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SNC hires reputation doctor, but the cure won’t come cheap

There are two ways to greet the announcement from SNC-Lavalin Group Inc. that it has hired one of the world's top corruption fix-it specialists as its chief compliance officer.

The good news is that Andreas Pohlmann led a successful clean-up effort at Siemens AG after the German-based industrial giant was embroiled in a nasty global bribery scandal in the 2000s. He's a big hire by new SNC chief executive Robert Card and will oversee the introduction of "the type of world-class compliance system that he helped install at Siemens," Mr. Card said.

Dr. Pohlmann, now a partner in a Frankfurt-based compliance and corporate governance advisory firm, is the second outside compliance expert to join SNC, after it hired former Watergate investigator Michael Hershmann last month as an independent adviser.

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The bad news? The recruitment of Dr. Pohlmann suggests SNC is gearing up for a broader and more expensive resolution to its widening bribery probe than the market seems to be pricing into SNC stock, which has had a nice recovery since the scandal broke open a year ago.

Recall that in December of 2008, one year after Dr. Pohlmann joined Siemens, the company agreed to pay $1.6-billion (U.S.) in fines to settle bribery charges against it.

Half of that money was paid to the U.S. Department of Justice, which spearheaded a tough investigation into Siemens, and the U.S. Securities and Exchange Commission, despite the fact Siemens is a German company and the alleged bribery took place in Asia, Africa, Europe, the Middle East and Latin America.

So far, we haven't heard anything about U.S. investigators – easily the world's toughest corruption fighters – dipping their fingers into the SNC case. The probes have largely been the domain of Canadian and Swiss investigators.

But what if that were to change? SNC isn't a U.S.-listed company, but no doubt the Justice department would join the trail if any of the company's U.S.-based operations were implicated in any way.

Now, consider the latest news on the SNC scandal: On Thursday, the Globe and Mail reported that investigators are probing SNC's operations in Algeria and one of its agents in the country.

We don't yet know which projects in Algeria are being probed, but we do know that SNC's Thermal Power division, which built and operated two thermal plants in Algeria in the 2000s, is based in the state of Washington. Could such a link be enough to prompt the U.S. Justice Department to investigate, particularly when it's not yet clear how much further the unfolding scandal, which touches SNC operations in Libya, Algeria, Bangladesh and Montreal, may spread?

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What is certain is that the SNC board has sent a clear message it is prepared to get to the bottom of every last serious ethical lapse in the company, come clean about it and make any and all changes that are necessary. During Dr. Pohlmann's tenure, Siemens' rapid remedial efforts, substantive reforms and full public acknowledgment of its transgressions won the company praise and allowed it to move on.

SNC investors should expect a similar game plan, and to a day when SNC, like Siemens, can restore its international reputation. The cost to get there, however, is another matter.

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About the Author

Sean Silcoff joined The Globe and Mail in January, 2012, following an 18-year-career in journalism and communications. He previously worked as a columnist and Montreal correspondent for the National Post and as a staff writer at Canadian Business Magazine, where he was project co-ordinator of the magazine's inaugural Rich 100 list. More

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