Thursday, October 3, 2013

Leighton denies bribery, corruption claims in Asia and the Middle East

The construction company Leighton Holdings says it is co-operating with federal police amid allegations it paid millions of dollars of kickbacks to win contracts in Iraq.

Fairfax Media has obtained hundreds of confidential documents that it says show corruption was widespread and, in some cases, approved across Leighton's international businesses.

Listen to my story which includes an exclusive interview with former Leighton chief executive Wal King

The documents include a handwritten note from November 2010 that allegedly shows former chief executive Wal King approved $42 million in kickbacks to "a firm in Monaco nominated by Iraqi officials" for a $750 million oil pipeline contract.

The six-month investigation also exposes alleged plans to pay multi-million dollar kickbacks to win contracts to build a barge in Indonesia, as well a dam-building project in Malaysia.

Leighton voluntarily reported the Iraq and Indonesia incidents to the AFP in 2011 but it has refused to confirm when the alleged breaches of its code of ethics occurred.

The AFP says it is treating the case as a priority, and "working to ensure the matter is thoroughly investigated".

Mr King, who was chief executive of Leighton for 23 years until retiring at the end of 2010, told the ABC he was not aware of the activity in the reports and will issue a statement this afternoon.

In a statement, Leighton says it takes the accusations seriously and "is deeply concerned about the suggestions of impropriety".

It described the Iraq investigation and the construction of a barge in Indonesia as "exceptional instances".

"Leighton continues to cooperate with the AFP while the AFP undertakes its investigation," the statement says.

"We are not aware of any new allegations or instances of breach of our ethics."

Leighton has taken action in NSW Supreme Court to recover $5.6 million from a former employee for alleged breaches of "contractual and fiduciary duties" in relation to the construction of the barge in Indonesia for a subsidiary, Leighton Offshore Pte Limited.

And the company says it has already conducted internal investigations into the Iraq case.

It dismissed a senior executive in July 2012 in relation to the Iraq matter, and says it has changed its management and risk structures and revised its code of business conduct.

The allegations come as the Reserve Bank confronts claims that its subsidiary Note Printing Australia tried to strike a deal an illegal deal with Iraq in 1998.

The Australian Securities and Investments Commission (ASIC) says the reports are a matter for the AFP, because such activity is governed by the Commonwealth Criminal Code.

But Independent Senator Nick Xenophon has stepped up his criticism of ASIC in light of the new allegations, saying the regulator should have the power to investigate in such cases.

"If it's an Australian-registered company, it ought to be within the domain of ASIC to look at bribes being paid by an Australian-based company or a company with significant Australian operations in relation to their conduct overseas," he said.

When Mr King's retirement was announced in 2010, Leighton chairman David Mortimer praised his contribution to the company.

"During Wal's leadership, Leighton has risen from being a middle-ranking Australian construction company to a global leader as a contractor and the world’s largest contract miner," Mr Mortimer said at the time.

"Just recently, Engineering News Record ranked Leighton as the 12th largest contractor by revenue in the world."

Leighton shares fell sharply in early trade and at 10:25am (AEST) were down 8.9 per cent at $17.85.

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