Leighton Holdings’ chief executive Hamish Tyrwhitt says he is shocked to have uncovered an alleged case of improper payments being made by one of the company’s subsidiaries in Iraq.

Leighton Holdings on Monday said the Australian Federal police (AFP) was investigating payments that may have been made in relation to work its subsidiary Leighton Offshore is doing to expand offshore loading facilities for crude oil exports.

Mr Tyrwhitt said Leighton Holdings volunteered the information about possibly illegal conduct to the AFP after becoming aware of it, and was co-operating with the investigation.

“If true, it obviously comes as a shock, not only to me but everybody,” Mr Tyrwhitt said on Monday during the company’s first half earnings presentation in Sydney. “We reviewed it and we decided before we investigated it or try to validate it ourselves, we would go and ask for advice from the AFP on how to handle this, in case there was any substance to that breach.”

The AFP on Monday confirmed it received a referral from Leighton Holdings on November 7 2011, “relating to alleged improper payments” made by Leighton Offshore.

“As this is an ongoing investigation, it is inappropriate to comment further,” an AFP spokesperson said in a statement.

Mr Tyrwhitt said Leighton Holdings had disclosed the news pre-emptively and in full co-operation with the AFP.

“We had legal advice (and) we didn’t have to disclose,” he said. “We sat there and we decided it wouldn’t be appropriate to communicate such positive results and then in X number of weeks come to the market with this news, if there is any substance.”

Leighton shares were down 70 cents, or 2.94 per cent, at $23.15 at 1434 AEDT.