Leighton scandal exposes corruption

Every now and then a spotlight shines that allows us to see deep into the cesspit that is corporate Australia.

A six-month inquiry by Fairfax journalists has revealed a sordid history of bribery and corruption at Leighton Holdings, a $23 billion construction and development company, in which the major villains have walked away with their pockets stuffed with cash or continue to serve as senior executives on multi-million dollar salary packages.

Over at least five years, Leighton’s international arm paid bribes to the value of tens of millions of dollars to shady middlemen to win contracts for infrastructure projects the length and breadth of Asia – Iraq, India, Indonesia and Malaysia. Some of those millions then leaked back to Leighton bosses, some were kept by the middlemen, and the rest were passed on to politicians and government officials responsible for awarding the contracts.

All of this was illegal, and yet senior managers inside the company were either in on the lurk or turned a blind eye. The one manager who blew the whistle on the corporate crookery was persecuted and eventually terminated. The manager most directly implicated in the worst case was promoted and given a bonus before the stink grew so strong that he was later fired.

Despite corruption becoming public knowledge within the senior management in November 2010, the company waited a year before it called in the Federal Police. It took a further three months to notify shareholders that an investigation was under way. Even then it didn’t reveal that bribery was involved. This came to light only more than 18 months later courtesy of the Fairfax journalists.

The top boss, Wal King, was implicated in all of this. This big business hero, recipient of the Order of Australia, who had overseen the rapid expansion of the company over 23 years, was eventually squeezed out by the company’s German owner, but not before ransacking the company’s coffers. King walked away from the company in January 2011 with a $30 million payout, continued free use of the company credit card and a “consultancy” with the company valued at $6 million.

In just three months, King managed to blow $40,000 of the company’s money on hotel and travel expenses without authorisation. This was nothing new – he managed to spend this every month while boss. King now stands to earn more money as a director on the new board of the National Broadband Network at the invitation of communications minister Malcolm Turnbull.

King’s corrupt sidekick David Savage “earned” a cool $6 million for his last year at the company. Current chairman Bob Humphris sat on the board of Leighton International throughout this period and did nothing to address the endemic corruption staring him in the face.

Capitalism and corruption

This is not just a story of corporate malfeasance in one company. It comes just a few years after the Australian Wheat Board scandal, in which almost identical practices were unearthed, leading finally to a royal commission. That commission, as was to be expected, had no impact in restraining the criminal practices at the top end of town. The bosses know full well that a battery of social privileges protects them from the full application of the law.

Through this whole saga of corporate crookery, the agencies tasked with cracking corporate crime – the Australian Federal Police (AFP) and the Australian Securities and Investigation Commission (ASIC) – have been asleep on the job. Under Australian law, paying kickbacks to win business is a serious crime, while directors who fail to act with care and diligence can breach corporate law. Penalties include bans, fines or jail time. But the Leighton bosses, past and present, are at no risk of a stretch in Long Bay or Deer Park jails.

The AFP complains that it lacks the resources to tackle corporate crime. What a joke! The AFP has no shortage of money and officers to harass refugees and Muslims. The real problem is that its leaders and the responsible minister, Labor or Coalition, have no interest in sending bosses to jail.

ASIC has done nothing whatsoever on the Leighton case, on the grounds that it has no jurisdiction over corrupt practices undertaken outside Australia and did not want to duplicate and interfere in the AFP’s “investigation”. These are just excuses.

ASIC has repeatedly ignored corruption and misconduct in a string of companies, ranging from the Commonwealth Bank and ABC Childcare to the Reserve Bank’s currency printing arm and failed financiers Storm and Westpoint.

If you’re ABC’s Eddy Groves or the boss of Storm Financial, who looted the savings of many working class Queenslanders, you get the kid glove treatment from ASIC. But if you’re environmental activist Jonathan Moylan, who hoaxed the stock exchange earlier this year over Whitehaven Coal, ASIC will have you in front of the courts on serious charges in double quick time.

The response from the Abbott government to the Leighton scandal has been total silence. Senior ministers understand that this kind of corruption is “just the way business is done”. If Australian business is to get its share of the Asian economic boom, institutionalised dishonesty and clear breaches of law are inevitable – after all, as Financial Review journalist Michael Smith noted, “everyone does it”.

No accident, then, that on his recent visit to Indonesia, Abbott took along Leighton boss Hamilton Tyrwhill as one of the 20 CEOs hunting for new business in that country.

Return of the ABCC

If the government turns a blind eye to corporate crooks, it takes a very different attitude to alleged law-breaking by another big player in the construction industry – the CFMEU and other unions.

High up on the list of Abbott’s priorities is the reestablishment of the Australian Building and Construction Commission, a union-busting task force established by Howard and, shamefully, allowed to linger on for four years under the Rudd and Gillard governments until it was abolished in 2011. The ABCC will soon be back on sites persecuting construction workers and smashing safety standards.

Abbott is also set to legislate federally to back up union-busting legislation by the Victorian, NSW and Queensland governments, which prohibits construction companies from agreeing to pay union rates for contractors on pain of exclusion from government contracts.

So far as the politicians, themselves up to their necks in expenses rorts, are concerned, business corruption is acceptable. Standing up for workers’ rights is a heinous crime deserving heavy fines or jail terms. Rarely is the class character of capitalist justice expressed so clearly.