Why Trudeau’s Plea-Deal Headache Just Got a Lot Worse

(Bloomberg) -- Canadian Prime Minister Justin Trudeau's rough start to the year has gotten much worse. It was bad enough when a newspaper charged his office had improperly leaned on his former attorney general, Jody Wilson-Raybould, to settle fraud and corruption charges against a prominent Quebec construction firm. The damage grew graver when she told lawmakers the article was true -- and that Trudeau himself had exerted pressure she considered improper.

1. What did she say?

Wilson-Raybould, who until January was the government's top lawyer and Trudeau's justice minister, gave a detailed account of how the prime minister and his most senior aides pressured her over several months to “help out” SNC-Lavalin Group Inc., an engineering giant based in Trudeau's home town of Montreal. Wilson-Raybould said this week in Ottawa she “experienced a consistent and sustained effort by many people within the government to seek to politically interfere,” and that she faced “veiled threats” about what might happen if she refused to order public prosecutors to allow SNC-Lavalin to settle attempted bribery and fraud charges out of court.

2. What does it mean for Trudeau?

The testimony is problematic for the prime minister on a number of levels, especially with an election coming in October. Since the Globe and Mail newspaper first reported the allegations in February, Trudeau has denied there was anything untoward about conversations he or his staff had with his attorney general, a position he reiterated Thursday in comments to reporters in Montreal. Wilson-Raybould's testimony, however, in part contradicts the prime minister. While she doesn't think any laws were broken in the efforts to pressure her, she decried them as inappropriate.

3. Isn't Trudeau all about giving women more of a voice?

Wilson-Raybould alleges she was shuffled to a new ministry because of her stand on the SNC-Lavalin case, deepening the impression Trudeau tried to solve a political problem by replacing his attorney general. None of this is good optics for a prime minister who built a political brand touting his feminist credentials, pledging to restore good relations with indigenous communities and promising to uphold the rule of law in the face of political pressure, in particular from China in the case of the detained Huawei Technologies Co. executive Meng Wanzhou.

4. Will it hurt Trudeau's election chances?

Trudeau's Liberals had been expected to cruise to victory in October. However, the scandal has already cost the prime minister his principal secretary and closest adviser Gerald Butts, who resigned Feb. 18, six days after Wilson-Raybould left her post. After the former attorney general's revelations -- in which she alleged inappropriate behavior by almost a dozen other aides to the prime minister, as well as by Michael Wernick, the country's highest-ranking public servant -- it's unclear whether more resignations will follow, or what the future holds for Wilson-Raybould, who remains a member of the Liberal caucus. Perhaps most crucially, Trudeau's brand as one of most progressive leaders in Canada's history has been tarnished.

5. What happens now?

Trudeau is standing his ground. Speaking to reporters Thursday in Montreal, the prime minister said he and his staff “have always acted in a professional manner. I totally disagree with the former attorney general's characterization.” He also said, to his knowledge, none of his staff has been contacted by police. It's possible the scandal could blow over, but the ordeal dredges up ghosts of the party's past, which is marked by hand-in-glove ties with corporate Canada -- particularly in Quebec. Those impressions have hurt the party in previous elections, and the current scandal has already driven the Liberals lower in national polls.

6. Is there a silver lining?

Trudeau and his team have consistently said that one of their top concerns during their conversations with Wilson-Raybould was the future of SNC-Lavalin, which employs 9,000 people in Canada and is a pillar of the economy in Quebec. Trudeau's path to re-election runs through the largely French-speaking province, where his defense of SNC-Lavalin is being applauded.

7. What other damage could the case cause?

It could hurt Trudeau's attempt to sort through the many delicate issues raised by the Huawei case. Meng, the company's chief financial officer and daughter of its founder, was arrested in Canada on a U.S. extradition request over potential violations of Iran sanctions. China's government is calling for her release and has threatened retaliation if Canada moves ahead with extradition. Trudeau's defense has been that he can't intervene, a position that may be undermined by the report of meddling in the SNC-Lavalin case. The justice department is expected to rule in the coming days on whether the country can proceed with formal extradition hearings.

8. Where does it leave SNC-Lavalin?

David Lametti, the new justice minister and attorney general, has signaled he could still overrule prosecutors and negotiate a settlement, but this may be increasingly difficult now that the case has become so politicized. The company was charged in 2015 with attempted bribery and fraud related to construction projects in Libya. But SNC says it has given up on settling corruption charges and is now focusing on preparation for a trial. The legal battle will probably last “a number of years,” but SNC is confident it will get “the right outcome,” Chief Executive Officer Neil Bruce told analysts on a conference call Feb. 22.

The Reference Shelf

A columnist's view of how this could bring down a government.
The resignation of Trudeau top aide Gerald Butts.
Raybould's statement when she was moved from justice.
Her resignation and Trudeau's reaction.
Stories on SNC's legal troubles around bribery charges in Libya, a record ban on World Bank projects, and campaign contributions.

To contact the reporters on this story: Chris Fournier in Ottawa at cfournier3@bloomberg.net;Josh Wingrove in Ottawa at jwingrove4@bloomberg.net

To contact the editors responsible for this story: Theophilos Argitis at targitis@bloomberg.net, Stephen Wicary, John O'Neil