Former Leighton Holdings chief operating officer David Savage was arrested on Monday leaving a Sydney hotel and charged with two counts of giving false or misleading information in a long-running investigation into alleged bribes paid to secure contracts in Iraq.
He is the second former Leighton executive to be charged after Russell Waugh, 54, who once ran the Indian joint venture Leighton Welspun Contractors, was arrested in November.
The AFP issued an arrest warrant for a third man, aged 62, in November but has not disclosed his name.
The 60-year-old Mr Savage was handcuffed in a basement car park by officers of the Australian Federal Police investigating allegations the construction group, now known as CIMIC, used payments of up to $100 million to win contracts to rebuild war-torn Iraq's energy infrastructure after the 2003 US invasion.
The police said they would allege Leighton Offshore funnelled payments through entities associated with Monaco company Unaoil to win contracts worth some $US1.46 billion.
"Police will allege the key targets of the bribery scheme were Iraqi Ministry of Oil officials and government officials within the South Oil Company of Iraq," the AFP said.
"The investigation identified approximately $US77.6 million in suspicious payments made via third-party contractors."
Mr Savage was charged under section 1309 of the Corporations Act, which states officers of companies must not make false or misleading statements.
The AFP investigation centred on two contracts granted in 2010 and 2011 to build onshore and offshore oil pipelines designed to increase Iraq’s crude oil exports.
The Age first reported in 2013 that some of Leighton's former executives had allegedly been aware of a $42 million kickback paid to Unaoil to secure contracts.
The news reports revealed the existence of a memo handwritten on November 23, 2010, by former Leighton chief executive David Stewart, which said David Savage – then Leighton International's managing director – had allegedly disclosed during a meeting that he knew of the kickback.
Documents filed in Mr Waugh's case show Mr Savage instructed Mr Waugh to "amend" a PowerPoint slide that was to be presented to former Leighton CEO Wal King and other Leighton directors in October 2010, according to The Age, which first reported Mr Savage's arrest.
According to the AFP allegations, the change was sought by Mr Savage to hide a $48.5 million payment that detectives claim was partly a slush fund to pay bribes, The Age said.
Mr Savage allegedly suggested that a payment of $50 million to $60 million would win an extra $500 million of Iraqi contracts, according to legal documents filed in a class action lawsuit against the company.
Around the same time Sydney lawyer Malcolm Davis advised Leighton that its executives might be linked to corruption or serious mismanagement and it faced an "extreme" risk of reputational damage, the lawsuit said.
The memo referring to Mr Savage was passed on to police a year later after lawyers working for Leighton accidentally stumbled over it, according to the lawsuit.
Mr Davis didn't immediately respond to a request for comment. Mr Savage was taken to the Sydney Police Centre in Surry Hills, where he appeared by video link before a magistrate, who granted him bail.
Known as Operation Trig, the AFP's investigation began in 2011 after Leighton alerted the agency to suspicious payments and made by its subsidiary Leighton Offshore and a possible breach of its code of ethics.
Leighton was renamed CIMIC after being acquired by Spanish construction company Grupo ACS in 2014.
The Australian Federal Police and the US Department of Justice have been running investigations into the alleged bribes for almost a decade.
The UK's Serious Fraud Office started criminal proceedings in mid-2018 against Unaoil Monaco and Unaoil and has charged several individuals with conspiracy to make corrupt payments to secure the award of contracts in Iraq to Unaoil's client SBM Offshore.
The AFP is continuing its investigations and has not ruled out further arrests or charges.