Leighton Offshore, a Singapore-based subsidiary of Australia’s Leighton Holdings, is now facing a corruption probe in Iraq in addition to that it faces in Australia, after the parent company reported a possible illegal payment by one of its subsidiaries linked to work expanding Iraq’s crude oil export facilities.
Australia’s Federal Police are already investigating Leighton Offshore. At this stage it is not known whether there has been any wrongful or illegal conduct, or whether there will be any adverse financial consequences for Leighton.
No charges have been filed in either Australia or Iraq, and officials say Leighton is co-operating fully with the investigation, which is in its preliminary stages.
“We’re working closely with Australia’s Leighton to reveal any violations that infringe contracts signed with the company. Leighton is showing full co-operation and pledged to give all information to the inspector-general’s office,” oil ministry inspector general Hilal Ismael told Reuters.
The Australian Financial Review is reporting that a bribe may have been made to an official in order to obtain details of rival bids for the project, enabling Leighton Offshore to low bid its competitors.
The Iraqi investigation is taking place by the independent Iraqi Inspector General’s office, which will report to the Iraq Oil Minister Abdul Kareem Al-Luaibi. Officials are on record saying the company could be prevented from undertaking further work in the country if found guilty of corruption.
Despite efforts made by lead officials such as Deputy Prime Minister for Energy Hussain Al-Sharistani, Iraq’s oil sector is infamously corrupt, with pressure to pay bribes often coming from the Iraqi side on everything from contract awards to visa processing. Leighton Holdings CEO Hamish Tyrwhitt reacted with surprise to the news, telling investors that “if true, it obviously comes as a shock, not only to me but everybody.”
Australia has tight anti-corruption practices, broadly similar to those in place for US and UK companies, which can make doing business in Iraq difficult.
Fattah al-Sheikh, a former member of Parliament who now heads Iraq’s anti-corruption National Independents Party, told Australian Financial Review that corruption in Iraq is endemic.
“I would say that it is virtually impossible for a foreign company to come to Iraq without paying bribes,” al-Sheikh said. “Corruption has infected every level of the business environment. Everyone, at every level from the top down, wants a piece of the cake. Unless you pay someone off, you don’t win contracts. Very simple.”
Leighton Offshore had previous problems with corruption. A continuing court case surrounding the dismissal of former Leighton Offshore project manage Gavin Hodge contains allegations that Hodge mishandled the construction of the Leighton Eclipse pipe laying vessel for the company to personally gain from the project. The vessel is now in use in Iraq.
Leighton Offshore is already working to finish phase 1 of the Crude Oil Export Facility Reconstruction Project offshore Basra under a $733 million deal. On 16 October last year the company landed a second contract from Iraq, worth $518 million, to build a further two offshore platforms, an oil pipeline and a single point mooring system to further expand the facility.
