Tue, Nov 28, 2006 - Page 5 News List

Australian inquiry finds AWB broke UN sanctions

FOOD-FOR-OIL-PROGRAM Former judge Terence Cole's investigation found that the former state-run wheat exporter paid kickbacks to secure wheat sales to Iraq


Top officials from Australia's monopoly wheat exporter deceived the UN and likely broke Australian law by paying more than US$200 million to Iraq's former dictatorship under the world body's discredited oil-for-food program, an inquiry reported yesterday.

Former judge Terence Cole said he found no evidence of wrongdoing by government officials in his months-long investigation into the kickbacks, but recommended police investigate 11 executives from AWB (formerly the state-owned Australian Wheat Board) and a 12th from another company.

Prime Minister John Howard said the inquiry's key recommendations would be acted upon immediately. Howard's government launched the inquiry after AWB was named as the largest single payer of kickbacks in the corruption-ridden UN program.

He said a police task force would be set up to investigate AWB executives mentioned by Cole, who identified possible crimes but did not have the power to file charges.

Howard also said Canberra would immediately review the system granting AWB a monopoly over Australia's wheat exports.

Howard said the report vindicated him, Foreign Minister Alexander Downer and former trade minister Mark Vaile, who claimed to have no prior knowledge of the kickbacks.

In his five-volume, 2,000-page report, Cole said he found no evidence of illegal activity by the government.

"The government has hidden nothing," Howard told a press conference after the release of the report. "The commissioner has found in the most emphatic terms imaginable that there is no evidence of wrongdoing" by the government.

The inquiry's government-given mandate, however, was to examine company executives -- not government officials.

The report said 11 AWB officers may have breached Australian corporate and criminal law, including AWB's former chairman, Trevor Flugge.

The report also said Norman Davidson Kelly, a former executive from mining giant BHP Billiton, may have engaged in criminal conspiracy. AWB agreed to inflate invoices for its Iraq wheat sales to help Tigris Petroleum, a company owned by Davidson Kelly's family that was assigned by BHP to recover US$5 million from Iraq for an earlier wheat shipment.

At the inquiry, Flugge did not deny approving the payments but said he was unaware they were in breach of UN sanctions.

Brendan Stewart, AWB's chairman, said in a statement his board "deeply regrets" the way in which the wheat trade with Iraq was conducted. The company was to respond to the report at a press conference today.

From 1999 to 2003, AWB executives allegedly authorized US$222 million in bogus transport fees to a Jordanian trucking company, Alia Transport, that was part-owned by former Iraqi president Saddam Hussein's government. Payments to Saddam were illegal under UN sanctions.

AWB allegedly inflated the cost of wheat it was charging to the oil-for-food program to cover the bogus transport fees, which the Iraqi Grain Board demanded as a condition of lucrative grain contracts.

"AWB knew that the fee it was paying to Alia was not for the provision of transport services. It knew the fee was a payment to Iraq," Cole said, noting AWB went to "extraordinary lengths to hide the payment."

Cole also found, however, that the UN knew Iraq was breaching sanctions by requiring extra payments for transport fees and after-sales service fees. But he said that the UN had not taken any steps to stop the practices.

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