Australia's Leighton hit by corruption reports; shares slump


* Leighton says unaware of new allegations, ethics breaches

* Media reports allege senior executives knew of kickbacks

* Ex-CEO denies allegations

* Analysts, investors see little that's new in allegations

* Shares drop 10 pct (Adds comment from ex-CEO Wal King, updates shares)

By Sonali Paul

MELBOURNE, Oct 3 (Reuters) - Leighton Holdings,Australia's biggest builder, came under fire on Thursday frommedia reports saying corruption and bribery were widespread atthe company under previous management, sending its shares down10 percent.

Investors and analysts played down the media reports, sayingthey reopened old wounds tied to previous management rather thaninflicting fresh reputational damage, and pointed to Leighton'sefforts to improve ethics compliance over the past two years.

"My reaction when I read it this morning is that it's just arehash of old news," said Don Williams, chief investment officerat Platypus Asset Management, which does not own shares inLeighton.

The allegations hit just as Leighton, controlled by Spain'sACS, has been emerging from a rough patch due to heftylosses on two big projects and faces challenges recoupingpayments from clients and a downturn in new mine construction.

Citing internal company memos, Fairfax media reported thatLeighton senior executives, including highly regarded former CEOWal King, knew about plans to pay alleged multimillion-dollarkickbacks in Iraq, Indonesia and Malaysia. King denies anywrongdoing.

In a near three-page statement to the Australian SecuritiesExchange made in response to the media reports, Leighton said itwas not aware of any new allegations or instances of ethicsbreaches beyond already disclosed bribery cases in Iraq andIndonesia.

Australian federal police are investigating potentialcorruption relating to Iraq contracts, after Leightonvoluntarily reported a possible ethics breach in 2011.

The company also said on Thursday it had sacked a seniorexecutive last year and has gone to court seeking to recoverA$5.6 million from a former employee for alleged breaches ofcontractual duties tied to the construction of a barge inIndonesia for a Leighton unit.

It declined to comment further on the Iraq and Indonesiabreaches as they are under investigation or in court.

Nowhere in its statement did Leighton deny wrongdoing, butit said the Iraq and Indonesia cases were "exceptionalinstances".

Former CEO Wal King, who retired in 2011 after running thecompany for 23 years, denied on Thursday that he was "in theknow" about the alleged misconduct and said he would take allsteps necessary to protect his reputation.

"Mr King emphatically denies all allegations of wrongdoingmade against him in those news stories," a statement released byhis office said.

Simon Fitzgerald, an analyst at Moelis Australia Securities,said it was important to note that the accusations concernedformer management and that Leighton has taken clear steps toimprove its governance.

"In terms of whether it creates reputational issues fromhere, the damage has already been done, but perhaps moreso inthe regions where these issues occurred," he said, adding itwon't hurt Leighton in Australia, where it remains one of thefew companies that can handle large, complicated projects.

Shares in Leighton, majority owned by Germany's Hochtief AG, which is in turn controlled by ACS, slumped 10.4percent to close at a one-month low of A$17.54.

($1 = 1.0675 Australian dollars) (Additional reporting by Jane Wardell; Editing by RichardPullin, Edwina Gibbs and Christopher Cushing)

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