Australia Nombres Coimas Caminosca Confirmadas

Brisbane-based Cardno became embroiled in a corruption scandal — in South America.
QLD Business
Cardno Caminosca
corruption probe: How
Queensland’s leading
engineering firm was
entangled
Liam Walsh, The Courier-Mail
January 5, 2017 12:29am
Subscriber only
THE investigators found a journal, but it seemed to be written in code. Trying
to crack that code would be central to corruption allegations entangling one of
Queensland’s leading engineering firms, Cardno.

The journal was found during a probe into Cardno’s subsidiary in Ecuador. It was an
electronic calendar, The Courier-Mail can reveal today, and inside were a series of strange
words.
At first they didn’t make sense. But a legal team investigating for Cardno thought they
had decrypted the code. It seemed to point to payments linked to tenders on Ecuadorean
government projects, say sources with knowledge of the probe.
The corruption allegations have been a shock to Cardno, which bought the Caminosca
operation in Ecuador in late 2012. But they also raise deeper questions about the
adequacy of checks when the Brisbane-based engineering firm, now with more than 6000
staff, swallowed almost 50 businesses in a decade.
The Courier-Mail today, via interviews and examinations of company documents, can
reveal the untold story of how things went wrong and a potential scandal was uncovered.
A CORRUPT PLACE FOR BUSINESS
Ecuador was a rough place to do business. Based on the equator on South America’s west
coast, the nation of 15 million people was ranked 118 out of 174 on Transparency
International’s corruption perception index. That was worse than the likes of Ethiopia
(113), Mexico (105) and Greece (94).
Yet the petro-nation was expanding, experiencing 5.6 per cent real domestic product
growth, according to Australia’s Department of Foreign Affairs. Cardno, meanwhile, was
hoovering up businesses globally and wanted a piece of Ecuador’s growing infrastructure
market.
Up for sale was Ecuadorean engineering consultancy Caminosca. Founded in 1976,
Caminosca’s executives included a guy who The Courier-Mail has chosen not to identify
for legal reasons but we’ll call Don, because sources remember him as a smooth operator,
with flowing hair reminiscent of Sonny Crockett, the character Don Johnson played in
1980s cop drama Miami Vice. He was rich and travelled with a driver.
Another executive was a man we’ll name Brains. That’s because whereas Don was
polished, Brains was described as nerdy — a technically sharp, tall fellow with glasses.
Both were “really, really nice people”, says Andrew Buckley, Cardno chief executive officer
when Caminosca was bought. “I would have said: ‘Totally straight-up … they could
babysit my kids’,” he adds.

Cardno bought a subsidiary that worked Ecuador’s capital Quito.
The pair were part a 400-staff operation specialising in infrastructure from hydropower
to roads. Among Caminosca’s clients were “many government institutions”, Cardno
noted.
The Ecuadorians were ready to cut a deal and Cardno looked through the books with a
due diligence committee that included outside experts and Cardno staff.
Corruption was one red-light flagged in due diligence, The Courier-Mail understands. But
it can be revealed that Cardno’s checks concluded Caminosca had won government
contracts fairly and squarely.
The deal was sealed for more than $15 million, with almost $5 million held back initially.
Original shareholders also took Cardno stock as partial payment, in theory a safeguard
against the acquisition turning out as a dog.
And the acquisition seemed to succeed — Cardno in 2014 worked on the first subway
project of its kind in Ecuador’s capital Quito, which sits 2800 metres high along a
volcano’s slopes and boasts UNESCO-listed historical architecture.
WHAT ARE THESE DEALS?
Yet in early 2015, a top beancounter in Cardno’s US office was alerted to unusual
transactions involving Caminosca during a review of years of taxes.

Digging began. The penny dropped. This looked really bad.
Payments to offshore subcontractors from Caminosca for millions of dollars went back
many years, sources say. Working out ownership was difficult. “They were very
sophisticated in the way they did the bribery,” says one person with knowledge of the
probe. “They treated bribery as a cost.”
One theory is the alleged bribery revolved around government-linked tenders.
Engineering firms give two envelopes when making a bid. Inside Envelope 1 is your
technical capability: outlining your staff qualifications and methodology for building a
project. Typically, only if your bid meets a required technical score will Envelope 2 be
opened. Inside Envelope 2 is your bid price. In the Caminosca case, according to one
source, it’s possible the numbers for both envelopes had already been decided.
There are duelling versions about whether any questionable payments occurred after
Cardno acquired Caminosca. Regardless, the evidence was enough that Cardno felt legally
obliged to alert Australian and US authorities, where it has operations.
Don and Brains were called in to explain to Cardno. Both denied any wrongdoing, sources
say. To justify the payments, reports were produced the subcontractors had apparently
made, but Cardno’s information technology experts found reasons to think these reports
had been faked.
Don and Brains left Cardno. After multiple attempts by The Courier-Mail to reach the
men, their Quito-based lawyer Juan Francisco Guerrero del Pozo contacted the paper,
saying: “My clients, as shareholders or officers of Caminosca, have not conducted any
illegal activities, neither individually nor through Caminosca”.
The Courier-Mail put details about the probe to Guerrero, a politely spoken lawyer who
says he also represents Caminosca’s original shareholders. He maintains some
information was inaccurate but won’t specify anything, citing “confidentiality
obligations”.
COLOUR-CODED STAFF
Cardno assigned Caminosca staff into colour categories: red meant an employee was
branded a bad apple and out, yellow meant they were on a watchlist and green meant they
were good to remain, sources say. Projects were also tagged, with evidence leading to
concerns about at least one successful tender on an old dam project.
Items were seized including laptops and the journal, belonging to Brains, was found,
sources say.
The investigators’ methodology is not proven beyond doubt, but they came up with a way

