Worley admits corruption findings
Engineering group Worley has admitted to investors that an arbitration tribunal made corruption findings against it relating to contracts in Ecuador.
Engineering group Worley has admitted to investors that an arbitration tribunal made corruption findings against it relating to contracts in Ecuador.
But Worley denied it had acted corruptly, disputing the tribunal’s findings.
In a statement to the stock exchange following a near two-day trading halt, the group responded to The Australian’s reports of the legal fight.
Worley told the ASX on Wednesday afternoon that the net amount owed to it by Ecuador in the legal battle was $58m.
The tribunal’s decision, filed in a US court late last year, records that the amount in dispute was “nearly $US470 million” – about $A700m.
“Against this background, says the claimant, full accountability requires that compensation for the harm caused to the claimant and its investment encompass the cost of this proceeding. In this respect, the claimant states that at the moment of filing of its Statement on Costs, the breach amounts to $US141.3m not compensated to Worley for its contributions to the Ecuadorean projects and $US325m in civil liabilities,” the tribunal’s decision says.
In Worley’s notice of arbitration, filed in February 2019, the company said Ecuador owed “$US83m plus interest for unpaid services and created a baseless liability of $115m plus interests”.
“Ecuador is liable for all damages arising from its acts and omissions, and is obligated to fully compensate WorleyParsons,” the company’s notice said.
Worley’s claims against Ecuador were dismissed by the international tribunal on three grounds, including “the existence of a widespread pattern of illegality and bad faith affecting the centrepieces of the claimant’s investment from their inception, depriving the tribunal of jurisdiction”.
The tribunal also found Worley’s “corruption during the operation of its investment” rendered its claims inadmissable, as did its “wilful blindness” to the corruption of a key subcontractor.
In its initial December 27, 2023 disclosure of the arbitration loss, Worley told the market only that the claim had been dismissed on jurisdictional grounds.
On Wednesday, after Worley was forced into a trading halt to respond to The Australian’s reporting, Worley confirmed the tribunal’s decision to dismiss its claims was “based on jurisdictional and admissibility grounds relating to corruption, illegality and bad faith by Worley and a subcontractor, including wilful blindness by Worley to the subcontractor’s corruption”.
In its ASX statement, Worley denied “any corruption, illegality or bad faith” by the company.
“In particular, Worley did not breach anti-bribery and corruption laws. Worley takes its responsibilities under such laws extremely seriously,” the company said.
It said it also did not believe it owed $US18m ($A27m) in back tax that the Ecuadorean government has demanded it pay following an audit.
“Worley believes that it has complied with its tax obligations and that the tax positions in the financial statements have been appropriately taken,” it said.
It described gifts to officials at Ecuador’s state-owned oil and gas company, Petroecuador, which the tribunal found amounted to corrupt conduct, as “a limited number of historical business entertainment events during the 2011-2017 period”.
Those gifts included paying $US1200 ($A1800) for a Petroecuador official’s birthday party, paying $US3,637.81 ($A5430) to fly three Petroecuador officials to Miami Beach for a weekend at a luxury hotel, spending $US22,000 ($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, and buying six tickets to an NBA game at the request of a Petroecuador official, according to the tribunal’s findings — which stated none could be considered business trips.
Worley’s statement on Wednesday said: “Since that time and as part of ongoing processes to strengthen our ethical business practices, Worley has improved its processes for training and education, approval and recording of entertainment expenses.”
It also denied the tribunal’s finding that it improperly hired an unqualified person for eight months at $5000 a month at the request of a Petroecuador official.
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”.
On Wednesday afternoon, Worley told the ASX it “believes that all project employees were hired in accordance with proper processes”.
The company did not clarify whether it accepted it hired the man, but it has previously denied doing so to the tribunal.
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.
In its statement on Wednesday afternoon, Worley said The Australian “inaccurately reported the amount of the Worley receivables”.
“The net amount owed to Worley is $58m which has been recorded as non-current in Worley’s periodic reporting since the 2019 financial year,” the company said.
However, The Australian did not refer to Worley’s receivables in its coverage.
The figure in dispute of $US470m was drawn from tribunal documents and Worley was asked if it was correct before publication. Worley did not answer the question or other specific questions related to the arbitration.
Worley shares fell by 2.3 per cent when the stock came back on Wednesday afternoon, to close at $16.53 each.
