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Will Canada Actually Lose 9,000 Jobs If SNC-Lavalin Is Prosecuted?

Experts weigh in on Justin Trudeau's talking points that a prosecution of SNC-Lavalin will mean mass job losses for Canadians.

by Tamara Khandaker
Mar 11 2019, 9:33pm

Photo courtesy of The Canadian Press/Justin Tang

By now, Canadians have heard repeatedly from the government that the potential closure of Montreal engineering giant SNC-Lavalin—if it was found guilty of bribery and fraud in a criminal trial—could mean the loss of around 9,000 jobs in Canada.

But experts and observers are divided on the validity of this claim.

It’s the figure the prime minister and other senior officials said they focused on during their discussions with former justice minister and attorney general Jody Wilson-Raybould about the public prosecution service’s decision to not drop criminal proceedings against SNC-Lavalin.

Wilson-Raybould has characterized these conversations as “veiled threats" and inappropriate pressure to get her to intervene in the public prosecution service’s decision, while Trudeau and government officials have maintained they didn’t fall outside the normal operations of government.

SNC-Lavalin was charged in 2015 with bribing the Gaddafi regime in Libya for years—until it collapsed in 2011—in exchange for government contracts. The company, which has an extensive history of paying bribes to win contracts in places like Bangladesh and in its home province of Quebec, is accused of paying Moammar Gaddafi’s son Saadi almost $50 million, including paying for sex workers for him, in exchange for multibillion dollar infrastructure projects.

Last week, federal court upheld the public prosecution service’s decision not to grant the company a DPA.

On Monday, the Organization for Economic Co-Operation and Development, an intergovernmental organization made up of 36 countries, announced it is monitoring allegations that Trudeau and his office attempted to politically interfere in the prosecution, which could put Canada in violation of the OECD’s anti-bribery agreement.

“[P]olitical factors such as a country’s national economic interest and the identity of the alleged perpetrators must not influence foreign bribery investigations and prosecutions,” said the statement.

Canada’s economic interests have, however, been at the centre of the SNC-Lavalin scandal from the start.

“When 9,000 jobs are at stake, it’s a public policy problem,” Gerald Butts, Trudeau’s former right-hand man, testified before the justice committee last week. Butts resigned in February reports accusing the Prime Minister’s office of attempted political interference first surfaced in the Globe and Mail.

Butts dodged the question when Green Party leader Elizabeth May first challenged him to explain where the figure came from.

Public Services and Procurement and Accessibility Minister Carla Qualtrough avoided repeating the number on CTV’s question period, and said instead, “History would tell you that when corporations are convicted, jobs are lost, sometimes companies go bankrupt, sometimes their headquarters leave the country. So the potential of job loss is a significant factor. You know what, can we tell you exactly the precise number? No. But we can tell you that jobs are in jeopardy and that’s enough that it warrants consideration.”

A deferred prosecution agreement, which the government is free to offer to the company until a verdict is reached in the criminal case, could force the company to admit to wrongdoing, give back the money gained from any illegal activity and pay a hefty fine. It would allow SNC to avoid a criminal conviction, which could bar them from bidding on federal contracts for 10 years.

A ban on federal contracts, SNC’s “bread and butter,” as one expert calls it, could land the company in deep trouble by putting downward pressure on their stock price and making them vulnerable to a hostile foreign takeover. A foreign entity could then take jobs out of Canada and bring them into their own country.

The blow of losing public sector contracts could also drive the company into bankruptcy — also resulting in job losses.

Some experts disagree that the potential closure of SNC would cost Canada 9,000 jobs, pointing out that that SNC already holds a number of Canadian contracts for projects like building a light rail project in Montreal, where its headquarters is located, and refurbishing two Ontario nuclear plants, among others.

“But that’s all else remaining equal—it doesn’t take into account a potential bankruptcy or a foreign takeover,” said Omar Khan, former Chief of Staff to Ontario’s Minister of Economic Development.

Some have argued that any job losses at SNC would be absorbed by the economy—that engineers are in high demand in Canada and likely wouldn’t have trouble finding other work.

Others say it’s not that simple, and that the impact could be even bigger than the 8,700 currently employs in Canada, if supply chains are taken into account.

“The economic multiplier for these big infrastructure projects is like 10 to 1, which is comparable to the auto sector,” Khan told VICE, vice president of public affairs at Hill + Knowlton Strategies, adding that it isn’t guaranteed that all the lost jobs would be reabsorbed into the economy, although it would be easier for people with the highest levels of education.

“Let’s assume it’s all 8,700 jobs—those are exactly the jobs that every government in Canada is trying to attract, in that they’re advanced manufacturing value-add jobs. It’s not just general assembly line. It’s the jobs of the future — high tech, clean tech,” Khan said.

Kevin Milligan, a professor at UBC, also points out that there are transition costs associated with reorganizing part of of the economy this way.

“There’s existing networks of suppliers and the way the firm does business for the good parts of it, and there’s pensioners who rely on pensions from the firm,” said Milligan. “That whole set of relationships would be nuked if that firm were to be shut down… considering the fact that there would be some costs is not wrong.”

Khan adds “the loss of a major international player like SNC being based here in Canada, putting aside the direct jobs, the impact on the supply chain would be enormous because... let’s say SNC was to get a contract from Switzerland—that net new work that would be coming into the SNC pipeline would be lost to Canada.”

The alleged nefarious activities that SNC-Lavalin is now facing prosecution for happened about a decade ago, Khan argued.

That’s not really the fault of the workers, the pensioners or the management that’s currently in place,” he said. “And the whole purpose of a DPA is to essentially to leverage admission of wrongdoing on behalf of the company to put in place a plan for a structural and cultural change as a company that becomes a binding legal document between them and the Crown, and it’s not as if they get off scot-free.”

“The intention of the DPAs is to punish those people who did the bad things, but allow the structure of the firm and the employees and the pensioners to continue,” said Milligan.

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