THE DISTILLERY: Leighton hijinks

Jotters open fire on Leighton's latest announcement, while others pick apart Gina Rinehart's Fairfax selldown.

Will Leighton ever learn? Not long ago, jotters were obsessing about the builder's lazy disclosure after a string of surprise writedowns cost investors dearly, now more ink is being spilled over the company's hazy response to an ongoing investigation into an alleged bribery scandal in the Middle East. One commentator says it's a case of too little, too late, while another wonders whether Leighton is purposefully keeping questionable information under wraps. Also this morning, scribes doubt that Gina Rinehart's new strategy will get her any closer to the Fairfax boardroom.

But first, in The Australian, Damon Kitney takes aim at Leighton, which fired a senior manager linked to a possible bribery scandal in Iraq. Of course, the news comes not long after the company's shock $254 million writedown in March, which had already tested the company's creditably and raised questions about transparency, Kitney says.

"The company did nothing to assuage those concerns yesterday, with another vague statement about the Iraq scandal -- the first in five months. Leighton is believed to have had a high-powered internal team investigating the issue, which has also been using the services of external parties. But there was no detail yesterday on the investigation, what it had found and what exactly it was examining. Nor was there any detail about exactly why the senior manager in question was dismissed, other than the vague line statement: 'failure to meet governance standards in respect of the proper documentation of contractual arrangements'."

After doing some digging, The Australian Financial Review's Chanticleer columnist, Michael Smith, was able to name the Leighton manger in question as Peter Cox. And, Smith says, it's no wonder Leighton chose to conceal his identity.

"Cox reported directly to Leighton boss Hamish Tyrwhitt while the chief executive was running Leighton’s Asian operations before his promotion last year. No one is suggesting Tyrwhitt has done anything wrong, but questions will be asked regarding how much he knew about the situation."

To make matters worse, Fairfax's Adele Ferguson says Leighton might also be suffering problems in Australia, where yet another construction project has reportedly run into financial trouble.

"The project, the $705 million Sapphire to Woolgoolga upgrade of the Pacific Highway, is understood to have claims on the job of up to $140 million. Industry sources said yesterday Leighton set the job poorly and got hit by wet weather. The project is a joint venture between Leighton and New Zealand-based Fulton Hogan. The company refused to comment on individual projects but said it would disclose anything material in accordance with its obligations."

Commentators are also paying close attention to Fairfax, which will be deciding how to respond to Gina Rinehart's latest shot at representation at the company. The mining heiress sold down her stake in the publisher, from more than 18 per cent to just under 15 per cent, to address a technical clause in Fairfax's insurance policy that was damaging her bid for seats in the boardroom.

In The Australian, John Durie notes that Perpetual bought most of the shares that Rinehart offloaded. The fund manager's return to the publisher's register could make life even more difficult for the company, he says.

"Perpetual has not owned the stock for some time but fund manager Charlie Lanchester told The Australian: 'We think the board could benefit from a fresh set of eyes and we would support Rinehart's push for a board seat.' … Perpetual’s entry into the battle will make life more interesting for Fairfax chair Roger Corbett given its reputation as an aggressive supporter of shareholder value."

However, The Herald Suns' Terry McCrann argues that Rinehart's smaller stake will only weaken her argument for seats. He says the aggressor is now left with three choices:

"She can sign the charter [of editorial independence], join the board and be both a passive investor and passive director. She can fight – rebuild her stake and seek shareholder support, especially if Corbett 'fails' her KPIs (key performance indicators). Or she can sell out, and leave Fairfax to its fate." Given Corbett's not-so-subtle hints that Rinehart is not welcome in his boardroom, McCrann says the latter option would be in Rinehart's best interest.

In other company news, Fairfax's Elizabeth Knight reckons PMP may have learned a lesson from David Jones' seemingly bogus takeover offer last week, as the printing company blocks TMA from its data room based on fears the suitor can't fund its touted takeover bid.

And in The Australian Financial Review, Matthew Stevens revels in the "delicious" timing of a warning by Rio Tinto chairman Jan du Plessis about ballooning executive pay. While du Plessis had the financial sector in his sights, Stevens notes that the chair's comments come within weeks of a shareholder vote on the fate of Xstrata's $US90 billion merger with Glencore, where there is expected to be some anxiety about the collection of $350 million in "golden handcuffs" that tie the surrendering Xstrata management to their existing jobs.

Finally, at Fairfax, Michael Pasco shouts down Australia's economic "whingers" by pointing out that a string of recent data shows that the nation is on a pretty good footing. "For corporates," he says, "it should refocus attention on management's ability to successfully manage rather than blame externalities for underperformance."

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