MONTREAL, March 26, 2012 /PRNewswire/ - SNC-Lavalin Group
Inc. (TSX: SNC) announced today the results of the independent
review of the facts and circumstances surrounding certain payments
and contracts (the "Independent Review") voluntarily
initiated by the Board of Directors of the Company and announced on
February 28, 2012.
The Independent Review was carried out by external independent
counsel under the direction and oversight of the Audit Committee.
The executive summary of the results of the Independent Review and
the related findings and recommendations of the Audit Committee is
reproduced below.
The Board has adopted all of the recommendations of the Audit
Committee, and has directed management to develop a detailed plan
and timetable for their implementation. Such recommendations are
directed primarily at reinforcing standards of conduct,
strengthening and improving internal controls and processes, and
reviewing the compliance environment.
The Company intends to separately report these matters to the
appropriate authorities and to cooperate fully with such
authorities with respect to these or any other matters. Based on
the findings of the Independent Review, the Company does not
believe that these payments are related to Libya.
The Company is separately announcing today the departure of its
chief executive officer and its 2011 fourth quarter and year-end
financial results.
EXECUTIVE SUMMARY OF INDEPENDENT REVIEW,
FINDINGS AND RECOMMENDATIONS DELIVERED ON MARCH 23, 2012
BACKGROUND OF THE INDEPENDENT REVIEW
During December 2011 and
January 2012, information was
received as part of an accounting review and numerous internal
meetings, held amongst certain members of senior management, with
respect to two agency agreements documented to construction
projects to which they did not appear to relate. The Chairman of
the Board of Directors was briefed on January 19, 2012, requested additional
information, and was further briefed on February 3, 2012, at which time Stikeman Elliott
LLP was mandated as independent counsel. The investigation
commenced of payments aggregating US$33.5 million made by the Company in the
fourth quarter of 2011 under presumed agency agreements (the
"A Agreements") documented in respect of Project
[Intentionally omitted]1 ("Project 1") and
Project [Intentionally omitted] ("Project 2"), but believed
in fact to relate to Project [Intentionally omitted] ("Project
A"). Independent counsel retained investigative advisors to
provide business intelligence and related services.
In February 2012, documents were
received by the Company's Chief Financial Officer (the
"CFO"),2 and related information was detected as
part of year-end accounting processes, with respect to two other
contracts. On February 16, 2012, the
Chairman of the Board of Directors and the Chairman of the Audit
Committee were briefed and the scope of the investigation was
widened to include: (a) payments aggregating approximately
US$22.5 million made by the Company
in 2010 and 2011 under a presumed agency agreement (the "B
Agreement" and together with the A Agreements, the
"Agreements") documented in respect of Project
[Intentionally omitted] ("Project 3"), but believed in
fact to relate to Project [Intentionally omitted] ("Project
B"); and (b) a presumed collection agreement (the
"Collection Agreement") and related 2009 invoice (the
"Invoice") purporting to relate to the settlement of a
dispute relating to Project [Intentionally omitted] ("Project
4"), as to which there was no information at the time.
On January 23, 2012 and on
February 16, 2012, the Company
informed its external auditor, Deloitte & Touche LLP
("D&T"), of the subject matters of the Independent
Review, and has since regularly kept them informed as it has
progressed.
Independent counsel has reported periodically to the Audit
Committee or the outside members of the Board of Directors on the
progress of the Independent Review. Outside Board members were
invited to attend Audit Committee meetings. The Chairs of the Audit
Committee and of the Board of Directors were briefed regularly to
update them on the progress of the Independent Review, as well as
to seek instructions on matters arising therefrom.
On February 27, 2012, based upon
the analysis to date regarding the A Agreements, the Audit
Committee was informed by management that they had concluded, with
the concurrence of D&T in the context of their audit of the
2011 financial statements, that the payments thereunder would need
to be recorded as period expenses (i.e. not generating any
revenues).
On February 28, 2012, before the
opening of markets, the Company publicly announced that its 2011
net income is expected to be approximately 18% (or approximately
$80 million) below its previously
announced 2011 outlook, including because of period expenses of
approximately $35 million
relating to certain payments referred to above made in the fourth
quarter of 2011 that were documented to projects to which they did
not relate and, consequently, had to be recorded as expenses in the
quarter.
