32.1 Alkaloids of Australia Pty Limited (ACN 010 675 439[644]) is a private company based in Kingaroy, Queensland; its principal business is producing a pharmaceutical product called hyoscin-N-butyl bromide (hyoscine). Hyoscine, which is sometimes known as scopolamine, is extracted from a native Australian plant called Duboisia. It is an antispasmodic and is used to relieve the symptoms of muscle spasm caused by food poisoning and stomach upsets.[645] Most of Alkaloids' sales of hyoscine are to overseas markets.[646]
32.2 The directors of Alkaloids are, and at all material times were, members of the Crumpton family (Colin Crumpton, Glyn Crumpton and Olga Crumpton) and Mr Gregory Bowling. The Crumptons and Mr Bowling ran the processing and production side of Alkaloids' business and had little, if anything, to do with sales and marketing.[647]
32.3 From the commencement of its business in the late 1980s, all marketing and sales of Alkaloids' products have been handled by an agent. From May 2000 Australian Pioneer Pistachio Company Pty Limited (Pioneer Pistachio) was retained as Alkaloids' agent.[648] The business of Pioneer Pistachio, at least insofar as it involved its agency for Alkaloids, was conducted primarily by one of its directors, Mr Joyce.[649] During 2000 and 2001 Pioneer Pistachio also employed Mr Ward.[650] Mr Ward assisted Mr Joyce in relation to the sales and marketing of hyoscine on behalf of Alkaloids.[651] Whilst Mr Joyce was never an employee of Alkaloids, in correspondence and other documentation he was generally referred to as Alkaloids' Commercial/Export Manager.[652] When conducting business on behalf of Alkaloids, Mr Joyce used Alkaloids' letterhead and stationery, rather than the letterhead of Pioneer Pistachio.
32.4 The directors of Alkaloids had no direct involvement with the contract to supply hyoscine to Iraq that is mentioned in the Independent Inquiry Committee's final report. Mr John Crumpton's evidence was that, whilst the directors were kept generally informed by Mr Joyce about the retainer of an overseas agent by Pioneer Pistachio on behalf of Alkaloids, the progress of the negotiations, the contract, the United Nations approval of the contract, other dealings concerning the supply of the goods, the remittance of the funds and the payment of commissions, they were not involved in the detail or the day-to-day dealings regarding these matters.[653] Mr Joyce's evidence was to similar effect.[654]
32.5 The agency agreement of May 2000 between Alkaloids and Pioneer Pistachio was not reduced to writing.[655] Its terms included that Pioneer Pistachio be paid a commission of 2 per cent on all sales of Alkaloids' product and receive a marketing fee of $9,500 per month.[656]
32.6 In mid-2000 Messrs Joyce and Ward, as a result of reviewing some correspondence files, became aware of a Canada-based Iraqi national named Albert Shimoon. The correspondence suggested that Alkaloids' previous agent had corresponded with Mr Shimoon (and his company A-S International Enterprises) in relation to possible tenders to supply hyoscine to Iraq under the Oil-for Food Programme.[657] Mr Joyce and Mr Ward followed up this lead, and on 13 October 2000 Mr Joyce had a telephone conversation with Mr Shimoon about the potential for doing business in Iraq.[658]
32.7 During the telephone conversation Mr Shimoon told Mr Joyce that he was well connected in Iraq, that he was friends with many of the decision makers in Iraq, including the Director General of Health, and that he would be able to get Alkaloids business in Iraq.[659] He offered to assist Alkaloids to tender for the supply of hyoscine under phase IX of the Oil-for-Food Programme. Whilst he took a number of Mr Shimoon's claims 'with a large grain of salt', Mr Joyce decided to pursue the opportunity to export to Iraq and to retain Mr Shimoon as an agent for sales to Iraq.[660] It was not unusual for Pioneer Pistachio to retain the services of overseas agents on behalf of Alkaloids to facilitate overseas sales.[661]
32.8 Mr Joyce did not recall discussing Mr Shimoon's commission with him on 13 October 2000. However, correspondence received within days of the conversation indicated that Mr Shimoon wanted to be paid 16 per cent commission on sales.[662] This rate of commission was significantly higher than commission Alkaloids paid to other overseas agents, which was typically around 5 per cent.[663] Alkaloids rarely agreed to pay commission to overseas agents that exceeded 15 per cent.[664]
32.9 Mr Shimoon assisted Alkaloids in registering with the Iraqi State Company for Manufacturing of Drugs and Medical Appliances (the State Company), and preparing a tender to the State Company[665] in accordance with its conditions and requirements of supply.[666] One of the State Company's terms and conditions of supply (condition 27) was that negotiations were to be conducted between buyer and seller directly.[667] No agent or third party was permitted. Although the commercial arrangement between Alkaloids and Mr Shimoon was one of agency, a document prepared at the request of Mr Shimoon and signed by Mr Joyce was a letter advising that Mr Shimoon was the commercial manager for Alkaloids.[668] This was to satisfy condition 27.[669] Mr Joyce was prepared to acquiesce in this misrepresentation of Mr Shimoon's position to 'get the deal done'[670] and because he felt that the consequences to Alkaloids were minor.[671] Mr Joyce did not inform the directors of Alkaloids of this letter .[672]
32.10 With the assistance of Mr Shimoon, Mr Joyce drafted a tender for the supply of 1 tonne of hyoscine to the State Company. Whilst preparing the tender, on 22 January 2001 Mr Joyce had a telephone conversation with Mr Shimoon during which they discussed the proposed price and Mr Shimoon's commission.[673] Mr Joyce asked Mr Shimoon to reduce his commission so that he could offer the hyoscine at a competitive price, to which Mr Shimoon replied, 'My expenses don't allow that. I have expenses-I have to pay the people-it's about 8% of the total'.[674]
32.11 Mr Joyce said this sort of 'argy-bargy' was usual when negotiating the price for product being sold through a commission agent.[675] He understood 'the people' to have included 'sundry expenses' that Mr Shimoon had in Iraq.[676] He did not query Mr Shimoon about who 'the people' to whom he had to pay the 8 per cent were.[677] During the negotiations Mr Shimoon frequently referred to people who were part of the decision-making process with whom he had to deal; however, with the exception of his initial conversation with Mr Joyce when he referred to the Director General of Health, Mr Shimoon never specified who the people were.[678] Mr Joyce said it did not cross his mind that Mr Shimoon may have been referring to the need to make improper payments to people to secure the contract.[679]
32.12 On 24 January 2001 Mr Joyce confirmed in writing to Mr Shimoon that his rate of commission was 15 per cent.[680] Mr Joyce agreed this was a higher commission than he would normally expect to pay an agent; however, 'the circumstances of a very difficult market seemed to warrant the higher percentage'.[681]
32.13 Also on 24 January 2001 Mr Joyce signed a tender to supply 1 tonne of hyoscine to the State Company at €865 per kilogram.[682] The terms of supply included 'CIF, net AIR CIF Samara'. This meant that Alkaloids was responsible for (and the price included) freight and insurance to Samara, which is a town in central Iraq.
