Construction giant Leighton Holdings has vowed to vigorously defend itself against a shareholder class action relating to allegations of bribery and corruption in Iraq.
Leighton has been notified that Melbourne solicitor Mark Elliott filed a writ against the company in the Supreme Court of Victoria late last week.
LISTEN: Business editor Peter Ryan speaks with class action lawyer Mark Elliott
The writ alleges Leighton breached its continuous disclosure obligations under the Corporations Act by failing to reveal allegations of bribery and corruption against senior officers responsible for a $750 million oil pipeline contract in Iraq.
It also alleges the company failed to disclose an investigation of "misbehaviour" involving senior officers, including "misbehaviour the subject of a claim by Leighton against a former employee for $5.6 million", relating to the construction of a barge in Indonesia.
Mr Elliott, who is also a Leighton shareholder, told PM he launched the class action because he was concerned shareholders still did not know the full story about the alleged incident in Iraq.
The company denies there is a "proper basis for the alleged claim" and says it will vigorously defend itself.
Leighton voluntarily reported the incident to Australian Federal Police in 2011, describing it as a possible breach of its code of ethics, and notified the market in February 2012.
"The initial disclosure in February of last year had no impact on the share price and that's probably because the announcement was very innocuous - it talked about breaches of codes of ethics and similar wording," Mr Elliott said.
"I think you can see from activity in the share market on the 3rd and 4th of October last week that the share market was quite surprised by the most recent round of announcements and decided it was a billion-dollar problem now and marked the shares down accordingly."
Leighton has also attacked "sweeping criticisms" of its governance structures, processes and integrity in ongoing coverage of the allegations, revealed last week as part of a six-month investigation by Fairfax Media.
The reports revealed hundreds of confidential documents that Fairfax says show corruption was widespread, and in some cases approved, across Leighton's international businesses.
The documents include a handwritten note from November 2010 that allegedly shows former chief executive Wal King, who led the company for 23 years, approved $42 million in kickbacks to "a firm in Monaco nominated by Iraqi officials".
The investigation also exposed alleged plans to pay multi-million dollar kickbacks to win contracts to build a barge in Indonesia and a dam-building project in Malaysia.
Mr King has emphatically denied all allegations.
Today, Leighton issued a statement saying its board and management "condemn any form of corrupt or fraudulent behavior".
"Media coverage of the possible employee fraud concerning the construction of a barge has deflected the fact that this issue was investigated on more than one occasion and ultimately by external auditors, engineers and lawyers," Leighton said in the statement.
"The investigations have led to court proceedings being brought against the ex-employee, with Leighton seeking the recovery of $5.6 million.
"These steps were taken before media reporting on the matter, not in reaction to it. The attempt by some media, or their sources, to characterise this issue as a foreign bribery matter is misguided and incorrect."
When Leighton reported the Iraq incident to AFP in 2011, the company said it was not known whether there had been any "wrongful or illegal conduct".
The company says it is cooperating with the federal police investigation.