SCOPE OF THE INDEPENDENT REVIEW
The scope of the Independent Review and the processes undertaken
were approved by the outside members of the Board of Directors or
the Audit Committee, as the case may be. From the outset, the
cooperation and support of current senior executive officers was
sought and obtained in the Independent Review, including assistance
in helping to coordinate requests and to obtain information.
At the direction of independent counsel, electronic and paper
documents were collected from Company corporate headquarters in
Montreal, Company servers and
members of senior management and key employees. The electronic
documents were searched using relevant keywords, and documents
flagged as a result of the searches performed were reviewed.
Independent counsel interviewed members of senior management and
other employees identified as possibly having knowledge about the
subject matter of the Independent Review or who were otherwise
relevant to it, in some cases more than once. In addition, at the
direction of independent counsel, background intelligence and other
information was sought about various companies and individuals.
Background intelligence work was carried out in respect of the
named counterparties to the Agreements and Collection Agreement and
other entities where some form of connection was observed to such
named counterparties. This consisted primarily of searches of
publicly available information, such as company records in the
relevant jurisdictions.
The Independent Review has been subject to certain practical
limitations, including that: (a) Mr. Riadh Ben Aïssa (the
"Former EVP Construction"), a former senior executive of the
Company, is believed to have direct and significant knowledge about
most of the investigated transactions, but has not been met despite
a request to his counsel; (b) Mr. Stéphane Roy (the "Former
Controller Construction"), a former executive of the Company
who may have knowledge about some of the investigated transactions,
was met prior to his dismissal on February 9, 2012, but has not been met
since; (c) the information reviewed is limited to that within the
Company's control and information that is publicly available; (d)
the relevant counterparties to the Agreements and Collection
Agreement are constituted in multiple jurisdictions and public
records in certain of these contain limited information which may
not be complete, current or accurate; (e) third parties have been
unresponsive or reluctant to provide information regarding their
operations or their clients' affairs; (f) some former employees
have conducted Company affairs using non-corporate email addresses
or had password protected devices to which the Company does not
have access; (g) the conclusions drawn are limited to the
information obtained to date; and (h) the interpretation of
improper documentation cannot be definitive, including because it
is known to be inaccurate, at least in some respects, and the true
arrangement and terms thereof will be inferred from contradicting
or supplementing oral or circumstantial evidence.
RESULTS OF THE INDEPENDENT REVIEW
Preliminary matters
The Agreements are based upon the form of representative
agreement contemplated in the Company's Policy on Commercial
Agents/Representatives (the "Agents Policy"). The Agents
Policy sets out the rules governing the hiring and remuneration of
commercial agents or representatives by the Company in various
markets around the world. One key feature of the Agents Policy is
that all of the hiring and remuneration of agents is the
responsibility of SNC-Lavalin International Inc. ("SLII"), a
subsidiary of the Company. There are different authorized
signatories depending on whether the contract with the agent
respects certain limits, but no provision in the Agents Policy
allows any person to override the Agents Policy.3
Findings derived from information obtained
Based upon the information obtained as part of the Independent
Review, and although there is no documentary evidence linking the
Agreements to Project A or Project B: (a) a presumed agent,
representative or consultant4 appears to have been
retained for each of Project A and Project B; (b) the Agreements
were respectively documented in respect of Projects 1 and 2
(instead of Project A) and Project 3 (instead of Project B); (c)
all or part of the US$33.5 million
paid in 2011 under the A Agreements is more likely than not to
relate to Project A; and (d) all or part of the approximately
US$22.5 million paid in 2010 and 2011
under the B Agreement is more likely than not to relate to Project
B. No agency agreement other than the Agreements came to light in
the context of the Independent Review as being improperly
documented in respect of a project to which it did not effectively
relate.
The following table summarizes these findings:
|
A Agreements |
B Agreement |
Presumed agents hired |
In 2011, the Former EVP Construction
said that he had hired an agent to help secure work in respect of
Project A.
