Cardno Caminosca corruption probe had Ecuador Catch-22: fears that agencies to be informed were dirty themselves

BRISBANE engineers Cardno were worried about telling Ecuador’s government agencies of a bribery probe in the South American nation — because the same agencies were thought to be taking the dirty money.

The Courier Mail - Liam Walsh 24/03/2017

BRISBANE engineers Cardno were worried about telling Ecuador’s government agencies of a bribery probe in the South American nation — because the same agencies were thought to be taking the dirty money.

A catch-22 also ensnared Cardno because it could not cancel government-linked contracts allegedly won via bribes. That was due to the risk of joint-venture partners or the Ecuadorean government suing.

The concerns were aired in arbitration documents recently seen by The Courier-Mail. Cardno, a 5900 staff operation, was entangled when it purchased Ecuadorean engineering outfit Caminosca in 2012 for more than $15 million.

A subsequent wideranging internal investigation raised concerns of bribery in up to five bids, including a hydro-electric project, in a scheme using US banks.

“Cardno has essentially purchased a sword of Damocles to hang over itself,” the arbitration document said.

Among those allegedly targeted for bribes was a senior Ecuadorean official. The official has not responded to Courier-Mail questions but was quoted in Ecuadorean media as rejecting corruption claims and threatening to take proceedings against those who had besmirched the official’s reputation.

The arbitration eventuated because Cardno had sued Caminosca’s original shareholders, looking to rescind the 2012 purchase.

‘NO BRIBES? THEN NO PAY!’

Among ongoing problems was Cardno only receiving $US1 million ($A1.3 million) of $US11 million owed for Caminosca work from January to June 2016. “It appears that there is some correlation between Cardno’s refusal to continue (the alleged) bribery scheme and Cardno’s inability to collect full payment on its invoices,” the documents said.

“Cardno has determined that it cannot unilaterally terminate the Caminosca contracts without risking significant legal consequences, including lawsuits by their respective joint venture partners and potentially the Ecuadorean Government.

“In addition, Cardno has examined the possibility of reporting this bribery scheme to the Ecuadorean government but because the Ecuadorean agencies it would report to are the same ones that allegedly received these bribes, it is not practical to do so without risking damage to its employees.”

But Cardno had notified Australian and US authorities, and the firm noted some kind of sanction was “probable”.

FALLOUT?

That included, under the US Foreign Corrupt Practices Act, an impact on its ability to work on government contracts.

Ted Williams, a partner with law firm Piper Alderman, said US authorities could potentially sanction acquiring companies if authorities felt pre-purchase due diligence had been inadequate and the acquirer had failed to install steps to address problems in the purchased business.

But Mr Williams added US authorities would favourably view companies that actively assessed and investigated corruption risks, addressed them and voluntarily reported findings to authorities.

Australian authorities have examined the matter and said they found “no Australian offence disclosed”, while US authorities declined to comment.

Cardno declined to comment and the Ecuadorean embassy has not answered questions. Caminosca’s original shareholders have denied wrongdoing.

The Courier-Mail exclusively outlined the alleged scheme in January. The arbitration documents, initially obtained by Ecuador’s Expreso newspaper in February, said the tribunal had given a first partial finding largely in Cardno’s favour.

Fuente Original