32.14 Mr Joyce sent the tender documents to Mr Shimoon for lodgment with the Iraqis. He was uncertain whether he also sent copies directly to the State Company[683] but, given that 'the contract was written at a higher price than the tender price, I can only assume that the tender documents did not reach [the State Company], at least, not in the form in which they were despatched to [Mr Shimoon]'.[684] He expected that Mr Shimoon would provide the tender documents to the State Company and would submit, on behalf of Alkaloids, an offer to sell 1,000 kilograms of hyoscine at €865 per kilogram.[685] He agreed that the likelihood was that Mr Shimoon did provide the tender documents to the State Company.[686] He did not expect or authorise Mr Shimoon to put an offer to the State Company at a higher price.[687]
32.15 On 30 January 2001 Mr Joyce had a telephone conversation with Mr Shimoon. His note of the conversation included the following:
'X' still working with him on non hyoscine product. Has to pay $$ up front to the Director. 'X' has paid 2/3rds of this Shimoon. For AA Albert paying from his own pocket as he trusts u-He does not trust 'Y'.[688]
32.16 Confidentiality orders were made in relation to the names of the persons referred to in this note.[689] The reference to 'X' is a reference to a company to whom Alkaloids had previously supplied a related product (hyoscine hydrobromide) and for whom Shimoon had acted as agent in relation to supplying goods to Iraq.[690] 'Y' was the principal of that company.
32.17 Mr Joyce had no particular recollection of this conversation, but, since he wrote the words in his day book, he believed Mr Shimoon must have said them to him.[691] Mr Shimoon had referred in an earlier conversation to his friendship with the Iraqi Director General of Health. It was not, however, clear to Mr Joyce that Mr Shimoon was saying in this conversation that the Director General of Health required '$$ up front'.[692] He had no recollection of asking Mr Shimoon what he meant in this conversation or to whom he was referring when he spoke of the 'director' or why he had to pay money upfront to the director.[693] His evidence was that he did not turn his mind to whether the payments had something to do with bribery or corruption:
Q: Did it cross you mind when he said those words to you, 'he has to pay money or dollars upfront to the director' what he was suggesting was the making of some illicit payment or bribe.
A: Its probable that during all of this, whether in this particular conversation or some other time, the possibility of payments being made to various people was always a possibility. There was never any explicit statement of it, whether these statements were illicit payments or payments to facilitate business I don't know. I have no knowledge of such payments. He never told me about such payments.
Q: Would not the making of that statement to you that Mr Shimoon 'has to pay money or dollars upfront to the director' start ringing alarm bells in your head about bribery or corruption?
A: Not alarm bells, no.
The Commissioner: Because it's expected in this area of the world?
A: I think, Commissioner, that western businessmen, and myself included, almost have a common stand of (sic) belief that in the Middle East those types of payments are common. I sometimes think that the major reason for that is that it's a view promulgated by agents in the Middle East so that we western businessmen will pay them higher commissions in justification of their higher commissions and what they claim to be those types of payments as expenses. I don't have any direct knowledge of it at all, but it's certainly, I think, common wisdom in western business circles that those types of payments in those Middle East countries are common, and I guess I have those same prejudices.
Q: Or beliefs?
A: Or beliefs, yes.
Q: That's fairly clearly what this note is referring to, isn't it?
A: It's a claim by Shimoon to that effect, yes. Whether it actually happens or not I don't know. But it's certainly Shimoon's claim, yes.[694]
32.18 Mr Joyce denied he was shutting his eyes to whether bribery was involved.[695] He agreed, however, that what Mr Shimoon was probably talking about was that, unlike 'X', whom he did not trust, he trusted Mr Joyce and so he was not requiring Mr Joyce to pay in advance the money that he, Mr Shimoon, was paying to the director upfront.[696] It is difficult to see how Mr Shimoon's statement could be construed as being anything other than a reference to a bribe or some other form of improper payment to an Iraqi official.
