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Daily Media Quotation

Kickbacks Blowing Up Into A First-Rate Scandal

January 19, 2006

by Mike Steketee - The Australian

The Howard Government regarded Saddam Hussein's regime as so odious that it went to war to remove it. At least that was the second line of justification after the weapons of mass destruction failed to turn up.

Yet from 1999 onwards, AWB funnelled no less than $300 million in kickbacks to Saddam and his cronies. These payments not only were in breach of UN sanctions but they came out of a UN fund that was meant to be paying for food and other humanitarian assistance for ordinary Iraqis.

It is clear after only three days of hearings that a first-rate scandal is unfolding before the commission of inquiry headed by former judge Terence Cole. It remains to be seen to what extent it embroils the Howard Government.

The wheat board used to be a government-owned monopoly but it was privatised in 1999. Nevertheless, despite the Government specifically excluding its own involvement from the inquiry's terms of reference, it is clear there was frequent contact between the Government and AWB.

That is not surprising, considering it is one of Australia's leading export corporations.

But not only did Department of Foreign Affairs and Trade officials travel with AWB employees to Iraq, there was a specific reason for close contact: under the sanctions, the department had to vet contracts with Iraq before passing them on to the UN. Counsel assisting the inquiry John Agius, SC, made clear on Tuesday that, despite suggestions that the terms of reference restricted the inquiry, the commission had been investigating DFAT's role and there would be evidence about it during the proceedings.

As for ministerial involvement, AWB chief executive Andrew Lindberg told the inquiry he met Foreign Minister Alexander Downer "on a number of occasions ... but not specifically about individual contracts". Ministers, including Downer through his office yesterday, deny any knowledge of the kickbacks and to date there has been no direct evidence to contradict them.

But the Government certainly was aware of the allegations. In 2000, the Canadians complained to the UN that AWB had made arrangements for direct payments to Iraq of a kind that the UN was telling the Canadian government were illegal.

As a result, the UN raised the concerns with the Australian mission to the UN in New York. Opposition questions through Senate estimates committees have produced the revelation that the report on these discussions went to the offices of the Prime Minister, Foreign Minister and Trade Minister, as well as their departments and others.

We do not yet know whether John Howard, Downer and Mark Vaile saw this report. Even if they did, they no doubt would rely on the fact that DFAT wrote back to New York saying no breach of UN sanctions was involved.

It just so happens that it was wrong. Three days of hearings at the inquiry have shaken the AWB defence that it did not realise the trucking company to which it was making the payments was a front for the Iraqi government. It also has challenged the initial reactions from the Government to the findings last year about AWB payments to Baghdad of the inquiry commissioned by the UN from former US Federal Reserve head Paul Volcker. Howard said on October 28 that he had always found the people in AWB to be "a very straight up and down group of people ... I can't, on my knowledge and understanding of the people involved, imagine for a moment that they would have knowingly been involved in anything improper".

On the same day, Deputy Prime Minister and Trade Minister Vaile said that if there were failings, they lay with the UN rather than AWB.

Summarising his detailed introductory statement to the Cole inquiry on Monday, Agius said he expected evidence to the effect that people at high levels within AWB always knew that Alia, the company to which it made the payments, was a conduit for payments to the Iraq government and that AWB knew they were in breach of UN sanctions. Agius has had trouble extracting such concessions from defensive AWB executives and lawyers representing the parties before the inquiry presumably will contest the claims. But the paper trail Agius has obtained from AWB, using the inquiry's royal commission powers to order the production of documents, explains why he made such strong allegations.

The sanctions under the UN's oil-for-food program required the proceeds from Iraqi oil sales to be put into a UN escrow account that could then be used to buy food, medicine and other humanitarian goods. The key point is that all transactions had to go through the UN and be approved by it. The kickbacks through payments to Alia, which pretended to be responsible for "inland transport" - that is, trucking the wheat within Iraq - but was really a front company for Saddam's regime, circumvented this.

One of the emails between two AWB executives produced by Agius says that "in discussion with the [Iraqi] Minister of Trade, he has continually insisted on repayment directly as an addition to the inland transport and said that this was his understanding of the agreement reached with [AWB chief executive] Andrew Lindberg ... Direct payment to a company with links to the Iraqi regime may be construed to be in contravention of the UN sanctions." Lindberg finally conceded under questioning yesterday that he did reach an agreement in 2002 but said it had not included the form of the payment.

It is unlikely that the Government's defence can be shot down as easily as the AWB's. But the Canadian and US wheat corporations accepted advice that transactions such as those negotiated with Iraq by AWB were illegal. As well, the UN sanctions were backed up by a series of specific legal measures in Australia. This lends force to the claim by Opposition foreign affairs spokesman Kevin Rudd that the Government is guilty at least of culpable negligence.

The Government has imposed terms of reference on the inquiry that do not allow it to make specific findings against ministers or departments. But as Agius has made clear, that is not stopping it bringing out evidence of government involvement.

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