Stephen Jarislowsky, a Canadian investing icon and billionaire, and former director for SNC-Lavalin, is calling on the engineering firm at the centre of a scandal in Ottawa to allow shareholders to vote on the sale of a lucrative stake in the 407 toll road.
SNC, whose fortunes have been hobbled by criminal charges stemming from allegations of bribery in Libya several years ago, announced plans this month to sell a 10 per cent stake in the Ontario freeway to a Canadian pension fund for $3.25 billion. Proceeds are to be used, in part, to pay down debt and shore up the balance sheet.
In an open letter posted on the website of the Foundation for the Advancement of Investor Rights (FAIR Canada), where Jarislowsky is a director, the veteran investor points out that the value of SNC’s 16.5 per cent holding in the 407 toll road’s assets represented about 80 per cent of the engineering and construction company’s market valuation at the time of the announced sale.
“The board of SNC-Lavalin is seemingly content to deny shareholders the chance to retain a top-quality investment,” wrote Jarislowsky, who was a director of SNC and its predecessor companies from 1975 until 1996.
“Instead, with this 407 sale, shareholders are forced by its own board to gamble on rescuing a now near-worthless asset, a deal that strikes me as cruel and Machiavellian,” wrote the 93-year old.
Jarislowsky, who founded Montreal-based investment manager Jarislowsky Fraser Ltd., which had $40 billion in assets under management when it was sold to Bank of Nova Scotia last year, called on the business community and securities commission to “stand up against this possible betrayal of the rights of shareholders.”
In the letter, he said the toll road’s income-generating capacity and growth potential stands in contrast to SNC’s engineering business, which is dealing with challenges beyond the corruption charges the firm is facing.
“Why would one not remain invested in such a superb asset after having suffered in the market as a result of the dishonesty and its aftermath?” Jarislowsky wrote.
“I doubt that the engineering company can be rebuilt, since it has lost its best people and faces a long criminal trial which may go on for years.”
Jarislowsky Fraser was among SNC’s largest shareholders and most vocal critics in 2012 and 2013 when the bribery allegations shook the company. The RCMP charged SNC with corruption and fraud in 2015, charges the company continues to fight.
Investment guru Stephen Jarislowsky describes the decision to sell SNC-Lavalin’s stake in Highway 407 as “cruel and Machiavellian.”
The case returned to public prominence in February of this year, following a report that federal justice minister and attorney general Jody Wilson-Raybould had faced political pressure to intervene after the Public Prosecution Service of Canada declined last year to invite SNC to negotiation a remediation agreement, which would have allowed the company to pay a fine and resolve the matter rather than go to trial.
The remediation agreement regime is new to Canada, but a similar enforcement tool called a deferred prosecution agreement, or DPA, has been used in the United States since the early 1990s. The United Kingdom also adopted a mechanism in 2014 that allows for criminal prosecutions against companies to be deferred in certain circumstances.
Jarislowsky touched on the criminal prosecution in his letter, suggesting that a deferred prosecution would have been appropriate.
“Despite the passing of new legislation, common in advanced economies, that uses fines instead of criminal prosecution in order to preserve the jobs of the majority of employees, who were not involved in the criminal activities, SNC-Lavalin was ordered to face criminal charges,” he wrote.
“To date, this error has not been reversed, a situation I have difficulty understanding. After all, individual people are guilty of crimes, not shareholders nor loyal employees. To fine the shareholders doubly, when they had no impact on poor decisions, makes little sense to me.”
SNC Lavalin did not respond immediately to a request for comment on Jarislowsky’s letter.
