Turning the Page? SNC Pleads Guilty to Fraud Relating to Libya Work; Former Executive Sentenced for Fraud, Corruption

On December 18, 2019 a division of SNC-Lavalin Group Inc. pleaded guilty to fraud in relation to the company’s activities in Libya, to resolve the criminal case against the  Montréal-based engineering firm. The size of the negotiated penalty – a $280-million fine and three-year probation order – is a significant departure from previous penalties for fraud in Canada. Additionally, on January 10, 2020, former SNC-Lavalin executive Sami Bebawi was sentenced to eight years in prison for fraud, corruption and proceeds of crime offences in connection with the scheme. Like the negotiated corporate penalty, this is well above previous sentences for similar offences.

The question is whether both of these outcomes, determined independently but in respect of related matters, reflect a move toward tougher white collar enforcement in Canada, or are unique in light of the uncharacteristically high public profiles given to the cases over the past months and years.

SNC-Lavalin Settlement and Conviction

The allegations against SNC-Lavalin pertained to activities in Libya from 2001-2011. The impugned division, SNC-Lavalin Construction, is alleged to have paid $127 million to two shell companies, according to an agreed statement. Approximately $47.7 million of this money was then used to reward Saadi Gadhafi, son of the late Libyan dictator Moammar Gadhafi, for helping SNC-Lavalin secure lucrative construction contracts in Libya.

The RCMP charged SNC-Lavalin with one count of bribing a foreign public official under section 3(1)(b) of the Corruption of Foreign Public Officials Act and one count of fraud under s. 380(1) of the Criminal Code.

The charges stemmed from an internal review of SNC-Lavalin in 2012. This review was initiated in February 2012 to look into $35 million in suspicious expenses in Libya. On March 26, 2012, the company announced the results of the investigation which found the following:

  • The former Executive Vice-President of Construction, Riadh Ben Aissa, had hired agents without complying with SNC-Lavalin’s policies on authorized signatories and limits on fees; and,
  • These agents were paid $56 million USD.[1]

Justice Claude Leblond accepted a joint recommendation that will see SNC-Lavalin Construction pay a $280 million fine over five years and be subject to a three year probation period. In return, five other fraud and corruption charges filed against SNC-Lavalin, SNC-Lavalin Construction, and the company’s international marketing arm, SNC-Lavalin International, were all dropped.

As part of the probationary period the company will engage an independent monitor who will provide initial and annual reports as well as executive summaries which will be publicly available on the company’s website. The company is already subject to monitoring by Public Services and Procurement Canada and the World Bank.

Notably, in its press release, SNC-Lavalin stated it does not believe that the plea agreement will affect its eligibility to bid for future projects. By entering a plea agreement for fraud under the Criminal Code rather than corruption under the Corruption of Foreign Public Officials Act (CFPOA), the company potentially avoids the scope of the Government of Canada’s Integrity Regime and associated debarment. The company may still face debarment under provincial legislation or from bidding on projects backed by the World Bank or other organizations.[2] The plea agreement follows unsuccessful attempts by SNC-Lavalin to enter into a deferred prosecution agreement with the Public Prosecution Service of Canada (PPSC).

Bebawi Conviction

On December 15, 2019, former SNC-Lavalin executive Sami Bebawi was convicted by a jury on five separate counts relating to fraud, corruption of foreign officials, and laundering the proceeds of crime in relation to the company’s activities in Libya. According to the Crown's position, Mr. Bebawi was behind a “business model” that involved kickbacks and payoffs to foreign agents to secure lucrative deals for the engineering company in Libya, beginning in the late 1990s. The Crown recommended he be sentenced to nine years for fraud, 4.5 years for the corruption of foreign officials, and 45 months for laundering the proceeds of crime.

On January 10, 2020, Mr. Bebawi was sentenced to eight years and six months in prison, ending the last of the criminal charges brought against the company and its former employees. This penalty far exceeds those previously seen for such convictions. Justice Guy Cournoyer explained he was opting for a more severe penalty given a number of aggravating factors in the case, including the sophisticated nature of the fraud, the level of premeditation required, and Mr. Bebawi’s behaviour after the infractions were committed. Specifically, the jury heard evidence that Mr. Bebawi tried to offer a $10 million bribe to a witness to change his testimony and discredit the case against him. This witness, Riadh Ben Aïssa, had agreed to cooperate with the RCMP before being extradited to Canada from Switzerland.

Canadian Corruption Law: The CFPOA and US-Style “Megafines”

Both convictions represent a significant departure from sentences imposed for similar offences in the past in Canada. The negotiated monetary penalty of $280 million appears to be the largest financial penalty levied against a corporation for fraud under the Criminal Code, and is significantly larger than any fine corporate levied for similar offences under the CFPOA. Canada had levied only $19,874,000 in total fines for CFPOA convictions as of 2018, with the largest fine being $10.35 million awarded to Griffiths Energy.

 

[1] SNC-Lavalin Press Releases dated February 28, 2011 and March 26, 2012.

[2] The World Bank suspended SNC-Lavalin in 2013 from bidding on projects it finances for a decade over allegations of bribery involving a bridge contract in Bangladesh and a project in Cambodia. The World Bank debarment was announced in 2013 and runs for 10 years. The debarment is eligible to end in 2020 (after 8 years) if the company complies with all conditions of the agreement.

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Editors

Lawrence E. Ritchie

Partner, Litigation

Alexander Cobb

Partner, Litigation

Shawn Irving

Partner, Litigation

Kevin O’Brien

Partner, Litigation

Lauren Tomasich

Partner, Litigation

Malcolm Aboud

Associate, Litigation