Business Ethics and Social Responsibility: Case Study of Peter Gregg's Fraudulent Activities at Leighton Holdings

This essay evaluates the key ethical issues raised in the article in relation to corporate citizenship, leadership, corporate social responsibility and corporate governance. The decision taken by the court to hold Mr Gregg liable for falsification of the records of the company is ethical. The ethical decision-making process is used in this essay in order to evaluate that the decision taken by the company to conduct an investigation against Mr Gregg is considered ethical.

0 | P a g e
Comparative Business Ethics and Social Responsibility

1 | P a g e
In this essay, the article posted by the Sydney Morning Herald on its website titled
‘Businessman Peter Gregg found guilty of falsifying records’ will be evaluated. This article
was posted on 11th December 2018, and it raised a key ethical issue relating to non-
compliance with duties by directors (Baker and McKenzie, 2018). This article provided that
Peter Gregg was found guilty of falsifying the books of accounts of Leighton Holdings while
he was acting as the director. A case was filed by the Australian Securities and Investments
Commission (ASIC) against Mr Gregg regarding this transaction which was conducted by him
around a decade ago. After evaluating all the evidence, the court found Mr Gregg guilty for
issuing payment of $15 million (Baker and McKenzie, 2018). In this essay, the key arguments
made in this article will be analysed along with the evaluation of relevant history to consider
any legal implications. This essay will evaluate the key ethical issues raised in the article in
relating to corporate citizenship, leadership, corporate social responsibility and corporate
governance. Whether the most appropriate ethical decision is made in this case or not will
be evaluated in this essay and examples of other cases will be evaluated to support the
arguments. An ethical decision-making process will be given in this essay by aligning it with
the arguments with most relevant of the seven moral philosophies to evaluate this case.
This article shows that the court found Peter Gregg liable for falsifying the books of accounts
of Leighton Holdings. Mr Gregg was the former CFO (Chief Financial Officer) of the company.
The company faced a trial which continued for five weeks in the District Court of New South
Wales (Wiggins, 2018). In this trial, a jury found that the corporation is guilty of violating
section 1307 (1) of the Corporations Act 2001 (Cth). It was held that Mr Gregg misused his
powers while acting as the CFO of the company to falsify the books of accounts of the
company. The investigation was started by ASIC which continued for several years. The
information regarding the breach of duty and corrupt activities was given by Leighton
Holdings itself to the ASIC in 2012. ASIC alleged the company for bribing foreign officials
between 2009 and 2011. All these allegations were centred on the payment which was
approved by Mr Gregg for US$15 million (AU$21 million). This payment was approved by
the company while conducting its operations in UAE (Baker and McKenzie, 2018).
It was held that the company entered into a contract to buy steel; however, this agreement
was not genuine. Mr Gregg showed a transaction of $21 million in the books of the company
which were made in order to secure the delivery of steel which the company never

2 | P a g e
received. The position of the CFO of the company was misused by Mr Gregg for his personal
interest which resulted in harming the company and its public reputation (Williams, 2018).
The article argues that this was a major breach of director duties; however, it was not
reported until a decade later. It was argued that the money of the shareholders was used to
make the payment which shows the misconduct of the organisation. Even Leighton Holdings
was concerned regarding the falsification of its books of accounts which leads to this corrupt
action. An appeal was made to the ASIC in order to conduct investigation regarding this
matter which shows that the company did not want to engage in unethical practice (Baker
and McKenzie, 2018). This investigation was conducted by ASIC due to the pressure imposed
by the Banking Royal Commission to comply with the guidelines given under the
Corporations Act. The article showed that Mr Gregg was found guilty for his actions and
violation of his duties.
The key ethical issue which is raised in this article is the violation of the duties of Mr Gregg
in order to conduct fraud in the company. He was operating in an apex position, and he
owed a duty towards the company and its stakeholders (Janda and Letts, 2018). However,
he breached this duty by falsifying the records of the company for personal gain. The article
argues that as the competition grows between corporations, it has become important for
them to generate a competitive advantage over their competitors to continue their growth
in adverse market conditions. However, it has also increased the importance of compliance
with business ethics policies to ensure that the corporations and their management did not
engage in immoral or illegal activities to generate profits on the business. The importance of
social responsibility of corporations has increased in the past few decades in order to
impose obligations on the management for their actions for the company. In the particular
scenario, the principles of business ethics were violated by Mr Gregg by falsifying the books
of accounts of Leighton Holdings (Baker and McKenzie, 2018). As a leader, he breached his
duties and moral responsibilities towards the company and its stakeholders. He shows
violation of ethical leadership principles since he prioritised personal interest above the
interest of the company and its stakeholders. He also violated the principle of corporate
governance while engaging in these unethical practices. Corporate governance is defined as
a set of rules and guidelines which governs the operations of corporations to ensure that

