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Leighton Holdings corruption cases hang around like a bad smell

Publication: 
Bryan Edwards
chiefofficersnet

In Australia and elsewhere, the multitude of actions relating to bribery and corruption at Leighton Holdings (see here ) continues in both the criminal and civil courts.

In April this year, it was announced that several former executives of Australian multi-national company Leighton Holdings would be summonsed to appear in civil court if a planned class-action suit comes to fruition. Wal King, David Stewart and Bill Wild all held chief officers' positions at the time of the corruption. Leighton Holdings has since changed its name to CIMIC and is Australia's largest listed construction company that has operations in more than two dozen companies across the telecommunications, engineering and infrastructure, building and property, mining and resources and environmental services industries. The trial, originally scheduled for March but it was adjourned because CIMIC said that it intended to call the former executives to give evidence. This is the second action: the first settled in 2014 when the company agreed to pay AUD70 million to investors as compensation for the fall in the company's share price following the discovery of the corruption and the subsequent announcement of the investigation. That action related to breaches of company law obligations for "continuous disclosure."

Class action law firm Maurice Blackburn says "Between 3 and 7 October 2013, Fairfax Media published a series of articles reporting that hundreds of confidential CIMIC documents obtained by Fairfax showed that senior CIMIC executives had discussed and approved payment of a $40 million bribe, had contemplated further similar arrangements, that bribery, corruption and cover-ups were widespread within CIMIC’s international operations, and known by top executives at the time.

"The company’s share price slumped by more than 10% when the allegations of foreign corruption first emerged on 3 October 2013. The rest of the market was up on the same day. Fairfax Media published further information and allegations about the company's involvement in corrupt practices on 4 October 2013 and the shares fell further, this time by more than 4%."

The lead plaintiff, Inabu Pty Ltd, as trustee for a pension fund, "alleges that CIMIC failed to comply with its continuous disclosure obligations under Australian corporate laws, and engaged in misleading and deceptive conduct, by withholding from shareholders that senior executives had knowledge, or knowledge of a risk that an offshore subsidiary was, or may have been engaged in corrupt conduct in order to secure construction work in Iraq."

At the time of the corruption, Leighton Holdings was made up of a number of subsidiary companies in a range of sectors operating in multiple countries. It also had interests in joint ventures. The amended defence shows that, for a period from Q3 2010 to Q3 2011 there were several significant management changes. It is interesting that officers appointed "from the ranks" left their new senior positions, and the company, within months of being admitted to senior management. There were other people leaving after that date but before the Fairfax reports were published. The company says that it took action relating to matters of governance in 2012 which appears to coincide with at least two people leaving the company. A media statement on 5 July 2012 says "Leighton Holdings announced that its internal review of the Iraq projects undertaken by its subsidiary, Leighton Offshore Pte Limited, identified instances of failures to meet governance standards in respect of the proper documentation of contractual arrangements. As a consequence, a senior manager was dismissed. "

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