Leighton execs signed off on suspect fee
The signature of former Leighton Holdings senior executive David Savage appears on a preliminary tender document that includes an alleged $40 million kickback to win a lucrative project in Iraq.
Documents obtained by Fairfax Media reveal that the agency fee - which the Australian Federal Police suspect was a kickback - was signed off by both Leighton International boss David Savage and chairman John Faulkner in March 2010, well before the tender was pitched to the board.
Fraud and bribery claims against Leighton Holdings revealed by Fairfax Media on Wednesday sent the company's shares falling 10.4 per cent to $17.54, their biggest one-day loss since April 2011. The slump wiped $688 million off Leighton's market capitalisation.
The Leighton International board discussed the Iraq project at a board meeting in Mumbai in August and was sent a briefing document on October 3, 2010, before a meeting the following day. The briefing document did not include the suspicious "agency and security services fee". It was hidden in another line item.
A month before the deal was officially presented to the Leighton board, the $40 million "agency and security support services fee" was removed from the tender sheet. A new category of costs was created, "an 'onshore and security' payment", which was then used in a presentation document sent to the board.
A former director of Leighton International - who was at the October board meeting - said he was told there were security concerns in Iraq that justified a high payment. Wal King, who at the time was chief executive of Leighton, and Bob Humphris, who is now chairman of Leighton Holdings, were at that meeting. The director, who did not wish to be named, said there was no discussion at the board meeting about an "agency" payment or other potentially illegal payments.
He said if he had been privy to the tender document that showed a figure of $40 million for "agency and security support services", he would have questioned it. "It was a big number that would have raised questions," he said.
As reported on Wednesday, a memo handwritten on November 23, 2010, by Leighton Group acting chief executive David Stewart, had revealed during a meeting with Savage he had the opportunity to negotiate a $US500 million extension to the Iraq contract. Savage allegedly said it would require a $50 million to $60 million payment to a third party subcontractor who would do the onshore work. According to the memo, Stewart asked what the real value of the work was. "He [Savage] said less than 50 per cent of the payment."
"I asked then how we won the current $700 million contract and he says it was won by an $87 [million] payment to a NSC [nominated subcontractor] on the same terms."
The following month, the full Leighton board met and Stewart hosted the meeting as King, the outgoing chief executive, decided not to attend as he had been precluded from most executive decisions at that time. It is not known whether Stewart discussed his concerns with the board at the December 7 board meeting. King said in a statement on Thursday that he had no knowledge of any misconduct at the time.
What is known is that the police investigation into the potentially illegal payments was reported to the Australian Stock Exchange in February last year. At the time, shareholders were not told how big the potential bribery payment was.
Leighton CEO Hamish Tyrwhitt said as soon as the company became aware of the file note, it notified the police. He said it had banned all facilitation payments and was rebuilding the reputation of the company.