SNC-Lavalin Group has had more than its share of woes lately. The company faces charges for bribery in Libya, posted two profit warnings for troubles in Chile and Saudi Arabia, and has lost almost half its value in nine months.
Why, then, is Canadian Prime Minister Justin Trudeau risking his political career to rescue the construction firm? It comes down to three things: jobs, SNC's political clout and the special status that many Quebec companies hold in the halls of power of Canada's capital.
SNC was hardly a household name before Trudeau's crisis began about a month ago on reports his former attorney-general, Jody Wilson-Raybould, felt she was unduly pressured by Trudeau's office to help the company avoid a trial on the corruption charges.
Its work is certainly well known. The Montreal-based engineering firm built the train line linking Vancouver's downtown and its airport. It's part owner of the massive toll highway than runs along the north end of Toronto. Globally, it's built or managed everything from coal terminals in Colombia to petroleum projects in Saudi Arabia.
These global contracts in far-flung places have created many problems for SNC -- and now for Trudeau. The company was charged by the Royal Canadian Mounted Police in 2015 for allegedly paying bribes more than a decade earlier to Moammar Qaddafi's regime in Libya. Closer to home, the company paid restitution to several Quebec municipalities under a provincial program to recoup overcharges in tainted public contracts, while La Presse has reported it could face charges over a bribery scheme tied to the renovation of a Montreal bridge.
On the Libya charges, SNC thought it had secured what was essentially a get-out-of-jail-free card in the form of a deferred prosecution agreement. Under this program, used in the U.S. and U.K. but new to Canada, the company could have avoided trial and paid a fine instead by arguing it has cleaned house and shouldn't be punished for the sins of former executives.
Canada's public prosecutor rejected SNC's request for an out-of-court settlement in September. Wilson-Raybould could have stepped in to overturn the order, but chose not to. Trudeau's team urged her to reconsider, sparking the current scandal. The Organisation for Economic Co-operation and Development said Monday it has written to Trudeau's government outlining its concerns about potential political interference in the case.
So why is SNC so special it warrants all this political capital?
Jobs for one -- lots of them. SNC employs more than 52,000 people around the world, and is one of the few global giants still based in Canada. Nortel Networks Corp. went bankrupt, BlackBerry Ltd. is a shell of its former self and Barrick Gold Corp. may soon be run from South Africa. Almost 9,000 SNC workers are in Canada, with about a third of those in the largely French-speaking province of Quebec. Those kinds of job numbers -- and highly skilled, well-paid workers -- are tempting for any politician to protect.
"There was concern SNC could leave Canada altogether," Trudeau told reporters Thursday in Ottawa.
Gerald Butts, the prime minister's former top aide and best friend from their days at McGill University in Montreal, echoed that in his testimony to lawmakers last week. He said jobs were at risk and that the company could move its head office to London. SNC already has about 10,000 employees in the U.K. after its $2.7 billion (C$3.6 billion) purchase of WS Atkins Ltd. in 2017.
"When 9,000 people's jobs are at stake, it is a public policy problem of the highest order," Butts said. "It was our obligation to exhaustively consider options the law allows."
The risk of a massive jobs flight may be a stretch. Even the worst-case scenario, in which SNC is convicted and faces a 10-year government ban in Canada, would hardly be crippling. Canada accounts for less than 30 percent of the company's revenue and the government work is only a fraction of that. What's more, SNC committed to keeping its head office in Montreal under terms of a loan from a Quebec pension fund in the Atkins deal.
"There's a number of uncertainties around the company,'' Chris Murray, an analyst with AltaCorp Capital Inc., said in a telephone interview last month. "I don't think any of them are lethal in the long term.''
SNC's finances are also relatively healthy. It has an order book worth C$15 billion, revenue of C$10 billion a year and has just C$2.3 billion in debt. The company, with a market value of more than C$6 billion, is considering asset sales to bolster its balance sheet, and could raise more than C$2 billion alone from the sale of its stake in the 407 toll road.
The stock has plunged by almost half since June, but most of that decline was in January when the company had two profit warnings in as many weeks related to work delays in Chile and a slowdown in the Middle East -- in part due to a rift between the Trudeau government and Saudi Arabia. The scandal in Ottawa seems to be less of a concern for investors than it is for lawmakers.
"There is a tremendous amount of value here" after the price decline, Steve DiGregorio, a fund manager at Canoe Financial LP in Montreal told BNN Bloomberg Television.
SNC also punches above its weight for political clout. Few people are as knowledgeable about the inner workings of Canada's capital as SNC Chairman Kevin Lynch, who joined the board in 2017 and became chairman 14 months ago. He was clerk of the privy council -- the country's top bureaucrat -- under former Prime Minister Stephen Harper. He's also held senior posts at the finance department, the Bank of Canada and the International Monetary Fund, and remains a vice chairman at the Bank of Montreal.
It's no surprise then that when he reached out to Michael Wernick, the current clerk of the privy council, in October the call was taken. Lynch wanted to know what could be done to help the company, which had announced five days earlier that it had been denied a settlement.
SNC is "not a pariah, it was not improper to have communications with the company," Wernick told lawmakers. He said he told Lynch to reach out to the attorney-general.
SNC has been a frequent lobbyist in Ottawa. Chief Executive Office Neil Bruce or other executives had 59 meetings, calls or encounters with Trudeau's inner circle over the past 12 months, according to Canada's lobbyist registry. That group included Finance Minister Bill Morneau and his chief of staff, Ben Chin, and Mathieu Bouchard, a senior adviser to Trudeau. All three were among the people Wilson-Raybould said had contacted her or her staff to advocate for SNC.
The company also pushed to have the deferred prosecutions introduced in the first place. The new policy was introduced in last year's federal budget.
Quebec, meanwhile, is the final piece of the SNC puzzle. No federal party can win power without strong support in the province, which accounts for nearly a quarter of the country's population and carries similar weight in the House of Commons.
So when companies like SNC or Bombardier Inc. need help, their pleas are heard, especially with an October election looming. Quebec Premier Francois Legault has placed SNC on his list of 10 companies that need to be protected from takeovers.
SNC has a long history in the province. Its name derives from the surnames of three founders --- Arthur Surveyer, Emil Nenniger, and Georges Chenevert -- who started the firm 108 years ago. With its backlog of orders and plenty of support in Ottawa, it's not going away anytime soon.
--With assistance from Bloomberg's Sandrine Rastello.