Two top Leighton Holdings executives secretly created a rival company with a suspected corrupt “bagman” while they were meant to be working for the construction group

Leighton: bagman’s inside job

PUBLISHED: 9 HOURS 38 MINUTES AGO | UPDATE: 9 HOURS 36 MINUTES AGO

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David Savage was Leighton’s top international executive when he created a rival company in late 2010.

AFR FAIRFAX EXCLUSIVE NICK MCKENZIE AND RICHARD BAKER

Two top Leighton Holdings executives secretly created a rival company with a suspected corrupt “bagman” while they were meant to be working for the construction group. Confidential company emails reveal that David Savage covertly launched “Project T” under the cover of his job as Leighton’s top international executive in late 2010. Project T sought to lure several Leighton senior figures, including the chairman of its Dubai-based joint venture Habtoor Leighton Group, Riad al Sadik, and a suspected corrupt Leighton global consultant Packianathan Srikumar, to a private firm operating in the same market as Leighton and which could conceivably compete with it to win work.The role of Mr Savage and others in Project T may break Australian laws that require senior company officers to work in the best interests of Leighton and its shareholders while employed by the Australian firm.

PROJECT T FORMED ON LEIGHTON’S INTERNAL EMAIL

Project T was formed and discussed on Leighton’s internal email system, on company time and involved other top Leighton staff, including then executive Eric Wardle.

It appears Mr Savage wanted his new venture to win work on resource projects and offshore, shallow water projects – the same type of work he had been helping Leighton win.

At the time Mr Savage launched Project T, he and longtime Leighton International consultant Mr Srikumar were named in internal Leighton memos as being allegedly involved in serious corruption and bribery.

On Friday law firm Maurice Blackburn signalled it may widen its shareholder class action against Leighton to include the allegations of rife corruption and misconduct at the building giant.

Greens Deputy Leader Adam Bandt called for a federal funding boycott of any projects featuring Leighton or its subsidiaries until a parliamentary inquiry into the affair is completed.

As The Australian Financial Review revealed on Thursday, a Leighton file reveals Mr Savage allegedly disclosed to acting chief executive David Stewart on November 23, 2010, that Leighton’s international business paid a $40 million bribe to win a $750 million project in Iraq.

In November 2010, an internal investigation was probing Mr ­Srikumar’s suspected role in kickbacks and fraud on a Leighton project in Indonesia.

PROJECT T LED TO FORMATION OF STONEHOUSE CONSTRUCTIONS

Mr Savage was secretly working on Project T in the last few months of 2010 and in early 2011.

A confidential Project T proposal states that Mr Savage envisaged Mr Srikumar providing $US2 million capital along with “direct entrepreneurial access to clients” in the oil and gas industries.

Mr Sadik was expected to contribute $US2 million and win work “through his connections in general and particularly in the Middle East”.

These were the same connections Mr Savage spruiked in 2007, when, as head of Leighton International, he convinced the Australian company to pay Mr Sadik $377 million to buy into his firm Al Habtoor.

Investors now view the merger as disastrous due to Leighton Habtoor’s poor performance.

Malaysian company documents reveal Project T led to the formation of Malaysian firm Stonehouse Constructions, which was named after a ­holiday house Mr Savage owns in ­Tasmania. Mr Savage was named director of Stonehouse on March 31, the same day he left Leighton.

Mr Srikumar and a representative of Mr Sadik were appointed shortly afterwards and are understood to have invested several million dollars each.

Another director is Malaysian businessman Asgari Stephens, a former chairman of Leighton International’s ethics committee.

STONEHOUSE USED LEIGHTON’S TRACK RECORD IN MALAYSIAN TENDER

On April 14, two weeks after Mr Savage left Leighton and took over Stonehouse, Leighton reported an 11 per cent write-down of the book value of its stake in Habtoor Leighton.

Files held in Leighton’s Hong Kong office reveal Stonehouse used Leighton’s track record to qualify to tender for a project in Malaysia.

The revelation that former high-ranking Leighton executives were secretly plotting to establish a rival company comes after Fairfax Media reported on company documents that showed a suspected $42 million bribe in Iraq and internal investigations that raised concern about Leighton ­Holdings’ exposure to corruption ­allegations.

The reports prompted a drop in Leighton’s share price and pressure on Australia’s corporate regulator, the Australian Securities and Investments Commission, over its appetite for investigating potential corporate breaches.

In trading on Friday, Leighton lost a further 4.5 per cent as its shares fell 80¢ to $16.74. Before the story broke, Leighton shares had traded as high as $19.88 on Wednesday.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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