32.19 Over the following months there were further discussions and correspondence between Messrs Joyce, Ward and Shimoon about Mr Shimoon's rate of commission. Whilst neither Mr Joyce nor Mr Ward had any recollection of these conversations, correspondence in May 2001 suggests that Mr Shimoon wanted to increase his commission to 20 per cent. This was resisted by Mr Ward.[697] Mr Shimoon advised that he could not 'do it for less than 17.5 per cent' because of the expense involved in him travelling to Iraq and Jordan.[698] Ultimately, on 29 May 2001, Mr Ward confirmed in writing that Mr Shimoon would receive a commission of 17.5 per cent.[699]
32.20 The correspondence recording the terms of Mr Shimoon's agency makes no reference to Mr Shimoon asking for, or Mr Joyce or Mr Ward offering to pay, anything greater than this percentage commission. However, Mr Joyce's evidence was that at some time between 29 May 2001 (the date of Mr Ward's letter confirming Mr Shimoon's commission of 17.5 per cent) and 19 July 2001 (the date the contract between Alkaloids and the State Company was signed)[700] Mr Joyce agreed with Mr Shimoon that, in addition to his percentage commission, he would be entitled, if the contract were fulfilled, to any amount received under the contract above the tender price of €865 per kilogram.[701]
32.21 Mr Joyce had no precise recollection of when he entered into this agreement or of the circumstances in which he agreed to this 'overprice' commission, although he thought that the overprice commission was a form of compromise because Mr Ward had been unwilling to agree to commission above 17.5 per cent.[702] He said that such arrangements were not uncommon in Alkaloids' business.[703]
32.22 The agreement to pay Mr Shimoon overprice commission was not recorded contemporaneously or confirmed in writing[704], notwithstanding that it was a consistent requirement of Mr Shimoon that his commission arrangements be confirmed in writing.[705] Most of the other discussions and agreements concerning commission to be paid to Mr Shimoon were recorded or confirmed in writing. Nor is there any note of this agreement in Mr Joyce's day books[706], notwithstanding that Mr Joyce endeavoured to record in his day books any matters of particular significance or substance in relation to his dealings with overseas agents.[707] Mr Ward had no recollection of any conversation with Mr Shimoon about paying overprice commission and no recollection of Alkaloids entering into such a commission arrangement, although he had a vague recollection that Alkaloids may have entered into such an arrangement with an agent in Bangladesh.[708]
32.23 On 19 July 2001 a contract was entered into between the State Company and Alkaloids.[709] The contract, signed by Mr Shimoon on behalf of Alkaloids[710], was for the supply of 1,000 kilograms of hyoscine at a price CIF Samara of €955. This price is slightly more than €865 plus 10 per cent.
32.24 Mr Joyce was not aware how the contract price was arrived at. He was told by Mr Ward about the contract price on 20 July 2001 and was surprised at the amount of the overprice-€90 per kilogram.[711]
32.25 Mr Joyce agreed that the likelihood was that Mr Shimoon had put to the State Company Alkaloids' offer to sell at €865 per kilogram, but for some reason the State Company was prepared to pay 10 per cent more than the price Alkaloids was prepared to accept.[712] Despite the incongruity of this situation, Mr Joyce never asked Mr Shimoon about the circumstances that led to the State Company being prepared to pay the higher price:
Q: Did you ever ask Mr Shimoon what were the circumstances that led the company to be prepared to pay 10% more than you have offered or indicated that you would be willing to accept?
A: When we discovered that this had happened, in May 2001, I assumed it was because Shimoon had gained himself an overprice, and I never thought of any of the other possibilities that you have mentioned and which, with the eyes of 2006, are perhaps obvious. But in 2001 it-that just didn't occur to me at all. I hadn't had the benefit of Volcker or of this inquiry in May 2001.[713]
32.26 When he set the tender price Mr Joyce pitched the offer at about the market price of €865 for hyoscine.[714] In evidence, Mr Joyce offered the following explanation for how the State Company agreed to pay 10 per cent more than his understanding of the market price:
Q: Are you able to offer an explanation as to how that could have come about?
A: When I say there is a market price for hyoscine, it is not a commodity listed on any commodity exchange. You can't go to Chicago's exchange and get a price. There are only a few sellers of this product in the world; there are only a few buyers. It is not uncommon for the achievable prices to vary by as much as $50, $60 a kilo for the same product to different customers. Certainly a margin of 90 euros is very, very high, but in fact it is just within the parameters of what is possible in the price ranges that are achievable for the price variations in hyoscine. So it did not occur to me to pursue Shimoon as to why he got that figure or how he got that figure.[715]
32.27 Mr Joyce said the contract price was within the range of market prices then being obtained for hyoscine.[716] The United Nations also reported that the contract price appeared to be 'reasonable and acceptable'.[717]
32.28 Mr Joyce had some familiarity with the Oil-for-Food Programme and the procedures required to export to Iraq. He was aware that there were economic sanctions preventing unrestricted trade with Iraq[718], that the contract had to be approved for payment by the United Nations[719] and that permission to export was required from the Australian Government.[720] At some stage either he or Mr Ward obtained, possibly from the Department of Foreign Affairs and Trade's website, a copy of DFAT's publication entitled Exporting to Iraq.[721] This publication spelt out the requirements and procedures necessary to obtain both UN approval for the payment of the contract and permission to export under s. 13CA of the Customs (Prohibited Exports) Regulations. He believed he would have read this document to familiarise himself with the procedure required to obtain permission to export.[722] He understood that everything to do with the approval process went through DFAT.[723] He was also aware that the goods would be paid for out of funds held by the United Nations on behalf of Iraq.[724]
32.29 A UN 'Notification or request to ship goods to Iraq' form[725] was prepared either by Mr Joyce or under his supervision and forwarded to the United Nations via DFAT and the Australian mission to the United Nations.[726] The form contained details of the contract between Alkaloids and the State Company, including the contract price of €955,000. A copy of the contract was also provided to DFAT.[727] The notification was registered with the United Nations on 15 August 2001.
