The ongoing SNC-Lavalin scandal has reached Canada's government with the recent resignation of Veterans Affairs Minister Jody Wilson-Raybould,
according to Global News. The engineering and construction company faces charges of attempting to bribe government officials in Libya and defrauding Libyan companies.
Last year, when Wilson-Raybould was justice minister, federal prosecutors refused SNC-Lavalin's request to avoid a criminal trial by making a financial payment under a new remediation agreement law. A
Globe and Mail report alleges that SNC-Lavalin lobbied the prime minister's office to pressure Wilson-Raybould to convince prosecutors to change their decision, but she refused.
In January, Wilson-Raybould was named Veterans Affairs minister, but she later resigned. Prime Minister Justin Trudeau has called the
Globe and Mail allegations "false."
Two previous articles on InternalAuditor.org have covered this long-running fraud case (see
"Constructing Fraud" and
"Foreign Bribery"). With no resolution in sight, events have taken an unexpected and politically charged turn.
These events underscore the need for companies and governments to establish and maintain strong legislative, regulatory, and business controls against the threat of corruption and bribery activities abroad. That said, governments also should consider whether only those found guilty of such crimes, or also their companies, should face tough penalties. A particular concern is whether those penalties would cause the business to shut down, harming innocent lives. In a country such as Canada, with a small number of very large companies employing thousands of people, that is an important balancing act.
That is partly why the Canadian federal government recently changed the Criminal Code to establish a remediation agreement regime that allows companies that face being barred from bidding on government contracts — upon which SNC-Lavalin heavily relies — to pay financial penalties instead. Whether there was political pressure applied to Department of Justice officials and their minister to agree to a deal remains unclear. However, it appears that prosecutors were not convinced that the facts of SNC-Lavalin's case merited approval of such an agreement. This may be because of the repeated and widespread nature of the alleged bribes and corruption, especially in Libya. There are a few lessons internal auditors, government officials, and regulators can learn:
- The prosecutors' decision supports an important principle — applicable to internal auditors — that there must be independence of advice and decision-making in dealing with fraud cases. Moreover, auditors need to be confident that their advice and recommendations will be taken seriously by decision-makers and not compromised.
- SNC-Lavalin needs to demonstrate accountability and publicly show it has made a major shift in its culture and business practices. On its website, the company states it "has developed and built a world-class ethics and compliance framework" and changed some board and management leaders. The company should back up those statements by cooperating fully with enforcement authorities to bring to justice individuals with significant involvement in bribery and corruption activities.
- To demonstrate a permanent, systemic change in its culture and business practices, SNC-Lavalin should plan and implement regular anti-fraud, corruption, and bribery-related audits. These audits should be part of a top-down, bottom-up approach to a balanced compliance program.
- Better yet, SNC-Lavalin should make the results of these audits publicly available, along with management's response. The audits should address the related controls, as well as their strengths and weaknesses. These include controls over funds, unauthorized use of bank accounts, high-risk procurement and payment mechanisms, inappropriate use of intermediaries and payments, and the adequacy of cost accounting and accounting records.