Title of Article: Source of Article: Date of Article: Terminology: Fraud Shares Company Cent Firm Ethics Investigation Payments

Leighton denies culture of corruption and cover-ups Sydney Morning Herald October 3, 2013

Contractor Profit Shareholder

Why I chose this article: I chose this article for my commerce assignment because of how it made me realise how often major corporations used illegal acts to further improve their standing point compared to other companies. What Leighton had committed had raised many questions. A few are if they are not the best at what they do and they only get contracts through bribing, this means that the projects that they have built may not be safe or require the best performed job. This means that many buildings around the world may not be safe and poorly built which does worry me. What does it have to do with commerce? This article has obvious connections to what we have been learning in commerce. The connections include law and shares. The article can relate to law through many different ways as the acts committed by Leighton are highly illegal and bypass many regulations and governance to make sure that these things do not happen. So when Leighton knowingly committed these acts it put them in serious trouble. When they had been paying people to give them the contracts for certain projects it was breaking the law and now since they had been discovered a lot of people will be going to jail for corruption. The article also has ties towards shares as now since this act of corruption has come to light, many shareholders are now not sure if the company is stable enough and this makes the shareholders nervous. So in turn many of the shareholders will be selling their shares before the price goes down too far.

Former Leighton Holdings' chief executive Wal King has denied claims he was aware of bribery and fraud allegations made against the building giant. Mr King's comments came as shares in the company slumped more than 10 per cent today following the publication of the allegations in a Fairfax Media report. Leighton Holdings said it was "deeply concerned" about the claims made against the firm, but denied it had a culture of corruption and cover-ups.

Denials: Former Leighton Holdings CEO Wal King. Photo: James Davies The investigation said hundreds of confidential company documents revealed that top executives, including the highly respected Mr King, knew about the corruption claims. Advertisement The allegations include the payments of kickbacks in Iraq, Indonesia, Malaysia and other countries, as well as other serious corporate misconduct. Mr King, who retired as chief executive in 2010, said in a statement that he "emphatically denies all allegations of wrongdoing made against him". "Mr King intends to take all steps which may be necessary to protect and vindicate his reputation," the statement said. Shares in Leighton Holdings closed 10.4 per cent lower to $17.54, its biggest one-day loss in more than two years. The slump wiped $688 million off Leighton's market capitalisation. Leighton said in a lengthy ASX statement this morning it had voluntarily reported to the Australian Federal Police (AFP) in 2011 a possible breach of its code of ethics after accusations of bribery payments in Iraq. The construction firm stressed that it was continuing to work with the AFP over the investigation, and was "not aware of any new allegations or instances of breach of our ethics". It described the alleged cases as "exceptional instances". Leighton added that fraud allegations in relation to a barge construction in Indonesia were internally investigated and resulted in the company taking a former employee to the NSW Supreme Court to recover $5.6 million. Leighton added that the case was still before the court. Leighton said its board acted in the best interests of its companies and its board members were "aware of their responsibilities and have at all times executed their duties with the appropriate care and diligence". The contractor said that since it discovered a possible breach to its code of ethics in 2011, it initiated an internal review which led to the sacking of a senior executive the following year, an overhaul of its management structure and improved corporate governance and risk management processes. Leighton revival in recent years Leighton recently enjoyed a share price resurgence, following a raft of new projects worth up to $6 billion in

recent months. The construction firm is also expected to benefit from Prime Minister Tony Abbott's pledge to build up Australia's infrastructure. Shares rose as high as $24.29 in February, after the company recorded a full-year profit of $450 million following a net loss of $285.5 million in the previous reporting year. Earlier this year, Leighton's board was rocked by turmoil when then chairman Stephen Johns, along with two other independent directors, resigned following differences with major shareholder Hochtief. The firm was also hit by profit downgrades after cost blowouts on Brisbane's Airport Link and the Victorian desalination plant. "It's not something that Leighton would welcome," Morningstar analyst Ross MacMillan said about the allegations, citing the company's recent profit growth under chief executive Hamish Tyrwhitt. "We are certainly reassured by the processes that Hamish Tyrwhitt has introduced, and also the fact that a number of these allegations have been investigated by the company. ... But we'd like to see Leighton address any issues that were raised in the newspaper articles as soon as possible and potentially clear up any allegations that are there." The Fairfax Media investigation also revealed that the corporate watchdog, the Australian Securities and Investments Commission, appeared to have failed to conduct rigorous investigations into the allegations Leighton alerted the AFP about in 2011. ASIC said in a statement that AFP was leading the investigation as they, and not ASIC, enforced the Commonwealth Criminal Code governing the bribery of foreign public officials and corruption. AFP said in a statement on Thursday it was treating the Leighton case as a priority. "We are working to ensure that the matter is thoroughly investigated," the statement said. Shares in Germany's largest construction company, Hochtief, which owns 56 per cent of Leighton, fell 7.9 per cent in trading following the report. Hochtief experienced its biggest fall in almost two years, dropping 5.15 euro to 60.20 euro in Frankfurt trading. Shares in Hochtief, which is controlled by Spains Actividades de Construccion & Servicios SA, have soared 37 per cent this year. Hochtief's spokesman Christian Gerhardus declined to comment, Bloomberg reported.