32.30 Alkaloids encountered difficulties in securing UN approval of payment for the contract. The application was put on hold as a result of actions by the permanent mission of the United States, which had concerns about how the material would be used.[728] Representations were made by Mr Joyce on behalf of Alkaloids to the then Minister for Agriculture[729], DFAT[730], and the Australian mission.[731] DFAT and the Australian mission in turn made representations to the United Nations in support of Alkaloids' application. The hold was ultimately lifted in November 2001.[732] Alkaloids then encountered a further problem in that, whilst the contract was approved by the United Nations[733], the United Nations advised in December 2001 that no funds remained available in the health sector of phase IX to pay for the goods.[734] Finally, on 17 May 2002, the contract was approved and found to be eligible for payment under the Oil-for-Food Programme.[735]
32.31 Mr Joyce understood from his dealings with DFAT that, once the United Nations had approved payment of the contract, a domestic permission to export the goods was automatic. The DFAT officer with whom Mr Joyce primarily dealt was Mr Cuddihy. In an email dated 23 May 2002 that referred to the UN approval, Mr Cuddihy wrote:
Once you have shipping details organised, let me know the quantity you will be sending and we'll send you an export permit (it is not necessary to send the whole order in one consignment, but the export permit will need to state the amount of each consignment). We've tried to match UN turn-around times on these permits, but the best we can manage is a 3 to 4 hour delay (or overnight for requests received after mid-afternoon).[736]
32.32 A permission to export under the Customs (Prohibited Exports) Regulations was signed by a delegate of the Minister for Foreign Affairs on 20 June 2002.[737]
32.33 The terms of the contract required that Alkaloids be responsible for trucking the goods from the airport in Amman to Samara in Iraq. This was an unusual contract term for Alkaloids. Its typical contract term for exports was either FOB, where title and risk in the goods passed to the buyer upon loading of goods aboard the vessel or aeroplane[738], or 'CIF airport', where Alkaloids assumed the cost of insurance and air freight to the airport in the importer's country.[739] Mr Shimoon advised Mr Joyce that contract terms requiring delivery of goods into Iraq by land were common. This was confirmed by other people spoken to by Mr Joyce, including Austrade.[740]
32.34 Mr Joyce arranged for the transportation of the goods to Iraq. The goods were air freighted to Amman in Jordan and trucked across the Jordanian-Iraqi border at Trebil. The freight forwarder retained by Alkaloids was Hellmann Worldwide Logistics, Alkaloids' regular freight forwarder.[741] Hellmann arranged for the air freight to Amman and retained a local agent, Gezairi Transport, to truck the goods from Amman airport to Samara via Trebil.[742]
32.35 Notations on the transportation documentation indicate that the goods arrived at the border at Trebil on 18 July 2002[743] and were inspected by Cotecna on behalf of the United Nations on 20 July 2002.[744]
32.36 When the shipment arrived at the Trebil border crossing a difficulty arose. On 20 July 2002 Hellmann's agent in Jordan sent to Mr Joyce and Hellmann an email that stated:
Top urgent
Shpt arrived Trebil border on Friday 19/7.
Now waiting to rcv entry permission from Ministry of Health Baghdad. Please inf shpt to rush matter with their rep in Baghdad to avoid more delay at border.
I think they have to pay the 10%.
Truck detention per day USD 50 started from today.[745]
32.37 Mr Joyce recalled receiving this email and accepted that he must have read the reference to 10 per cent.[746] When he read the email he was most concerned to learn of this hold-up because entry permission by the Iraqi Ministry was not a condition of the contract or a requirement of the letter of credit.[747] Despite his concerns, he did not make any inquiries about the apparent requirement to pay 10 per cent.[748]
32.38 He forwarded the email to Mr Shimoon and requested him to 'gain the necessary approvals from the Ministry of Health'.[749] He also telephoned Mr Shimoon. Mr Shimoon reassured him that everything was under control and that 'it's just a glitch. Someone's stuffed up'.[750] Mr Shimoon did not say anything about paying, or promising to pay, anyone a percentage (of 10 per cent or any other amount) of the value of the contract in order to resolve the difficulty. Nor did Mr Joyce ask him about this.
32.39 Mr Joyce replied to the email. He advised Hellmann's agent that Alkaloids' 'Iraqi agent, Albert Shimoon, will contact both you and the Ministry of Health to solve the problem'.[751]
32.40 On 22 July 2002 Mr Joyce sent to Hellmann's Jordanian agent a further email that stated:
I understand from Mr Shimoon that you are taking the necessary documents from Amman to Trebil for the MoH [Ministry of Health] approval. This should have been completed yesterday or early today. Mr Shimoon understands that the truck should proceed to Samara today.[752]
32.41 The agent replied to Mr Joyce's email in the following terms:
Yes we rcvd guarrantee extention from bank and same sent with taxi driver to border. Hope this dcts accepted. Shall advise developments today.[753]
32.42 The 'guarantee extension' referred to in the agent's email apparently resolved the impasse at the border because on 24 July 2002 the agent emailed Mr Joyce advising that the trucks had left the border the previous night.[754]
32.43 A note in Mr Joyce's day book records a conversation he had with Mr Shimoon on about 7 September 2001-that is, shortly after the notification form and contract had been lodged with the United Nations via DFAT but before final approval by the United Nations and the granting of permission to export. The note includes the following:
Albert
LC90 opening to Iraqis guaranteeing the
€90 through RAFADIN BANK-no one[755]
The note also referred to a number of figures, one of them €1800.
