CIMIC execs jailed in Qatar

Two executives working for CIMIC’s Qatar joint venture were arrested and placed in jail as authorities sought answers over spiralling debts and scores of legal cases.

CIMIC is due to report annual results on Wednesday.

Two executives working for CIMIC’s Qatar joint venture were arrested and placed in jail as authorities sought answers over spiralling debts and scores of legal cases lodged by suppliers and contractors in the Gulf state.

CIMIC, Australia’s biggest construction company, has been served with hundreds of legal and arbitration claims demanding unpaid debts topping $US1bn ($1.3bn) with an administrator appointed over fears delays in paying scores of workers may spark a humanitarian crisis.

While the bulk of the contractor’s in-country management team had already departed for Dubai, several of the remaining executives were jailed in a bid to trigger the payment of overdue salaries and project related settlements dating back more than a year, sources told The Australian.

While no charges were thought to have been laid, one of the executives was locked up for more than a week in the hope he could gain access to company funds as anger among the local business community grew over the stalemate situation.

CIMIC, due to report its annual results on Wednesday, is trying to sell its 45 per cent stake in the BIC Contracting joint venture in addition to its 49 per cent share of the Doha-based venture, known as Leighton Contracting Qatar. It was offered to its local partner Hawar Group for just 1 Qatari riyal (36c) but rejected due to liability concerns.

Frustration has been brewing in Qatar over difficulties in contacting either CIMIC or BICC executives over the situation and a lack of legal representation to address a raft of court cases and arbitration, according to the official administrator appointed to manage the fallout.

“Creditors including sub-contractors, suppliers and joint venture partners are filing arbitration locally to secure their dues,” a statement by Qatar’s Judicial Administrator said.

“Regrettably, Leighton Contracting Qatar management has failed to retain any legal counsel in Qatar to represent the company, as they have not settled their account billings. Thus Leighton Contracting Qatar has no representation at the arbitration hearings.”

CIMIC declined to comment while BICC did not respond to a request for comment.

The fallout is the latest setback in the Middle East for the Spanish controlled company, previously known as Leighton Holdings, following a high profile bribery probe over Iraq oil deals that led to charges being laid by the AFP.

CIMIC suprised shareholders a year ago with a $1.8bn writedown and a decision to quit its troubled Middle East business, blaming tough market conditions in the region.

The administrator remains concerned over unpaid wages.

“There have been no positive developments to report. To date the agreed funding of payroll for current employees and settlements of employees terminated by Leighton Contracting Qatar management as far back as October 2019 has still not made significant progress despite the willingness of the Qatari partner to contribute a major portion of funding, and furthermore purchase certain fixed assets in exchange for additional funds,” Qatar’s Judicial Administrator said.

“Piecemeal payroll credits continue to be effected by the Administrator for specific projects, and the project management continues to receive salary funded from outside Qatar.”

Still, the future of the joint venture for Hawar looks murky with no sign of a resolution in sight.

“The local shareholder has maintained their intention to restore Leighton Contracting Qatar to its formerly reputable competence. The absence of any contribution or co-operation from the minority shareholder, a subsidiary of CIMIC, renders this objective very hard to achieve,” the statement said.

CIMIC is controlled by the Spanish-German shareholder Hochtief-ACS, which owns a 73 per cent stake in the business.

The Sydney-based engineering group — which is building major infrastructure projects in Australia including Melbourne’s troubled $6.7bn West Gate Tunnel - first gained exposure to the Middle East in 2007 when Leighton merged its regional operations with Al-Habtoor Engineering group, taking a 45 per cent stake in the combined company for $870m in a bid to win new business in the booming Gulf construction market.

Leighton at the time moved its international headquarters to Dubai from Kuala Lumpur to cash in on the region’s thriving building sector, which initially appeared to have dodged any major fallout from the global financial crisis.

Still, market conditions eventually started to unravel and the group has for years struggled to collect hundreds of millions of dollars of bad debts from other suppliers in the region, with court proceedings often drawn out and lacking regulatory enforcement.

CIMIC fell 1.2 per cent to $26 on Tuesday.

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