UPDATE 1-SNC-Lavalin holds payments to ex-CEO arrested for fraud

* Engineering firm caught in widening ethics scandal

* SNC says it may not have been aware of all facts

* Former CEO left with C$5.0 million exit package

* CFO to be replaced, but will remain with SNC

Dec 13 (Reuters) - SNC-Lavalin Group Inc, Canada's biggest engineering company, said on Thursday it will suspend payments to its former chief executive, saying Pierre Duhaime's arrest last month on fraud charges suggested it may not have been aware of all the facts when he resigned.

Duhaime resigned in March after an internal investigation found that $56 million in company funds had gone missing, paid to unknown agents on projects that did not exist.

He was arrested on Nov. 28 by Quebec's anti-corruption squad on charges of fraud, conspiracy to commit fraud and use of false documents.

Duhaime could not be reached immediately for comment.

SNC-Lavalin also said it had launched a search for a new chief financial officer. Once a replacement is in place, current CFO Gilles Laramée will become executive vice president for infrastructure, concessions and investment, a new role.

The company, one of the world's biggest engineering and construction firms, also published a full-page letter to its stakeholders in the Globe and Mail newspaper. The letter outlined new compliance and ethics policies.

"SNC-Lavalin's board and management are determined to put this unfortunate chapter in this great company's 101-year history behind us, all the while without forgetting the lessons learned," it said.

The company said it is cooperating with authorities and encouraged its employees to do the same. It also said some board members had decided not to stand for re-election.

Duhaime's exit package, as laid out in a proxy circular in April, is worth about C$5.0 million ($5.1 million), and includes C$1.9 million in salary, two years' pension credit and about C$55,000 for professional development.

Until the facts are clarified or resolved, payments under the arrangements will be held separately, said SNC-Lavalin.