32.44 Mr Joyce's evidence was that he did not recall having a discussion with Mr Shimoon about requesting or requiring a guarantee to pay the Iraqis €90.[756] He had no recollection that a guarantee was provided in the course of the transaction.[757] In his statement to the Inquiry, Mr Joyce said his day book note, 'read with 2006 eyes, may well be a mention of a guarantee that [Mr Shimoon] had given to the Iraqi government to pay to it an amount of €90/kg'.[758] He claimed, however, that he 'never understood at that time from anything [Mr Shimoon] had said to me that [Mr Shimoon] was suggesting that an amount of €90 a kg was to be paid to the Iraqi government or that [Mr Shimoon] had guaranteed such a payment to them'.[759]
32.45 Mr Joyce agreed that the email exchange between himself, Mr Shimoon and the Jordanian agent between 20 and 24 July 2002 suggested that the document causing delay at the border was a guarantee extension from the bank[760] and that this married with his day book note of the conversation with Mr Shimoon on 7 September 2001.[761] He claimed, however, that he never saw the guarantee or asked Mr Shimoon for a copy of it.[762] When he saw the emails from the Jordanian agent he did not understand what the guarantee extension from the bank was and was more focused on the fact that the documents had been accepted and the goods allowed to pass.[763] He had never asked Mr Shimoon about the guarantee.[764]
32.46 The goods were delivered to Samara on 22 July 2002.
32.47 Mr Joyce received the UN notification of delivery of goods (a requirement of the letter of credit) on 29 July 2001. The documents required by the letter of credit were lodged with Alkaloids' bank, the Commonwealth Bank. Alkaloids' banker was directed to split the proceeds of the letter of credit (€955,000) and pay the proceeds into two accounts-€243,175 to an account in Jordan and the balance (less charges) to Alkaloids' account in Australia.[765] The Jordanian bank account was that nominated by Mr Shimoon as his account.[766] The amount transferred to Mr Shimoon's account represented 17.5 per cent of the tender price of €865,000 plus €90,000 (being the 'overprice'-the difference between the tender price of €865,000 and the contract price of €955,000) plus €1,800.[767]
32.48 Mr Joyce was unable to explain what the additional €1,800 payment to Mr Shimoon was for[768], although he agreed in evidence that it was possible that this was the additional expense in establishing a guarantee at the Rafidain Bank.[769]
32.49 Mr Joyce prepared a 'summary of sale' report to report on the sale to his principal.[770] This report recorded that the 'overseas' commission paid on the sale (that is, the commission paid to Mr Shimoon) was A$437,758.80 and the commission paid in Australia on the sale (that is, the commission received by Mr Joyce) was A$25,628.26. Mr Joyce's commission of A$25,628.26 was 2 per cent of the net price after Mr Shimoon's commission has been deducted.[771] This was unusual because Mr Joyce's commission was usually calculated on the gross sale price.[772]
32.50 Mr Joyce furnished a tax invoice to Alkaloids in relation to the commission payable to him.[773] Bank records produced to the Inquiry record the receipt by Alkaloids of the proceeds of the letter of credit (less Mr Shimoon's commission) and the receipt by Mr Joyce of his commission.
32.51 Mr Joyce, with assistance from Mr Shimoon, caused tenders to be submitted to the State Company during other phases of the Oil-for-Food Programme.
32.52 A tender during phase X was lodged through Mr Shimoon in July 2001 but was unsuccessful.
32.53 A tender during phase XI was lodged through Mr Shimoon in January 2002 but was also unsuccessful.
32.54 A tender during phase XII was lodged through Mr Shimoon in January 2003. Mr Shimoon advised Mr Joyce that the competition was tendering at about €850 and that if Alkaloids submitted a tender at about that price, it might be successful.[774] Accordingly, Mr Joyce, on behalf of Alkaloids, prepared and submitted a tender for the supply of 500 kilograms of hyoscine at €848 per kilogram.[775]
32.55 Alkaloids was awarded the contract under phase XII at a contract price of €935.[776] That price was apparently 10 per cent more than the price offered in the tender. Mr Joyce gave the following evidence in relation to the phase XII tender and contract:
Q: This follows an almost remarkably similar pattern that was established in relation to the phase IX tender and contract; does it not?
A: Yes, it is when you sit here and look at it all today, but try looking at them 18 months apart and see whether you recognise the significance of them then, because that's what the difference-the difference between those two events is 18 months; it is in fact nearly two years.
Q: The pattern to which I refer is that the contract price is tendered for and the contract is awarded at a price almost exactly 10 per cent higher than the tender price; right?
A: Yes, it is.
…
Q: May we take it from that answer that you don't recollect ever asking Mr Shimoon how he had achieved the remarkable feat of, yet again, getting 10 percent more than the contract price that had been put in the tender?
A: I certainly don't recollect doing that at all.[777]
32.56 A note in Mr Joyce's day book records that he had a conversation with Mr Shimoon about this tender and was advised that the tender had been accepted by the Iraqis at a price of €850.[778] Mr Joyce did not recall being advised by Mr Shimoon that the contract had been awarded at €850 or that there had been added to the price an additional 10 per cent.[779]
32.57 The phase XII contact was not executed because of the intervention of military action in March 2003.
32.58 In February 2005 Mr Joyce was contacted by investigators from the Independent Inquiry Committee. In an email to the investigators dated 2 February 2005, he stated:
The trader who arranged the deal and who assisted through almost two years of negotiations and difficulties created by the USA after the contract was awarded, was A-S International, Canada. We paid commission in Euros to A-S International.
At no time did we make any payment to any person or party in Iraq. At no time were we requested to make, nor did we make, any payment as an inducement for the awarding or execution of this contract by any party or person.[780]
32.59 The investigators replied to Mr Joyce's email, asking some further questions. One was whether Mr Joyce ever received a fax, email or letter from A‑S International, Hellmann or any other party involved in the transaction stating that the goods would not be allowed into Iraq unless he could produce a receipt to show that he had paid a service fee of 10 per cent.[781] Mr Joyce did not reply to this email. His explanation for not replying was that it would have required him to disclose confidential commercial information.[782]
32.60 At about the time he was corresponding with the IIC investigators, Mr Joyce contacted Mr Shimoon. Mr Joyce informed Mr Shimoon he had been approached by the IIC investigators to provide information. Mr Shimoon responded in the following terms:
I must tell you that the information about the payment of commission to me is my information. I don't want you releasing that information to the UN and I give you no authority to release it. Have you told them that I was the agent? If you haven't, I do not want you to.[783]
32.61 When this Inquiry was established, Mr Joyce kept Mr Shimoon apprised of developments, including details of the Letters Patent and various media articles.[784] He advised Mr Shimoon about the Inquiry's website.
