 Chapter 30 |
 Contents |
 Chapter 32 |
31.1 Counsel Assisting have submitted that the findings I have made of factual circumstances should be considered against certain Commonwealth, State and Territory legislation in order to determine whether there might have been the commission of an offence. Appendix 26 is an analysis prepared by Counsel Assisting of possibly applicable laws required to be considered. I first address those statutes which in my view have no application.
Division 70 Criminal Code: Bribery of Foreign Officials
Section 176 (2) of the Crimes Act 1958 (Vic)
For the reasons advanced in Appendix 26, these offences have no application to the facts as found.
Confiscation Act 1997 (Vic) s. 122 and s. 123 prior to 1 January 2004
Crimes Act 1958 (Vic) s. 194 and s. 195 after 1 January 2004
31.2 If AWB dishonestly obtained a financial advantage contrary to s. 82 of the Crimes Act 1958 (Vic) for itself or Tigris in recovering from the United Nations escrow account the Tigris debt, the question arises whether it might have committed an offence against s. 194 or 195 of the Crimes Act 1958 (Vic) after 1 January 2004, or s. 122 or s. 123 of the Confiscation Act 1997 (Vic) prior to that date.
31.3 Each offence requires either that the person knew that the property being dealt with was the proceeds of crime or was reckless as to whether or not it was the proceeds of crime.
31.4 There is no evidence that AWB or its officers knew that the recovered funds were the proceeds of crime. AWB and its officers sought advice regarding whether it was legally entitled to pay such monies to Tigris. Seeking such advice, as distinct from the quality or advice itself, negates any concept of recklessness or negligence in AWB or its officers regarding whether such funds were the proceeds of crime.
31.5 Accordingly I am satisfied that there is no basis for any finding that AWB might have breached s. 194 or s. 195 of the Crimes Act 1958 (Vic), or s. 122 or s. 123 of the Confiscation Act 1997 (Vic). Nor am I satisfied, in the light of my finding that there is insufficient evidence that AWB knew or was reckless or negligent about whether the money was the proceeds of crime, that this is a matter that it would be appropriate to refer to appropriate authorities for consideration of whether proceedings should be instituted.
31.6 Regarding Tigris and its officers, there is no evidence before me sufficient to establish the mental element of any breach of s. 194 or 195 Crimes Act 1958 (Vic) or s. 122 or s. 123 Confiscation Act 1997 (Vic).
31.7 The Member for Mitcham in the Parliament of Victoria, Mr Robinson MP, by letter dated 31 January 2006 sought that the Inquiry consider whether the material before the Inquiry might constitute a breach by AWB of the provisions of Part 5.3 of the Criminal Code relating to terrorism. Counsel Assisting placed available relevant material before me and advanced submissions on the issue.
31.8 It was submitted the material before me was not sufficient to support an allegation that AWB might have committed an offence against s. 102.6 of funding a terrorist organisation.[392] I agree with that submission. The reasons why that is so are set out in Appendix 26.
31.9 However, Counsel Assisting submitted that the material before me was sufficient to support a finding that AWB might have committed an offence against s. 103.1 of the Criminal Code, namely, that AWB intentionally provided funds to Iraq and was reckless as to whether the funds would be used to facilitate or engage in a terrorist act.
31.10 Section 103.1 as it stood between 6 July 2002 and 29 May 2003 provided:
(1) A person commits an offence if:
(a) the person provides or collects funds
(b) the person is reckless as to whether the funds will be used to facilitate or engage in a terrorist act.
31.11 AWB submitted that the material before me was insufficient to support a finding that there might have been the commission of such an offence, or any basis upon which any such offence should be referred to a relevant agency. It submitted:
(a) there was inadequate evidence on which to do so
(b) the trucking fees and after-sales-service fees were in the nature of an excise or tax imposed by a sovereign government as a fee due upon the importation of goods and thus such payment could not be characterised as funds 'provided' under s. 103.1[393]
(c) the Iraqi Government did not fall within the statutory definition of 'terrorist organisation'[394]
(d) no 'terrorist act' with which the payment must be connected, had been identified. Amendments to s. 103 made in 2005 meant a prosecutor must identify the 'terrorist act'.[395]
(e) the evidence at best established that some portion of the funds paid by AWB to Iraq were paid to the 'Ministry of Finance', or the Iraqi consolidated revenue. The evidence did not establish how that Ministry used such funds.[396]
31.12 The evidence before me does establish that AWB paid money indirectly to the Government of Iraq through one of its instrumentalities. It also establishes that it intended to make those payments to Iraq. It establishes that the payments were made because they were regarded as necessary if AWB was to retain its market in Iraq.
31.13 There is evidence before the Inquiry from which a tribunal of fact might find that the acts of the Iraqi Government prior to 2002 might fall within the definition of 'terrorist act' as that expression was defined in the legislation commencing on 6 July 2002 and thereafter. It would be for a tribunal of fact to determine what inferences, if any, should be drawn from that circumstance regarding the possibility or probability of the government of Iraq again engaging in such acts, in so far as such inferences of fact might be regarded as relevant.
31.14 The evidence before me does not establish that AWB gave any consideration to:
(i) the use to which payments made to Iraq might be put
(ii) whether funds paid to Iraq might be used for purposes which might fall within the meaning of 'terrorist act'
(iii) the character, nature or objectives of the former Iraqi Government
(iv) whether the former Iraqi regime might be regarded as a 'terrorist organisation'
(v) reasons why payments to Iraq were prohibited, or reasons for the United Nations sanctions.
31.15 The terms of s. 103.1 are extremely wide. The section does not restrict its scope by specifying any characteristic that the person to whom funds are provided must have to attract the operation of the section. It need not be a terrorist organisation as defined. Reading paragraphs (a) and (b) together seems to import some unspecified relationship between the provision of funds and a terrorist act, and require a finding of recklessness on the part of the provider of funds in relation to the possible or probable use of the provided funds to attract the section. That a mental element of intention is required is clear because of s. 5.2(1) of the Code, but the extent to which the intention to make the payment is to be judged against the background of an unspecified relationship between the making of the payment and the terrorist act is not so clear.
31.16 Section 5.4(2) of the Code provides:
(2) A persons is reckless with respect to a result if:
(a) he or she is aware of a substantial risk that the result will occur
and
(b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk.
The 'result' contemplated in s. 103.1 is that funds provided might be used to facilitate or engage in a terrorist act.
