Formula 1, luxe trips, parties: Inside Aussie giant Worley’s secret Ecuadorian corruption scandal

Australian engineering contractor Worley has been engulfed in scandal after an international tribunal found the company acted in a corrupt way. Worley disputes the findings.

Worley became involved in rebuilding Ecuador’s oil and gas sector in 2011.

Exclusive: Australian contracting giant Worley lost a $700m dispute with Ecuador due to “conduct amounting to corruption”, an international tribunal has found.

An arbitration tribunal found Worley engaged in “serious and widespread illegal conduct” that included corruptly showering crooked government officials with gifts, linked to contracts to rebuild Ecuador’s oil and gas industry.

Its ruling, made just before Christmas and included in US court filings, also found Worley, which was previously known as WorleyParsons, benefited from illicit insider information when bidding for government contracts and broke a law limiting the amount of work that could be farmed out to subcontractors.

The tribunal, made up of three senior international lawyers, said it was “faced with a widespread pattern of illegality and bad faith affecting the centrepieces of the Claimant’s (Worley’s) investment from their origination and flowing into the Claimant’s subsequent investments in Ecuador”.

Worley has consistently denied any wrongdoing and says it is “considering the options for further legal proceedings”.

Worley CEO Chris Ashton. Picture: Al Torres

The company did not answer detailed questions but said: “We believe that the decision by the tribunal was not supported by the facts or the evidence provided during the arbitration process, and we are reviewing our legal options to address this.”

In 2019 Worley used the provisions of an investment treaty with the United States, where it has a subsidiary, to take Ecuador to an international arbitration tribunal.

The company sought payment of $US470m (about $A700m), telling the tribunal it had done all the work it was contracted to do and was the victim of an illegal harassment campaign by Ecuador that included slapping it with project audits and income tax bills as well as “baseless criminal investigations against WorleyParsons’s personnel”.

Worley told shareholders in late December the international arbitration tribunal, made up of three senior lawyers, rejected its claims last month on “jurisdictional grounds”, but did not mention the findings of corruption and illegality which were behind the ruling.

Investment tribunal findings are made outside the court system but are binding and are normally very difficult to appeal.

The ruling is a major setback for Worley, which reaps about $7bn a year in revenue from engineering contracts around the globe with clients including BHP and the world’s biggest oil producer, Saudi Aramco.

Worley boasts a high-powered board that includes Turnbull-era cabinet secretary Martin Parkinson and former Dow Chemical chief executive Andrew Liveris, both of whom joined after the company’s corrupt behaviour in Ecuador, and is led by chair John Grill, who founded the company and was its boss until October 2012.

On the board... Martin Parkinson

Andrew Liveris

The company became involved in rebuilding Ecuador’s oil and gas sector in November 2011 when it won two contracts.

One was to oversee the construction of a new 300,000 barrel a day refinery, Pacific, for RDP, a company 51 per cent owned by Ecuador and 49 per cent by Venezuela.

The second was to overhaul the country’s biggest refinery, Esmeraldas, which was in bad shape and producing only 80 per cent to 85 per cent of its capacity, for Ecuador’s state oil and gas company, Petroecuador.

A man whose consulting company was advising RDP on the process illicitly helped Worley by providing it with inside information, the international tribunal found.

“Worley sought and accepted (the man’s) assistance in bad faith during the negotiation phase of the Pacific Refinery Agreement, thus likely securing more favourable terms under the Pacific Refinery Agreement than it would have obtained in an arm’s length transaction,” the tribunal said in its award.

The Amazon River and its tributaries flow through Ecuador. Picture: Getty Images

In 2016, the Panama Papers trove of documents, leaked from Panamanian law firm Mossack Fonseca, revealed evidence that one of Worley’s subcontractors in Ecuador had paid tens of millions of dollars in bribes to key government officials and executives of state-owned Petroecuador to help secure ongoing work in building the country’s oil and gas infrastructure.

As a result, in October that year the Ecuadorian government suspended payments to Worley and launched formal investigations into both the contractor, Tecnazul, which had close connections to then-president Rafael Correa, and Worley itself.

Ecuador’s concerns included a series of contracts worth almost $US150m ($A220m) awarded in Worley’s favour without any bidding process in the early to mid 2010s.

In 2012 and 2013 Worley “corruptly offered undue advantages” to Petroecuador officials to help secure the contracts, for extra work on the Esmeralda project, the tribunal found.

This included paying $US3,637.81 ($A5430) to fly three Petroecuador officials to Miami Beach for a weekend at a luxury hotel, spending US$22,000 ($A32,800) on accommodation, transport and hospitality so that three Petroecuador officials and some of their spouses could attend a Formula 1 race in Austin, Texas, buying six tickets to an NBA game at the request of a Petroecuador official and paying $US1200 ($A1800) for a Petroecuador official’s birthday party.

Lewis Hamilton (right) is followed by driver Sebastian Vettel (left) during the 2012 US Formula 1 Grand Prix, attended by Petroecuador officials. Picture: Jim Watson/AFP.

At the request of a Petroecuador official, Worley also agreed to employ, at $US5000 ($A7400) a month for eight months, an “electrical consultant” who had no electrical qualifications but instead was a trained economist.

The tribunal said it was “persuaded that the dubious circumstances of this hire indicate a lack of any reasonable business justification and are part and parcel of the Claimant’s overall corrupt conduct”.

Worley also agreed to spend up to US$6m ($A8.95m) on what it said was a “charitable project” building a school and dock on an island where a Petroecuador executive had his holiday hacienda, but the tribunal made no finding about this payment.

The broader Tecnazul scandal was heavily covered by the Spanish-language press in Ecuador, which also explored the contractor’s links to Worley.

It resulted in several Petroecuador executives - including some who were also showered with largesse by Worley - being convicted for corruption.

However, Worley does not appear to have disclosed the issue to its shareholders in Australia.

After auditing Worley’s projects, Ecuador’s Comptroller-General claimed Worley owed it $US97m ($A145m) in overpayments - something the company told the tribunal was “unsubstantiated” but has also never disclosed to its shareholders.

Ecuador’s tax authority also hit Worley with a $US18m ($A27m) tax bill and the country’s prosecutor general launched 24 criminal investigations into Worley’s employees, including its program manager.

Worley told the tribunal Ecuador only targeted its program manager because he was its representative and said five of the cases against him had been dismissed or dropped.

In its US court case, filed with the Federal Court for the Southern District of Texas, Ecuador seeks to recoup the US$6m ($A8.95m) it spent defending the arbitration case.

Worley spent about US$30m ($A45m) on lawyers during the arbitration.

The US case is set for a preliminary hearing next month.