UPDATE 1-SNC Lavalin CEO sees growth potential despite scandal

* New CEO, Robert Card, sees "a lot of potential growth areas"

* Card will focus on managing risk, growth and attracting best staff

* La Presse reports SNC made "dubious payments" to win Montreal contract

* SNC chairman says global economic slowdown will require repositioning

(Updates with CEO interview)

By Susan Taylor

TORONTO, Oct 1 (Reuters) - SNC Lavalin Group has strong long-term growth potential despite the chilling effect of a misconduct scandal, its new CEO said on Monday, even as a fresh report surfaced about mysterious payments allegedly made by the Canadian engineering and construction company to win a contract.

Chief Executive Robert Card, in his first day on the job, said he will need time to study the company and set a strategy to restore SNC to firm footing after a far-reaching ethics scandal first rocked the company earlier this year.

"Every company has things they can do better and that's what I'm going to be looking for," Card said in an interview with Reuters. "T he first priority is managing and mitigating risk to the employees, the clients and investors."

Card replaces former CEO Pierre Duhaime, who resigned as chief executive of 101-year-old SNC in March after an internal probe found that he had authorized $56 million in mystery payments to agents on construction contracts that did not exist.

During a conference call with financial analysts and media on Monday morning, both Card and Chairman Gwyn Morgan refused to answer questions about police probes into the wrongdoing.

Shares of SNC have fallen more than 20 percent since early February, when SNC announced that two executives, now implicated in the misconduct, had left the company.

In another headache for the company, Montreal's La Presse, citing unnamed sources, reported on Monday that SNC executives are suspected of having made C$22 million ($22.36 million) in "dubious payments" to get the giant C$1.3 billion contract to build a health center at Montreal's McGill University.

The newspaper said the C$22 million in payments, split up and paid out to fake companies abroad in 2010 and 2011, are part of the $56 million in rogue payments that SNC already disclosed.

"Investigations by domestic and international authorities continue," Morgan said on the conference call, referring to police investigations in Canada and Switzerland. "We are hopeful that these investigations will get to the bottom of any wrongdoing that may have been committed."


Card, a former long-time executive with U.S. engineering and construction rival CH2M Hill Cos Ltd, said h e's not "handcuffed" by those probes and has zero tolerance for unethical behavior.

While at CH2M, he shut down a multi-million dollar line of business in one country because, after two fatalities, the company could not ensure sub-contractor safety.

"We would issue the employees safety gear and they would sell it at night and come back with sandals the next morning. And so we exited that business," h e told Reuters.

Card won't rule out SNC working in any part of the world, even in countries where corruption is not as tightly policed or rigidly enforced as Canada.

"The board has made it clear that if they have to exit businesses or countries to resolve this, they are ready to do so. I'm not convinced that's required yet," he said in an interview.

While there is some speculation that Card will purge SNC management ranks to assuage investors still rattled by the misconduct scandal, Card said he has no such plans.

"My goal at this point is to go out and find the very best and bring them into the company," he told Reuters.

Card said he is confident in the company's long-term prospects, due to SNC's position at the "nexus of the world's critical problems of energy, resources, environment, water," but admitted the short-term outlook is less certain.

"SNC Lavalin has a lot of potential growth areas. We have to look at what is the best fit for the company's current capabilities and market outlook to know which ones are the best," he on a morning conference call.

"In my former company, we viewed SNC as strong but could be stronger in all of its core markets: infrastructure, mining, oil and gas, and its geographic spread, or key markets, where it has limited presence right now. So we'll be looking at all of those areas for future growth."

It will take about six months for a "blueprint" from the new CEO, who has the right experience to lead SNC out of its current mess, said AltaCorp Capital analyst Maxim Sytchev.


Still, SNC is not immune form the impact of a global economic slowdown that is affecting new projects across all sectors and geographies, Morgan said.

"This will require a repositioning into regions and sectors of global growth," he said. "It may take time, but the board is confident that Bob ... has the global perspective and the strategic insight to take us forward into the future."

Card, who said he has purchased close to C$1 million in SNC shares, has bought a home in Montreal and begun taking French classes with his wife Nancy. Card does not speak French, a bone of contention for some in Montreal, the financial hub of the French-speaking Canadian province of Quebec.

Montreal-based SNC has said it does not believe the mystery payments are related to Libya, where it has worked on several projects, including the construction of a prison for the now-deposed regime of Libyan dictator Muammar Gaddafi, but it cannot say where the projects were located.

SNC said its former head of construction, Riadh Ben Aissa, may have "direct and significant knowledge" about most of the transactions. Ben Aissa and former controller Stephane Roy, suspended by the company in February, had ties with Gaddafi's son, Saadi Gaddafi, Canadian media has reported.

Ben Aissa was taken into Swiss custody in mid-April on suspicion of corrupt practices, fraud and money laundering in connection with dealings in North Africa.

Canadian police are also probing bribery allegations against SNC executives involving a $1.2 billion bridge project in Bangladesh. The World Bank has suspended its loan for the development and temporarily barred a SNC Lavalin subsidiary from bidding on its contracts in the country.

SNC shares were down 64 Canadian cents at C$37.31 on the Toronto Stock Exchange in early afternoon trade on Monday. ($1=0.98 Canadian)

(Additional reporting By David Ljunggren in Ottawa; Editing by Frank McGurty)

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