How plans for a blue-chip Canadian firm to build a Montreal hospital became a scandal

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The hospital rising over Montreal's west end is supposed to become one of the world's leading medical institutions, a hub of ground-breaking research and top-level care. SNC-Lavalin, a jewel of corporate Canada building the $1.3-billion project, was running the project like clockwork – at first. Little wonder Prime Minister Stephen Harper and Philippe Couillard, Quebec's former health minister and current Quebec Liberal leadership candidate, were among the luminaries who flocked to be associated with Arthur Porter, the magnetic personality presiding over the McGill University Health Centre. Today, the dream behind the hospital is overshadowed by multimillion-dollar corruption charges against the men in charge. Dr. Porter is a wanted man. Former SNC-Lavalin CEO Pierre Duhaime awaits a court date. The politicians who once scrambled to share the glow at the conjunction of public and private prestige now duck for cover.

The project

For a period in the mid-2000s, the plan to build an English-language hospital complex in Montreal was the envy of the francophone half of the city, which watched helplessly as their own mega-hospital was delayed again and again.

While the French project languished on the drawing board amid recriminations and disputes over location, the English project hummed along, a veritable model of competent organization, efficient fundraising and community strength. Arthur Porter, who was to have a street near the site named for him, was not shy about crediting his own organizational acumen as the reason construction ever started.

The only thing holding the project back, for years, was the drawn-out wait for a political green light from the province. Successive PQ and Liberal governments had no interest in allowing an English hospital to rise from the vacant Glen Yards site while francophones scrapped over whether to build in Outremont, the affluent francophone bastion, or the downtrodden east-side core.

A prominent separatist group and some Quebec nationalists complained that there shouldn't be a separate English hospital at all.

The idea of building new super-hospitals to replace several decrepit hospitals, some dating to the Victorian era, first surfaced in 1991. In the late 1990s, eight of the city's hospitals were merged into two networks – the McGill University Health Centre and the Centre hospitalier de l'Université de Montréal. In 1999, the province announced it would turn the two networks into prestigious and gigantic bricks-and-mortar institutions.

After a decade of bickering over language, location, specialties, and which of the old hospitals would be bulldozed, construction finally began three years ago. The English hospital complex is expected to be completed in 2015. The French hospital should have a first phase open in 2016 but won't be entirely ready before 2019.

The institutions

McGill University Health Centre

When the McGill University Health Centre was introduced in 1994, the promise was that it would become one of the 10 best medical institutions in the world, a magnet for research and innovation. "The status quo is not an option," said the MUHC chairman, Alex Patterson, 21 years before the new hospital would be complete.

The genesis of the health centre dates back to the early 1990s, when provinces were making big health-care budget cuts. One of the most popular approaches was to consolidate the administration of various hospitals. Most of Montreal's English-language health-care institutions are teaching hospitals affiliated with Canada's oldest and most prestigious medical school at McGill University, so it was a natural unifying force. There was a recognition, however, that most of these facilities were old and rundown, and merely removing a layer of bureaucracy was not going to solve that fundamental problem. The idea of a "super-hospital" quickly evolved from being a "virtual" facility to a new, bricks-and-mortar one.

But, along the way, the initial idea of replacing several old facilities with a new one succumbed to political pressure and the MUHC took shape as a new institution that would exist in addition to many of the old ones.

SNC-Lavalin Group Inc.

One measure of how important Lavalin Inc. was to Quebec in 1991 was how the provincial government forced smaller SNC Group Inc. to take over its giant, debt-ridden rival. The province literally declared Lavalin "too big to fail."

The combined SNC-Lavalin Group Inc. has grown exponentially from there. From Vancouver's rapid transit system to the Alberta oil sands to Ontario's Highway 407, SNC-Lavalin has had its stamp on many of Canada's biggest infrastructure projects. At $1.3-billion, SNC's contract to build Montreal's hospital complex is dwarfed by some of its national and international projects. But it should have been a prestigious hometown jewel for the Montreal-based company rather than just another piece of Quebec's growing construction and engineering corruption scandal.