The Independent Review has found no direct and conclusive evidence
establishing the nature of the services or actions undertaken by,
or the true identity of, any presumed agent. The counterparties
named in the A Agreements appear to be without substance, and
any individual named on the public registers in relation to the
corporate counterparties does not appear to be a true
principal.5 |
In 2009, the Former EVP Construction
said that he had hired an agent to help secure work in respect of
Project B.
The Independent Review has found no direct and conclusive evidence
establishing the nature of the services or actions undertaken by,
or the true identity of, any presumed agent. The counterparty named
in the B Agreement appears to be without substance, and any
individual named on the public registers in relation to the
corporate counterparties does not appear to be a true
principal. |
Decisions to attribute to other projects |
At the same time, a decision was made
not to charge the presumed agents' fees to Project A, and not
to otherwise associate the presumed agents with Project A. |
At the same time, a decision was made
not to charge the presumed agent's fees to Project B, and not
to otherwise associate the presumed agent with Project B. |
Execution of improper documents |
The Former EVP Construction co-signed
and instructed a senior officer of SLII to co-sign the A Agreements
on behalf of SLII. The A Agreements were improperly documented in
respect of Projects 1 and 2. |
The Former EVP Construction
instructed a senior officer of SLII to sign the B Agreement on
behalf of SLII. The B Agreement was improperly documented in
respect of Project 3. |
Agents Policy |
The Agents Policy was not complied
with in various respects in connection with the A Agreements,
including the authorized signatories and the aggregate corporate
limits on fees attributable to the attributed projects. |
The Agents Policy was not complied
with in various respects in connection with the B Agreement,
including the authorized signatories and the aggregate corporate
limits on fees attributable to the attributed project. |
Payments |
The A Agreements contemplated fees of
US$33.5 million in the aggregate. In December 2011, payments of
US$33.5 million under the A Agreements were requested of SLII by
the Former EVP Construction. The required signatories (the Chairman
of SLII and the CFO) refused to approve the payments. The requests
were brought to the Company's Chief Executive Officer (the
"CEO"), who authorized or permitted the Former EVP
Construction to make the payments through his division. |
The B Agreement contemplated fees of
$30 million. Payments aggregating approximately US$22.5
million6 were made in 2010 and 2011 through SLII
(Tunisia), but were improperly approved on its behalf by the Former
EVP Construction and someone within his division. |
Use of payments, etc. |
The Independent Review has found no
direct and conclusive evidence establishing the exact use, purpose
or beneficiaries of payments made under the A Agreements.
However, as noted above, the decision to hire presumed agents was
based on the understanding at the time that it would help secure
work in respect of Project A. |
The Independent Review has found no
direct and conclusive evidence establishing the exact use, purpose
or beneficiaries of payments made under the B Agreement.
However, as noted above, the decision to hire a presumed agent was
based on the understanding at the time it would help secure work in
respect of Project B. |
Accounting |
Payments were to be accounted for in
respect of Projects 1 and 2 in accordance with the improper
documentation. Accounting entries were not made or were made and
reversed in short order in relation to Projects 1 and 2. |
Payments were accounted for in
respect of Project 3 in accordance with the improper documentation.
Accounting entries were made in relation to Project 3 in 2010 and
2011. The entries were subsequently detected in February 2012 as an
anomaly and reported to the Senior Vice-President and Controller of
the Company. |
Disclosure |
The agencies on Project A were
neither properly disclosed within the Company, nor were they
disclosed to its internal or external auditors until shortly before
the Independent Review began.7
In late 2011, the CFO was told at a meeting with the CEO and the
Former EVP Construction that agents had been hired on Project A.
The CFO objected to any involvement. |
The agency on Project B was neither
properly disclosed within the Company, nor to its internal or
external auditors until shortly before the Independent Review
began.
In 2010, the CFO was told at a meeting with the CEO and the Former
EVP Construction that an agent had been hired on Project B and that
its fees would be charged to other projects. The CFO objected to
this at the meeting.
|
Collection Agreement
The Collection Agreement and the Invoice were received together.
The Collection Agreement purports to relate to a dispute over an
amount owing to the Company under Project 4 and to give rise
to a payable of US$8.25 million.
The Invoice appears to have been received by the Company in 2011
only, but payment was refused on the basis that there were no
records or other information available about such an arrangement.
