Why we’re all reeling from the dramatic bribery allegations surrounding Leighton’s Wal King

Leo D’Angelo Fisher Columnist

Why we’re all reeling from the dramatic bribery allegations surrounding Wal King

Published 03 October 2013 11:58, Updated 08 October 2013 07:12

As spectacular front-page headlines go, when it comes to media coverage of Australian business, this may prove the one to beat for 2013 and for some time thereafter: Wal King “approved Iraq bribe”, in The Australian Financial Review. Equally devastating was the overhead line that spelt out the jaw-dropping Fairfax Media exclusive: “Former Leighton CEO knew $700m project won through inflated contractor payment, notes allege”.It doesn’t get more explosive – despite the allegations coming hot on the heels of further revelations about whistleblower allegations of bribery in Reserve Bank of Australia subsidiaries Note Printing Australia and Securency, and the alleged complicity at the highest levels of the two companies and the RBA itself.

“Bribery, corruption and cover-ups in Leighton Holdings’ international empire were rife and known to top company executives and directors, according to internal company files,” the story opens. “Those in the know included the construction giant’s chief executive at the time, Wal King, and his short-term successor, David Stewart.”

Wal King! That’s what makes this story so sensational. It’s dramatic enough that the internal files allege “multimillion-dollar kickbacks” in Iraq, Indonesia, Malaysia and elsewhere, but the fact that King has been placed fairly in the frame takes matters of corporate governance and probity to a whole new level.

Not so old-school after all

Wal King: plain-speaking, no-nonsense, craggy, understated, the antithesis of charisma, a tough negotiator – but presumably honest and old-school. The full-length colour photo on the front page of the Financial Review showed King outside his Sydney home taken on Wednesday: if he was worried about the allegations to be made, he wasn’t showing it.

The six-month investigation by reporters Nick McKenzie and Richard Baker (who also broke the Note Printing Australia/Securency story) uncovered hundreds of confidential company documents, revealing “a culture of rewarding corruption or incompetence, and abysmal governance in what is looming as the worst recent case of corporate corruption involving a major Australian firm”.

The documents include a handwritten memo, dated November 23, 2010, by then acting chief executive David Stewart.

The memo says Leighton International’s managing director, David Savage, revealed during a meeting that he and King knew that a $42 million kickback was paid to a company in Monaco nominated by Iraqi officials who had selected Leighton for a $750 million oil pipeline contract.

“I asked did Wal K approve this? And he said yes,” Stewart’s memo says of his conversation with Savage. “I said I will talk to WMK [King] and he said that WMK will now deny it and have ‘forgotten it’.”

According to Stewart’s account, he said to Savage: “It is exactly what got the AWB into trouble with their trucking contract at 2 to 3 times market rates.” The reference was to the Iraq bribery scandal involving the Australian Wheat Board in 2006 – at the time the AWB scandal was considered a loss of innocence for corporate Australia. It almost pales into insignificance now.

Around this time, Melbourne management consultant Concorde Corporation advised Leighton that it was exposed in Asia to allegations of “conflict of interest, kickbacks, unethical staff appointments and so on”. Concorde warned that the allegations “indicate a serious breakdown of probity, governance and ethics within Leighton’s Asian operations”.

According to Stewart’s note, Savage had claimed that Monaco-based company Unaoil, run by a prominent and controversial Iranian family, was paid kickbacks by Leighton through an inflated $87 million contract, claiming that the value of “real work” was “less than half”.

Internationally embarrassment

In revelations that will be internationally embarrassing for Australia and raise questions about the role of regulatory authorities, the files expose plans to pay alleged bribes and kickbacks along with other serious corporate misconduct.

Confidential legal advice provided to Leighton in late 2010 also warned that executives may be linked to corruption or serious mismanagement and that the company was facing an extreme risk of damage to its reputation.

Savage was given a $2 million bonus when he left the company in March 2011, despite internal concerns about his knowledge of corruption, the Financial Review reports.

Stewart’s 2010 memo says Savage allegedly suggested an extra $23 million illicit payment to win a further $500 million of work in Iraq.

The confidential Leighton files reveal King and other top executives were emailed in 2009 by a whistleblower about a “payoff” made to a corrupt Leighton employee in connection with a barge-building project in Asia.

Leighton’s Indian projects alleged to be tainted by corruption were multimillion-dollar offshore works in the Indian town of Cochin and the district of Jamnagar. In Malaysia, internal company documents reveal Leighton International planned to pay tens of millions of dollars in kickbacks to win a dam-building project.

King has denied the allegations of bribery and corruption, according to The Australian, which reports that he “planned to discuss the claims with his legal team this morning”.

“Mr King said he was likely to issue a statement later today [Thursday] in which he would deny allegations of ‘any prior knowledge’ of the wrongdoing,”The Australian reports.

In a statement to the ASX, Leighton states that the company “takes these accusations seriously and is deeply concerned about the suggestions of impropriety”.

Ironically, the company’s “foundation values” are: discipline, integrity, safety and success. Time will tell how true it has been to these values. As for King, who retired as chief executive of Leighton in 2010 on a package of $23.5 million, he finds himself in interesting times.

Speaking to BRW in 2010, King explained his leadership philosophy, which may shed some light on his approach to the bribery allegations:

“As a leader, you have to admit to yourself when you are facing serious issues. In dealing with issues you need to look at a range of outcomes, however, you don’t need to confess with everyone. It might make you feel better, but the people around you don’t need to hear it.”