32.62 On 19 January 2006 the Inquiry wrote to Mr Shimoon and sought his assistance in relation to its investigations. Mr Shimoon was requested to make himself available for an interview by telephone regarding his knowledge of the Alkaloids contract and his dealings with the Iraqi Government on behalf of Alkaloids.[785]
32.63 On 26 January 2006 Mr Shimoon contacted Mr Joyce about the Inquiry's request that he make himself available for an interview. On advice from his solicitor, Mr Joyce told Mr Shimoon that he was unable to discuss the events surrounding the 'Iraqi transaction' with Mr Shimoon until after he had given his evidence.[786] In an email Mr Joyce sent to Mr Shimoon after that conversation, Mr Joyce encouraged Mr Shimoon to provide all assistance to the Inquiry.[787]
32.64 The Inquiry wrote again to Mr Shimoon on 6 February and 23 February 2006. The letter of 6 February enclosed a list of questions for Mr Shimoon and requested a written reply. On 23 February 2006 the Inquiry received an email from a solicitor in Ottawa, Canada, who represented Mr Shimoon. The solicitor advised that he had advised Mr Shimoon it would not be appropriate for Mr Shimoon to respond to the Inquiry's request for information. The advice was based on the solicitor's 'understanding' that Mr Shimoon had not been given notice that certain evidence would be put before the Inquiry and that Mr Shimoon had not participated with legal representation in the Inquiry.
32.65 The solicitor's understanding that Mr Shimoon had not been given notice about evidence does not sit well with Mr Joyce's evidence that he had provided Mr Shimoon with details of the Inquiry's website, from which Mr Shimoon could have obtained notice of the dates certain witnesses, including Mr Joyce, were expected to give evidence. At the time Mr Shimoon received the Inquiry's request for assistance, no witness had given evidence relating in any way to the Alkaloids transaction. This was pointed out to Mr Shimoon by Mr Joyce.[788] Mr Shimoon had also been given the Inquiry's terms of reference and could have appeared with legal representation at an early stage had he so desired.
32.66 Mr Joyce's evidence was that neither he nor to his knowledge anyone else on Alkaloids' behalf ever paid any money to any Iraqi government official. He claimed that Mr Shimoon never told him that he was required to pay 10 per cent of the contract price-or any other amount-to the Iraqi Government. In his statement tendered to the Inquiry, Mr Joyce stated:
Apart from the single payment of €243,175 in August 2002, neither I nor [Alkaloids] nor anyone on its behalf paid [Mr Shimoon] any money. No money in any form, has been paid to [Mr Shimoon] or to anyone else at his request or direction for the purpose of paying that money to someone called the Director whether for himself or as an agent of the Iraqi government for any purpose whatsoever. Moreover [Mr Shimoon] has never sought payment of any money either to himself or anyone else other than the payment to which he was entitled and which was paid in August 2002.
No money in any form, has been paid to [Mr Shimoon] or to anyone else at his request or direction for the purpose of paying a fee or alleged tax levied by the Iraqi government called an 'after sales service charge' or given any other name. [Mr Shimoon] never asked me for money to pay such a fee.[789]
and
I never at any time discussed with any other person (and, in particular, without limiting the generality of this statement, with [Mr Shimoon]) the payment of any money or of a benefit to an official of the Iraqi government or anyone on behalf of such an official in connection with the transactions undertaken by Alkaloids under the UN Oil-for-Food programme. At no time did [Mr Shimoon] ever ask me for money or other benefit to make a payment to him which was said to be a payment for a third party (whether the government of Iraq or anyone else); nor did he ask me to make a payment to a third party (whether the government of Iraq or anyone else).[790]
and
I have no idea how AS [Shimoon] spent the commission paid to him by AOA for effecting the contract with the Iraqi government under the oil-for-food programme. If any part of it was paid to an Iraqi government official, or in breach of the economic sanctions imposed against Iraq, neither I nor AOA knew anything about such a payment and we did not countenance or encourage or cause the making of such a payment. AS never suggested to me that any part of the commission was to be, or had in fact been, paid to an Iraqi official.[791]
32.67 The issues of fact requiring determination are:
32.68 There is a significant body of evidence from which it may be inferred that the contract price was inflated by 10 per cent from the original tender price of €865 to provide for the payment of a 10 per cent after-sales-service fee. The following evidence supports the finding that such a fee was paid:
32.69 Mr Joyce presented as a truthful and credible witness. He gave evidence and responded to questioning in a frank and forthright manner, without any apparent obfuscation. He cooperated fully with the Inquiry by producing all relevant documents to the Inquiry in a timely fashion and by providing detailed statements. He denied knowledge of any improper payments to Iraq in connection with the contract.
32.70 The evidence does not support a finding that Mr Joyce knew that the contract price was inflated to incorporate a 10 per cent after-sales-service fee or that such a fee was paid to the Iraqi Government or any Iraqi official. There is no evidence that Mr Shimoon ever told Mr Joyce of the need to pay a 10 per cent after-sales-service fee or that such a fee was required to be built into the contract price. The circumstantial evidence is insufficient to support an inference of Mr Joyce having knowledge of the incorporation of payment of such a fee. It is equally open to infer from the evidence that it was only Mr Shimoon who was involved in the relevant dealings with the Iraqi authorities in relation to the payment of the after-sales-service fee and that he did not fully disclose the true nature of the payments to Mr Joyce or the true reason for the inflation of the contract price.