On March 21, 2012, a demand letter
was received from legal counsel to the counterparty demanding
payment of Euros (sic) 8.25 million. To date,
other than these documents, there is no oral, documentary or
circumstantial evidence linking the documents to Project 4 or any
other project. In addition, there does not appear to be any payment
of any amount to the payee thereof since January 2010. Accordingly, no conclusion can be
drawn other than that these documents are unlikely to relate to
Project 4, including because there is already a collection
arrangement in respect of the presumed dispute and there is no
obvious reason why there would need to be a second collection
agreement on the project. The Independent Review has found no
direct and conclusive evidence establishing the nature of the
services or actions undertaken by, or the true identity of, the
presumed agent. From the business intelligence gathered, the named
counterparty appears to be without substance, and the true
principal involved in the transaction does not appear to be an
individual named on the public registers relating to the
counterparty.
Potential Sanctions
In the absence of direct and conclusive evidence, the use and
purpose of the payments or nature of the services rendered or
actions taken under the Agreements cannot be determined with
certainty. However, the absence of conclusive findings does not
exclude the possibility that, if additional facts that were adverse
to the Company became known, sanctions could be brought against it
in connection with possible violations of law or contracts.
Code of Ethics and Business Conduct and Related
Matters
Introduction
Code. The Company's Code of Ethics and Business Conduct
(the "Code") was considered in light of the findings of the
Independent Review. The general policy underlying the Code is
expressed as follows:
"Our policy is to maintain ethical standards in the conduct of
our business and in our relations with whomever we associate - our
colleagues, directors, shareholders, customers, associates and
suppliers, as well as governments, the public and the media. Our
integrity and reputation for ethical practices are among our most
valued assets and are essential aspects of our sustained
profitability."
The Code applies to "all members of the Boards of Directors and
to all officers and employees of SNC-Lavalin in Canada and abroad." It imposes personal
obligations on all directors, officers and employees "[a]s a
condition of membership and of employment", and each must
acknowledge having read the Code, understanding its contents, and
being bound by its provisions.
Each person who authorizes or participates in a breach of the
Code breaches the Code ("each one of us is accountable for his or
her actions"). However, while it is open to any individual who is
aware of a suspected breach of the Code by others to report it,
there is no duty to report such a suspected breach, such that a
person who has knowledge of a breach of the Code and who does not
report it is not himself or herself in breach.
Whistleblower Policy. The Procedures for Complaints and
Concerns Regarding Accounting, Internal Accounting Controls,
Auditing and Other Matters (the "Whistleblower Policy") sets
out the procedures governing complaints, including matters such as
protecting the confidentiality of any whistleblower and ensuring
that there be no retaliation against a whistleblower. The
Whistleblower Policy does not, however, impose an obligation to
report an issue.
Agents Policy. The Code provides that "[a]ll transactions
are conducted at the level of authority required by SNC-Lavalin
policies and procedures", such that a breach of the Agents Policy
is a breach of the Code.
Records Rule
In the present circumstances, the relevant provisions of the
Code include compliance with sound accounting practices and record
maintenance (the "Records Rule"):
Compliance with Sound Accounting Practices and Record
Maintenance
"Accurately reflecting our business transactions"
We all have a responsibility to ensure that SNC-Lavalin's books
and records accurately and punctually reflect the Company's
transactions, assets and liabilities. We adhere to a proper
application of accepted accounting standards and practices, rules,
regulations and controls. These commitments include the
following:
- Business records, expense reports, invoices, vouchers,
payrolls, employee records and other reports are prepared with care
and honesty and in a timely fashion.
- All transactions are conducted at the level of authority
required by SNC-Lavalin policies and procedures and in compliance
with applicable rules and regulations.
- No transaction, asset, liability or other financial information
is concealed from management or from SNC-Lavalin's internal and
external auditors. …
- All documents signed are, to the best of our knowledge,
accurate and truthful.
- False or misleading entries and unrecorded bank accounts, for
any purpose, whether regarding sales, purchases or other Company
activity, are strictly prohibited. ...
The above list is by no means exhaustive. Suspected breaches of
our accounting practices and record maintenance and internal
controls that appear to be in violation will be investigated."
[Emphasis added.]
