AFP protects systemic corrupt Conduct/ Corruption/ Leighton Holdings
The corruption and bribery allegations at Leighton Holdings which is subject to an Australian Federal Police investigation is particularly amuzing.
Not because it involves bribery and corruption but because
the investigation is being carried out by the AFP which is currently
trying to protect corruption and systemic corrupt conduct in Government
Departments.
So it is all particularly bizarre that the AFP Investigates corruption and also protects it.
Bribery scandal engulfs Leighton Holdings
Leighton Holdings is once again facing scrutiny over its business practices following the release of internal documents.
Corruption and cover-ups in Leighton Holdings' international
construction empire were rife and known to top company executives and
directors, according to internal company files.
It is exactly what got the AWB into trouble with their trucking contract at two to three times market rates.
Those in the know included the Australian construction
giant's chief executive at the time, Wal King, and his short-term
successor David Stewart.
In revelations that will cause international embarrassment
for Australia and raise questions about the role of the nation's
corporate watchdog, the files expose plans to pay alleged
multimillion-dollar kickbacks in Iraq, Indonesia, Malaysia and
elsewhere, along with other serious corporate misconduct.
Advertisement
Hundreds of confidential company documents, obtained during a
six-month Fairfax Media investigation, also reveal a culture of
rewarding corruption or incompetence, and abysmal corporate governance
in what looms as the worst recent case of corporate corruption
involving a major Australian firm.
Mr King, one of Australia's most highly regarded chief
executives and who has reportedly been approached by Communications
Minister Malcolm Turnbull about taking an NBN Co board seat, was chief
executive of Leighton Holdings for 23 years and is a prominent Sydney
business community figure.
Leighton is one of Australia's biggest construction
companies, with a market value of nearly $7 billion. It has built the
Victorian desalination plant, Sydney's ABC studios, and Queensland's
Ross River dam.
Among the most explosive of the company files is a memo
written on November 23, 2010, by then acting CEO David Stewart. It says
Leighton International managing director David Savage had revealed he
and Mr King knew of a $42 million kickback to a firm in Monaco
nominated by Iraqi officials who gave Leighton a $750 million oil
pipeline contract. "I asked did Wal K approve this? And he said yes,"
the memo says.
Around the same time, a private consulting firm, Concorde
Corporation, advised Leighton it was exposed in Asia to allegations of
''conflict of interest, kickbacks, unethical staff appointments and so
on''.
Concorde warned that the allegations ''indicate a serious
breakdown of probity, governance and ethics within Leighton's Asian
operations''.
The allegations coincide with a tumultuous time at Leighton
after Mr King, who has been awarded an AO, left the company to be
replaced by Mr Stewart, and an international takeover battle between
Leighton's major shareholder, the German company Hochtief and a Spanish
firm, ACS.
In his time at the top, Mr King transformed Leighton into a global construction powerhouse with $13 billion in revenue.
Confidential legal advice provided to Leighton in late 2010
also warned that executives might be linked to corruption or serious
mismanagement and that the company was facing an ''extreme'' risk of
damage to its reputation.
But Leighton withheld the Stewart memo, along with other
files detailing corruption, from authorities for several months or
failed to pass some of them on at all.
Another key factor impeding full exposure of the corporate
scandal is the apparent failure of the corporate watchdog, the
Australian Securities and Investments Commission, to conduct rigorous
investigations in the two years since Leighton alerted federal police
that it may have breached foreign bribery laws in Iraq.
ASIC has spoken to no witnesses or suspects, despite
witnesses telling federal police they had grave concerns about corporate
offences in the company.
Key Leighton witnesses and whistleblowers, including former
top Leighton executive Stephen Sasse, told Fairfax Media on Wednesday
that ASIC and the federal police appeared unable to adequately respond
to the breadth of issues engulfing Leighton.
''I would be surprised if the federal police or ASIC have the
expertise or technical knowledge to undertake investigations of this
nature,'' Mr Sasse said. ''I suspect that the lack of urgency stems from
resourcing issues rather than any lack of purpose.''
He declined to answer questions about his stint at Leighton in 2011.
Another source familiar with the Australian Federal Police
investigation revealed that AFP agents privately complained about
inadequate resources to conduct a proper probe.