31.17 There is no direct evidence before me that AWB was aware of any risk, let alone a substantial risk, that the funds it provided to Iraq might be so used. Nor am I prepared to draw any inference that AWB was aware of a risk on the basis of the material before me relating to the public notoriety of acts of the Iraqi Government prior to 2002. It is to be noted that s. 5.2(a) refers to the person being 'aware'; it does not refer to 'ought reasonably to have been aware'.
There being no evidence that AWB was aware of a substantial risk that funds it provided to Iraq might be used to facilitate or engage in a terrorist act, no question can arise whether it was unjustifiable for AWB to take such risk.
31.18 Accordingly, the material before me does not support a finding that AWB might have breached s. 103.1 of the Criminal Code.
31.19 I addressed these regulations in Chapter 2. For the reasons there given, the only regulation having any possible application is Regulation 5 as in force prior to 10 March 2002. Reference may also be made to the discussion in Appendix 26.
31.20 I addressed these regulations in Chapter 2. For the reasons given in Appendix 26 no question of any breach of these regulations arise.
31.21 Counsel Assisting contended that ss. 180, 181, 182 and 184 of the Corporations Act 2001, concerning the duties of directors and officers of a corporation, and ss. 1307 and 1309 might be applicable. Those sections are addressed in Appendix 26.
31.22 I am of the view that s. 1307 has no application to the Tigris agreement, the only document said to have been falsified contrary to the section.
31.23 Counsel Assisting have submitted that various persons might have committed an offence against s. 1307 of the Corporations Act 2001, in that the agreement referred to as the Tigris agreement does not truthfully record the actual agreement between AWB and Tigris Petroleum Limited, and thus there has been a falsification of a 'book effecting or relating to affairs of the company'.
31.24 'Books' are defined, subject to contrary intention, in the dictionary found in section 9 of the Act to include:
(a) a register; and
(b) any other record of information;
(c) financial reports or financial records, however compiled, recorded or stored; and
(d) a document;
but does not include an index or recording made under Subdivision D of Division 5 of Part 6.5
Clearly enough the Tigris agreement is a document within that definition.
31.25 Section 1307 appears in Chapter 9 of the Act addressing miscellaneous matters. Part 9.3 addresses books. It contains eight sections being sections 1300 to 1307 inclusive. In my view it is apparent from a consideration of those sections that the 'books' referred to in those sections are books which are required to be kept under the provisions of the Corporations Act 2001. That appears from a consideration of s. 1300 (1) which addresses inspection of books that are 'by this Act required to be available for inspection'; s. 1301 (1) which permits the location on computers of 'matters this Act requires to be contained in a book'; s. 1302 (1) which addresses the location of registers 'required by section 271 to be kept by a company'; s. 1305 (1) which addresses admissibility of books in evidence kept by a body corporate 'under a requirement of this Act'; and s. 1306 (1) which addresses the form and evidentiary value of books 'required by this Act to be kept or prepared'. It is falsification of such books to which section 1307 refers.
31.26 The Tigris agreement is not a document which AWB is required to maintain under any provision of the Corporations Act 2001. Accordingly, in my view, section 1307 has no application to that agreement.
31.27 There remains to consider whether AWB, Rhine Ruhr, Alkaloids of Australia, BHP, Tigris or persons or companies associated with them might have committed offences of the following categories:
- Crimes Act 1914 ss 29D, 29A, 29B prior to 24 May 2001
- Criminal Code ss 135.1(7) and 136
- Crimes Act 1958 (Vic) s. 82.
It is also necessary to consider whether any officers or employees of AWB might have committed offences against ss 184 and 1309 of the Corporations Act 2001, or civil contraventions of ss 180, 181 and 182 of the Corporations Act 2001.
Findings in relation to Alkaloids of Australia and Rhine Ruhr are dealt with in Chapters 32 and 33 respectively.
31.28 AWB did not deny its corporate criminal responsibility for the acts of its executives. Nor did it address the acts or culpability of its officers as addressed in submissions of Counsel Assisting. Indeed it made no submissions of substance on the facts and evidence which emerged during the Inquiry. It reserved its position simply stating:
In parts E to K we respond to the allegations that AWB was in breach of Australian laws. In so doing we will refrain from addressing the culpability of officers and employees even though in many instances Counsel Assisting have submitted that the companies are primarily liable for their conduct. This is not to say that should the need arise in the future, in a different context, the companies will not contend that there are circumstances which negate any primary liability.[397]
31.29 I have considered the matter of corporate responsibility in accordance with the principles enunciated in Appendix 26.
31.30 During the period July 1999 to March 2003, AWB lodged twenty Notification forms and contracts with DFAT as follows:
(a) contracts A4653, A4654 and A4655 lodged with DFAT on 3 August 1999
(b) contract A4822 lodged with DFAT on 29 October 1999
(c) contracts A4970, A4971 and A4972 lodged with DFAT on 2 February 2000
(d) contracts A0265, A0266 and A0267 lodged with DFAT on 14 August 2000
(e) contract A0430 lodged with DFAT on 2 November 2000
(f) contracts A0552 and A0553 lodged with DFAT on 27 February 2001
(g) contracts A0784 and A0785 lodged with DFAT on 27 June 2001
(h) contracts A1111 and A1112 lodged with DFAT on 22 January 2002
(i) contract A1441 lodged with DFAT on 24 July 2002
(j) contracts A1670 and A1680 lodged with DFAT on 23 December 2002.
31.31 DFAT certified all of the Notification forms relating to these contracts and submitted the forms and the copy contracts provided to it by AWB to the United Nations. All of the contracts were approved for payment from the escrow account by the United Nations 661 Committee. In due course, permission was given by delegates of the Minister for Foreign Affairs to export the wheat the subject of these contracts.