The Records Rule does not refer to or incorporate materiality
thresholds explicitly or implicitly, except where it refers to
accounting practices. Accordingly, a finding that the Records Rule
has been breached does not require or imply misconduct resulting in
a material event on a consolidated basis.
Findings
In the present circumstances, the Records Rule was not complied
with as a result of any one of the following findings: (a) the
improper documentation of agency arrangements in respect of
projects to which they did not relate, and concealment thereof; (b)
incorrect entries relating to payments in the books and records of
the Company, and concealment thereof; and (c) non-compliance with
the Agents Policy.
Transactions not disclosed. The Code provides that no
transaction or other financial information is concealed from
management or from internal and external auditors. In December 2009 and in July
2011, presumed agents in respect of Projects A and B
respectively were hired by the Former EVP Construction, without
complying with the Agents Policy. The agencies on Projects A
and B were neither properly disclosed within the Company, nor were
they disclosed to its internal or external auditors until shortly
before the Independent Review began. The CEO and Former EVP
Construction authorized or permitted this course of action until
2012, which did not comply with the Code.
Accuracy of documents and records. The Code provides that the
Company's books and records accurately reflect the Company's
transactions and that all documents signed are, to the best of
one's knowledge, accurate and truthful. The Agreements signed by
the Former EVP Construction are neither accurate nor truthful, and
thus in breach of the Code. The books and records relating to
Project 3 inaccurately reflect fees unrelated to it. The CEO knew
that agents were being hired by the Former EVP Construction on
Projects A and B in unusual circumstances, and that the Former EVP
Construction would cause their fees not to be charged to Projects A
and B but rather to other projects.8 The CEO did not see
the Agreements or accounting entries in the Company's books and
records, but should have known that contractual documents would
refer to projects other than Projects A and B and that incorrect
entries would be made, which did not comply with the Code.
Proper levels of authority. The Code provides that all
transactions are conducted at the level of authority required by
Company policies, and the Agents Policy provides that all payments
of agent fees must be made by SLII. In December 2011, the Former EVP Construction
requested SLII to make the payments under the Agreements. The
Chairman of SLII and the CFO refused to authorize the payments. The
matter was brought to the CEO, who authorized or permitted the
Former EVP Construction to make the payments through his division.
While the CEO thought he had the authority to do so, he should have
confirmed his authority but did not. The CEO's authorization of
these payments did not comply with the Agents Policy and therefore
was in breach of the Code.
SUMMARY OF ACTIONS RECOMMENDED
The Audit Committee has found that the hiring of presumed agents
in respect of Projects A and B and the improper documentation
results primarily from the following:
- management override, flawed design or ineffective enforcement
of controls in connection with the presumed agencies, including the
controls contained in the Agents Policy;
- non-compliance with the Code and the Agents Policy; and
- ineffective enforcement or scope of, or controls over
compliance with, the Code and the Agents Policy.
The Company is a multi-national organization that has changed
organizational structure over the past several years. One legacy of
this changing structure is distributed leadership, which has
generally served the Company well. The Audit Committee notes that
the model could usefully be reviewed over time and within a broader
context.
Governing Principles
The Audit Committee considered what governing principles, based
on the results of the Independent Review, should be considered to
prevent recurrence of inappropriate conduct, and to improve the
compliance and control environments. These principles were directed
primarily at:
- reinforcing standards of conduct
- strengthening and improving internal controls and
processes
- reviewing the compliance environment
Recommendations
The Audit Committee recommendations are discussed below, for
consideration by the Board of Directors. If adopted,
management should be directed, where applicable, to develop a
detailed plan and timetable for their implementation, subject to
the Board of Directors monitoring the implementation thereof by
management.
Code and Related Matters
The Audit Committee recommends the following measures be taken
in light of its findings:
- Non-compliance with the Code. The Board of Directors should
consider what sanctions if any to apply in connection with
non-compliance with the Code.9 Generally, in
exercising its powers with a view to the best interests of the
Company, the Board of Directors may consider in assessing breaches
of the Code the following factors:
-
- the individual's functions and responsibilities within the
Company;
- the nature and seriousness of the conduct, including the risk
of harm to the Company, whether it was repeated, and whether it
constituted a breach of law;
- whether the individual devised or was a participant in the
conduct, the length of participation, and the motivation in
participating;
- the timely and voluntary disclosure of the breach and the
willingness to cooperate in the investigation;
- any loss or risks to the Company resulting from the conduct,
and whether there are any illicit gains to an individual;
- whether the breach constitutes aberrant behavior in light of an
individual's overall history with the Company and character;
and
- the multiple purposes of enforcing the Code, including
sanctioning inappropriate conduct, and specific and general
deterrence.
