AWB oil-for-wheat scandal

In the mid-2000s, it was found to have been, through middlemen, paying kickbacks to the regime of Saddam Hussein, in exchange for lucrative wheat contracts.

United Nations investigator Paul Volcker found that the Australian Wheat Board, and later AWB Limited, were not the only, but certainly the largest source of kickbacks to the Iraqi regime.

Since the payments were discovered, AWB Limited has undergone a major restructuring, losing its monopoly supply of Australia wheat exports, and appointing an entirely new management.

The AWB had sold wheat to Iraq since 1948, and was the single largest supplier of humanitarian goods to the nation during the Oil-for-Food Programme.

[citation needed] Alia was established in 1994 as a Jordanian-registered transportation company, intended to refurbish Iraqi vessels stranded off the coast of Jordan for commercial use.

[10] However, transportation services were in fact provided by employees of the Iraqi Government, who also negotiated with the humanitarian supplier the size of the commission.

However, in July 1999 it entered into this new contract with the Iraqi Government that had AWB assume responsibility, through Alia, of transporting wheat to points throughout Iraq.

[11] Only a small part of the fees remained in the hands of the drivers and Alia, the majority being funnelled back to the Iraqi Government.

[citation needed] Given these fees were added on top of the price of the wheat, this arrangement then had the effect of moving the proceeds from oil revenues from being used in humanitarian consumption to being placed in the form of currency in the hands of members of the Iraqi government.

[citation needed] David Marr and Marion Wilkonson, both journalists with the Sydney Morning Herald, wrote that the "beauty of the rort from AWB's point of view was that Australia's wheat farmers didn't pay a cent.

He later told the Cole Inquiry, "I do not recollect ever being asked by anyone from AWB about who owned or controlled Alia, or whether it had connections with the Ministry of Transport.

[17] Under Australian legislation, all shipments to Iraq were banned unless the Foreign Minister (at the time, the Alexander Downer) was "satisfied that permitting the exportation will not infringe the international obligations of Australia".

In 2004, Iraqi daily Al Mada published a list of 270 persons and entities who were given oil vouchers for helping Saddam Hussein.

Its terms of enquiry were to "collect and examine information relating to the administration and management of the Oil-for-Food Program...including entities that have entered into contracts with the United Nations or with Iraq under the Programme.

It accused almost half of the companies operating in Iraq during the time of the Oil-for-Food Programme to have paid either kickbacks or illegal surcharges to secure Iraqi business.

"[13] In response to the UN Report, the Government sanctioned a royal-commission into the allegations, headed by Honourable Terence Cole QC, a former Judge of Appeal of the New South Wales Supreme Court.

[21] The inquiry found that, at the insistence of the Iraq government of dictator Saddam Hussein, the AWB agreed to pay 'transportation fees' of around A$290 million.

The Cole Inquiry concluded that from mid-1999, AWB had knowingly entered into an arrangement that involved paying kickbacks to the Iraqi government, in order to retain its business.

On 11 July 2006, North American farmers claimed $1 billion in damages from AWB at Washington DC, alleging the Australian wheat exporter used bribery and other corrupt activities to corner grain markets.

The growers claimed that AWB used the same techniques to secure grain sales in other markets in Asia and other countries in the Middle East.

[28] The Australian Securities and Investments Commission proceeded with several civil cases against six former directors and officers of AWB;[29] some of which have been discontinued on terms that the parties bear their own costs.

[30] Flugge was later fined $50,000 and banned from managing a company for 5 years, for failing to inquire about AWB's payments to the Iraqi regime.

[1] The AWB share-price continued to suffer, and the company was acquired by Agrium Inc. in December 2010 and delisted from the Australian Securities Exchange.