Worley had eight years to tell shareholders about its legal problems in Ecuador

Worley fought corruption allegations from Ecuador tooth and nail for almost eight years so why was it so afraid to tell shareholders about it?

Worley shares took another hit on Thursday after the company finally admitted it lost an arbitration dispute with Ecuador. Picture: Adam Yip

Why is it so difficult for some companies to understand that the market’s disclosure rules apply to bad news as well as good?

The contracting industry is rife with legal disputes, big and small. It would not be reasonable to expect disclosure on every single one – when launched or when concluded.

But Worley’s conduct in its disclosure of the company’s travails in Ecuador is appalling.

This week Worley was forced to properly explain its dispute over petrochemical contracts in Ecuador, after The Australian revealed the company had its claim rubbed out by an international tribunal because of “conduct amounting to corruption”.

The ASX forced Worley into a trading halt to prepare a more accurate disclosure to the market. On Wednesday the company issued the statement it should have given to the market on December 27, when first announcing the loss.

And even then Worley downplayed the matter, to the extent that it could, in telling the market The Australian’s report it was claiming $US470m from Ecuador was “inaccurate”, because Worley carried only $58m in overdue receivables on its own books.

It is possible the company’s board and management didn’t bother reading the tribunal decision – or perhaps don’t understand there is a difference between accounting standards and disclosure obligations.

That might have made it easier to wave off queries from concerned investors this week – nothing to see here, it was only $58m, who cares? But had Worley won its full $700m claim, you can bet the company would be trumpeting the windfall to the rafters.

And it’s worth remembering that none of this was news to the global contracting giant.

The involvement of Worley contractors in making corrupt payments to Ecuadorean government officials was revealed in the Panama Papers in 2016.

The government immediately stopped paying Worley’s invoices and launched a series of criminal and civil investigations into the company – all reported in the local media, including comments from Worley ­executives.

Executives of the contractor, Tecnazul, were prosecuted and convicted of corruption.

Worley knew all this when launching its arbitration claim in 2019. It knew corruption was central to Ecuador’s defence in 2021, when a US Court ordered Worley to hand over internal documents relating to its conduct in the country.

Worley chief executive Chris Ashton. Picture: Al Torres

The tribunal decision was handed down on December 22. Worley would have seen articles referring to Ecuador’s claims for costs, including the corruption claims, in the US legal press on January 2. And the company certainly knew what The Australian intended to publish when a detailed list of questions was sent to its corporate affairs department on Monday – questions the company did not bother to answer.

And yet, at no point along this history did Worley feel the need to tell its shareholders it had a problem in Ecuador, let alone that it had been accused of ­corruption.

The company’s purported disclosures on the subject are buried in the accounting notes to its annual financial statements.

None mentioned Ecuador by name, and none detailed the accusations it faced.

A simple release, at any point in time, telling shareholders it had lost the Ecuadorean contracts and that its local officials had been accused of corruption – including Worley’s long standing denial of any wrongdoing – would have been enough to keep the market informed, and gone a long way to inoculate the company against any further claims of corrupt behaviour.

Instead it chose to quietly avoid any public mention of the scandal to shareholders – a decision that never helps proclamations of innocence after the event. But for Ecuador’s decision to file the full tribunal decision in the US courts, and The Australian’s reporting on the matter, Worley shareholders would still be in the dark.

The real question Worley shareholders should be asking is this: what else might be out there that you don’t know about yet?

Originally published as Worley had eight years to tell shareholders about its legal problems in Ecuador