Thursday, October 3, 2013

Leighton Holdings directors blamed over graft

Bob Humphries, chairman of Leighton.

Bob Humphries (above), chairman of Leighton.

Leighton Holdings chairman Bob Humphris, along with other directors, oversaw a "dramatic failure in governance" that enabled corruption and "a litany of disasters" to engulf the firm's international operations, according to a leaked federal police interview with a former top Leighton executive.

A Fairfax Media investigation has also obtained an email from Leighton Holdings' former chief operating officer, Bill Wild, that says "everywhere you look in LIL [Leighton International Ltd] there is evidence of corruption and/or incompetence".

Leighton Holdings bribert scandal: the story so far.

Leighton Holdings bribery scandal: the story so far.

Mr Wild, who could not be reached for comment, discovered corruption in Leighton's dealings in Malaysia in 2011, including plans to pay millions of dollars in kickbacks.


Fairfax Media can also reveal that certain Leighton International directors - including Mr Humphris and current director Bob Seidler - failed to raise the alarm about a suspicious $80 million "onshore" construction subcontract to be awarded to a Monaco firm and which was detailed in key board documents about a major project in Iraq in October 2010.

A cursory check of Leighton's computer system at the time would have revealed that those same documents had, just weeks earlier, in September 2010, been revised to conceal a highly suspicious $40 million "agency and security support services" fee to the same Monaco firm, Unaoil.

A comparison of the September and October documents suggests the $40 million ''agency'' fee was shifted into the $80 million ''onshore'' contract given to Unaoil and which is now at the centre of a bribery scandal.

On Thursday, Fairfax Media revealed other company documents stating Iraqi officials allegedly instructed Leighton to award Unaoil an inflated $87 million contract if Leighton were to win a $750 million contract.

Another internal Leighton file dated February 2011 and sent to director Peter Gregg reveals a company audit had found ''less awareness'' in the firm about ''prohibited transactions'' - such as facilitation payments made to win contracts overseas. The audit found Leighton had failed to keep detailed registers of the fees paid to, and services provided by, the firm's overseas middlemen.

''Not all of the reviewed consultancy agreements show the high level of service details and payment transparency required to avoid misinterpretation of the services provided,'' auditor Christof Brixel said in his report. ''Inconsistencies had been found.''

On Thursday, Fairfax also revealed that top former and serving company officers and directors, including departed chief executives Wal King and David Stewart and former managing director of Leighton International David Savage, had known of corruption allegations but did not report them to authorities.

The report prompted a major drop in Leighton's share price and a statement from lawyers for Mr King in which he rejected any wrongdoing and vowed to protect his reputation.

Internal files reveal the firm's international operations are allegedly rife with corruption, bribery and malfeasance across Asia and the Middle East. The revelations about corporate misconduct and governance failures come as the Australian Securities and Investments Commission faces criticism for failing to conduct comprehensive inquiries into Leighton two years after the company contacted federal police over concerns about its Iraq dealings.

Greens deputy leader Adam Bandt on Thursday called for the Abbott government to conduct an inquiry to determine whether Australia needs a specialist agency to fight white-collar crime, similar to Britain's Serious Fraud Office. Mr Bandt said the inquiry should also examine the relationship between ASIC and the Australian Federal Police.

Maurice Blackburn special counsel Jenny Tallis said a shareholder class action against Leighton for alleged disclosure failures over its operations in Australia and the Middle East had entered a pre-litigation settlement phase.

The current Leighton chairman, Mr Humphris, was a long-time director of Leighton International - the arm of the company suspected of involvement in bribery or corruption in Iraq, Malaysia, Indonesia and elsewhere - along with Mr King and Mr Savage.

A leaked AFP transcript of the force's interview this year with another former top Leighton executive reveals allegations the Leighton International board failed to uphold basic corporate governance standards and oversaw bungled internal graft probes and apparent cover-ups by senior executives. Directors can be charged with various offences for failing to act with care and diligence.

"One of our major concerns here was that there was very little corporate governance with Leighton International full stop," the former executive says in the transcript. "[Leighton] International had almost no corporate governance at all and you look at some of the processes and problems that we uncovered … there was just a litany of disasters. I would say that there was really no effective corporate governance framework in LIL.

"… the current chairman, Robert Humphris, was on the Leighton International board for years and years. So he would have been sitting on both [the LH and LIL boards] .. but I never got the sense that the board was excited by this stuff. The way that Leighton International had been managed was an absolute disaster from a commercial perspective. In the view of Stewart and Bill Wild, who was David's deputy, pretty much everything that Leighton International had touched was a disaster, either commercially [or] we felt that there were many aspects of the Leighton international business which were corrupt.''

The ex-executive also said in the interview: "There is no part of that LIL business that has been properly managed. There is no deal done that doesn't stink to high heaven … it's not transparent where the value in the deal is or where money is going.'' He said Mr Savage's management of Leighton's Middle East business was ''a disaster''.

Leighton said on Thursday that its directors had all acted appropriately. Despite Fairfax revealing documents that show senior company officers discovered allegations of corrupt dealings in Malaysia, the Middle East and India, Leighton insisted it only had evidence about corruption in Indonesia and Iraq.
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