3 | P a g e
they maintain a balance between the interest of stakeholders of the company (Wintoki,
Linck and Netter, 2012).
The actions taken by Mr Gregg resulted in adversely affecting the shareholders of the
company because their money was used by Mr Gregg to make the payment of $21 million.
The public image of the company suffered after this incident as well which made it difficult
for the company to attract potential investors for future ventures. Since Mr Gregg violated
his duties for personal gains, he prioritised his personal interest above the interest of the
corporation and its stakeholders based on which he failed to maintain a balance between
the interests of the stakeholders of the company (Janda, 2018). Although the corporation
complied with the principle of corporate citizenship in this scenario; however, its executives
failed to comply with their responsibilities. The principle of corporate citizenship provides
that the corporation is an entity which has various social, cultural and environmental
responsibilities towards the community in which it operates along with its immediate
stakeholders (Lin et al., 2012). Lastly, the corporation violated the principle of corporate
social responsibility (CSR) which is a common business model adopted by corporations in
order to have an overall positive impact on society. This model covers sustainability, ethics
and social impact which incorporated into the core business activities of the company
(Aguinis and Glavas, 2012). The actions taken by the CFO of the company violated the
principle of the CSR model since he focused on gaining personal benefits rather than
fulfilling the social responsibilities of the company. The corporation also failed to take
corrective actions to ensure that the executives are not able to engage in illegal and
immoral business practices.
In this case, the decision was taken to hold Mr Gregg liable for falsifying the books of
accounts of the company and the court imposed penalty on him. As per my opinion, this is
the right decision which was taken by the court in this scenario. The key duties owed by Mr
Gregg were violated by him when he decided to use the company’s money to conduct fraud
(Baker and McKenzie, 2018). The decision taken by the court to impose penalty on Mr Gregg
a decade after he conducted the fraud is a good example for executives who think that they
can get away after conducting fraud in the organisation. The decision taken by Leighton
Holdings to consult with the ASIC regarding the corruption conducted in the organisation
and helping ASIC to collect evidence against Mr Gregg was ethical. The company fulfilled its

4 | P a g e
duties by holding Mr Gregg liable for the breach of duties and assisting ASIC in conducting
the investigation. Although the corporation failed to ensure that its directors did not engage
in unethical trading practices; however, it was actively engaged in the practices to hold Mr
Gregg liable based on which has acted in an unethical manner. Another example is the
judgment given by the court in the case filed by ASIC against Adler who was acting as the
director of HIH Insurance Company and he misused his position to give a loan to another
company which was not receivable (Gibson and Brown, 2012). He was held liable by the
court and penalty was imposed on him by the court.
The Utilitarianism ethical theory can be applied in this scenario in order to evaluate whether
the decision taken by the parties are ethical or not. This theory focuses on the
consequences of a situation while determining whether the decisions taken by the parties
are unethical or not (Broad, 2014). As per this theory, the parties should focus on achieving
greater good for a greater number of people. If the actions of the parties have positive
consequences, then such actions are considered ethical. In the given scenario, the decision
taken by Mr Gregg was unethical since it adversely affects the interest of the company and
its stakeholders. The company and shareholders suffered a loss due to loss of capital, and
the public image of the company suffered as well. On the other hand, the Deontology
ethical theory can also be applied to this scenario which is opposed to the Utilitarianism
ethical theory. This theory provides that parties should not breach their duties while taking
decisions even if the decisions have positive consequences. This theory evaluates the maxim
of the parties based on which they take the decision (Dion, 2012). In the given article, the
duty owed by Mr Gregg as the CFO of the company was breached since he conducted fraud
in the company. The maxim of Mr Gregg was focused on generating profit for himself rather
than fulfilling his duties toward the company based on which his actions are considered as
unethical as per the deontology ethical theory.
The ethical decision-making process can be used in order to align my opinion with the
principles of moral philosophies discussed above. The first step of the process is that the
ethical problem must be identified properly (Thiel et al., 2012). The article highlighted that
the key ethical concern which is raised in the article is breach of duties by Mr Gregg while
acting as the CFO in Leighton Holdings. The second stop is collecting relevant information
about the issue. Mr Gregg conducted fraud by showing false entries in the books of the