31.32 Throughout the period during which DFAT considered contracts sent to it by AWB, liaised with the United Nations in relation to those contracts and caused permissions to export to be issued, AWB concealed from DFAT, and ultimately the United Nations, material information concerning the arrangements it had with IGB in relation to the sale and export of the wheat the subject of these contracts. In general terms, the material information that AWB concealed was that the arrangements it had with IGB were materially different from the contractual terms that were disclosed in the Notification forms and contracts that it lodged with DFAT. The arrangements not clearly and accurately disclosed (in the case of the first four contracts) or disclosed at all (in the case of all later contracts) included that AWB had agreed to pay substantial fees in United States dollars (and later in deutschmarks or Euros) to Iraq or an Iraqi entity, ostensibly in relation to the discharge and transportation of the wheat in Iraq, that the amount of the fees to be paid by AWB was added to the contract price, and therefore would ultimately be paid out of the United Nations controlled escrow account. The extent of the differences between the disclosed and non-disclosed arrangements, and the amount of the fees that AWB agreed to, and did, pay to Iraq, differed between the various contracts. The first four contracts (A4653, A4654, A4655 and A4822) contained a clause referring to the payment of a 'discharge cost' to 'Maritime Agents in Iraq', but this did not clearly and accurately record the actual arrangements. In relation to contracts A1670 and A1680, the arrangements concealed from DFAT and the United Nations also included: first, that the contract price had been inflated, with the agreement of IGB, to facilitate the repayment of a debt supposedly owed by IGB to Tigris; and second, that AWB and IGB had entered into a collateral arrangement relating to the payment of compensation to IGB for alleged contamination of earlier shipments contrary to the UN sanctions in a way designed to circumvent the sanctions.
31.33 The concealment by AWB of this material information from DFAT and the United Nations was intentional and dishonest. It was known by senior officers of AWB who had actual or de facto responsibility for AWB's trade with Iraq and whose knowledge and intentions accordingly can and should be attributed to AWB. Senior officers of AWB knew that AWB's arrangements included the making of substantial payments indirectly to Iraq and that, with the exception of contracts A4653, A4654, A4655 and A4822 the Notification forms and contractual documents made no reference to the arrangements in relation to these payments. Although contracts A4653, A4654, A4655 and A4822 did include a clause referring to payment of a 'discharge cost', this clause did not fully or accurately reveal the actual arrangements between AWB and IGB in relation to the payments. Senior officers of AWB also knew about the inflation of the contract price in contracts A1670 and A1680 for the purpose of recovering the Tigris debt, and the collateral arrangements relating to the payment of compensation to IGB, and that the documents submitted to DFAT did not reveal these matters.
31.34 At no time did anyone at AWB ever disclose this material information to DFAT. Nor did DFAT or relevant Ministers of the Commonwealth discover the information from any other source during the period that the Oil-for-Food Programme was on foot.
31.35 The reason for the dishonest concealment from DFAT and the United Nations was that senior management at AWB wanted to retain its substantial wheat trade with Iraq and were therefore disposed to meet the IGB's demands for the payment of these fees. Senior officers of AWB knew, however, that the arrangements which it agreed with IGB and pursuant to which it paid the inland transportation fees and after-sales-service fees, breached, or circumvented the UN sanctions. AWB also knew that if it disclosed these arrangements to DFAT, which would in turn have led to disclosure to the United Nations, the likelihood was that the arrangements would not be approved. The chosen solution to this dilemma was to conceal the true nature of its arrangements with IGB from DFAT and the United Nations. By the time contracts A1670 and A1680 were entered into in December 2002, it was known that the by then well established inland transportation fee mechanism was a mechanism that could be readily used to pay foreign currency to Iraq in circumvention of the sanctions and without the knowledge of the United Nations and DFAT, and that it was possible to extract funds from the escrow account (in the case of these contracts, to facilitate the repayment of the Tigris debt) by inflating the contract price, again without disclosing this fact to DFAT or the United Nations.
31.36 During late 1999 and 2000, AWB also entered into contracts with foreign grain traders in relation to wheat that was to be shipped to Iraq from Australia. These contracts included:
(a) contracts A4906, A4907 and A4908, concluded in December 1999
(b) contracts A4993, A0662 and A0101, concluded in February, March and April 2000.
31.37 AWB did not seek the approval of the United Nations 661 Committee for any of these contracts. It was not necessary for AWB to do so. Such approval was sought by the Russian Federation on behalf of Russian based grain trading companies. It was accordingly not necessary for AWB to submit any of these contracts to DFAT. AWB did, however, seek and obtain permission to export the wheat the subject of these contracts from the Minister for Foreign Affairs. When it sought this permission, it concealed from DFAT that under the arrangements for the sale and shipment of this wheat, AWB had agreed to, and would, pay fees to an Iraqi entity through third parties, purportedly on account of inland transportation of the wheat. Again, the concealment of these undoubtedly material facts from DFAT and the Minister was intentional and dishonest.
31.38 The differences between the provision in the tender form, the short-form contract, the long-form contract and the true arrangement made with IGB is set out in schedule form in Appendix 28.
31.39 The possible offences that might have been committed by AWB arising from its deception of DFAT are offences under sections 29A, 29B and 29D of the Crimes Act (in the case of conduct occurring before 24 May 2001), and sections 135.1(7) and 136.1 of the Criminal Code (in the case of conduct occurring after 24 May 2001). The offences that might have been committed by AWB arising from its deception of the United Nations are offences under section 82 of the Crimes Act 1958 (Vic). The elements of these offences are addressed in Appendix 26. The application of these offences to the facts is addressed after the individual contracts, or groups of contracts, have been considered.
Before dealing with the specific groups of contracts entered into by AWB, I will deal with submissions made by AWB that deal in a global way with whether AWB might have committed any of these offences relating to deception of DFAT and the United Nations.
31.40 AWB and others submitted it was not the function of this Inquiry to consider whether there might be a defence to a charge of deceiving the Commonwealth by determining whether the Commonwealth knew of the subject matter of the alleged deceit.[398]
31.41 I reject that submission. If I was satisfied that the Commonwealth knew of the subject on which it was alleged to have been deceived, I would find that a charge alleging deceit could not be maintained, and would not find that there ' might' have been the commission of such an offence.
31.42 AWB also submitted that there should be no referral to a prosecutorial authority because the submission of Counsel Assisting that the evidence established that the Commonwealth did not know of the true circumstances regarding AWB's contracts, should be rejected. It contended it should be rejected because:
(a) DFAT witnesses were unreliable and lacked credibility
(b) DFAT had been required to produce only limited material because of the alleged narrow scope of notices served upon it
(c) DFAT did not rely on any AWB forms given to it: it acted only as a 'post box'
(d) regarding permission to export applications, AWB was under no duty at all. It merely had to apply for permission to export. The only duty was imposed upon the Minister or delegate to be satisfied of compliance with international obligations.[399]
31.43 Regarding (a), I did not detect such lack of credibility or unreliability as would deter me from referring a matter which depended on the evidence of DFAT or Commonwealth witnesses.
