Trouble looms over BHP Billiton as it faces a controversial a graft scandal on its exploration project in Cambodia.

The iron ore miner admitted it paid $2.7 million to the community near the bauxite site in a Cambodian province of Mondulkiri.

A Cambodian government minister coined these payments as "tea money" - a term used for unofficial payments to government officials.

BHP denied these claims and insisted that the money was used as a development fund for local social welfare programs. It also paid $US1 million to the Cambodian government for bauxite exploration rights in September 2006.

BHP revealed Wednesday it has suspicions on whether corruptions inside the company might be possible and have been cooperating with the U.S. Securities and Exchange Commission since last August.

The mining giant added that it discovered evidences of possible violations of anti-corruption laws linking local government officials in several of its abandoned projects. However, the firm did not specify a country;

A spokeswoman for BHP dismissed other claims and said that SEC's investigation does not relate to any activity in China nor its marketing activities or sales relating to the company's products. She said that the inquiry is related to past exploration projects some as recent as a year ago.

''They were terminated by us on commercial grounds, not because of any inquiries, just because they weren't commercially viable and relatively small,'' she said.

During the investigation, Cambodia was mentioned several times by non-government organizations that overseer global miners in developing counties. A nickel project in the Philippines was also brought up.

The exposed corruption scandal of BHP has tarnished its reputation and there is no telling if it things will look bright for the company as it awaits an approval from global regulators on its iron ore joint project with Rio Tinto.

According to the U.S. Foreign Corrupt Practices Act, BHP may be facing a $US2 million penalty while individual employees may be fined up to $US100, 000 and jail sentence u to five years.