The Quebec engineering industry could see it coming.
Since unscrupulous entrepreneurs and corrupt civil servants started testifying at the public inquiry on public works contracts, Justice France Charbonneau's courtroom has become a chamber of horrors. The hearings will resume in September. But Quebeckers who have watched this year-long striptease of sleaze have seen enough. They want retribution.
Just how the engineering firms should be punished is a major concern in the business community. Some now fear that Quebec is going too far.
The Charbonneau inquiry's final report is not expected any time soon. Most trials haven't started. But in the meantime, potholes still need to be filled.
That has left the Quebec government and cities with the uneasy job of blacklisting some companies caught in scandal through newly crafted rules.
The stakes are sky high for firms such as Dessau Inc., which has let go over 100 employees since it was blacklisted by Quebec in June. Public works contracts in the province represent 75 per cent of Dessau's $775-million in annual revenue. The engineering firm was allowed to finish the work started but faces a cliff if it cannot get the ban lifted by proving it has truly cleaned up its act. Dessau is now looking for new sources of funding. "Everything is on the table," says spokesperson Jessie-Kim Malo, including the sale of the 5,000-employee firm.
Montreal and its boroughs' new rules illustrate how uneven this justice appears.
Excavator Pierre Allard is one of the few entrepreneurs who stood up to the collusion system that was rampant in Laval. In 2003, the Mascouche entrepreneur was asked to pull a bid away by another entrepreneur but refused to go along. When he landed the contract, an engineer forced him to deal with a supplier that was costlier than his. Then a Laval municipal employee refused to connect his pipes to the water system. Mr. Allard had to pay him off with $60 to get the work done. He then went on to denounce the employee to his supervisors.
While Ms. Charbonneau described his testimony as "comforting," the City of Montreal has just blacklisted his company, Excavation S. Allard, under a policy adopted in 2012. Anyone who has admitted to bribing or colluding is now excluded from its contracts. "Yes, it was $60, but the city can't make a distinction between a $60 and a $5,000 payoff. The fact is that he openly admitted this," said Darren Becker, the city's communications director.
In the meantime, Simard-Beaudry Construction Inc. has been able to retain a $2.2-million asphalt contract with the City of Montreal despite the fact its control was recently returned to controversial entrepreneur Tony Accurso.
Mr. Accurso was arrested three times in the past year and a half. In June, he was accused of defrauding Revenu Québec through a complex scheme to collect tax deductions with subcontractors. Mr. Accurso was already accused of fraud and bribery as well as having conspired to bribe Canada Revenue Agency employees in two unrelated affairs. None of the allegations have been proven in court. Two of his companies were found guilty of tax evasion in 2010 after they failed to pay $4.1-million in federal taxes.
And yet with its new policy, Montreal cannot blacklist Mr. Accurso's companies on the sole grounds two of his firms evaded federal taxes. His firms, however, could eventually lose their ability to bid in Montreal, just as Mr. Allard may regain the right to work for the city should he get the nod from Quebec's securities commission, l'Autorité des Marchés Financiers.
Through its new integrity law, Quebec asked the AMF to determine if firms are clean enough to work for the government, after they are investigated by the province's anti-corruption squad. But the whole process takes precious time.
Until now, three firms have been barred from bidding on Quebec contracts of over $40-million. But the AMF hasn't finished reviewing all the firms, including SNC-Lavalin Group Inc. Currently barred from Montreal contracts, SNC is anxiously awaiting the AMF's decision. Its order book has fallen to $9.7-billion from $10.1-billion at the end of 2012. And that isn't good news for a company with no controlling shareholder and a new activist investor.
Dessau now has 90 days to clean up its act and ask the AMF to reconsider its ban, and its future rests on reclaiming that right. Fears that Quebec might lose control over its engineering industry altogether have led to calls for steep fines to companies instead of bans. But that remedy would still be unfair to the firms who lost out on past rigged contracts.
There is no clear-cut way to punish the culprits without hurting innocent workers. But one thing is certain: Quebec must work fast so that its engineering firms have a clear path out of their corruption mess. This is not a bandage you can pull slowly in the faint hope it will hurt less.