Regarding (b), I reject the submission that notices served on DFAT or the Commonwealth were other than wide-ranging. Three notices were served on DFAT and a further eighteen on the departments of the Commonwealth. AWB sought to demonstrate a failure by the Commonwealth to produce documents to the Inquiry by annexing to its submissions 12 pages of documents AWB and a member of parliament had obtained through a Freedom of Information application. All of these documents were produced to the Inquiry in response to notices, and included in the Inquiry's database. They were not tendered because they are irrelevant.
Regarding (c), there was material before the Inquiry which I accept that senior officers of DFAT would not have permitted contracts to be forwarded to the United Nations if they knew or suspected that the contracts did not comply with United Nations sanctions. The so called 'post box' approach arose against a background of the perceived reliability and supposed integrity of AWB, an approach based upon a long history of dealings between AWB and DFAT. Had AWB advised DFAT of its true arrangement with Iraq and the IGB, and advised DFAT of information that was known to be material to the decision to grant permission to export there could be little doubt DFAT would have refused to forward the contracts to the United Nations or declined to grant permission to export, under r. 13CA of the Customs (Prohibited Exports) Regulations.
Regarding (d), AWB had a duty of honesty. If it wished to obtain the benefit of an export permit, it was obliged to act honestly in seeking that permission. That involved being truthful about the terms of the contracts pursuant to which it sought to export.
31.44 AWB also submitted that, as officers of DFAT and the Minister's delegate relied upon the consent of the United Nations in granting the permission to export under the Customs regulations, 'the conduct of AWB was irrelevant when informing that part of the process.'[400] I reject that submission. Obtaining approval for payment from the escrow account from the United Nations was of no value at all without the approval to export. The two matters are inextricably linked as both AWB and DFAT well knew. They were part of a continuum. Deception in the first part of the process continued to the second part.
I should also add that, even if I accepted AWB's submission that the evidence did not establish that the Commonwealth did not know of the true circumstances regarding AWB's contracts, this would not be an answer to possible offences under s. 135.1(7) of the Criminal Code. To make out an offence under s. 135.1(7) it is necessary only to prove that the person did something with the intention of dishonestly influencing a Commonwealth public official in the exercise of the official's duties. It is not necessary to prove that the official was in fact deceived, or that he or she would necessarily have acted differently if not deceived.
31.45 AWB and others submitted, based on its analysis of the IIC September report, that:
(a) The 661 Committee therefore acquiesced in the payment of 'internal transport costs to transportation companies that may have links to the Government of Iraq'. The alternative might have been to see the OFF Programme collapse[401]
and thus:
(b) It is not open to me to 'conclude that the payment of inland transport fees to transportation companies with links to the Government of Iraq were not authorised'[402]
and further:
(c) the OIP and the 661 Committee treated contract provisions calling for inland transportation terms as acceptable, provided that the amounts at issue were reasonable[403]
and finally:
(d) 'during 2001 the 661 Committee (and, in particular, the OIP, which was responsible for contract approval) was well aware that:
1. a fee equal to 10% of the total contract value of any goods shipped to Umm Qasr was payable prior to discharge of any cargo at Umm Qasr
2. that fee was payable either to Alia or the ISCWT
3. other fees, levies and charges were imposed on humanitarian suppliers by Iraq yet no stop was placed on any contracts.
51. As AWB's contracts all involved shipments to Umm Qasr, it logically follows that it must have been obvious to the OIP that each AWB contract that it approved would necessarily have included an amount to cover these payments. Even if AWB had expressly disclosed that its contracts contained inland transportation and after-sales service fees, it would not have been telling the OIP anything that it must already have been known (sic) or at least suspected.
52. In those circumstances, it is impossible to maintain that AWB misled the United Nations in any relevant respect.'[404]
31.46 AWB also submitted that the fact that the United Nations approved four AWB contracts which showed a price term 'CIF Free in Truck to Silo at All Governates' and specified a 'discharge cost' of US$12.00 pmt 'properly gave AWB cause to believe that these payments were approved'.[405]
31.47 These submissions ignore the facts.
31.48 First, AWB denied to the United Nations and the Commonwealth that it was making payments to Iraq outside the Oil-for-Food Programme.
Second, 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.
Third, AWB knew it was not responsible for transportation within Iraq. AWB knew it had no contract with Alia to provide transport services. It was obliged to pay a fee.
Fourth, AWB went to extraordinary lengths to hide the payment of the fee to Alia. It did so by using shipowners to pay the fee and by interposing Ronly and Tse Yu Hong Metal Limited. These subterfuges were undertaken because AWB knew that the fees were not approved by the United Nations. If AWB believed the payments were approved by the United Nations, it would have paid the monies direct to the Iraqi entity nominated in each tender.
Fifth, AWB knew that its contracts submitted to the United Nations did not reflect the true agreements it had with Iraq. The true agreements reflected the Iraqi tenders which specified a fee to be paid to Iraq by way of 'transportation fee' and 'after-sales-service fee'. The contracts did not. The reason the contracts did not show the 'transportation fee' was because AWB knew such fees were not approved by the United Nations, were not for transportation, from November 2000 included a 10% contract value factor bearing no relationship to transport, and were to be paid to Iraq contrary to sanctions.
Sixth, the proposition in paragraph 51 amounts to a contention that, the United Nations having imposed sanctions to prevent payments to Iraq, if told that such payments in breach of sanctions were to be made to Iraq, would have approved contracts which so stated. There is no material to support that proposition and it is contrary to Ms Johnston's evidence. Common sense suggests the contrary proposition.
Further, including an element of debt recovery within a price for wheat as AWB did in the Tigris transaction but submitting the contract as though the stated price related only to the wheat price and legitimate wheat costs was plainly to mislead the United Nations.
31.49 I find that AWB did mislead the United Nations.
31.50 An alternative argument was advanced.[406] Even if it was accepted that the United Nations was deceived by the conduct of AWB, there should not be a recommendation to refer a possible breach of Australian law to a prosecuting authority because such prosecuting authority would face insurmountable difficulties in mounting proceedings against AWB because the 'political' nature of the United Nations, and its operations through its committees would mean it could not be established that the United Nations had been misled.
31.51 No doubt any prosecuting authority to whom a possible offence may be referred will consider difficulties of proof in determining whether proceedings should be commenced. Difficulties of proof are not a bar to a referral unless I am satisfied they are insurmountable. I do not regard as insurmountable the establishment in an Australian court the proposition that the United Nations would have rejected for approval a contract which disclosed payments contrary to United Nations sanctions, or the issue whether the United Nations was deceived.
