Australian construction giant Leighton Holdings is under a significant legal cloud, with Melbourne lawyer and investor Mark Elliott having taken action to sue the company over its handling of a corruption scandal.
A writ issued in the Victorian Supreme Court last week alleges Leighton breached its continuous disclosure obligations regarding possible illegal payments in Iraq and a court case in which the company is trying to recover $5.6 million from a former employee with regard to corrupt behaviour over construction of a barge in Indonesia.
The action is separate from a class action suit being conducted by plaintiff law firm Maurice Blackburn on behalf of shareholders against the company over its disclosure practices, and comes after more than $957 million was wiped off the value of the company on the stock market last week.
That decline came after Fairfax Ltd reports which detailed allegations of bribery and corruption and described what it said was a culture of rewarding illegal behaviour or incompetence within the company.
Elliott says the company, which in February last year shocked the market by revealing possible illegal payments made by one of its subsidiaries in Iraq, should have been more up-front about the extent of the allegations, which are the subject of investigations from the Australian Federal Police.
Leighton, however, has denied the claims. The company issued a brief statement to the ASX on Monday denying there was a proper basis for the claim and saying it will ‘vigorously’ defend the action.
A subsequent further statement specified that the company referred the matter immediately to the Australian Federal Police upon becoming aware of it in November 2011 and kept the information confidential until February 2012 only to facilitate collection of evidence.
Furthermore, the company lashed out at media coverage regarding the possible employee fraud concerning the construction of the barge, which Leighton says has deflected the fact that the issue had been investigated on multiple occasions by external auditors, engineers and lawyers – steps it says were taken long before media reporting on the issue.
In the statement, the company further hit out at criticisms of its governance and integrity.
“Leighton does not propose to correct all of the inaccuracies contained in a number of media articles,” the statement read. “It is not appropriate for Leighton to descend to a debate over matters of fact and matters of error when those matters are the subject of investigatory and court proceedings."
“[However] Notwithstanding the seriousness of the matters raised, Leighton takes exception to the sweeping criticisms of its governance structures, processes and integrity. Leighton’s board and management condemn any form of corrupt or fraudulent behaviour.”
The latest events follow years of turmoil at Leighton which, aside from the aforementioned allegations, has endured massive write-downs on major projects and a walkout by non-executive members of its board over concerns with the company’s governance arrangements.