World Bank blacklists SNC-Lavalin over corruption in Padma Bridge project

Source: Thomson Reuters Foundation - Thu, 18 Apr 2013 11:44 GMT
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WASHINGTON (TrustLaw) – The World Bank banned a leading Canadian engineering firm, SNC-Lavalin Inc, on Wednesday from doing business with it for 10 years because of the firm’s role in a corruption scandal over the Padma Bridge project in Bangladesh.

The penalty is the largest ever in a World Bank settlement and means the company is also barred from doing business with other multilateral development banks.

The World Bank alleges that SNC-Lavalin, which represents 60 percent of the business of Montreal-based SNC-Lavalin Group Inc., conspired to receive bribes over the financing of the $2.9 billion rail and road bridge, a massive project to link impoverished southwestern Bangladesh with the country’s port city and capital.  

SNC-Lavalin had bid to supervise the contractor of the bridge. The World Bank said in June 2012 that it had found “credible evidence” of high-level corruption among Bangladesh officials involved with the bridge and that it had alerted Canadian officials.

Bangladesh cancelled World Bank involvement in the more than 4 mile (6 kilometre) double-decker bridge, designed to replace ferry routes to Dhaka, in February, after the bank insisted on anti-corruption measures as a condition for renewing its $1.2 billion share of the financing. 

Two former SNC-Lavalin executives, Ramesh Shah and Mohammad Ismail, were arrested by the Royal Canadian Mounted Police after a 2011 raid on SNC-Lavalin offices and currently are on trial on charges of bribing foreign officials.  

“This case is testimony to collective action against global corruption,” Leonard McCarthy, World Bank Integrity vice president, said of the settlement in a news release.

During its investigation, the World Bank said it also had found misconduct by SNC-Lavalin over the Rural Electrification and Transmission Project in Cambodia.  SNC-Lavalin has agreed to cooperate with the World Bank.             

Under the terms of the settlement, the rest of SNC-Lavalin Group companies are put on notice that if they violate procurement rules they too would be debarred for 10 years.  The blacklisting could be reduced to eight years if the companies comply with all the terms of the agreement, the bank said.

“The Company’s decision to settle signals our determination as we go forward to set standards for ethics in business conduct and for good governance that are beyond reproach,” Robert G. Card, president and CEO of SNC-Lavalin Group Inc. said in a news release.

“The Company has already taken, and will continue to take, measures to ensure rigorous compliance and control procedures are in place.”         

The blacklisting affects projects representing about 1 percent of its annual revenues, SNC-Lavalin said.  It operates in over 100 countries in infrastructure, engineering and construction.

The World Bank saw the Padma Bridge as a way to jump-start economic growth in the delta region of the Padma, the local name for the Ganges, and reduce poverty.  Malaysia has indicated a readiness to provide financing, though its terms are likely to be more demanding than the loan from the World Bank.