31.52 It was also submitted by AWB that:
Because the [UN] Resolutions do not impose obligations on non-political entities, such as AWB, it would be difficult to contend that AWB had a legal duty to inform the UN (or even DFAT) about anything. The UN (and the Minister under Reg 13CA) were bound by a political compact to achieve the agreed outcome. The political objective does not become law unless translated expressly in a rule of domestic law. It was not.[407]
I reject that submission. A body such as AWB, seeking approval from the United Nations for a contract so that it may be paid from a fund controlled by the United Nations, has a legal duty of honesty in making its application. That negates the right of a company, such as AWB, to deceive or defraud the United Nations in making its application.
31.53 These contracts and the arrangements between AWB and IGB relating to the payment of inland transportation fees in respect of these contracts are considered in Chapter 13. Mr Emons was primarily responsible for the negotiation of these contracts.
31.54 The short-form contracts prepared within AWB for each of contracts A4653, A4654, and A4655 were signed by Mr Emons and contained the following clause:
The cargo will be discharged Free into Truck to all silos within all Governates of Iraq at the average rate of 3,000 metric tons per weather working day of 24 consecutive hours. The discharge cost will be a maximum of USD 12.00 and shall be paid by Sellers to the nominated Maritime Agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan.
The price of the wheat sold under the contracts was also expressed in the short-form contracts as being on 'C.I.F. Free in Truck' Terms.
31.55 The IGB long-form version of these contracts expressed the price as being on terms 'CIF F.O.T TO SILO AT ALL GOVERNATE OF IRAQ VIA UMM QUSER PORT' but made no reference to any requirement to pay a 'discharge cost,' or of any payment to maritime agents in Iraq.
31.56 The UN Notification forms for these contracts contained details of the price per tonne in the contracts and referred to the fact that the wheat was to be shipped to Umm Qasr by bulk carrier. They made no reference to a discharge cost.
31.57 The IGB long-form contracts were forwarded to DFAT between 27 July 1999 and 29 July 1999. The short-form contracts signed by Mr Emons were sent to DFAT by Mr Borlase on 3 August 1999.
31.58 DFAT certified the Notification forms on 3 August 1999 and sent the documents to the United Nations 661 Committee. On 13 August 1999, the United Nations advised that the contracts were eligible for payment under the Oil-for-Food Programme. The approval notices were subsequently sent by DFAT to AWB. Between 7 October 1999 and 8 March 2001 Mr Lister sought and obtained on behalf of AWB permissions to export to Iraq the wheat sold under these approved contracts.
31.59 None of the documents sent by AWB to DFAT accurately stated the true contractual arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts. Nor did AWB otherwise advise DFAT, or through it the United Nations, at any time during the period between 27 July 1999 (when the contracts were first forwarded to DFAT) and 8 March 2000 (when the last permission to export referable to these contracts was signed by a delegate of the Minister for Foreign Affairs) of the true contractual arrangements between it and IGB. The true contractual arrangements were:
(a) AWB was not responsible for delivering the wheat 'free in truck' or 'FOT' to 'all silos within all Governates of Iraq,' contrary to the appearance created by the terms of its written contracts. AWB was responsible only for shipping the goods to Umm Qasr (that is, the true terms were CIF free out Umm Qasr); the IGB remained responsible for the discharge of the wheat and its inland transportation within Iraq and delivery to silos in all governates in Iraq.
(b) AWB was obliged to pay a fixed fee of US$12.00 per tonne (described variously as a 'trucking' or 'inland transportation fee'). At the time the contracts were entered into, there was no final agreement between AWB and IGB as to how the fee would be paid, but it was understood that it would be paid at the direction of IGB to an Iraqi entity or bank account nominated by IGB and that it would be paid indirectly, via third parties, to avoid any scrutiny of the payments by DFAT or the United Nations and because the UN sanctions prevented the payment of foreign currency to an Iraqi entity.
(c) The fee of US$12.00 was to be added to what was otherwise the CIF price for the goods so that AWB's payment of the fee was funded from the UN controlled escrow account.
(d) The fee that AWB was obliged to pay at IGB's direction was not, as represented by the clause included in its short-form contracts, a variable cost (to a 'maximum' of $US12) related to the discharge of vessels at Umm Qasr at the specified rate and payable to the maritime agents responsible for the discharge of the vessels on AWB's behalf, but rather:
(i) was unrelated to any contractual obligation that AWB had with IGB (or any other person or entity) to discharge, truck or transport the wheat beyond the ships rail at Umm Qasr
(ii) was a fixed fee payable at the direction of IGB irrespective of the actual costs of discharge of the vessels that shipped the wheat to Umm Qasr
(iii) was imposed by the IGB and payable to an Iraqi entity or account nominated by IGB.
31.60 In short, the true contractual arrangement between AWB and IGB in relation to these contracts was the supply of wheat on terms CIF free out Umm Qasr, as it had been in the past, with the only additional obligation being one upon AWB to pay a fee of US$12.00 per tonne to an Iraqi entity or account nominated by IGB. The fee was added to what was in effect the CIF price, though there was no breakdown of the price specified in the contract. The result was that AWB effectively recovered an amount equivalent to the fee from the escrow account when it was paid for the wheat. In his evidence before the Inquiry, Mr Hogan agreed that this was the substance of the agreement between AWB and IGB.
31.61 The contractual arrangements were not, as represented in the documents lodged with DFAT, that AWB was contractually obliged to discharge and deliver the wheat internally in Iraq to nominated silos in different governorates. Nor was AWB's contractual obligation, as a fair reading of the clause in the short-form contract would suggest, to pay to nominated maritime agents in Iraq the cost of actually discharging the vessels, capped at US$12.00 per tonne, such services being performed on AWB's behalf because it was contractually obliged to discharge the wheat. The actual arrangement negotiated between AWB and IGB was that IGB would advise AWB of the account into which it was to pay the US$12.00 per tonne fee, not that it would advise AWB of the maritime agents that were responsible for discharging the wheat. The Iraqi wheat tender for phase VI also specified that the payment was to be made to the 'Land Transport Co', most likely a reference to the Iraqi State Company for Land Transport or possibly the Iraqi State Company for Water Transport. Unlike the wheat tender, the clause in the short-form contract did not make it explicit that the payment was required to be made to Iraq or an Iraqi entity, still less the ISCWT or the Land Transport Co. A maritime agent in Iraq is not necessarily an Iraqi entity, although as a practical matter it seems likely it would have been at that time. Nor did the clause in the short-form contract make it explicit that the specified contract price was arrived at by adding the amount of the fee payable by AWB to an Iraqi entity to the negotiated CIF wheat price in circumstances where the fee did not relate to a contractual obligation and was effectively payable to the buyer or at its direction.
