Calling ASX, ASIC: part I. The Australian Financial Review’s Chanticleer columnist, Tony Boyd, has the best local business story of the day (topping the global bribery and corruption exclusive in The Age and SMH and HuffPo) with a report on how Target’s solid December half-year profit recovery seems to have been a fiddle:
“Wesfarmers is investigating deals done with 30 foreign suppliers to discount store Target, which boosted profit by 25% in the first half with the express condition that the money flow back to the suppliers through higher prices before the end of the financial year. The suppliers rebate arrangements lifted Target’s profit for the six months to December by between $US10 and $US15 million. Without the deals the Target earnings before interest and tax would have slumped about 15% instead of rising 5.7%. The reported results were the best at target for three years.”
Chanticleer reported that the supplier rebates were discovered by Guy Russo, the former head of Kmart (also owned by Wesfarmers), who was made head of the department stores business in a major restructuring earlier this year, just before Wesfarmers’ results were announced in mid-February. Chanticleer says that normally supplier rebates are included in a retailer’s accounts in inventories, not the profit-and-loss account. The report will force Wesfarmers to restate the Target accounts for the six months to December, and Wesfarmers’ group accounts. The position of former Target head Stuart Machin is unclear. — Glenn Dyer
Calling ASX, ASIC: part II. The bribery and corruption story on the front page of The Age and SMH features an old friend to Australian regulators, Leighton Holdings. In fact, there is a separate article on Leighton (now called CIMIC and controlled by Spanish construction giant ACS). The Leighton story centres on its offshore arm, Leighton Offshore:
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“The offshore arm of Australian company Leighton Holdings paid millions of dollars in bribes to middlemen as part of an audacious strategy to influence Iraq’s deputy prime minister, oil minister and other senior officials, and win more than $1.3 billion of oilfield contracts.
“Leighton’s 18-month campaign of corruption, bribery, fraud and money laundering is revealed in the biggest leak of documents in the oil industry’s history. The documents are leaked from the email account of Cyrus Ahsani, the chief executive of the global oil industry’s bagman, Unaoil. Unaoil is a Monaco-based company that specialises in paying bribes. It was paid tens of millions of dollars by Leighton in 2010 and 2011 to help the Australian company win Iraqi government contracts.”
Both stories are scoops and demand statements from both Wesfarmers and Leighton/CIMIC, and from the ASX and ASIC. — Glenn Dyer
Let the great ruling-off commence! Tonight a handful of major companies rule off their books for quarterly or half-year financial results, and some of them will determine the future strength and direction of the ASX and billions of dollars in value for investors off all sizes. Three of the major banks rule off their accounts for the first half: NAB, ANZ and Westpac. Bank of Queensland ruled off its books at the end of February (as did the Ten network). And the Commonwealth Bank usually issues a third-quarter trading update in early May. On top of these, Macquarie Group rules off its full financial year tonight (a record profit north of $1.6 billion is expected). And a string of mining companies, large and small, will release their latest quarterly production and sales reports, with BHP Billiton and Rio Tinto the majors. Retailers such as Woolworths and Wesfarmers release third-quarter sales data in late April. — Glenn Dyer
Fines and penalties. According to a survey from an Irish research company called Corlytics, 10 of the biggest US and Europeans investment banks have been fined a total of US$150 billion since 2009 for a long list of problems, starting with rigging markets, selling customers dodgy products (called mis-selling) and money laundering. The Financial Times pointed out that figure is not the whole total because only two UK banks were involved in the survey, Barclays and HSBC. Therefore the cost of the financial products mis-selling scandals in Britain, which have cost the banks an estimated 30 billion pounds (well over$US50 billion) have not been included in the Corlytics cost. The fines relate to civil and criminal cases brought by regulators and other authorities with powers to levy penalties — most have been in the US, followed by the UK. The FT pointed out that the fines have taken a heavy toll on the banks, wiping out the equivalent of 14% of their equity capital. But has anyone gone to jail or been charged over some of these rigging and other problems? Yes, several small fries, but none of the lunatics in the US who gave the world the subprime crisis and then the GFC. — Glenn Dyer