MONTREAL – The first day of any job is usually marked by hope and promise, but SNC-Lavalin’s new CEO couldn’t escape the company’s problematic past as a new report surfaced about millions of dollars in questionable payments made in its own backyard in Montreal.
The new CEO, American import Robert Card, and board chairman Gwyn Morgan refused to answer any questions about police investigations into SNC-Lavalin and $56 million in payments to undisclosed agents in North Africa, breaching the company’s code of ethics.
“We are hopeful these investigations will get to the bottom of any wrongdoing that may have been committed,” Morgan said in a conference call introducing Card. “(But) neither of us are in a position to respond to any questions concerning these matters.”
The payments had previously been thought to have been directed to agents in North Africa. But Montreal’s La Presse reported Monday that $22.5 million of the amount is believed to have been used to win a contract to build a $1.3-billion superhospital in Montreal.
The newspaper said sources indicated that the payments were not made in Canada, but instead were paid in U.S. dollars and passed through several countries in 2010 and 2011.
SNC-Lavalin’s headquarters have been raided by the RCMP at the request of the Swiss police. Quebec’s anti-corruption squad also exercised search warrants at the Montreal University Health Centre and Infrastructure Quebec, the agency that manages public-private partnerships such as the hospital.
Company spokeswoman Leslie Quinton wouldn’t confirm that the $22.5 million payments allegedly involving the hospital is part of the same payments highlighted in its March internal investigation report.
“It’s not that we don’t want to be transparent … because it’s a police investigation we really can’t say anything yet,” she said in an interview, noting the file was handed to police in March.
“They have never communicated to us any findings based on that information.”
The news report may not be the best welcome for SNC’s new chief executive, but it doesn’t really change anything for company investors, said Maxim Sytchev of AltaCorp Capital.
“It’s not an incremental amount and ultimately that’s what people should care about is — have they uncovered something in addition to the inappropriate payments and it doesn’t seem to be the case,” he said in a interview.
Sythev welcomed Card’s courtesy call with analysts and the news media on Monday but believes it will take a few months before the U.S. executive will announce any strategic changes for the company.
“For the time being it’s just nice that we have a permanent CEO in place and we can look forward.”
Industry observers have suggested Card will consider several paths ranging from a purge of company officials to a sale of its concessions business to exiting certain troubled geographies.
Card said he is keeping all options open as he studies the engineering and construction company and determines what changes to make.
“I don’t think that it’s ever appropriate to rule anything out,” he said when asked if anything’s off the table, including selling the company, its assets or moving the headquarters from Montreal.
“However I don’t view myself as a Wall Street wheeler-dealer so I’ll be doing listening, figuring out what is the best strategy is for our investors, clients and employees and moving forward with that.”
Card said the best way to regain the confidence of investors is to “deliver” results.
“We’ve got to not have downside surprises and we need upside continuity. That’s what I’ll be focusing on.”
Card said he was attracted to SNC-Lavalin because of its global footprint, depth and strong capital base and said he expects to remain with the company “for the long term.”
He has purchased a house in Montreal, begun French lessons and has acquired about $1 million in SNC-Lavalin (TSX:SNC) shares.
Card described SNC’s concessions business as a “critical part” of its strategy and said the engineering and construction company is well-positioned in the long term with its focus on energy, resources, the environment and water.
“I’m confident over the long term, we’ll have to see what happens in the short term.”
Coming from the U.S., Card is expected to increase SNC’s exposure in that huge market. While the United States is “an obvious” opportunity that needs to be considered, “there’s other ones as well,” he said.
Morgan thanked interim CEO Ian Bourne for his efforts to restore employee confidence in the 101-year-old company as it faced “unprecedented turmoil.”
The chairman described Card’s arrival as “an important day” in SNC-Lavalin’s history as he brings almost 40 years of experience with large rival CH2M Hill Companies and the public sector in the United States.
SNC-Lavalin is not immune to the slowdown of the global economy and changes will be required to reposition the company into regions and sectors of global growth, he said.
“It may take time but the board is confident that Bob, together with our team of dedicated employees, has the global perspective and the strategic insight to take us forward into the future as one of the world’s leading engineering and construction companies.”
On the Toronto Stock Exchange, SNC’s shares closed down 35 cents at C$37.60 Monday.