31.62 For the reasons given below, it should be inferred that the clause was drafted in the way it was to make it appear to be a normal commercial clause which one would expect to see in a contract that recorded that AWB was responsible for the cost of discharge and transport to all governates in Iraq. It was drafted in a way designed to obscure or conceal the real arrangements between AWB and IGB.
31.63 It was known to senior officers of AWB who were responsible for the Iraq trade and for the documentation of AWB's contract with IGB and the submission of these documents to DFAT, including Messrs Officer, Emons, Hogan, Watson, and Lister, that AWB's true contractual arrangement with IGB was not to discharge and deliver the wheat within Iraq, and to pay maritime agents in relation to discharge and transport, but was simply to pay a US dollar fee or impost demanded by IGB and payable, at IGB's direction, to an Iraqi entity. It was known that the requirement to pay the fee was simply a mechanism by which Iraq could extract foreign currency from the escrow account. The following matters support that conclusion.
31.64 IGB ultimately advised AWB that the account into which it should pay the fees was an account maintained in Jordan by Alia. Because they knew that the fee was payable to Iraq, it follows that Messrs Officer, Emons, Hogan, Borlase, Watson and Owen must also have known that Alia did not perform trucking or transport services in relation to the wheat shipped by AWB to Umm Qasr. It merely operated the account into which the fees were to be paid. It was, in other words, merely a conduit for the payment of the inland transportation fees. But even payment to Alia was considered by these officers to be too direct and an insufficient disguise of the true nature of the payments. When circumstances required AWB to make the fee payment for the first shipment of wheat under these contracts in November 1999 direct to Alia, Mr Emons advised Mr Watson in an email that this was a 'little too direct' and that he had been assured by the Director General of IGB that it was a 'one off.'
31.65 Mr Watson was tasked with further disguising and distancing AWB from the payments by using shipping companies that carried the wheat to Iraq as a conduit for the payment of these fees by AWB to Alia. Mr Watson entered into arrangements with several shipping companies whereby AWB would pay to them not only the cost of sea freight, but also the so-called inland transportation or trucking fee, which the shipping companies would then pay on to Alia. Messrs Officer, Emons, Hogan Borlase, Watson and Owen knew that those shipping companies that agreed to assist AWB in receiving and paying these fees were mere conduits, designed to disguise the payments of these fees to Iraq by AWB. Mr Watson also subsequently arranged for the interposition of Ronly Holdings Limited, via its nominee, the Liechtenstein registered company Tse Yu Hong Metal Limited, between the shipowners and AWB, and for Ronly and its nominee to receive the inland transportation fees from AWB and pay them on to Alia in the manner described in detail in Chapter 18. There was no genuine commercial reason for using the shipowners and Ronly in this way, or for interposing Tse Yu Hong Metal Limited into its existing contracts with shipowners, and paying them a fee for the 'service' provided by them. The only possible reason for the use of the shipping companies, Ronly and its nominee Tse Yu Hong Metal Limited in this way, was as a conduit so as to disguise and distance AWB from the payments so that it was not apparent that AWB was paying the US$12.00 per tonne fee to Iraq. The only rational reason for seeking to disguise the payments in this manner was because it was known by those within AWB responsible for the Iraq trade that the payments were contrary to the UN sanctions and had not been approved by the United Nations. In an email to Mr Bali of Ronly dated 7 March 2000, Mr Emons told Mr Bali that the reason AWB paid the trucking fees through the shipping companies, and wanted Ronly to assist, was to 'disguise the fee' because 'under UN/Australia policy no payment can be made directly to Iraq' and 'to divorce clearly from the FOB price any connection with a shipping/logistics charge should the contracts come under scrutiny.' To similar effect, Mr Bali of Ronly explained in a letter that Ronly became involved in making the payments because in early 2000 AWB became concerned whether payments it was making for inland trucking in Iraq, were in breach of UN sanctions and so approached Ronly to 'front' the payments.[408]
31.66 In their evidence to the Inquiry, Mr Hogan and Mr Emons claimed that the payments were disguised not because of a concern to conceal them from the United Nations, but because payment of the fees in US dollars was not possible as a result of the embargo imposed by the United States Government that effectively prevented any payments in US dollars being made to Iraq. It may be accepted that it was recognised at the time by officers at AWB, perhaps including Messrs Emons and Hogan, that the US embargo prevented direct payments of US dollars to Iraq. It does not follow, however, that the steps that were taken to disguise the payments were taken only or principally to circumvent the US embargo. The practical problems created by the US embargo could easily have been resolved by AWB paying the fees into the Jordanian Bank account of Alia. Such payments were not prevented by the US embargo. But the additional steps taken by AWB to use shipping companies to make the payments and to interpose Ronly and its nominee into existing contracts with shipowners in the manner described sought to disguise the payments further and to further distance AWB from even the payments to Alia. Circumvention of the US embargo did not require such steps. These additional steps can only be explained by a recognition both that direct payments of US dollars to Iraq could not be made as a result of the US embargo, and that any payments that found their way to Iraq involved a contravention or circumvention of the UN sanctions. That is why Mr Hogan advised Mr Emons, Mr Snowball and others that 'discretion' was required when implementing the payments: because AWB did not want to be the one waving the 'red flag' in front of the United Nations in relation to the payment for fear of losing the Iraqi wheat trade. Mr Emons agreed in evidence that he knew both that the payments were outside the UN sanctions and that direct payments of US dollars to Iraq could not be made through the US Treasury. Mr Emons' email to Mr Bali of Ronly on 7 March 2000, referred to above, demonstrated that AWB's concern with direct payments to Iraq arose from 'UN/Australian policy', not the US embargo.
