawyer and Swiss bank accounts to funnel the money to Gadhafi and themselves.
Aissa has since pleaded guilty to fraud, corruption of public officials and other crimes in a Swiss court while a jury in Quebec on Sunday convicted Bebawi of fraud and other crimes in connection with the scheme.
SNC-Lavalin Construction Group Inc. also pleaded guilty to defrauding Libya and agreed to pay a $280 million fine.
But the consequences of the guilty plea are not as bad as some had been predicted.
(SNC) managed to avoid (being excluded from Canadian bids) by pleading guilty to defrauding Libya, not Canada.
Jennifer Quaid, law professor, University of Ottawa
In February, the company’s former chief executive Neil Bruce had suggested that a conviction could doom the company by restricting it from bidding on federal contracts in Canada, a key source of business.
But legal experts said that it managed to avoid such a situation by pleading guilty to defrauding Libya, not Canada.
“The fraud was committed against Libya, so that’s the out,” said Jennifer Quaid, a law professor at the University of Ottawa, who has watched the case. “This was not an accident, this was a very carefully crafted plea. That was the thought and that was the effect.”
Quaid said she wasn’t surprised that Crown prosecutors settled the case with SNC-Lavalin, saying that the vast majority of corporate criminal actions end in settlement rather than trial.
But she said there are downsides including that the public does not have a full view of prosecutors’ evidence against SNC-Lavalin. Instead, it must look at details in documents such as the statement of facts, the guilty plea and the transcript from the court hearing.
Much remains vague, including how prosecutors and SNC-Lavalin Group Inc. negotiated to pay a $280 million fine.
“It seems to me we could do a much better job of making this stuff accessible,” Quaid said. “Corruption is about opacity, so you don’t want to be opaque about your enforcement efforts.”
Kenneth Jull, a private defence attorney in Toronto who also teaches corporate criminal law, said prosecutors risked losing the case if they took it to trial either because a jury wouldn’t convict, or possibly on technical grounds, including the length of time that elapsed in between the alleged crimes and the trial.
But he said $280 million is one of the, if not the, largest criminal penalty paid by a corporation in Canada, where such prosecutions remain rare.
“One could say Canadians and Canadian prosecutors are still finding their way with this new impetus to enforce our anti-corruption laws…,” said Jull.
The company’s stock continued to rebound a second day, rising 6.3 per cent to close at $30.51, after at least one analyst, Maxim Sytchev, of National Bank of Canada Financial Markets, bumped its price target from $37.50 to $42.