TORONTO (Reuters) - SNC Lavalin Group Inc SNC.TO, a Canadian construction company caught up in allegations of bribery and improper payments, vowed on Thursday to get to the bottom of any wrong-doing but said the transactions were still a mystery.
The company also reported weaker-than-expected financial results on Thursday, sending its shares lower.
But it had no further details to share about revelations that it made $56 million in payments to unknown “agents” on construction contracts that did not exist.
SNC, which held its annual meeting in Toronto on Thursday, said it was encouraging employees to come forward with any information that might help with police investigations into the alleged misconduct.
“We are committed to getting to the bottom of any violations of laws or misappropriations of funds that may have occurred,” Chairman Gwyn Morgan told the company’s annual meeting.
“We are hopeful that our actions will help in establishing accountability and bringing to justice anyone found to have been involved in criminal activity,” Morgan told the room of about 100 people attending the meeting.
Shares of Montreal-based SNC dropped receded 2.7 percent on Thursday, extending a slide of more than 20 percent of its value since it revealed its internal probe into payments mystery in late February.
It also warned that the impact of the civil war in Libya, where it had several big contracts, would push 2011 profit below earlier forecasts.
“The biggest question is whether this episode is going to affect their future ability to earn contracts,” said Morningstar Inc analyst Min Tang-Varner.
WORK OF “A RELATIVE FEW”
In March, Pierre Duhaime resigned as chief executive of the 101-year-old company after revelations he had authorized the payments, but details surrounding the matter remain shrouded in mystery.
Morgan said the company still does not know who received the payments and what the money was used for, but he stressed that the misconduct was the work of “a relative few.” He admitted the company was not sure if police would uncover other rogue payments.
SNC has handed over information from its internal investigation to police, which have the “capability and means to go much further and much deeper,” than a civilian review, Morgan said in a press conference after the meeting.
Canada’s Royal Canadian Mounted Police searched the company’s Montreal headquarters in mid April, after launching an investigation into the payments.
SNC has said its former head of construction, Riadh Ben Aissa, who left the company in February, may have direct knowledge of the mysterious transactions.
Swiss authorities confirmed over the weekend that Ben Aissa had been arrested on charges of corruption, fraud and money laundering.
Canadian newspapers have linked Ben Aissa in an unflattering light to the family of deposed Libyan dictator Muammar Gaddafi.
Police were also probing bribery allegations against SNC involving a $1.2 billion bridge project in Bangladesh financed by the World Bank.
Shareholders attending SNC’s meeting were polite but passionate about the need for management to move quickly to repair the company’s battered image.
Ian Bourne, appointed interim CEO in March, said support from SNC’s clients and suppliers remains strong. A couple of new contracts are close to completion, he said.
Even so, Morgan conceded, “2012 will be the most challenging year we’ve ever faced.”
SNC said it approved a new code of ethics on Thursday and, under a series of measures to help prevent future wrong-doing, was tightening reporting processes in its finance department.
All 11 SNC directors who had stood for re-election to the board were elected at the meeting.
The company aims to conclude its CEO search, which began in late March, in three to six months.
SNC’s shares were down C$1.02 at C$37.03 on the Toronto Stock Exchange early afternoon on Thursday after the company reported a 14.5 percent decline in first-quarter earnings to C$67 million ($67.91 million), or 44 Canadian cents a share.
That was below the 49 Canadian cents that analysts had been expecting, according to Thomson Reuters I/B/E/S.
Revenue rose to C$1.78 billion from C$1.64 billion, also below market expectations of C$1.84 billion.
“In this environment, where people are freaking out about what is going to happen with the company over the medium to longer term, I think that’s as good as it gets. Overall it looks all right,” said Maxim Sytchev, managing director of industrials research at Toronto-based AltaCorp Capital.
While SNC repeated its target of 2012 earnings in line with 2011 profit, the company has an internal target to top that.
Reporting by Susan Taylor and Nicole Mordant; Editing by Frank McGurty; and Peter Galloway