31.67 I reject any suggestion that the steps taken to disguise the transaction were taken only to avoid the problems in making the payments created by the US embargo. It is also difficult to see how anyone could seriously entertain the belief that the United Nations had approved contractual arrangements that included the making of payments that were prevented by the US embargo. If that belief was genuinely held, one would imagine that the logical step for AWB to take would have been to approach DFAT or the United Nations for advice concerning how to make the payments. That, of course, was not a step that was ever taken by AWB or anyone employed by AWB. On the contrary, AWB assiduously denied the payment of such fees when raised with them. Alternatively, AWB could have approached IGB and suggested that the fee be paid in some other foreign currency, such as Deutschemarks, as occurred in relation to later payments. When fees under later contracts were paid in Deutschemarks and Euros, the payment nevertheless continued to be made via Alia. Mr Hogan was unable to offer a plausible explanation for why this was so if the only concern was the US embargo.
31.68 It follows that, despite the reference in the short-form contracts to the payment of a 'discharge cost' of US$12.00 to 'the nominated maritime agents in Iraq,' senior officers of AWB who were primarily responsible for the Iraq trade, including Messrs Officer, Emons, Watson, and Hogan, knew that DFAT and the United Nations did not know, and the United Nations had not approved, AWB paying a fee of US$12.00 per tonne to an Iraqi entity as part of its contractual arrangements with IGB. At the highest, the United Nations had approved no more than the payment of a genuine variable discharge cost payable to an entity that had actually performed the service of discharging the wheat.
31.69 Knowledge of the introduction of the arrangements relating to the payment of fees to the Iraqis was not limited to those directly responsible for the Iraq trade. It also extended to the then Chairman, Mr Flugge AO, Chief Executive Officer, Mr Rogers AM and the Chief Financial Officer, Mr Ingleby. The overriding conclusion to be drawn from the evidence is that AWB's trade with Iraq was sufficiently important, and the imposition of the fee sufficiently significant, that Messrs Rogers and Flugge were consulted. Their response was that AWB should do whatever was necessary to retain the Iraq trade. By implication this included concealing facts from DFAT and the United Nations.
31.70 In relation to Mr Flugge, the evidence before the Inquiry supports the finding that from as early as June 1999, and in any event by October 1999, Mr Flugge knew that the arrangements between AWB and IGB included the payment by AWB of a US$12.00 per tonne fee, that the fee was included in the contract price, that the fee was to be paid ultimately to an Iraqi entity, that because payments in US dollars were not possible as a result of the sanctions, a method had to be found to make the payments and that Ronly had offered to be a conduit for the payments. The following matters support that finding:
I had a discussion with Trevor Flugge last week to discuss some of the finer points of the trucking fees. He is happy for us to carry on in fact he is determined that we should be accommodating to the Iraqi's so that our business does not come under threat from our US or CWB friends.[409]
31.71 The evidence also supports a finding that by October 1999 Mr Rogers was aware of the imposition of the fee by IGB, that the fee was to be paid to an Iraqi entity, that the payment of the fee was not permitted under the sanctions and that, as a result, AWB was proposing to pay the fee via various intermediaries. The matters supporting this finding include, in short:
31.72 In relation to Mr Ingleby, the evidence before the Inquiry supports the conclusion that he was part of the group of senior officers who considered and authorised the arrangements with Ronly. Each of Messrs Emons, Officer and Watson gave evidence to the effect that Mr Ingleby was involved in the discussions concerning the arrangements with Ronly and that he approved the mechanism for paying the fees. Mr Emons' evidence was that upon his return from the International Grains Conference in June 1999, he had a meeting with Mr Officer and Mr Ingleby about Ronly's offer to assist AWB in making the payments. During the meeting, Mr Officer told Mr Ingleby that AWB had to pay the trucking fee to the Iraqi maritime agent and that it was proposed to pay Ronly and the shipping companies to 'save our [AWB's] involvement.' No part of the proposed arrangements was kept secret from Mr Ingleby during the discussions. Mr Ingleby said that he was 'comfortable' with the arrangements. Mr Officer's evidence confirmed Mr Emons' recollection of the discussions following the International Grains Conference. Mr Officer claimed that Mr Ingleby and Mr Rogers 'were aware that the payment of these fees was the price for doing business in Iraq.' Mr Watson also gave evidence of a meeting with Mr Officer and Mr Ingleby in June 1999 in relation to the proposed 'mechanics' of making the payments via third parties. The evidence of Messrs Emons, Officer and Watson is supported by the following evidence.
31.73 It is entirely plausible that Mr Ingleby would have been consulted about the arrangements in relation to the payment of the trucking fees and the mechanism adopted to pay them. As previously discussed, these arrangements were considered and authorised at the highest level of management by Messrs Flugge and Rogers. They involved a major change to AWB's arrangements with IGB and, of particular significance as far as Mr Ingleby was concerned, the need to make large payments in an unusual context.
31.74 Once it is accepted that Mr Ingleby was made aware of and approved the arrangements for use of third parties to make the payments, including using Ronly, it should be inferred that he knew that the primary purpose of those arrangements was to disguise and distance AWB from the payments because it was recognised that they were not permitted by the sanctions and had not been approved by the United Nations. There was no sensible commercial purpose to interpose third parties. He must accordingly have recognised that the payments involved a deception of the United Nations and most likely DFAT. As Chief Financial Officer and head of AWB's Treasury, Mr Ingleby was ultimately responsible for making the payments. Mr Ingleby had authority to put a stop to the payments. He did not do so. He approved the involvement of Ronly and either expressly or impliedly authorised the payment of the fees to Iraq. By approving the arrangements with Ronly, he assisted in the concealment of AWB's arrangements in relation to the payment of the fees. It should also be observed that Mr Ingleby expressly authorised significant payments to Alia in relation to later contracts.
31.75 The evidence before the Inquiry suggests that both DFAT and the United Nations overlooked, or at least did not appreciate the significance of, the reference in the short-form contracts to the payment of the 'discharge cost.' Nobody at DFAT appeared to notice the clause or appreciated its meaning or significance when the short from contracts were sent to DFAT. The inclusion of the discharge cost clause did not cause DFAT to query whether the arrangements were, or may have been, in breach of the sanctions and did not stop it from transmitting the contracts to the UN for approval. The long-form contracts were initially forwarded to Ms Brodtman at DFAT on 27 July 1999. Subsequently, copies of the short-form contracts were sent to DFAT and Ms Brodtman forwarded them to Ms Moules at the Australian mission to the United Nations. Ms Brodtman's evidence was that she was not aware of any requirement by the IGB or the Iraqi Government that AWB pay money, directly or indirectly, to it ostensibly in relation to trucking or transportation. Ms Moules' evidence was to the same effect. She had no recollection of any issue being raised about clauses concerning the payment of discharge costs at the UN mission during the relevant period. As for the United Nations, the Customs Expert who reviewed these contracts was Ms Johnston. Her evidence was that she overlooked and did not appreciate the significance of the discharge cost clause.
