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Investors 'overreact' as Leighton Holdings corruption scandal resurfaces
by: Bridget Carter
From: The Australian October 04, 2013 12:00AM

INVESTORS have wiped $700 million from Leighton Holdings' sharemarket value after fresh detail emerged yesterday surrounding allegations of corruption and a bribery scandal hanging over the $6 billion mining and construction giant that last year sparked a federal police investigation.

Shares in Leighton crashed more than 10 per cent yesterday, down $2.04 to $17.54, in what analysts described as an overreaction to allegations first aired more than a year ago.

Fairfax Media reported yesterday that it had obtained hundreds of confidential documents, including a handwritten note allegedly written by acting chief David Stewart in November 2010 that in turn alleged former chief executive Wal King approved $42m in kickbacks to a firm in Monaco nominated by Iraqi officials for a $750m oil pipeline contract.

The reports alleged that the cover-ups and bribery went beyond the cases linked to projects in Iraq and Indonesia aired last year, and were in fact rife in the company's international empire. A dam-building project in Malaysia was also implicated, the reports said.

In a three-page statement to the Australian Securities Exchange, Leighton said that it was "deeply concerned" by the allegations in press reports of rampant bribery and corruption in the construction company's international business and was not aware of any new allegations or instances of a breach of its ethics.In February last year, Leighton said it had contacted the Australian Federal Police over a possible "breach of ethics" surrounding work on two major oil construction projects in Iraq worth $1.2bn, awarded between November 2010 and October 2011.The case has since been the centre of an AFP investigation.

The Australian Securities & Investment Commission has previously probed the company on its disclosure practices, but yesterday said the case was a police matter and not one for ASIC.

The construction and mining giant won billions of dollars worth of global contracts during the 23 years in which Mr King was chief executive.

During his tenure, Mr King was criticised for receiving excessive executive pay, collecting at least $100m in remuneration since 2004, including annual pay of $14m in 2010, the year of his departure.

Mr Stewart, who is the Australian chief for British construction giant Laing O'Rourke, was appointed acting chief executive of Leighton Holdings in November 2010, but departed in August 2011.Vas Kolesnikoff of Kolesnikoff Governance said yesterday that the fall in the company's share price reflected the significance of corporate governance.

"Over the last two to three years, Leighton has been a corporate governance minefield -- massive bonuses to all executives, CEO leaving on record pay and additional bonuses not linked to performance.

"Leighton said yesterday that it was making changes to codes of conduct and governance. Commonwealth Bank analyst Ben Brownette said in a note to investors that the allegations were "unacceptable" and "surely to leave a bad taste", but were not uncommon.

Mr Brownette described the timing of the reports as "interesting", given the case was first revealed in the media and advised by Leighton over 12 months ago."The fact that Wal King is the centrepiece and on the front page of newspapers may have some correlation with a potential board appointment," Mr Brownette said in a note to investors. He said it was "drawing a very long bow" to suggest the case would affect Leighton's other operations.

However, he said Leighton's boss Hamish Tyrwhitt headed the company's Asian operations from 2007 until he was appointed chief executive in August 2011, and there was the potential for the market to also focus on his time as CEO of Leighton Asia.

David Mortimer, who was appointed chairman in June 2007 and resigned suddenly in August 2011, was travelling and unavailable for comment.

His replacement Stephen Johns left in March and replaced by Robert Humprhis. One former board member said yesterday the board had referred the matter to the AFP as soon as it was alerted to the issue. - See more at: http://www.theaustralian.com.au/business/companies/investors-overreact-as-leighton-holdings-corruption-scandal-resurfaces/story-fn91v9q3-1226732568727#sthash.BoF8CuZH.dpuf