32.71 The evidence demonstrates that, as a condition of obtaining the contract for the sale of hyoscine to Iraq, there was included in the contract price a surcharge of approximately 10 per cent. Such a sum was paid to Iraq or its instrumentalities or officials by Mr Shimoon. The inflation of price, and the payment of the sum, were arranged by Mr Shimoon. The evidence does not support a finding that Mr Joyce had knowledge of the payment of the surcharge to Iraq.
32.72 There is no basis for any adverse finding against Alkaloids, its directors or Mr Joyce.
32.73 None of the acts of Mr Shimoon occurred in Australia. There is no other jurisdictional nexus that would permit Mr Shimoon to be charged with any breach of a law of the Commonwealth, a State or Territory. Accordingly, I make no findings as to whether any such breach might have occurred.
32.74 The evidence does not establish that Alkaloids of Australia, its directors or Mr Joyce might have breached any Commonwealth, State or Territory law by Alkaloids exporting hyoscine to Iraq during the Oil-for-Food Programme.
32.75 Absent evidence that Alkaloids, through Mr Joyce, knew that the contract price included a 10 per cent fee to be paid by Mr Shimoon to Iraq, no issue arises concerning any possible deception of DFAT or the United Nations by submitting either a notification form for approval for payment from the escrow account or application to export goods. Whilst it can now be seen that the inflated contract was due to a 10 per cent payment to Iraq, at the time the contract price was executed and forwarded to DFAT for transmission to the United Nations, and at the time the permission to export was obtained, the inflated price could reasonably have been attributed to Mr Shimoon having negotiated a high price to earn for himself an overprice commission. I am satisfied that neither Alkaloids nor Mr Joyce paid, agreed to pay or intended to pay any 10 per cent fee to Iraq.
Notes
[644] ASIC records also disclose the existence of another company with the same name but incorporated in New South Wales and with a different registration number: ACN 003 267 589. The existence of this other company is referred to in Ex 66, AOA.0007.0003 at 0003 para. 1. The other company had nothing to do with the contract to supply goods to Iraq: T 1351.38-42.
[645] Ex 66, AOA.0007.0025 at 0028.
[646] Ex 65, WST.0007.0118 at 0118, para. 2.
[647] Ex 65, WST.0007.0118 at 0118, para. 4.
[648] Ex 65, WST.0007.0118 at 0118, para. 3; Ex 66, AOA.0007.0003 at 0003 para. 1.
[649] Companies associated with Mr Joyce (including Nut Trading Australia Pty Limited, Joe White Maltings Limited and Jorgenson Waring Foods) had previously acted as Alkaloids' agent (both in relation to peanuts and then hyoscine) in the period 1987 to about 2000: Ex 65, WST.0007.0118 at 0118, para. 3.
[650] Ex 64, AOA.0008.0002, para. 2; Ex 66, AOA.0007.0003 at 0004, para. 5.
[651] T 1354.35-40.
[652] Ex 66, AOA.0007.0003 at 0003, para. 1.
[653] Ex 65, WST.0007.0118 at 0118-0119, paras 5-7.
[654] Ex 66, AOA.0007.0003 at 0003 para. 1.
[655] T 1353.22-25.
[656] Ex 66, AOA.0007.0003 at 0003, para. 1.
[657] Ex 69, AOA.0001.0714.
[658] Ex 66, AOA.0007.0003 at 0007, para. 13; Ex 69, AOA.0001.0712-0713.
[659] Ex 66, AOA.0007.0003 at 0007, para. 13; T 1360.34-39; Ex 69, AOA.0002.0085.
[660] Ex 66, AOA.0007.0003 AT 0007, para. 13.
[661] Ex 66, AOA.0007.0003 at 0006, para. 11; Ex 64, AOA.0008.0002 at 0002, para. 6. Mr Joyce believed that the only case where Alkaloids sold direct to an overseas end-user was Malaysia; Ex 66, AOA.0007.0003 at 0006, paras 10 and 11; T 1356.40 - T 1357.9.
[662] Ex 69, AOA.0001.0708.
[663] T 1358.24-29; Ex 64, AOA.0008.0002 at 0002, para. 6.
[664] T 1358.31-33.
[665] Ex 69, AOA.0001.0697 at 0697-0698; Ex 66 AOA.0007.0003 at 0008-0009, para. 14.
[666] Ex 69, AOA.0001.0767-0778.
[667] AOA.0001.0697 at 0698.
[668] Ex 69, AOA.0007.0049; see also Ex 69, AOA.0001.0613.
[669] T 1372.32 - T 1373.24.
[670] T 1387.15-22
[671] T 1369.29-39.
[672] T 1369.6-9.
[673] T 1379.41-46.
[674] Ex 66, AOA.0007.0003 at 0009-0010, para. 15.
[675] Ex 66, AOA.0007.0003 at 0009-0010, para. 15.
[676] Ex 66, AOA.0007.0003 at 0009-0010, para. 15.
[677] T 1380.24-30.
[678] T 1380.32-47.
[679] T 1381.1-31.
[680] Ex 69, AOA.0001.0667.
[681] Ex 66, AOA.0007.0003 at 0009-0010, para. 15.
[682] Ex 69, AOA.0001.0654. The tender also included an offer to supply a small quantity of Hyoscine hydrobromide ASP23, BP98 (Scopolamine HBr)
[683] T 1382.30-43; T 1384.39-T 1386.16. There are no documents suggesting that the tender documents were sent directly to the State company: T 1384.20-23.
[684] Ex 66, AOA.0007.0003 at 0010-0011, para. 17.
[685] T 1387.32 - T 1388.13.
[686] T 1391.17-21.
[687] T 1388.15-26.
[688] Ex 69, AOA.0002.0144; T 1395.
[689] T 1396.6-17.
[690] Ex 66, AOA.0007.0003 at 0007, para. 13.
[691] T 1397.31-35.
[692] T 1397.8-29.
[693] T 1397.37-47.
[694] T 1398.
[695] T 1398.45 - T 1399.20.
[696] T 1402.1-9.