ASIC - which failed to respond to inquiries from Fairfax
Media - is already under pressure for failing to investigate alleged
corporate law breaches linked to the Reserve Bank bribery scandal. ASIC
referred questions about Leighton to the federal police, which stressed
it was treating the Leighton case as a ''priority''.
''We are working to ensure that all alleged criminal activity is uncovered,'' Commander Ian McCartney said.
In a statement, Leighton Holdings said on Wednesday that it
was co-operating with police, had strong anti-corruption policies and
that its directors have ''at all times executed their duties with the
appropriate care and diligence'' required by law.
Mr Stewart's note says Mr Savage had claimed that
Monaco-based firm Unaoil had been paid kickbacks by Leighton via an
inflated $87 million contract of which the value of ''real work'' was
''less than half''.
Unaoil is run by an Iranian family that boasts close ties to
Iraq's oil minister and Prime Minister. Unaoil was recently named in the
British High Court as a company with influence among Middle Eastern and
African officials and that was once wired a commission ''disguised as
payment for office equipment''.
Mr Savage was given a $2 million bonus when he left the
company on March 31, 2011, despite internal concerns about his knowledge
of corruption.
Mr Stewart's memo of November 23, 2010, says Mr Savage
allegedly suggested an extra $23 million illicit payment to win a
further $500 million worth of work in Iraq.
''It is exactly what got the AWB into trouble with their
trucking contract at two to three times market rates,'' Mr Stewart
recorded himself telling Mr Savage, in reference to the Iraq bribery
scandal involving AWB Limited in 2006.
''Wal King is still CEO and if he is OK with it, go for it,'' Mr Stewart's memo says.
The memo was not passed to police until November 2011, a year
after Mr Stewart wrote it and only after lawyers working for Leighton
accidentally stumbled over it.
When Fairfax Media tried to question Mr Stewart about the
bribery allegations this week, he responded: ''I don't know anything
about it at all.''
Mr King declined to speak to Fairfax Media. A company source
still close to Mr King cast doubt on Mr Savage's claim - as recorded by
Mr Stewart - that he had discussed inflating the Iraqi contract with the
former chief executive.
But the confidential Leighton files also reveal that Mr King
and other top executives were emailed in 2009 by a whistleblower about a
''payoff'' made to a corrupt Leighton employee in connection to a
barge-building project in Asia.
They also reveal the whistleblower's corruption concerns were
subject to bungled internal investigations, despite spanning ''several
countries'', including Indonesia and India, and exposing ''criminal''
conduct, including a ''systemic fraud''.
''It is not difficult to understand the frustration expressed
by [the whistleblower] ... that there has been an attempt to cover up
these issues,'' a company memo says.
The whistleblower allegations exposed another company
middleman, Malaysian-based businessman Pakianathan Sri Kumar, who was
allegedly involved in corruption.
Mr Sri Kumar has worked with Leighton in Iraq, Indonesia,
India and Tanzania and the whistleblower said he had heard that the
businessman received ''a 10 per cent kickback'' on certain projects,
''some of which is passed to Leighton executives''.
Leighton's Indian projects alleged to be tainted by
corruption were multimillion-dollar offshore works in the Indian town of
Cochin and the district of Jamnagar.
In confidential legal advice provided to Leighton in late
2010, Sydney lawyer Malcolm Davis warned that Leighton executives may be
tainted by corruption or serious mismanagement.
''It is perhaps trite to say that 'reputational' risk to LHL
[Leighton Holdings] and the greater LH Group is extreme were it ever to
become known that LIL [Leighton International] ... engaged in conduct of
the kind referred to in the allegations of impropriety.''
Mr Davis said it ''beggars belief'' that a Leighton senior
project manager who had engaged in clearly ''criminal conduct'' with Mr
Sri Kumar in Indonesia was not sacked.
The manager, Gavin Hodge, allegedly stole $500,000 worth of
steel from Leighton to build a barge for Indian company Adani in a
black-market racket. Rather than being sacked, Mr Hodge was given a
bonus and thanked for his work by a Leighton executive who knew of his
alleged corruption, Russell Waugh.
Mr Waugh, who could not be reached, is now a top executive at engineering and property services company UGL.
After Mr Davis' scathing advice, Leighton finally fired Mr
Hodge and initiated private legal proceedings against him to recover
$500,000 he allegedly stole.
