The chairman of major Australian integrated services contractor Downer EDI (ASX: DOW) has stepped down this morning, two days after the company’s CFO resigned and amidst the launch of a public inquiry into the actions of the firm’s staff by the New South Wales corruption watchdog.
Chairman Mark Chellew has stepped down effective immediately without explanation this morning, and will be replaced by deputy chairman Mark Menhinnitt on an interim basis from today.
His departure comes after the NSW Independent Commission Against Corruption (ICAC) announced it would hold a public inquiry as part of an investigation concerning the conduct of employees of Inner West Council (IWC), Transport for NSW (TfNSW) and others.
Downer EDI employees were highlighted by the ICAC, which alleged they dishonestly obtained a benefit for themselves by favouring certain subcontractors when awarding work arising from contracts that TfNSW had awarded to Downer.
Chellew’s announcement also follows the resignation of Michael Ferguson as CFO of Downer EDI, announcing on Wednesday that he would leave over the coming six months once a replacement is appointed.
His departure came after Downer admitted in December 2022 to the historical misreporting of revenues and work in progress in one of its maintenance contracts.
In an update to the admission, Downer said post-tax earnings were overstated by $22.2 million between April 2020 and June 2022, of which $1.7 million related to FY20, $8.8 million related to FY21 and $11.7 million related to FY22.
Downer claimed the misreporting came about through the misapplication of its revenue recognition policy by making incorrect assumptions about work orders being completed.
Downer EDI CEO Peter Tompkins thanked Ferguson for his service to the contracting giant.
“I consider Michael to be one of the best commercial and financial professionals I have worked with. Importantly, he has built a strong team around him with significant depth in capability," Tompkins said.
“I am very appreciative of him staying on over the coming months to assist with the transition process.”
ICAC takes aim
Beyond ICAC’s interest in Downer EDI staff, its investigation primarily concerns the conduct of employees of a number of local council bodies and TfNSW.
Its list of claims is vast, and includes allegations that former Leichhardt Council and IWC employee Tony Nguyen partially and/or dishonestly exercised his offical functions by awarding and/or recommending contracts and tenders to companies with which he was associated.
TfNSW officer Benjamin Vardanega is alleged to have dishonestly and partially exercised his public official functions by using information gained in the course of his job to assist certain contractors to tender for TfNSW work, or to tender for subcontracts from entities that have been awarded TfNSW work, to benefit himself and others.
Others named in ICAC’s allegations include TfNSW employees Nima Abdi, Raja Sanber and further unnamed staff.
As for Downer, ICAC’s allegations include that certain employees obtained benefits dishonestly by awarding contacts to favoured partners, and that between 1 July 2019 and 31 March 2020 a staff member of the contractor dishonestly benefitted from the payment or application of public funds for their own private advantage.
The watchdog alleges this was achieved by submitting and approving timesheets and invoices for payment in circumstances where no work was carried out.
ICAC’s public inquiry will commence on 20 March, 2023.
Shares in DOW are down 0.15 per cent to $3.28 per share at 11.41am AEDT.
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