What: The S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) closed down 1 % today to 5,480. However, the shares of Leighton Holdings Limited (ASX: LEI), the provider of multiple services to the infrastructure, resources and property markets in 20 countries were marked down by 90 cents or 4.12%.
So why the negative share price reaction?
Leighton shares went ex-dividend, which accounted for almost two thirds of the fall. The market sell-off also likely didn't help. And, the Fairfax media has today reported that it has received a "freshly leaked batch of company files including correspondence between two top Leighton executives in 2011." They reveal allegedly improper, "rewards, special bonuses and travel rorts" in the company's overseas operations.
This new evidence will be used in an upcoming Australian Federal Police case against the company. According to Fairfax it may "provide the most damning evidence to date that some of the company's senior executives not only conspired to pay kickbacks but sought to cover them up by inflating or backdating contracts."
The leaked emails refer to serious corporate governance failures in Iraq, India and the Middle East.
What now? Companies go ex-dividend twice a year (at least those that pay dividends every six months) so that isn't a surprise. And the company can't do much about broader market sentiment. When it comes to the allegations, it should be remembered that these alleged indiscretions are still to be proven and the company is yet to make a statement, let alone have its day in court.
However, should they be proven to be factual, it does point to potentially more trouble for Leighton. Major integrity improvements were made in 2012 and most executives involved prior to that date have departed the company.
"Editor's Note: The original version of this article cited the allegations in the Fairfax press, but didn't include a reference to the company's shares going ex-dividend or the broader market fall. This should have been referenced in the original article."