The players

Arthur Porter

Born in Sierra Leone, Arthur Porter, the former head of the MUHC and the national Security Intelligence Review Committee, was known for hosting lavish parties, for his dapper bow ties and eloquent speech. Dr. Porter wowed Montreal's anglo upper crust with his networking and apparent ability to get the hospital project moving. Now a wanted and apparently sick man, Dr. Porter spends his days holed up in his Bahamas cancer clinic where, he says, he is trying to heal himself. Inoperable lung cancer has spread to his liver, he says. He says he has no immediate plan to return to Canada to face justice.

Pierre Duhaime

When he was named CEO of SNC-Lavalin Group Inc. in 2009, Pierre Duhaime was seen as a steady hand to take hold of the tiller. The promotion of Mr. Duhaime, a company insider who made his name in metallurgy and mining, was seen as a triumph of a profitable corporate culture. He was also described as a fitting choice as the company looked to extend its global reach. Mr. Duhaime stepped down last year as the company investigated $56-million in mystery payments made for two projects, including the hospital. He now awaits trial at his Montreal home.

Riadh Ben Aissa

Born in Tunisia, Riadh Ben Aissa ran SNC's worldwide construction wing and was known within the company as the man to put out fires when international projects got in trouble. Mr. Ben Aissa was accused last year of making millions of dollars in payments over the objections of corporate overseers. In a separate criminal investigation, Mr. Ben Aissa was arrested and detained in Switzerland in April, 2012, by prosecutors who are investigating his alleged role in paying an estimated $160-million in bribes to Saadi Gadhafi, the son of the late Libyan dictator. It's unclear when he might return to Canada to face charges on the MUHC deal.

Yanai Elbaz

Yanai Elbaz, the MUHC's former director of redevelopment, was the first of the five accused to face charges in court in Montreal this week, but it wasn't the first time his name has been associated with corruption allegations. Mr. Elbaz was named at the Charbonneau corruption inquiry as a frequent guest of construction boss Paolo Catania at the exclusive 357c club. Mr. Catania is one of the lead figures accused of rigging the bidding system on Montreal public-works contracts. Mr. Elbaz was released on $150,000 bail while he awaits trial.

Jeremy Morris

Jeremy Morris, a principal in Nassau-based Sierra Asset Management Inc., is one of the lesser-known figures in the MUHC-SNC scandal. SNC funnelled $22.5-million to the company, and SNC auditors were unable to find any evidence the company did any work for the money. Police allege the company was a front for

The politicians

Philippe Couillard

Of all the politicians with links to Arthur Porter, none have faced as many questions as Philippe Couillard, the former health minister and current front-runner to replace Jean Charest as Liberal leader in Quebec. Dr. Porter was a close ally and acquaintance, Dr. Couillard has admitted, but it's clear he's getting tired of the question, saying he too was "fooled." Dr. Couillard has faced repeated questions about the consulting company he founded in 2010 with Dr. Porter (a company Dr. Couillard says never conducted any business activities) and a fishing trip the men took together at the invitation of the New Brunswick government. "It's an attempt to discredit me for political reasons. I had relations with Dr. Porter that were no different than dozens of other people in Montreal. It has to stop at some point," Dr. Couillard said following a recent campaign event.

Stephen Harper

The federal government has little direct role to play in the Montreal hospital project, but Prime Minister Stephen Harper was still drawn to Dr. Porter's charms. There were garden parties at 24 Sussex Dr. in 2007 before a government-paid limousine ride in 2008 brought Dr. Porter from Montreal to the national capital and an appointment to the Privy Council and the Security Intelligence Review Committee, where Mr. Porter would be entrusted with sensitive matters of national security. In 2010, Mr. Harper made Dr. Porter chair of the committee. One year later Dr. Porter resigned from SIRC amid revelations he was involved in business in Sierra Leone with Ari Ben-Menashe, a former arms dealer based in Montreal. Mr. Harper has worked to distance himself ever since. "You know, I don't know what to say," Mr. Harper said during a visit to Rivière-du-Loup, Que., on Thursday. "I just point out that none of these matters relate to his work in his former federal responsibilities."

