Outsourcing procurement mismanagement

Leighton Abu Dhabi scandal revealed

Leighton signed a $1.4 billion joint venture with Abu Dhabi-based Tourism Development & Investment Company in December 2007 to undertake contracting for various projects commissioned by TDIC, the tourism asset development arm of the Abu Dhabi Tourism Authority.

Eighteen months later, the joint venture company was abandoned and both companies blamed the decision on the global financial crisis. Neither company mentioned a scandal that had resulted in an internal investigation being carried out after TDIC received a series of documents that alleged fraudulent activity by a Leighton manager, who for the purposes of this article is called NX.

The revelations raised in the report come as Leighton admitted last month it had alerted the AFP to a possible breach of anti-bribery laws relating to its Singapore-based subsidiary Leighton Offshore Pvt and payments made to facilitate a wharf construction project in Iraq in 2010.

The Iraq payments are not the only potential corruption case facing the construction giant. Documents from a New South Wales Supreme Court case last year reveal Leighton conducted an internal inquiry into ''apparently corrupt conduct'' involving allegations that a senior employee channelled half a million dollars' worth of steel to a third-party project at the Bantam Shipyard in Indonesia.

It can now be revealed that another internal investigation, code-named project rabbit, was headed by Deloitte Corporate Finance. Deloitte completed an internal report on June 22, 2009, days after the TDIC/Leighton joint venture collapsed. The Deloitte report listed ''mental impressions, analyses and opinions solely to assist Al Habtoor Leighton Group in providing a summary of findings as part of its work in connection with an internal investigation into commercial procurement practices and to brief the TDIC''.

The report said: ''As of the date of this report there has been no evidence to substantiate any fraudulent activities alleged to have been conducted by [NX], however there are still concerns regarding his employment of procurement practices that are not in line with AHLG procedures. Further, the investigative team is not able to confirm the source of or the use for the AED [Arab Emirates dollars] 350,000 that was noted in his personal bank statements.''

Leighton said yesterday: ''It is difficult to confirm the detail. This is a matter that occurred in 2008-09 and current management have no knowledge of this matter. We appreciate these matters being raised with us are serious and undertake to look into them further as we take our values very seriously.'' None of the investigations into Leighton suggest it has done anything wrong, but it is a reminder to companies doing business in countries that have a culture of bribery and graft that they need to ensure their affairs are squeaky clean.

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