MONTREAL — A Quebec judge has ruled there is enough evidence to send SNC-Lavalin Group Inc. to trial on charges of fraud and corruption, surprising few and prompting a further tumble in the beleaguered firm's share price.
"Given the threshold to be met by the prosecution at the stage of the preliminary inquiry, this outcome was expected," said SNC-Lavalin chief executive Neil Bruce in a statement.
The company has previously pleaded not guilty and Bruce said that "we will vigorously defend ourselves to get the right outcome and be acquitted."
The Montreal-based engineering and construction giant is accused of paying $47.7 million in bribes to public officials in Libya between 2001 and 2011. The company, its construction division and a subsidiary also face one charge each of fraud and corruption for allegedly defrauding various Libyan organizations of $129.8 million.
Judge Claude Leblond's decision, which is subject to a publication ban, is the latest step in criminal proceedings that began last fall after SNC-Lavalin failed to secure a deferred prosecution agreement, a kind of plea deal that would have seen the firm agree to pay a fine rather than face prosecution.
Over the past four months, SNC-Lavalin has been at the centre of a political controversy following accusations from former attorney general Jody Wilson-Raybould that top government officials pressured her to overrule federal prosecutors, who had opted not to negotiate a deferred prosecution agreement with the company.
"The director of public prosecution has made a decision in that regard," said prosecutor Richard Roy, asked by reporters whether SNC-Lavalin could still secure an agreement and sidestep a trial.
Despite the high profile afforded to the case, "SNC-Lavalin will have a fair trial," he added.
Prime Minister Justin Trudeau has argued that a criminal trial could trigger the company's exit to the United States and the loss of thousands of jobs, a sentiment that was supported by an internal SNC-Lavalin document obtained by The Canadian Press.
"We respect the independence of our judiciary and we’re not going to comment on an ongoing court case, but as I’ve said many times, we’re always going to fight for Canadian jobs in ways that uphold the rules," Trudeau told reporters in Ottawa Wednesday.
SNC-Lavalin warned federal prosecutors last fall about a possible plan to split the company in two, move its offices to the U.S. and chop its Canadian workforce to 3,500 from 8,700 before eventually shuttering its domestic operations if it didn’t get a deal to avoid criminal prosecution.
Experts viewed the ruling as expected, though that didn't stop SNC shares from falling more than three per cent Wednesday to close at $24.17, a 14-year low capping off a month that opened with disappointing earnings results. The company's market valuation has dropped by $1.59 billion, or 27 per cent, over the past 30 days to $4.25 billion. Shares are trading at roughly half their October prices.
A conviction could lead to a ban on federal bidding for up to 10 years. It could also prompt a ban on bidding for projects backed by the World Bank, "which is not a big percentage of what they do," said Karl Moore, an associate professor at McGill University's business school.
He said a potential conviction would allow competitors to "make hay" of the company's situation. "They would make sure that their potential clients and current clients around the world are aware of it, and go, 'Even their own government doesn’t trust them,'" Moore said, echoing concerns from the CEO.
"If the company is convicted, you can’t invoke the defence that this was a bunch of rogue employees," added Ian Lee, an associate professor at Carleton University’s business school.
Nearly one-third of SNC-Lavalin’s $9.3 billion in revenues in 2017 came from Canada, down from roughly 60 per cent of revenue in 2014. Analysts estimate that up to one-half of home-turf revenues stem from federal contracts.
Attorney general David Lametti, who declined to comment, could technically extend an offer for a deferred prosecution agreement up until a guilty finding is handed down.
"In the meantime, SNC-Lavalin continues to remain unrestricted in bidding and winning Canadian government funded contracts," said analyst Derek Spronck of RBC Dominion Securities in a note to investors.
In a wide-ranging interview Wednesday, Wilson-Raybould said SNC-Lavalin's trial "will proceed in the way that it's supposed to proceed."
"I'm very comfortable and confident with the approach that I took as the attorney general with respect to SNC and with respect to my role generally throughout the three and a bit years that I was in that position," said the former attorney general.
The company is due back in court in Montreal on June 7 to choose a trial by jury or by judge alone. Prior to that, it can opt to apply within 30 days to the Superior Court of Quebec to have Wednesday's lower court decision quashed.
"We are evaluating whether errors at law could justify seeking a judicial review of the decision," the company said in an email.
Companies in this story: (TSX:SNC)
- With files from Kristy Kirkup
Christopher Reynolds, The Canadian Press