Primary Healthcare managing director Peter Gregg has been charged with two counts of falsifying books and records, prompting calls from analysts for him to step down from the listed company.
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The charges relate to Mr Gregg's time as an executive of contracting giant Leighton Holdings and, if found guilty, Mr Gregg could face up to two years in prison on each charge.
Analysts responded to the news by saying Mr Gregg, who has stressed his innocence, should stand aside as the managing director of Primary while the case is on foot.
Primary's shares dived more than 5.94 per cent to $3.96 on Tuesday.
It is unclear what position the company will take, with an emergency board meeting called to review the situation.
"The Primary board is meeting today and will continue to meet and review the implications of this development for the Primary Group and its stakeholders," the company said in a statement to the ASX.
The charges relate to revelations in a Fairfax Media expose last year on shadowy global consultancy house Unaoil that Mr Gregg allegedly signed off on a suspect $15 million offshore payment while he was chief financial officer of Leighton, which is now known as CIMIC.
Fairfax Media revealed Mr Gregg was subject to an investigation by the Australian Securities and Investments Commission regarding the allegedly corrupt payment to a consultant in Dubai.
Steel deal
The $15 million payment was linked to a deal to allow Leighton to buy steel at a preferred price as part its procurement processes, however, no steel was ever supplied after the $15 million was paid.
The Unaoil expose showed the Dubai consultant to be corrupt and Unaoil part of a global bribery factory.
Mr Gregg strenuously denies all allegations against him and is presently suing Fairfax Media for defamation over the allegations made against him in the Unaoil series of articles.
Mr Gregg's lawyer, Reaymond McGuinness of Webb Henderson solicitors, said on Tuesday Mr Gregg denied he had breached any civil or criminal law.
"He will be seeking to have the notice heard as a matter of urgency," Mr McGuinness said.
In its statement on Tuesday, Primary again noted Mr Gregg had told the company he denied the allegations.
Primary told the Australian Securities Exchange it had been informed by Mr Gregg late on Monday that he had been "served with a Local Court attendance notice by the Australian Securities and Investments Commission".
Contraventions claimed
"ASIC alleges two contraventions of Section 1307(1) of the Corporations Act during his time as an office of Leighton Holdings Limited," Primary said.
According to the Corporations Act, Section 1307 (1) relates to the falsification of books and records by a company representative "who engages in conduct that results in the concealment, destruction, mutilation or falsification of any securities of or belonging to the company or any books affecting or relating to affairs of the company".
Mr Gregg was appointed to Primary in January 2015, replacing company founder and long-time boss Edmund Bateman who had taken an extended period of sick leave.
The highly regarded Mr Bateman passed away in September 2015.
Morgans analyst Scott Power on Tuesday said Mr Gregg could be expected to stand aside, rather than resign, while the matter worked its way through the courts.
"I think usually in these sorts of circumstances you've got to stand down until your name is cleared. Isn't that what usually happens? I would have thought so?," Mr Power said, noting Mr Gregg had denied all allegations.
"I guess everybody knew these investigations were underway and this issue was overhanging, it's just how long it takes to be resolved.
"We have a neutral rating on the stock, we don't have a big exposure across our network, it is on a bit of a watching brief for us ... It's struggled for quite a while, it's been quite a laggard in the sector generally."
Another analyst, who declined to be named, agreed Mr Gregg should step down.
"The company has known about this for some time but obviously it's at the next level now. I would expect him to stand aside while it's all sorted out, there are some people in the organisation who could step up," the analyst said.
Citi analyst Victor Windeyer said in a note to clients the matter could be distracting for the company, which is due to report its first-half results in mid-February.
"These types of events have the potential to distract key management from the business," Mr Windeyer said.
"The presence of Jangho on the share register supports the stock given the elevated risk of corporate action; this is counter-balanced in our view by the high level of flux in all business units at Primary."
China's Jangho owns around 11 per cent of Primary's shares and was said to be considering a $2 billion tilt for the company.
Another analyst, Chris Kallos of Morningstar, said it was "obviously an important event for the company".
"He has been busy expanding the ranks in management at the operational level," Mr Kallos said,
"Whether that's enough to carry the momentum of the company forward I'm not sure but I would imagine the current board, despite the Batemans moving on, would be strong enough to steer this through this episode," Mr Kallos said.
Mr Kallos said Mr Gregg had been instrumental in removing the "key man risk" created by Mr Bateman's successful tenure at the company by appointing other senior management.
"I think the fact that they brought him in signalled to the market that they were moving away from this family business style management to more of a corporate entity," Mr Kallos said.
