February 11, 2013 Comments

Stocks were generally down a bit today. The Q4 earnings for many Canadian companies should be rolling in shortly.

I note today that the former CEO of SNC-Lavalin has been charged.

http://ca.finance.yahoo.com/news/former-snc-head-pierre-duhaime-formally-charged-fraud-152714437.html

Wow, that is certainly a fall from grace. From rich and powerful CEO to looking at possible jail time and certain large legal bills, stress and embarrassment.

I don’t know much about SNC. But my understanding is that huge bribes were paid in Libya¬† (and possibly elsewhere including even possibly Canada). And it seems that the top people knew about this. In the case Libya it may have been sort of excused as a cost of doing business, a case of “when in Rome”. They may have felt they were doing this for the good of shareholders. But it is illegal under Canadian law for Canadian companies or Canadians to offer bribes anyplace in the world.

While not knowing anything except the few news stories I have read, I think SNC faces a lot more trouble over this yet. I think they had some connection to that Canadian woman who is in a Mexican Jail accused of helping to try to smuggle out Saadi Gadhafi. From all appearances the company (or at least some former executives) were involved but now they have abandoned her. Nice. With several men now charged someone will sing in turn for a lower sentence and perhaps many more will be implicated. Possibly the company could be given a large fine. That would punish innocent shareholders but still it could happen I suppose. There is even the ridiculous possibility that some shareholders who bought more recently will win a class action suit and the company (i.e. indirectly other quite innocent long-term shareholders) would have to pay that.

I am not impressed with chairman Gywn Morgan’s handling of the whole affair and I expect him to try to jump ship as soon as he can. He is newer at the company and he never signed on for this crap. He seems to be too optimistic that the rot has now been removed. I would doubt that. To me, it seems more likely that rot had invaded quite deeply. We shall see.

I don’t know if SNC is a reasonable investment or not. I understand it has good assets and a good break-up value. But I tend to think its future is very unpredictable. I would not be comfortable investing in it. (Though it turns out that one would have been wise to got in at the lows a few months ago and yet I felt the same way then, too uncertain.)