SNC Lavalin Chairman Kevin G. Lynch, who also serves as Bank of Montreal‘s Vice Chairman, placed a call on October 15th to Michael Wernick, during which he repeatedly threatened the Clerk of the Privy Council of a potential loss of 9,000 Canadian jobs — ominously suggesting that the decision was to be made at a looming board meeting. Lynch feared that his firm could be implicated in the widespread bribery of First Nations officials in British Columbia.

Wernick, who holds a bachelors degree in economics from the University of Toronto, did not apply scrutiny to that assertion, despite his training, before repeating the threat to Prime Minister Justin Trudeau and others in the PMO.

On Wednesday, SNC Lavalin CEO Neil Bruce asserted that, in his lobbying efforts, he never threatened job losses if the firm were not offered a deferred prosecution agreement. He claimed to be unaware of who “makes stuff up”, though his name appears on hundreds of communication disclosures filed with LobbyCanada.

Sources close to Mathieu Bouchard and Elder Marques tell The Chronicle that isn’t their understanding of events. Lobbyists working on behalf of SNC Lavalin, including the allegedly ‘in-house’ attorney Frank Iacobucci, met multiple times with both men. Following those meetings, Bouchard and Marques were heard repeatedly emphasizing the risk of job losses inside of the PMO and with the office of Finance Minister Bill Morneau.

Following criticism from opposition finance critic Pierre Poillivre in recent weeks, that assertion has become a source of public outrage, given how apparently fabricated that the talking point now appears.

SNC Lavalin is a construction, engineering, and infrastructure company. Poillivre rightly explains that these jobs are bound to Canadian construction and infrastructure projects and will not be lost in the event that the firm relocated abroad. Lease agreements and loan covenants with Quebec’s public pension fund require the firm to remain in Montreal for several years.

It’s unclear if it was Lynch or Iacobucci who first started using the talking point because neither has fully disclosed their lobbying activities. Iacobucci, who is a partner at Torys, claims to have been working as an ‘in-house’ attorney with SNC Lavalin, which would allow him to skirt lobbying disclosures.

For his part, Lynch is a paid member of a corporate board, and as such is required to disclose all of his lobbying contacts with government officials to LobbyCanada. He did not disclose his phone call to Wernick, and Wernick failed to disclose the conversation in his initial House justice committee testimony.

BMO has a $400 million investment interest in the Trans Mountain Pipeline. That private placement was purchased in the government’s 2018 acquisition, but the firm secured an option to reacquire the position if it chooses to exercise it. Now that the government owns the $7.5 billion construction project, it became even more imperative for the firm to secure a deferred prosecution agreement since a criminal conviction would have banned the firm from performing work on federal projects. The Liberal Party is now planning to have that law changed.

The government’s purchase of the project from the Texas-based Kinder Morgan at top dollar valuations, and with expansive terms of indemnification, was intended to shield executives at SNC Lavalin — including Bruce himself — who fear that they have been culpable in an expansive scheme to bribe First Nations’ officials in British Columbia, from whom they need to secure consent (not merely consultation) for pipeline approvals.

Like many federal contracting giants, particularly in government-funded construction, SNC Lavalin meticulously manages its pipeline of projects — and budgets heavily for ‘selling, general, and administrative’ expenses associated with those procurement processes.

The Trans Mountain Pipeline’s court-related delays have caused a considerable hiccup in the firm’s financial statement, which includes a 26.8% decline in its oil and gas business from 2017 to 2018.

In Canada’s elite business and political circles, it’s long been suspected that SNC Lavalin and BMO have both been engaging with indigenous people in unseemly ways — BMO doing so through third parties in an effort to comply with the Foreign Corrupt Practices Act in the United States; while SNC Lavalin has engaged directly, in a fashion similar to the firm’s engagement with Saadi Gaddafi.

American anti-corruption laws were driving BMO, SNC Lavalin concerns

The Foreign Corrupt Practices Act (FCPA) is an American law known primarily for two of its main provisions: one that addresses accounting transparency requirements under the Securities Exchange Act of 1934; and another concerning bribery of foreign officials. It’s likely that SNC Lavalin and BMO have violated both.

FCPA prohibits firms with any registered class of securities trading in the United States from influencing foreign officials with any personal payments or rewards. The FCPA applies to any person who has a certain degree of connection to the United States and engages in corrupt practices abroad, as well as to U.S. businesses, foreign corporations trading securities in the U.S., American nationals, citizens, and residents acting in furtherance of a foreign corrupt practice, whether or not they are physically present in the U.S.

Direct payments to foreign officials, candidates, and parties, or any other recipient would violate the law if the payments are in furtherance of influencing a foreign official, candidate, or party. These payments are not restricted to monetary forms and may include anything of value.

BMO, Kinder Morgan, and SNC Lavalin are all subject to this act — and executives at each firm were concerned that their payments to indigenous groups constitute bribery of foreign officials.

It’s become common practice among multi-national firms to engage third parties to provide high-risk business functions in an effort to insulate executives with legal and reputational exposure related to FCPA, but under that law, corporations are accountable for corrupt activities performed on their behalf through third party service providers.

BMO’s relationship with Indigenous Canadians

BMO is widely credited with inventing what is now referred to as aboriginal banking in the late 1990s, when it was impossible to secure a mortgage loan for a home in a Reserve community because of the prospect of no-recovery default (commercial banks can’t repossess Indian land). A banker there with Indian status, Ron Jamieson, was able to convince the bank and federal regulators to solve the problem by offering loans only to Reserve members whose creditworthiness was so pristine that the Reserve’s band council would guarantee the loan.

The program is highly lucrative for BMO and averages lower default rates than the market at large. Since the Reserve government would be responsible for any loan defaults (the Reserve government can repossess land on territory), the bank enjoyed risk-free lending at higher interest rates than the non-aboriginal mortgage market.

Jamieson retired from BMO as a Senior Vice President in 2006.

By that time, Canada’s banking industry began to see indigenous communities in a new light: as emerging markets. Canada’s major banks — considered ‘federal works’ — now offer a slate of lending products, from financing land claim litigation to water infrastructure and managing endowment or trust assets.

Following Jamieson’s retirement from the bank, he has been involved in a slew of aboriginal-themed investment vehicles and consultancies. He is a founding director of Denendeh Investments Incorporated, which describes itself as the General Partner of Denendeh Investments LP, a private equity investment vehicle intended to monetize energy resources in the Northwest Territories on behalf of indigenous groups.

He is also a partner in First Canadians Property Investments Limited, which specializes in advising First Nations governments on investment opportunities, equity and debt financings, alternative energy projects, water distribution systems, public-private-partnerships (PPPs), asset valuations, dealing with government agencies, and financing litigation expenses.

First Nations governments comprising the Indian Resource Council, are being lobbied by the Trudeau government to purchase the Trans Mountain project, largely to recoup monies from Kinder Morgan’s exit. Trudeau hopes to “align the interests” of indigenous groups with the energy industry.