SNC-Lavalin is shaking up its management and board and suspending payments to a retired CEO as the engineering giant attempts to ensure that its reputation isn't permanently damaged by corruption charges levelled at several former officials.
The Montreal-based company said that while the allegations have not been proven in court, it is suspending payments to Pierre Duhaime because the criminal charges he now faces suggest there may be additional facts of which it was not aware at the time of his departure earlier this year.
"Until the facts surrounding Mr. Duhaime's situation are clarified or resolved, the payments under these arrangements will be held separately," the company said in a news release Thursday.
Duhaime received a $5-million payout after he stepped down as president and CEO last March.
He was arrested two weeks ago in connection with alleged fraud involving one of Montreal's huge new superhospitals.
The arrest warrant alleges that Duhaime and Riadh Ben Aissa, another former top executive, also committed conspiracy to commit fraud and uttered false documents in connection with a contract pertaining to the multibillion-dollar McGill University Health Centre.
SNC-Lavalin said its board was "disturbed" to learn about the charges and will continue to co-operate fully with ongoing investigations.
The company said it is "unequivocal" that no unethical behaviour or illegal acts be tolerated and that anyone found to have committed any wrongdoing should be brought to justice and held accountable for their actions.
"To the extent anyone is found to have misused or misappropriated company funds or to have abused their office while at SNC-Lavalin, we reserve our rights to assert claims against these individuals, including for the recovery of funds," it said.
New measures adopted
In full-page newspaper advertisements Thursday, SNC-Lavalin said it was bolstering compliance and ethics measures identified since a March report by outside advisers.
Among the measures is an improved complaint reporting procedure, an ethics and compliance hotline, an enhanced agents policy and review process and a requirement that suppliers and partners adhere to the same standards as its own employees.
SNC-Lavalin said it plans for the measures to be externally validated by "third parties and independent experts in compliance, anti-corruption and governance, as well as extensive benchmarking against global peers."
"We understand that these investigations bring with them outcomes that are difficult but are required in order to identify the problems and those who are responsible," said the open letter signed by chairman Gwyn Morgan and CEO Robert Card.
Meanwhile, the company announced that it has also begun a search for a new chief financial officer to replace Gilles Laramee, who is taking on responsibility for a new business unit as executive vice-president, infrastructure, concessions and investments.
Laramee will provide more active oversight to leverage the growing concessions business, which includes Highway 407 near Toronto, AltaLink, the Montreal Symphony hall and the new Montreal superhospital.
Laramee objected to $56 million in payments to agents that were approved Duhaime, some of which relate to the charges that he now faces.
The company said it has also hired a head-hunting firm to identify candidates for election at the next annual meeting who will serve as independent directors.
The number of new candidates wasn't disclosed but it said Eric Siegel and Chakib Sbiti, who were elected at the 2012 meeting, will stand for re-election.
Maxim Sytchev of Alta Corp Capital said SNC's concessions business is "a catalyst for the investment case" in the company's shares.
The analyst described SNC-Lavalin as the most compelling long-term Canadian industrial investment despite the clouds overhanging its name from police investigations and a provincial investigation into the construction industry.
He said it has a pristine balance sheet, strong backlog and is undervalued compared with global peers.
"We also believe that companies, just like people, have the ability to evolve and improve governance practices. SNC's board has been very pro-active in addressing the issues over the last nine to 12 months," he wrote in a report.
On the Toronto Stock Exchange, its shares were down 26 cents at $40.98 in morning trading Thursday.