David Angus

One of Dr. Porter's most vocal and loyal supporters, retired senator David Angus, a Conservative fundraiser going back to the Mulroney era, was one of the most frequent notables at Dr. Porter's side as he dazzled Montreal and pushed the hospital project forward. Mr. Angus became chair of the MUHC board in 2007. The Conservative stalwart described Dr. Porter as a "first-class operator and very straight shooter" within hours of hearing the news that he was charged in connection to allegations of corruption last week. Mr. Angus has declined to describe what role he played, if any, in Dr. Porter's federal appointments.

What went wrong

Investigators accuse SNC-Lavalin Group Inc. executives Pierre Duhaime, the company's former CEO, and international construction boss Riadh Ben Aissa, of arranging to pay up to $22.5-million to Arthur Porter and Yanai Elbaz, two of the public officials involved in the complicated process to award SNC a $1.3-billion contract to build part of Montreal's English hospital complex.

They allegedly used a Bahamian company named Sierra Asset Management to funnel part of the money.

Jeremy Morris, a man believed to be a principal with the company, and the four other men face a total of 24 counts of fraud, paying or accepting bribes, breach of trust and money laundering.

SNC's trouble overseas

The alleged bribes that SNC-Lavalin paid to become the builder of Montreal's new English-speaking hospital complex are just part of a much larger scandal that has engulfed the company for the past year and a half. Efforts by Canada, Switzerland and the World Bank to clamp down on companies that win business with bribes have created a major cross-border crisis for the Montreal-based engineering giant.

Bangladesh

The first public sign that SNC-Lavalin had some major legal problems ahead of it came in September, 2011, when a team of RCMP officers descended on the company's Oakville, Ont. office. The office building, just west of Toronto, is a long way from the impoverished nation of Bangladesh – but it was SNC's alleged conduct in that country that compelled the RCMP to act. The World Bank, which at the time was preparing to finance a six-kilometre bridge for the Bangladeshi government, sounded alarm bells when it discovered that SNC had allegedly offered a cut of a bridge contract to several officials, including the then-communications minister Syed Abdul Hossain. The World Bank cancelled its $1.2-billion loan and referred the case to the Mounties, who have since charged two SNC employees under Canada's Corruption of Foreign Public Officials Act, the law that forbids foreign bribery.

Libya

As revolutions started to sweep over North Africa in the spring of 2011, SNC-Lavalin shut down its many projects – including a Libyan prison and an airport – and got out of harm's way. But the company's greatest threat at that time was not gun-wielding rebels. Rather, it was a group of Swiss forensic investigators. Quietly, behind the scenes, Switzerland's attorney-general's office had launched a probe of multiple multinational corporations that had been using the country's secretive banking systems to channel bribes to foreign dictators, a criminal offence under Switzerland's anti-bribery laws. Working in conjunction with the RCMP, the Swiss determined that SNC's executive vice-president for construction, Riadh Ben Aissa, had allegedly done much more than wine and dine the family of the late Colonel Moammar Gadhafi; in fact, investigators suspected that he had used a complex web of shell corporations and Swiss bank accounts to funnel an estimated $160-million to Saadi Gadhafi, the late dictator's third-born son. So when Mr. Ben Aissa landed in Switzerland in April, 2012 – only a few months after an acrimonious parting of ways with SNC – he was promptly arrested. He has been jailed there ever since, on suspicion of bribery, fraud and money laundering. The investigation into SNC's alleged bribes continues.

Algeria

Over the past decade SNC has turned, on a number of occasions, to the same "agent" to help it secure contracts in Algeria. His name is Farid Bedjaoui, a jet-setting money manager who was educated in Montreal and is the nephew of a prominent Algerian diplomat and politician, Mohammed Bedjaoui. But investigators in Switzerland and Italy have started to question where all of Mr. Bedjaoui's money goes, and have alleged that he was used by several oil and gas service companies as a conduit to transfer more than $200-million in bribes to Algerian leaders. SNC has declined to say what projects they hired Mr. Bedjaoui to secure, but The Globe and Mail has learned that he has been used on several projects worth a total of more than $1-billion. A few weeks ago, police in Switzerland, Italy and France executed co-ordinated raids on several banks and residences, including Mr. Bedjaoui's Paris apartment.