5 | P a g e
company regarding booking a deal for purchase of steel which was false (Baker and
McKenzie, 2018). The third step is evaluation of the information. Strict compliance with
corporate governance policies and transparency in the operations would have caught the
fraud of Mr Gregg on the spot. Thus, implementing a CSR structure would have assisted
Leighton Holdings in avoiding this issue. The fourth step is acting or implementing the
ethical policies. As per utilitarianism theory, implementation of a CSR model would have
positive consequence since it would have avoided the fraud. The fifth step is making a
decision. Leighton Holdings should adopt a CSR model in order to ensure that it avoids
similar incidents in the future by imposing obligations on its executives. The sixth step is
considering alternative actions. The alternative option is hiding the information from the
ASIC to continue hiding the information about the falsification of records to maintain the
positive brand reputation. The seventh step is reviewing the action. The decision to hold Mr
Gregg liable is ethical since it will ensure that other executives did not commit similar fraud
in the future.
In conclusion, the article highlighted the unethical action taken by Mr Gregg while acting as
the CFO of Leighton Holdings when he falsifies the records of the company. This decision
was unethical as per the evaluation of utilitarianism and deontology ethical theory since its
consequences were negative and Mr Gregg breached his duties while taking the decision.
The principle of corporate governance was not fulfilled by Mr Gregg while taking the
business decision based on which his actions were unethical. As per my opinion, the
decision taken by the court to hold Mr Gregg liable for falsification of the records of the
company is ethical. The ethical decision-making process is used in this essay in order to
evaluate that the decision taken by the company to conduct an investigation against Mr
Gregg is considered ethical.

6 | P a g e
References
Aguinis, H. and Glavas, A. (2012) What we know and don’t know about corporate social
responsibility: A review and research agenda. Journal of management, 38(4), pp.932-968.
Baker, R. and McKenzie, N. (2018) Businessman Peter Gregg found guilty of falsifying
records. [Online] Available at: https://www.smh.com.au/business/companies/businessman-
peter-gregg-found-guilty-of-falsifying-records-20181211-p50lkp.html [Accessed
24/01/2019].
Broad, C.D. (2014) Five types of ethical theory. Abingdon: Routledge.
Dion, M, (2012) Are ethical theories relevant for ethical leadership?. Leadership &
Organization Development Journal, 33(1), pp.4-24.
Gibson, B. and Brown, D. (2012) ASIC'S expectations of directors. UNSWLJ, 35, p.254.
Janda, M. (2018) Former Leighton executive Peter Gregg found guilty of cooking the books.
[Online] Available at: https://subbiesunited.com.au/former-leighton-executive-peter-gregg-
found-guilty-of-cooking-the-books/ [Accessed 24/09/2019].
Janda, M. and Letts, S. (2018) Former Leighton executive Peter Gregg found guilty of cooking
the books. [Online] Available at: https://www.abc.net.au/news/2018-12-11/leighton-
executive-peter-gregg-found-guilty-falsifying-accounts/10606970 [Accessed 24/09/2019].
Lin, C.P., Tsai, Y.H., Joe, S.W. and Chiu, C.K. (2012) Modeling the relationship among
perceived corporate citizenship, firms’ attractiveness, and career success
expectation. Journal of business ethics, 105(1), pp.83-93.
Thiel, C.E., Bagdasarov, Z., Harkrider, L., Johnson, J.F. and Mumford, M.D. (2012) Leader
ethical decision-making in organizations: Strategies for sensemaking. Journal of Business
Ethics, 107(1), pp.49-64.
Wiggins, J. (2018) Why Peter Gregg was found guilty of falsifying Leighton Holdings' books.
[Online] Available at: https://www.afr.com/business/why-peter-gregg-was-found-guilty-of-
falsifying-leighton-holdings-books-20181213-h193jt [Accessed 24/09/2019].

7 | P a g e
Williams, P. (2018) Ex-Leighton CFO Peter Gregg guilty of falsifying books. [Online] Available
at: https://thewest.com.au/business/contracting/ex-leighton-cfo-peter-gregg-guilty-of-
falsifying-books-ng-b881047460z [Accessed 24/09/2019].
Wintoki, M.B., Linck, J.S. and Netter, J.M. (2012) Endogeneity and the dynamics of internal
corporate governance. Journal of Financial Economics, 105(3), pp.581-606.

8 | P a g e
Appendix

9 | P a g e

10 | P a g e

11 | P a g e