- Code and Whistleblower Policy. The Audit Committee also
recommends that the ongoing review and update of the Code, as well
as of the Whistleblower Policy, take its findings into account,
including to provide for a duty to report violations or possible
violations of policies or procedures.
Internal Controls and Processes, and Compliance
Internal controls foster sound monitoring of business operations
and corporate assets, accurate financial reporting, and compliance
with laws, and correspondingly reduce the risks of misuse,
inaccuracies and non-compliance. Accordingly, the Audit Committee
recommends the implementation of the following measures (the
implementation of some of which has already been initiated):
- Management departures. The Company should clarify the procedure
to be followed in cases of acceptable management departures from
policies or procedures.
- Compliance review. The Board of Directors should hire an
independent expert to provide advice on the structure of the
organization, guidelines and controls, and communication and
training.
- Agents Policy. The Agents Policy should continue to be reviewed
from time to time as legislative changes and commercial practices
evolve, including in accordance with the proposed changes presented
to the Audit Committee in February
2012. However, the Agents Policy should be further reviewed
in light of the findings of the Independent Review.
- Approval levels. Procedures and approvals should be reinforced
regarding levels of authority, with clear reporting obligations on
any deviations or proposed deviations therefrom.
- Divisional controllers. The reporting lines for divisional
controllers should be reviewed.
- Internal audit function. The existing practice of having the
head of the internal audit group report directly to the Audit
Committee should now be formally documented.
- Technology. The Company should continue to move forward with
the integration of its technology platforms to further facilitate
the production of accurate financial information results, as well
as the monitoring thereof in a timely and cost effective
manner.
Recommended Adoption
After thorough consideration, the Audit Committee has
recommended the adoption by the Board of Directors of each of the
recommendations set out above.
CONCLUSION
The Audit Committee understands that with the delivery of this
report, its Independent Review of the Agreements and Collection
Agreement is terminated. The Audit Committee will continue to
review the Agents Policy and compliance matters, including to
assess whether amounts may directly or indirectly have improperly
been paid to persons owing fiduciary duties to the Company. The
Audit Committee will continue to consider, develop and implement
additional remedial measures as appropriate. The Audit Committee
would expect its next steps may include such other specific
activities as it may deem advisable or the Board may instruct.
ABOUT THE COMPANY
SNC-Lavalin Group (TSX: SNC) is one of the leading engineering
and construction groups in the world and a major player in the
ownership of infrastructure, and in the provision of operations and
maintenance services. SNC-Lavalin has offices across Canada and in over 40 other countries around
the world, and is currently working in some 100 countries.
FORWARD LOOKING STATEMENT
Reference in this press release, and hereafter, to the "Company"
or to "SNC-Lavalin" means, as the context may require, SNC-Lavalin
Group Inc. and all or some of its subsidiaries or joint ventures,
or SNC-Lavalin Group Inc. or one or more of its subsidiaries or
joint ventures. Statements made in this press release that describe
the Company's or management's budgets, estimates, expectations,
forecasts, objectives, predictions or projections of the future may
be "forward-looking statements", which can be identified by the use
of the conditional or forward-looking terminology such as
"anticipates", "believes", "estimates", "expects", "may", "plans",
"projects", "should", "will", or the negative thereof or other
variations thereon.
