How things change. Four years ago Leighton was riding the crest of the Middle East boom after ploughing a fortune to buy a 45 per cent stake in one of the biggest construction companies in the Gulf. Fast forward to today and the company's foray into the Middle East has turned into a blinding headache.
Besides losing money - $492 million in the year to June 30 largely from the Middle East - it has now fessed up that the Australian Federal Police is investigating one of its subsidiaries over potential bribes involving a $1.2 billion construction project in Iraq related to oil exports.
Although Leighton's profit for the six months to December was $340 million and it reaffirmed it would meet its calendar 2012 forecast of $600 million to $650 million, the market is worried about the next period, along with two problem projects in Brisbane and Victoria, which have caused a lot of grief. Not surprisingly, the shares fell 2 per cent on a day when the overall market was up.
Leighton won the contract with Iraq's South Oil Company in November 2010. Details surrounding the potentially illegal payments are believed to date back to about that time. When this became apparent soon after the signing of the deal, an internal investigation ensued.
The company has decided to keep details of the investigation scant, except to say it volunteered the information to the federal police and that it was now co-operating with the inquiry.
The truth is the board became aware of the scandal on November 7 but decided to inform the market more than three months later, on the same day it released its profit results.
It also comes as the Australian Securities and Investments Commission persists with its inquiry into Leighton over its continuous disclosure obligations dating back to last year under a previous chief executive.
What is clear is the company is not telling shareholders how big the potential bribery payment was, whether it was quarantined to one person or whether the bribery was more widespread in its subsidiary, Leighton Offshore. Nor is it providing the exact time frame - believed to be late 2010 to early last year - when some senior executives first became aware of the breach of the code of ethics as well as possible wrongful or illegal conduct.
Leighton is at pains to say this investigation has no connection with a case involving an employee, heard in the NSW Supreme Court last November, but some well-placed sources believe otherwise. They say evidence was given that unearthed other potential practices going on in Iraq.
Leighton began proceedings against an employee through a statement of claim filed on April 28 last year. The case was heard on November 16, nine days after the board and ethics committee were told about what happened in Iraq.
Shareholders might be in the dark, but its main shareholder, Germany's Hochtief, which owns 54.6 per cent, will be feeling very nervous given the strict anti-bribery laws that operate in Germany.
It raises an old chestnut of how companies operating in countries that have a culture of bribery and graft can reduce the risk of their employees or agents getting caught. Leighton has worked in Asian countries for years, and has been able to keep its reputation relatively clean. It will be fighting to ensure the same in the Middle East.
But Leighton is not the only company to become embroiled in an investigation, and it will not be the last. It should alert companies that operate overseas to ensure their affairs are squeaky clean.
After the AWB kickbacks scandal and the recent one involving the Reserve Bank and its subsidiaries, Securency and Note Printing Australia, the federal police is also on high alert to uncover other cases of wrongdoing. It is believed to be investigating at least four companies.
But given the number of companies operating overseas, particularly in developing countries where bribery is part of doing business, there are likely to be many more cases. And the more companies increase their foreign footprint, the greater the risks become, making it an important issue for boards.
The recently beefed up British Bribery Act shows how seriously bribery should be taken. It has made a company criminally liable if it fails to prevent bribery by its employees or an associated company. There is pressure on other countries, including Australia, to follow suit. If they do, boards will need to do more than just rubber stamp the code of ethics of a company.
Australia is perceived to be weak in this area. It first introduced anti-bribery laws 12 years ago. During that period there have been 25 cases referred to the federal police, and only the Securency case has generated arrests.
The AWB scandal never resulted in any criminal convictions despite a royal commission that revealed institutionalised corruption, including making secret payments to the Iraqi government to retain its multibillion-dollar share of wheat sales to Iraq.
Australia has been classified as one of the least corrupt countries in the world, but companies that operate in nations that deal in cash payments and ''high'' commissions walk a tightrope. It should be a wake-up call to all companies to ensure their practices are in order.