[697] Ex 69, AOA.0001.0632; AOA.0001.0630.
[698] Ex 64, AOA.0008.0002 at 0003, para. 9; Ex 69, AOA.0001.0629.
[699] Ex 69, AOA.0001.0627.
[700] T 1407.7-35.
[701] T 1390.07-14.
[702] T 1411.10-17.
[703] Ex 66, AOA.0007.0003 at 0006, para. 11 and at 0012, para. 21; T 1410.8-15.
[704] T 1414.13-T 1415.9.
[705] T 1366.20-23.
[706] Mr Joyce's evidence was that his day books are not a complete record of his daily activities: Ex 66, AOA.0007.0003 at 0004-0005, para. 5; T 1358.5-10.
[707] T 1358.5-16.
[708] Ex 64, AOA.0008.0002 at 0003, para. 10.
[709] Ex 69, AOA.0001.0347-0353.
[710] Mr Shimoon was authorised to sign all contract with the State Company on behalf of Alkaloids: Ex 69, AOA.0001.0617.
[711] Ex 66, AOA.0007.0003 at 0012-0013, para. 23.
[712] T 1391.17-21.
[713] T 1391.23-33.
[714] T 1392.11-21.
[715] T 1392.28-41.
[716] Ex 66, AOA.0007.0003 at 0021, para. 46.
[717] Ex 69, AOA.0001.0442.
[718] T 1362.28 - 32.
[719] T 1363.26-29.
[720] T 1362.12-32.
[721] Ex 69, AOA.0001.0732.
[722] Ex 66, AOA.0007.0003 at 0008-0009, para. 14.
[723] Ex 66, AOA.0007.0003 at 0015-0016, para. 29; T 1363.26-43; T 1425.1-9.
[724] T 1372.23-30.
[725] Ex 69, AOA.0001.0444.
[726] T 1424.22-41.
[727] T 1425.11-14.
[728] Ex 69, AOA.0001.0494; AOA.0001.0326.
[729] Ex 69, AOA.0001.0325.
[730] Ex 69, AOA.0001.0323.
[731] Ex 69, AOA.0001.0326.
[732] Ex 69, AOA.0001.0562; AOA.0001.0318.
[733] Ex 69, AOA.0001.0437.
[734] Ex 69, AOA.0001.0435; AOA.0001.0439.
[735] Ex 69 AOA.0001.0147; AOA.0001.0421; AOA.0001.0423.
[736] Ex 69, AOA.0001.0423.
[737] Ex 69, AOA.0001.0146.
[738] Ex 66, AOA.0007.0003 at 0016-0017, para. 31.
[739] T 1371.4-30.
[740] Ex 66, AOA.0007.0003 at 0016-0017, para. 31.
[741] Ex 69, AOA.0001.0225; AOA.0001.0242.
[742] Ex 69, AOA.0001.0175.
[743] Ex 69, AOA.0001.0150.
[744] Ex 69, AOA.0001.0142.
[745] Ex 69, AOA.0001.0173; AOA.0001.0166 at 0168.
[746] T 1432.22-25.
[747] Ex 66, AOA.0007.0003 at 0018, para. 37.
[748] T 1431.35 - T 1432.5.
[749] Ex 69, AOA.0001.0173.
[750] Ex 66, AOA.0007.0003 at 0018, para. 37.
[751] Ex 69, AOA.0001.0166 at 0168.
[752] Ex 69, AOA.0001.0166 at 0167.
[753] Ex 69, AOA.0001.0166 at 0167.
[754] Ex 69, AOA.0001.0166 at 0166.
[755] Ex 69, AOA.0002.0313.
[756] T 1429.9-12.
[757] T 1431.8-11.
[758] Ex 68, WST.0008.0001_R at 0005_R - 0006_R, para. 9.
[759] Ex 68, WST.0008.0001_R at 0005_R-0006_R, para. 9.
[760] T 1434.25-28.
[761] T 1434.30-34.
[762] T 1434.25-41.
[763] T 1434.41 - T 1435.4.
[764] T 1435.23-26.
[765] Ex 69, AOA.0001.0208.
[766] Ex 69, AOA.0001.0534.
[767] Ex 69, AOA.0001.0159.
[768] Ex 66, AOA.0007.0003 at 0019, para. 40.
[769] T 1430.24 - T 1431.3.
[770] Ex 69, AOA.0001.0125; Ex 65, WST.0007.0118 at 0119, para. 7.
[771] Ex 67, WST.0007.0104 at 0104, para. 6.
[772] T 1437.28-43.
[773] Ex 67, WST.0007.0106 at 0107; Ex 67, WST.0007.0104.
[774] T 1439.19-35; Ex 69, AOA.0002.0533.
[775] Ex 69, AOA.0001.0860.
[776] Ex 69, AOA.0001.0032 at 0034.
[777] T 1441.08 - 41.
[778] Ex 69, AOA.0002.0554.
[779] T 1443.16-19.
[780] Ex 1395, AOA.0001.0005_R at 0006_R-0007_R.
[781] Ex 1395, AOA.0001.0005_R at 0005_R.
[782] T 1446.21-35.
[783] Ex 68, WST.0008.0001_R at 0002_R, para. 4.
[784] Ex 68, WST.0008.0001_R at 0003_R, para. 7; WST.0008.0016.
[785] Ex 68, WST.0008.0029; WST.0008.0031.
[786] Ex 68, WST.0008.0001_R at 0004_R-0005_R, para. 8.
[787] Ex 68, WST.0008.0027 at 0028.
[788] Ex 68, WST.0008.0027 at 0028.
[789] Ex 66, AOA.0007.0003 at 0011, para. 18.
[790] Ex 66, AOA.0007.0003 at 0020, para. 43.
[791] Ex 66, AOA.0007.0003 at 0020-0021, para. 45.