The Company cautions that its actual actions and/or results
could differ materially from those expressed or implied in
forward-looking statements, or could affect the extent to which a
particular projection materializes, as a result of risks and
uncertainties relating to: (a) cost overruns from fixed-price
contracts; (b) failure to meet scheduled dates or performance
standards on a particular project; (c) attracting and retaining
qualified personnel and any strike, partial work stoppage or other
labour actions by the Company's or its subcontractors' unionized
employees; (d) failure of the Company's joint venture partners to
perform their obligations; (e) failure by the Company's
subcontractors to deliver their portion of a particular project
according to contractual terms; (f) the financial performance of
the Company's infrastructure concession investments during a
particular concession period; (g) the Company obtaining new
contract awards; (h) revenue backlog and whether such revenue
backlog will ultimately result in earnings and when revenues and
earnings from such backlog will be recognized; (i) foreign currency
exchange and interest rates; (j) credit risk and the delay in
collection from the Company's clients; (k) information management
including its integrity, reliability and security; (l) the inherent
limitations of the Company's control framework and the
effectiveness of the measures implemented by the Company to
strengthen its internal controls over financial reporting following
the identification by the Company of material weaknesses relating
to the design and operational effectiveness of its internal
controls over financial reporting as of December 31, 2011; (m) uncertain economic and
political conditions in the countries in which the Company does
business; (n) any lack of strong safety practices by the Company or
its subcontractors exposing the Company to lost time on projects,
penalties, lawsuits and impact on future contract awards; (o) the
Company's inability to comply with environmental laws and
regulations; (p) the Company's reputation as a result of, among
others, any quality or performance issues on its projects, a poor
health and safety record, non-compliance with laws or regulations
by the Company's employees, agents, subcontractors, suppliers
and/or partners, or creation of pollution and contamination; (q)
the inability to adequately integrate an acquired business in a
timely manner; (r) non-compliance with laws and regulations by an
employee, agent, supplier, subcontractor and/or partner of the
Company or any further regulatory developments; (s) failure by the
Company's employees, agents, suppliers, subcontractors and/or
partners to comply with anti-bribery laws; (t) any litigation
and/or legal matters to which the Company is a party; (u) any
negative publicity associated with the Independent Review led by
the Company's Audit Committee of the facts and circumstances
surrounding certain payments that were documented to construction
projects to which they did not relate, and certain other contracts,
as well as any sanctions that could be brought against the Company
in connection with possible violations of law or contracts should
additional facts adverse to the Company become known in connection
with such Independent Review including as to matters beyond its
scope; (v) the proposed class action lawsuit filed on March 1, 2012 against the Company with the Quebec
Superior Court; and (w) the investigations of the Royal Canadian
Mounted Police and the World Bank relating to the Company's
involvement in a past submission as the Owner's Engineer for the
Bangladesh government.
For more information on risks and uncertainties, and assumptions
that would cause the Company's actual results to differ from
current expectations, please refer to the section "Risks and
Uncertainties" and the section "How We Analyze and Report our
Results", respectively, in the Company's 2011 Financial Report
under "Management's Discussion and Analysis". The forward-looking
statements herein reflect the Company's expectations as at the date
of this press release and are subject to change after this date.
The Company does not undertake any obligation to update publicly or
to revise any such forward-looking statements, unless required by
applicable legislation or regulation.
1 Because of the private or commercially
sensitive nature of such information, neither the projects nor
outside parties involved are named in this executive summary.
2 See note 8 below.
3 The Agents Policy also provides
among others for the existence of a written agreement with any
agent, the use of an approved master agreement, a progressive
payment schedule for commercial fees, percentage or ratio limits on
commercial fees, a procedure for approval and signature of
agreements and payments thereunder, standard distribution of the
agreements once signed, diligence and certification requirements,
and an approval process in case an agreement departs from the
specified limits.
4 Given it is not known precisely
what services were rendered, reference is made, for convenience
purposes, to a presumed agency or agent throughout this executive
summary.
5 In correlating this information to
similar information obtained, certain relationships have been
established through co-directorships or otherwise with other
counterparties to other agency agreements.
6 It is assumed that this corresponds
to a renegotiated fee arrangement resulting from a change in the
project cost, but there is no evidence of this amendment.
7 In 2011, a senior officer was told
that a presumed agent had been hired for Project A. He did
not, however, see the A Agreements.
8 No finding is expressed regarding
the Former Controller Construction. However, some awareness
on his part of the Agreements can be inferred from the fact he
handed copies and/or originals thereof to the CFO upon his
departure in February 2012.
9 These could include disciplinary,
compensation, training or other measures.
SOURCE SNC-LAVALIN