Michael Bleby Reporter

Michael writes on emerging markets, architecture and engineering. He has served as a correspondent in Tokyo, London and Johannesburg and has written for Reuters, the Financial Times, The Age and The Sydney Morning Herald.

View more articles from Michael Bleby

First GHD, now SKM: Engineering company rapped over ‘improper payments’

Published 25 July 2013 11:26, Updated 26 July 2013 06:14

+font -font print
First GHD, now SKM: Engineering company rapped over ‘improper payments’

SKM chief executive Santo Rizzuto praised by World Bank for ‘new standard of compliance’ in reporting bribes by subsidiary. Photo: Luis Enrique Ascui

The World Bank has put engineering firm SKM on a probation list for two and a half years after the Australian company voluntarily disclosed that a subsidiary had been making improper payments on some international aid projects in southeast Asia.

The payments were made by one of SKM’s operations centres servicing some international aid projects in South-East Asia, the company said. They happened in ‘several’ countries and the number of people involved was fewer than 10. Some direct employees of SKM were involved.

It is likely that contractors were also involved, as the firm also said it has ended agency agreements, typically used where a company has no fixed office on the ground but relies on third parties to engage with clients.

SKM, which employs 7500 people in more than 40 offices, including in Malaysia, Singapore, Indonesia, Thailand and the Philippines, did not disclose the location of the improper payments or the projects concerned, nor did it say over what period of time they took place.

Unlike rival GHD, which was last month debarred from bidding for World Bank work for a year over fraud in Indonesia, SKM and its subsidiaries remain able to bid on and be involved in all World Bank-funded projects, provided they stick to conditions set by the financing authority for the agreed period. Any failure to abide by that agreement will mean immediate debarment.

“The agreed upon sanction reflects the voluntary acknowledgment by SKM of corrupt misconduct and confirmation of corrective action, including a thorough internal investigation, and the dismissal of certain key individuals including senior managers connected with the illegitimate payments,” the World Bank says in a statement. “The company also initiated an internal Appropriate Business Practices Policy, and took steps to improve its governance and compliance procedures.”

The World Bank’s Vice President of Integrity Leonard McCarthy said the company’s behaviour in reporting the conduct and willingness to provide evidence to support the bank’s investigation set a ‘new standard of compliance’.

“A combination of self-reporting, corrective action against corruption, and engaging with the World Bank’s Integrity Vice Presidency with full transparency placed SKM in a strong and credible position with regard to the resolution of this matter,” the bank said.

SKM chief executive Santo Rizzuto disclosed the conduct and agreement in an internal email to staff on Thursday.

Rizzuto told staff the payments happened before November 2011. He was appointed chief executive in October 2011.

“Our concern was not the quantum of the improper payments but that this has happened at all,” he said. “SKM takes a very serious view of such conduct and requires its staff to act with integrity at all times.”

The approach taken by SKM contrasts with that of GHD, last month criticised by the World Bank not just for a $400,000-plus fraud, which included a “marketing fee” GHD’s Indonesian subsidiary paid to a sub-consultant, but also for attempts to falsify documents and destroy evidence.

The World Bank last year established a new policy to publish decisions by its independent sanctions board raises the pressure on companies to explain how they respond to fraud and corruption and how they manage wrongdoing when it is uncovered.

SKM said it notified all relevant enforcement authorities and aid agencies about the payments in August last year. The conclusion of the World Bank process determined the time of the disclosure to staff and the media, the company said.

Topics:

Comments