Trudeau Takes Solace in Quebec Where SNC Outcry Is More Muted

(Bloomberg) -- The biggest political crisis yet faced by Justin Trudeau originated in his home province of Quebec. That's also where voters, who hold the key to his re-election this year, may be the most forgiving.

Trudeau's former attorney general alleges the Canadian prime minister and his aides put heavy political pressure on her to help Montreal-based construction company SNC-Lavalin Group Inc. settle fraud and corruption charges. The scandal escalated on Monday with another key female cabinet minister quitting in protest, while Trudeau's former senior aide Gerald Butts, who quit amid the saga, is due to testify Wednesday.

Reactions to the explosive controversy have been more muted in Quebec, where columnists have kept their criticism several notches below peers elsewhere. Premier Francois Legault, meanwhile, has echoed Trudeau's arguments about the need to project SNC jobs.

“Perceptions are quite different; in Quebec the story is seen primarily through the lens of jobs and protecting this Quebec-based company,” said Daniel Beland, the Montreal-based director of McGill University's Institute for the Study of Canada. This “economic nationalism,” a political stance shared by all Quebec leaders since the 1960s, “doesn't resonate at all” outside the province, he said.

Quebec's distinct reaction is nothing new in Canada, where the largely French-speaking province has carved out special powers on issues including taxation and immigration and runs its own pension plan separate from the rest of the country. Trudeau, who represents a Montreal district in parliament, understands the strong attachment of voters to home-grown companies and the trauma of losing head offices -- a risk he allegedly flagged to former attorney general Jody Wilson-Raybould.

Bombardier Support

The tight relationship between Quebec and its large companies runs deep. When Bombardier Inc. was struggling with cost overruns and delays for its marquee commercial jet, the province stepped in with a $1 billion investment. Lowe's Cos. was forced to abandon an initial hostile bid for Quebec retailer Rona Inc. in 2012 after provincial lawmakers called it a “strategic asset.” It eventually bought Rona in a friendly deal four years later.

The ties run even deeper in the case of SNC because taxpayers' investments are at stake, according to Beland. The largest shareholder, with a 20 percent stake, is the Caisse de depot et placement du Quebec, the province's pension fund. The Caisse gave SNC a loan in 2017 to help finance its $2.7 billion purchase of WS Atkins Plc of the U.K. in a deal that included a promise the head office would stay in Montreal for seven years.

Vote Rich

Quebec, Canada's second-most populous province, holds 78 of Canada's 338 electoral districts and plays a decisive role in federal elections. Trudeau's Liberals have maintained a lead there so far, though it's narrowed after Wilson-Raybould's testimony. An Ipsos poll for Global News published Monday shows them backed by 35 percent of Quebec voters, followed by the Conservatives at 29 percent and the Bloc Quebecois at 19 percent.

Trudeau picked also up a seat in a by-election last week in the province, and pollster Quito Maggi said the Liberals had been on track to gain about 20 seats in the October election, from 40 currently.

“I still don't see anything significantly moving the needle yet,” Maggi said last week of the SNC saga. “I don't think people in Quebec see this as a scandal -- no one's lining their pockets, and those are the types of scandals Quebecers don't like, just like all Canadians.”

An Ipsos poll conducted from March 1 to 4 for Global News showed the Conservatives led by Andrew Scheer pulling ahead of the Liberals nationally, at 40 percent versus 31 percent. Trudeau is seeking a second term after winning a strong majority government in 2015.

Breaks Silence

Before Wilson-Raybould's dramatic testimony, the tone among Quebec commentators was supportive of Trudeau, who was understood to have pushed for ways to end the criminal case against SNC through a deferred prosecution agreement. The new legal tool, which in effect settles a criminal case, would prevent SNC from facing trial and a possible 10-year ban on government contracts if found guilty. About 3,400 of SNC's 9,000 Canadian employees are in Quebec, among a global workforce that tops 50,000.

Wilson-Raybould, a lawmaker from Vancouver, broke her silence last week with a detailed account of efforts by Trudeau and top aides to persuade her to step in on SNC's behalf. She said that Trudeau pressured her last September, in part, because his electoral district is in Quebec. She claimed he also didn't want bad news about SNC to erupt ahead of Quebec's provincial election in October, in which the Liberals' provincial cousins were defeated by Legault's Coalition Avenir Quebec.

The crisis worsened on Monday with the departure of Jane Philpott, Trudeau's treasury board minister, who quit in protest over the SNC ordeal. Philpott, from a Toronto-area district, says she will remain in the Liberal caucus.

Read more on Trudeau's crisis with this QuickTake

Wilson-Raybould said Michael Wernick, the clerk of the privy council and the country's top bureaucrat, warned her that SNC would "likely be moving to London" without help, and that she was repeatedly urged to consider potential job losses.

Yet there is little risk of SNC moving, in part because of the commitment in the Watkins deal, said Yuri Lynk, managing director of equity research at Canaccord Genuity Corp. That was echoed by Michel Nadeau, former deputy CEO of the Caisse.

Former Quebec finance minister Carlos Leitao, on the other hand, told BNN Bloomberg Television on Tuesday that the risk is “real.” Now a provincial lawmaker for the Liberals, Leitao said he sees “very broad-based support for the approach of the current federal government.”

The country's columnists outside Quebec have almost universally condemned Trudeau. Maclean's magazine latest cover reads “The Imposter.” Against that outrage, the tone in the province was more of concern, according to McGill's Beland. A Nanos Research poll for the Globe and Mail and CTV News conducted from Feb. 28 to March 1 shows that only 41 percent of people in Quebec back a trial for SNC, compared with 55 percent nationally who do.

Read about why SNC's CEO has ‘had enough'

This isn't to say Quebecers are blindly supporting SNC or Trudeau. “They went too far,” La Presse's editorial said on Thursday, referring to lingering “malaise” around the prime minister's action. Richard Martineau, a columnist for Journal de Montreal, even grew exasperated with fellow Quebecers.

“As for those who say we must defend Justin Trudeau because our prime minister wants to protect a Quebec champion...” he wrote. “Pleeeease! Justin only wants to save his butt and win the next election!”

To contact the reporters on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net;Josh Wingrove in Ottawa at jwingrove4@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Chris Fournier

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