of decoding the journal that indicated persons and projects had a code name along with a
note about payment. Associated calendar dates seemed to match project dates. The
names of Ecuadorean government officials also came up, sources say.
Cardno’s probe attracted the attention of regulators in markets including the US.
Cardno made the shocking stockmarket announcement in March 2015 that it was
reviewing “certain payments related to Caminosca’s government and state-owned entity
contracts”. A few months later, Cardno’s annual report revealed legal action against
Caminosca’s former owners for alleged sale misrepresentations. The matter is in
arbitration in Florida.
There’s no suggestion any Australian or US-based staff were involved in any suspect
transactions, and the Australian Federal Police told The Courier-Mail its “evaluation of
this matter has been finalised with no Australian offence disclosed”.
While the US Department of Justice declined to comment, sources say the DoJ can take a
hard line under the Foreign Corrupt Practices Act, meaning fines, even for US
management. It also would look poorly when bidding for any future government work.
Ecuador’s embassy did not answer questions.
GETTING BIG QUICKLY
Recriminations also linger about how a Brisbane-based firm, started by two engineers as
World War II finished, found itself in this position. One former insider thinks

Caminosca’s due diligence was badly done — the logic being that otherwise transactions
would have been caught. The counter view says the alleged bribery was too complex for
normal due diligence and unravelling the proverbial wool ball only came after immense
spending on external experts.
Buckley — who was CEO when Caminosca was bought but had retired in 2014, before the
scandal broke — has mixed views.
“We did a lot of due diligence. We didn’t find anything. We thought they were absolutely
on the up and up, straight people,” says Buckley, who was not on the due diligence
committee. “I suppose you could say it wasn’t adequate in front of the problem. But was it
extensive and careful? Absolutely.”
The acquisition was one of almost 50 made under the reign of Buckley, a charismatic
engineer who ran Cardno for 17 years. His successor, Michael Renshaw, a long-running
executive who had overseen Cardno’s international expansion, doubled down with
“Vision 20/20”, a plan to grow Cardno into a global top 20 engineering firm by 2020 with
a staff of 25,000.
Renshaw was boss during Cardno’s largest acquisition — and financially one of its worst
timed — the $US145 million ($A160 million) buyout of energy engineers PPI in March
2014, just before oil prices plunged. Renshaw departed Cardno 10 months into the CEO
role.
These purchases helped weaken Cardno; in the last two years it has lost $421 million,
including writedowns on Caminosca and impairments on US businesses.
Private equity outfit Crescent Capital Partners subsequently swooped on a 47 per cent
stake in Cardno and effectively seized control. Crescent has since publicly slammed
Cardno’s past integration process and “off strategy acquisitions”.
‘LIKE POLITICS: BLAME THE PEOPLE BEFORE!’
Cardno is now shrinking, selling US environmental consultancy ATC only three years
after its acquisition. Sure, ATC added an extra 1600 staff, but it also billed customers at
smaller rates than other Cardno divisions.
Buckley isn’t taking criticism lying down. “It sounds a bit like politics, doesn’t it: Blame
the people before! We did 17 years of revenue and profit growth. We went from 200
people to 8000, and I think we did it really well,” he says.

Former Cardno managing director Andrew Buckley. Pic: Peter Cronin
There was logic behind buying ATC, he adds. And while conceding a small number of
acquisitions weren’t successful, like Caminosca, Buckley proffers a skiing analogy: if you
don’t fall over, you’re not trying.
Cardno under Crescent, whose motto is “grow, increase, expand”, has some shareholder
support. But some former insiders are sceptical Crescent can manage Cardno any better.
“They don’t understand what they have,” one critic said. The argument is Crescent is
overly focused on raw numbers and does not understand the nuances of Cardno’s
worldwide operations. Crescent declined to comment, as did Renshaw. The Courier-Mail
also put details about the Caminosca probe to Cardno, which declined to comment.
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Back in Ecuador, the lawyer Guerrero says Caminosca’s former “shareholders do not
know why things with Cardno have turned out as they have”.
But he offers a theory: “Cardno’s timing in announcing a dispute to the public coincides
with news reports indicating a downfall of the Ecuadorean economy starting in mid-2014,
and the corresponding delay by the government in payments to public contractors.”
Not everything went pear-shaped in South America — Cardno has another venture still
working there. Yet the infamous Caminosca outfit, unsurprisingly, is for sale.