By Tara Hoke
Situation
In 2011 Swiss authorities began an investigation of an executive vice president of the Canadian-based engineering conglomerate SNC-Lavalin. The investigation stemmed from suspicion that the executive had used a Swiss bank account issued in his name to steer millions of dollars in illicit payments from his firm to a family member of the Libyan dictator Muammar el-Qaddafi (Moammar Gaddafi) to secure a major pipeline project and other lucrative contracts for SNC-Lavalin in the North African country.
When the investigation was reported in the news, SNC-Lavalin issued a press statement announcing the vice president's departure from the company. While not directly offering a reason for the departure, the statement alluded to the current "public attention" concerning its employees' conduct and noted that all employees at the company "must comply with our Code of Ethics and Business Conduct." In response, the former vice president filed a wrongful termination suit against the company, alleging that he had been made a scapegoat for the company's wrongdoing and asserting that his every action had been at the behest of his superiors.
This exchange was merely the beginning of what would prove to be a deluge of criminal and civil lawsuits, professional reprisals, and public scandal for SNC-Lavalin and its corporate leadership. In 2012 the company's chief executive officer resigned when an independent review commissioned by its board revealed that the chief executive had personally approved more than $50 million in suspicious payments. Later that year, this former executive was criminally indicted for paying bribes and conspiring to commit fraud in procuring a billion-dollar contract for a Montreal hospital. Newspaper accounts reported that a division of SNC-Lavalin had for years used a "secret account code" to earmark funds for payment of bribes in connection with projects in Nigeria, Uganda, Kazakhstan, and several other countries.
In 2013 the World Bank announced that it would impose a 10-year ban on SNC-Lavalin and more than a hundred of its affiliates based on its finding of misconduct on an SNC-Lavalin project in Bangladesh. That same year the company was forced to disclose that money falsely attributed to a gas project in the United Arab Emirates had in fact been used for payments to "unknown agents." In 2014 the Swiss authorities' investigation of the company's former executive vice president ended with his indictment on charges of money laundering, fraud, and corruption, and Canadian authorities in turn pursued their own criminal charges against him and other current and former SNC-Lavalin senior executives.
Despite sweeping changes in leadership and the implementation of a new global ethics program, SNC-Lavalin is still facing federal charges arising from the widespread findings of corporate fraud and corruption, and the penalties could include complete disbarment from all Canadian public works projects for up to a decade. Hearings are expected to begin in 2018.
Question
If the executives involved in this case had been ASCE members, how would their actions have violated ASCE's Code of Ethics?
Discussion
Canon 6 of the code reads as follows: "Engineers shall...act with zero tolerance for bribery, fraud, and corruption," and canon 5 states that engineers "shall build their professional reputation on the merit of their services and shall not compete unfairly with others." Category (a) in the guidelines to practice for canon 5 also is germane: "Engineers shall not give, solicit, or receive, either directly or indirectly, any political contribution, gratuity, or unlawful consideration in order to secure work."
Though canons 5 and 6 are explicit in proscribing bribery and corruption, a review of the SNC-Lavalin case suggests a number of other infractions of ASCE's code: a failure to serve clients and employers faithfully, as required by canon 4; a lack of truthfulness, in violation of canon 3; and an overall rejection of the canon 1 mandate to protect the public interest. Had this case involved ASCE members, it is likely that the Committee on Professional Conduct would have found that the members had violated as many as five of the code's canons.
While the SNC-Lavalin case provides an example of corruption on a grand scale, it is an unfortunate truth that bribery and fraud have been found to occur at engineering and construction firms of all sizes and in all parts of the world. Estimates of the amounts lost annually to corruption range from $1 trillion to $2.6 trillion, or as much as 5 percent of the global gross domestic product. While the true cost of corruption may be impossible to quantify, it is clear that any diversion of critical infrastructure funding through illicit payments has an adverse effect on the project in question and on the people who will rely on and benefit from it.
If the SNC-Lavalin case demonstrates the pernicious effect of bribery and corruption, it also offers an example of perhaps the greatest catalyst for such practices: a corporate culture that directly or implicitly encourages employees to secure work at all costs, even if it means crossing legal and ethical boundaries in the process. This suggests that bribery and corruption could best be deterred by a corporate environment that promoted ethical behavior and compliance with the law at all stages of engineering or construction projects.
Corporate leaders and organizations seeking assistance in establishing an ethical corporate culture may wish to examine ISO 37001 (www.iso.org/iso/home/standards/management-standards/iso37001.htm), a standard recently adopted by the International Organization for Standardization. Described as an antibribery management system, ISO 37001 defines the crucial elements of a corporate antibribery policy and outlines procedures for implementing it. The standard provides information on communication and training; risk assessments; oversight of internal activities and outside associates; internal audits and improvements; and investigating and reporting instances of noncompliance.
While the focus of the standard is on preventing bribery, the policies and controls it recommends could be extended to combat other ethical lapses. The processes are designed to be implemented within an organization's existing management structure and can be tailored to organizations of any size. They are suitable for both public- and private-sector entities, as well as for nonprofit groups. If they so desire, organizations can seek independent certification that their processes comply with ISO 37001. For their part, procuring agencies could promote the use of ISO 37001 by making compliance with it a prequalification requirement or by offering points in the evaluation process to firms that submitted evidence of such compliance.
While a voluntary standard such as ISO 37001 may offer a template for establishing an ethical corporate culture, ultimately the greatest predictor of success for such measures is the support provided by the organization's leadership. While employees at all levels must play a role in conforming to ethical standards, a corporate culture of trust and integrity cannot survive without a genuine commitment to those principles at the very top.
Tara Hoke is ASCE’s general counsel and a contributing editor to Civil Engineering.
© ASCE, ASCE News, March, 2017
