Worley faces ASX questions about its market disclosures over $700m Ecuador arbitration loss

The ASX has forced Worley into a trading halt to answer questions over The Australian’s reporting on findings the company acted corruptly in Ecuador.

Worley is facing questions from the sharemarket operator over its disclosure practices.

The stock exchange has forced Worley into a trading halt in the wake of revelations in The Australian that a tribunal found it had engaged in illegal and corrupt conduct in Ecuador.

Worley was on Tuesday night scrambling to respond to questions from ASX officials about the scandal and the company’s failure to disclose the corruption findings to the market.

The company’s shares did not trade on Tuesday. At 12.20pm it promised an announcement “later today” but did not deliver one by the time ASX trading closed at 4pm.

The Australian Securities & Investments Commission is closely monitoring the situation, including Worley’s response to the ASX’s query.

Corporate governance experts have also raised concerns about Worley’s failure to fully disclose the tribunal’s findings to the market a week and a half ago.

The Australian on Tuesday revealed that Worley had been defeated in arbitration with Ecuador over a $US470m ($700m) claim, with an international tribunal ruling its claims were inadmissable because the company’s contracts with ­Ecuador’s state-owned oil and gas company were “tainted by ­illegality and bad faith”.

In a ruling released just before Christmas, the tribunal found Worley engaged in “serious and widespread illegal conduct”, including “conduct that amounted to corruption” by showering crooked government officials with gifts, ahead of the award of contracts to rebuild Ecuador’s oil and gas industry.

The tribunal also sustained allegations made by the Ecuadorean government that Worley gained an inside advantage from confidential information when winning its first contract in Ecuador.

Worley has disputed the tribunal’s findings and told The Australian it was reviewing its legal options. But all Worley told shareholders on December 27, when announcing it had lost the dispute, was that the tribunal had rejected its claim on “jurisdictional grounds” – without saying those grounds were related to the company’s own corrupt conduct.

The corporate watchdog is monitoring Worley’s response to questions from the stock exchange about its failure to disclose the corruption findings.

ASX officials put Worley into a trading pause before the market opened on Tuesday.

Sources say that ASX compliance officers wrote to the company on Tuesday morning asking it to respond to The Australian’s report.

Transparency International Australia chief executive Clancy Moore said: “All ASX companies should proactively disclose information to shareholders and the market that may have a material impact on their business operations. For companies involved in the oil and gas sector, which is particularly prone to ESG risks, transparency is a must.”

Martin Lawrence, a director of proxy adviser Ownership Matters, said announcements that lacked specifics were of little use to investors.

“If a company has to announce an adverse event to the market, what investors want to know is what are the financial implications, if any, of the adverse event and why it occurred,” he said.

“There isn’t much point in an announcement otherwise.”

Worley did not answer when asked if it had reported itself to authorities including Australian Federal Police, which has responsibility for investigating foreign corrupt practices matters.

The AFP declined to comment when asked if it was investigating, as did the US Securities and Exchange Commission, which has jurisdiction over US-traded Worley securities.

The revelations of Worley’s Ecuadorean corruption scandal come only weeks after a separate case in which an Australian Federal Court judge found that Worley had misled the market in 2013 by releasing inflated earnings guidance – despite the company facing a widespread downturn in its global business.

Worley released the bullish earnings guidance in August 2013, but was forced to slash earnings expectations only months later, triggering a 26 per cent crash in its shares that wiped more than $1bn from its market value.

Despite finding the breaches, Justice Ian Jackman dismissed a long-running shareholder class action against the contracting major over its market disclosures on the grounds the plaintiffs had not established the causation and quantification of damages on the balance of probabilities.

The case had been returned to Justice Jackman for a rehearing. The original judge in the case dismissed the shareholder claims in their entirety.

That decision was overturned on appeal and the full bench of the Federal Court, in a May 2022 decision, criticised Worley’s public disclosures – particularly the company’s inclusion of a 19 per cent “blue sky” factor in its revenue projections for the year, at a time when Worley was facing a significant market ­pullback.

On December 19, the day Justice Jackman dismissed the case, Worley told shareholders it was “pleased to report that it has successfully defended claims for compensation by the application and all group members”.

The company’s market release did not mention the adverse findings that it had previously misled the market.

Shine Lawyers, which acted for Worley shareholders, is considering a further appeal.

Originally published as Worley faces ASX questions about its market disclosures over $700m Ecuador arbitration loss