SLIDESHOW: Top 5 Business Scandals of 2012
- Municipal Corruption
In Canada, cities are underfunded and responsible for delivering most of what we all need for day-to-day living: roads, infrastructure, etc. Underfunding means that municipal politicians and bureaucrats are not very well paid compared to their provincial and federal counterparts but they have a say over an incredible number of pricey contracts. Not a great combination. In Montreal, years of systemic corruption came to light at the Charbonneau Commision examining ties between the city's political class and the construction industry. Shocking testimonies revealed some of the city's bureaucrats accepted thousands of dollars in cash bribes from construction magnates and in exchange, they rigged public contracts. The revelations led to resignations, including that of the mayor, Gerald Tremblay. The mayor of Laval (Quebec's third largest city), Gilles Vaillancourt, also resigned after being charged with alleged fraud, corruption, breach of trust and conspiracy by Quebec's anti-corruption task force. Not to be outdone, the mayor of London, Ont., Joe Fontana, was charged with allegedly using taxpayer money to pay for his son's wedding reception.
- CP Rail
Less about money than ego the fight at CP Rail shed a harsh light on Canada's corporate class. The board at CP, a venerable but under-performing Canadian company was stocked with a who's who of this country's business elite. When American hedge fund billionaire Bill Ackman, who owns a significant minority of share, got fed up with the company's lackluster performance he staged the highest profile boardroom coup Canada's ever seen. He used his share position to launch a proxy fight to force the resignation of the CEO and chairman. After a very expensive and public skirmish, Ackman succeeded in installing his choice as CEO and in getting rid of a number of directors.
After two years of publicly defending its decision to purchase the Lockheed-Martin F-35 fighter jet to replace its aging fleet, the federal government pulled an about face in December, announcing it was cancelling the contract and starting over. Complaints over an uncompetitive bidding process and escalating costs forced the government into their 180 degree turn. The government had initially claimed the jets would cost taxpayers about $9 billion. Revised estimates that took into account maintenance costs massively inflated the price to about $45 billion. It takes something special for this government to admit they made a mistake
In many ways, it doesn't get any more scandalous. SNC-Lavalin, one of Canada's most revered companies and a global engineering giant, was shown to be pretty cavalier in its pursuit of global contracts, including developing close ties with Libyan dictator Muammar Gaddafi and alleged payments to his regime. The scandal has decimated the company's stock and led to the arrest of former CEO Pierre Duhaime.
LIBOR is the London inter-bank offered rate -- basically a key determinant of how much it costs banks to borrow money from each other. The LIBOR scandal is centred in the UK and basically saw traders artificially manipulate the rate for their own gain. The scandal has cost the British bank Barclays about $450 million in fines and forced the resignation of the CEO but there's now a Canadian connection with the Competition Bureau investigating possible roles in the affair by the Canadian arms of international banks such as the Royal Bank of Scotland, Citibank and HSBC.