Corruption Claims Rock Leighton 1

Friday, October 4th, 2013
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Construction giant Leighton Holdings has been rocked by media reports containing allegations of mass corruption and cover-ups.

A Fairfax media report published on Thursday has outlined claims of multi-million dollar kickbacks in Iraq and a number of Asian countries and what it describes as abysmal corporate governance and a ‘culture of rewarding incompetence or corruption’.

According to the report, which the media group says has been based on a six month investigation involving hundreds of confidential company documents:

  • A Monaco-based firm known as Unaoil which is run by an Iranian family with close ties to Iraq’s oil minister and Prime Minister was allegedly paid kickbacks by Leighton via an $87 million contract of which the real value was ‘less than half’.
  • In 2009, then company chief executive Wal King and other top executives allegedly received an email from a whistle-blower about a ‘payoff’ made to a corrupt Leighton employee – allegations the report says became subject to a bungled investigation despite the concerns relating to a number of countries including Indonesian and India and exposing ‘criminal’ conduct including ‘systematic’ fraud.
  • The aforementioned whistle-blower also said he had heard Malaysian based businessman Sri Kumar, who worked with the company in Iraq, Indonesia, India and Tanzania received a ten percent kickback on certain projects, some of which was allegedly passed on to Leighton executives.
  • Rather than being sacked, Gavin Hodge, a manager who allegedly stole $50,000 worth of steel from Leighton to build a barge for an Indian company in a black market racket was allegedly given a bonus and thanked for his work by a Leighton executive.

Leighton shocked the market in February last year when it revealed it had reported possible illegal conduct with regard to payments the company said may have been made by one of its subsidiaries in connection with work to expand offshore loading facilities for Iraq’s crude oil exports.

In a written statement in a response to the allegations, Leighton denied the cover-up claims and defended the conduct of its directors and senior executives.

The company said it voluntary reported the alleged conduct in Iraq to the Australian Federal Police as soon as it became aware possible illegal activity may have occurred and subsequently dismissed a senior executive when a resulting internal review identified failures to meet the group’s governance standards. With regard to the Indonesian barge allegations, meanwhile, Leighton says it has taken action to recover $5.6 million against the former employee concerned.

Furthermore, the company says it has taken steps to improve governance, including revising its code of conduct, beefing up tender risk controls and establishing a new tender review process and beefing up its audit program and assurance function.

“Leighton takes these accusations seriously and is deeply concerned about the suggestions of impropriety” the company said in a statement on Tuesday. “We have more than 61,000 employees who are focused on delivering our 400 plus current projects to the highest ethical and professional standards. The Iraq investigation and the construction of the barge in Indonesia are exceptional instances that are the subject of either an ongoing confidential investigation by the AFP or litigation commenced by Leighton Holdings which is before the courts.”

The allegations are yet the latest blow to a company whose reputation has been damaged in recent years by mass write-downs on major projects such as Victoria Desalination Plant and Brisbane Airport Link, the sudden and unexplained departure of its chairman and chief executive in consecutive days in late 2011 and a walkout of non-executive directors earlier this year amid reports of interference with board decisions on the part of Spanish construction giant ACS, which controls Leighton via a controlling stake held by its subsidiary Hochtief.

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  1. Grant Spork

    The USA has anti corrupt practices legislation which compels USA registered enterprises to act ethically and to ensure that systemic corruption cannot occur. Companies that are caught undertaking corrupt practices are banned from all government contracts for a long period, and directors are held accountable. To avoid corrupt practices all staff of companies operating internationally are required to undertake training in recognising and illiminating corrupt practices. Australia should enact such legislation to mirror the US legislation. I believe this would preclude Australian companies caught offering bribes or back handers from participating in US government sponsored projects. Community expectations are that corrupt employees or officials should be investigated and brought to justice, which should include asset stripping of criminals, and long gaol sentences.