Friday, October 4, 2013

Hockey extends deadline for ADM's $3 billion Graincorp bid

By Business editor Peter Ryan

Treasurer Joe Hockey has delayed a final decision on a controversial bid by the US agricultural giant Archer Daniels Midland for Australia’s Graincorp.

In a statement released this afternoon, Mr Hockey said the deadline for a decision on the $3 billion proposal had been extended to December 17.

Mr Hockey’s decision is seen as the government’s first major policy test of foreign investment amid pre-election speculation about revised guidelines for the Foreign Investment Review Board.

“Given the size of this transaction and the complex nature of the issues involved, I have decided to extend the statutory time period,” Mr Hockey said.

“This will allow sufficient time for the new government to carefully consider all the relevant issues and advice from the Foreign Investment Review Board before making a decision.”

A decision on ADM’s bid for Graincorp had been expected earlier this year but was put on hold when the Labor government moved into caretaker mode before the election.

Today Mr Hockey used powers under the Foreign Acquisitions and Takeovers Act to extend the deliberation period.

“Australia’s foreign investment review framework allows the Government to examine foreign investment applications on a case-by-case basis to ensure they are not contrary to Australia’s national interest,” Mr Hockey said.

ADM's grain division president Ian Pinner has been in Australia recently to lobby shareholders, including farmers, to approve the deal.

Mr Pinner has been working to dismiss concerns that the takeover could restrict access to grain storage and ports.

"Open access and arrangements that exist today will, and, I believe, need to exist going forward," Mr Pinner told the “AM” program in June.

"We've spent a lot of time talking to the stakeholders of GrainCorp to ensure that we've got what we believe is the right strategy once we acquire the business," he said.

While in Opposition, the leader of the National Party, Warren Truss, urged the Foreign Investment Review Board to veto the takeover.

Mr Truss has said the deal is not in Australia's national interests as it could see most of Australia's export facilities become foreign owned.

"It makes no sense for us to restrict access to the growers or to the trade to either the up country storage or to the ports," Mr Truss told the ABC earlier this year.

Mr Hockey’s decision reflects the attitude of the previous Labor government and reiterates that the government welcomes foreign investment “because of the benefits that it provides to the Australian economy.”

US Treasury warns debt ceiling deadlock or default could have "catastrophic consequences" and trigger deep recession

As the budget impasse in Washington starts to hurt financial markets, the US Treasury is warning a deadlock over America's $17 trillion debt ceiling could have "catastrophic consequences".

In a document released this morning, Treasury says a failure to raise the debt ceiling could see America default on its debts for the first time ever.

Treasury warns that will not only hurt America's economic recovery but put it back into a deep recession.

Listen to my analysis from this morning's edition of "AM".

· "Not only might the economic consequences of default be profound, those consequences, including high interest rates, reduced investment, higher debt payments, and slow economic growth, could last for more than a generation."

· "In the event that a debt limit impasse were to lead to a default, it could have a catastrophic effect"

· "Many private-sector analysts believing that it would lead to events of the magnitude of late 2008 or worse, and the result then was a recession more severe than any seen since the Great Depression."

Chicago volatility index (VIX) on rise - though nothing like last impasse in late 2011.

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.