In what may be a breach of Australian bribery laws, it has been revealed that Thiess paid Indonesian officials tens of thousands of dollars for their services rather than hiring actual security guards, Fairfax Media reports.
Bank transactions reportedly show that the mining contractor deposited a large sum of money in the bank account of a senior Indonesian security official’s relative, while other payments were made in cash – it is believed these payments benefited Indonesian third parties.
In return, the media outlet reported that these officials used their resources to provide security at Thiess' coal mines, where it was said workers voiced accusations of police brutality.
Australian law prohibits giving a foreign official a benefit to secure a business advantage that is not legitimately due.
When asked about it, a Leighton Holdings spokeswoman reportedly said: “We do not comment on matters that are the subject of old and unsubstantiated media reports or speculate on their implications”
Sources reportedly told Fairfax the company had referred the matter to law firm Allens for advice on whether federal police should be notified.
Until more is found out, it is possible Thiess may not be in breach of Australian law if it can prove that the security services it paid for – and which it is entitled to – did not amount to securing a “business advantage”
However, Thiess’ credibility is in doubt due to the size of the payments it made and the fact that the payments may have gone as bribes to third parties, rather than the officers who provided on-the-ground security support.
A company source reportedly said risks of bribery accusations could have been avoided if Thiess had hired private security guards, especially in light of the corruption profile of Indonesia's security services.
Fairfax said Thiess Indonesia's connections with the country’s military and police force came to light in March two years ago, when workers who began protesting at the company's East Kalimantan mine were reportedly met by military and police officers with batons.
Union general secretary Bambang Surjono told Fairfax that workers were beaten.
Continuing with the theme of shady deals, Fairfax also obtained a confidential 2007 agreement between Leighton Holdings and two wealthy Middle Eastern businessmen in relation to a merger to create the Dubai-based ailing developer Habtoor Leighton Group.
The documents reportedly show that despite Leighton's $343 million investment in HLG in 2007 – and a later decision to support the struggling firm with large interest-free loans – the company gave up majority management and board control to Riad Al Sadik and Mohammad Al Habtoor.
Former company sources reportedly explained Leighton's behaviour saying the company wanted to leverage off the pair's connections in the Middle East to expand its operations.
However, a former company executive told Fairfax things did not go as planned.
“If you are not going to get control of a company when you become a significant investor, you have to do very good due diligence to ensure your investment will be protected by those that have control,” the source said.
“We know that this due diligence wasn't done and the merger has been a financial disaster.”
The Leighton Holdings spokeswoman said the company would not comment on the HLG dealings because they were “the subject of commercial and confidential arrangements”
Last year Fairfax revealed corruption and bribery may have slipped into Leighton Holdings’ international operations, after it was found that a $42 million kickback was made to secure a multi-million Iraqi oil pipeline contract in 2010-11.
That payment remains under federal police investigation.
Besides being investigated by federal police, Leighton Holdings is also on the radar of the Australian Security and Investments Commission.
ASIC is reviewing trading in Leighton shares following a 14% price surge prior to majority shareholder Hochtief announcing its plan to raise its stake in the Australian contractor to almost 75%.
Reports of alleged undisclosed $2 billion in write-downs at Leighton could also trigger an inquiry by the ASIC, since the ABC reported the Leighton board was allegedly aware of those write-downs for months but failed to disclose them in the company’s 2013 financial results.
It is not the first non-disclosure incident at Leighton.
The company is being sued by some of its shareholders over a $1.1 billion write-down relating to costly delays on Brisbane's Airport Link toll road, Victoria's desalination plant and HLG’s operations, which Leighton failed to disclose in its profit forecasts for the 2011 financial year, thereby allegedly misleading investors.
Leighton is under review by major shareholder Hochtief, which took over almost 75% of the company on March 13.
It is looking at a business restructure – with potential divestment or merging of some subsidiaries – and job losses.
Leighton Holdings CEO Hamish Tyrwhitt and chief financial officer Peter Gregg – who were both on the Thiess board in Australia – left the company after the takeover, following Hochtief terminating their employment.
Hochtief CEO Marcelino Fernandez Verdes will replace Tyrwhitt.
Fairfax reports that Fernandez Verdes has spent the past week in Australia to focus on the restructuring of the Leighton Group.