31.76 A number of points may be made about the fact that both DFAT and the UN appear to have overlooked or failed to appreciate the significance of the 'discharge cost' clause. As has already been observed, the discharge cost clause did not clearly, fully or accurately disclose the true nature of the fee payable and the arrangements actually in place between AWB and IGB in relation to it. The clause misleadingly described the fee as a 'discharge cost', connoting that it was a payment referable to the actual cost of discharging the cargo incurred at the port by maritime agents in Iraq. Whilst the clause did record that a payment was to be made in US dollars to maritime agent in Iraq, it did not make it clear that the agent was an Iraqi entity. No reference was made to transportation, or inland transportation. In reality, the fee was not related to either-it was just a fee payable to Iraq. Nor was it made explicit in the contract that the cost had been added to the negotiated wheat price so that it was, in effect, to be met from funds extracted from the escrow account in circumstances where AWB had no obligation to provide the service to which it was said to relate. Whilst the reference in the clause to payments in US dollars being made to agents 'in Iraq' should have alerted a careful reader of the clause to its potential significance, the apparent failure of DFAT and the United Nations 661 Committee to pick this up may have been due to the innocuous and unclear way in which the clause was worded. It is less likely that the clause would have been overlooked if it had clearly, fully and accurately disclosed the true nature of the fee payable by AWB and the actual arrangements between AWB and IGB in relation to its payment.
31.77 I am satisfied that if the true nature of the arrangements had been disclosed to officers of DFAT, they would have acted differently, both in relation to the documents AWB submitted to them, and in relation to the issuing of permissions to export. The only reasonable inference to be drawn from the evidence before the Inquiry is that DFAT officers would not have simply certified the Notification forms and contract documents if they had been fully apprised of the facts. A number of matters support this inference. First, as discussed in Chapters 12 and 27, DFAT's responses to the proposals put forward by AWB and BHP in 1995 and 1996, which involved, at one stage, the suggestion that documents that did not fully disclose the proposed transaction would be sent to the United Nations, was emphatic. Senior officers of DFAT, and ultimately the Minister for Foreign Affairs, made it plain that DFAT would not compromise its reputation with the UN for 'frankness and transparency' by failing to ensure that applications put forward fully complied with UN resolutions and that DFAT 'could not collude in presenting deliberately incomplete documentation.' There is no reason to suppose a different approach would have been taken by DFAT between mid 1999 and March 2003. Second, the evidence of more senior DFAT officers who dealt with AWB's contracts was that they would not have put forward an application for approval of a contract if they had any concerns about any aspect of it, or if they knew that an aspect of the transaction was inconsistent with the sanctions regime. The evidence of other DFAT officers was that if the documentation raised any concerns about whether the transaction complied with the sanctions, they would have referred the matter to more senior officers. Third, it is, in these circumstances, difficult to accept that DFAT officers would have permitted documents to go to the UN which they knew did not fully and accurately document the arrangements in place between AWB and the IGB-particularly when those arrangements involved an indirect payment to Iraq in breach of the sanctions. It was implicit in DFAT's published procedures that it would not send contract documentation to the UN if it appeared that the transaction breached the sanctions. There is no evidence to suggest why DFAT officers would not have followed these procedures had they been fully apprised of the facts in relation to AWB's arrangements with IGB.
31.78 The conclusion that DFAT would have acted differently had AWB disclosed the true nature of its arrangements with IGB is not affected by the fact that, in general terms, DFAT officers largely regarded their roles as being akin to a 'post box' and that, for the most part, they did not scrutinise in any detailed way the terms of AWB's contracts. Whilst the DFAT officers may have seen themselves as having a limited role in relation to scrutinising the contracts, nevertheless they did give some consideration to the contracts. The evidence before the Inquiry is that if DFAT officers had picked up anything that was unusual or obviously outside the terms of the Programme, they would have referred the matter to a more senior officer or officers. By omitting any clear and accurate reference to the transportation arrangements, AWB effectively deprived DFAT of the opportunity to properly scrutinise and consider the legality of the arrangements actually in place between AWB and the IGB. A proper disclosure of the transportation fee arrangements in the contracts would have been so obvious it is difficult to accept that it would not have been picked up by DFAT, even if it was only performing a 'post-box' function.
31.79 The clearest indication both that DFAT and the United Nations did not know that AWB's contractual arrangements with IGB included paying a US$12.00 fee to Iraq, and that senior officers of AWB knew that DFAT and the United Nations did not know this, came in January and March 2000 when the Canadian complaint was raised with AWB. By early 2000, mid March at the latest, senior officers of AWB, including Messrs Flugge, Snowball and Emons, knew that the United Nations, via DFAT, had been informally investigating an allegation by Canada that AWB had agreed with IGB to make irregular payments outside the terms of the Oil-for-Food Programme. They also knew that these queries related to the 'discharge/trucking payment issue.' During their meeting with Mr Nicholas of Austrade on 9 March 2000, when the Canadian complaint was raised with AWB for the second time, Messrs Flugge and Snowball deliberately 'played down the issue.' In email exchanges following the meeting, Messrs Snowball and Emons made it clear that they believed that if the United Nations query could not be satisfied by deflecting attention towards an issue that had also arisen in relation to AWB's standard terms and conditions, AWB had something to 'worry about.' Mr Emons subsequently wrote to IGB and requested that it ensure that 'no information of a confidential nature' was released in relation to 'the manner of AWB payments' to the Jordanian trucking company.
31.80 Mr Emons' evidence was that the Canadian complaint raised concerns amongst senior management at AWB about future sales to Iraq and that the 'entire organisation,' including Messrs Flugge and Rogers, wanted to find a way to avoid attracting the attention of the United Nations.
31.81 There can be no doubt that if these senior officers of AWB genuinely believed that the United Nations and DFAT knew of, and approved, the arrangements that AWB had entered into with IGB in relation to the payment of fees of US$12.00 per tonne, they would simply have confirmed to DFAT that AWB was paying these trucking fees and indicated that that they believed that, by approving the July contracts, the United Nations had approved the making of these payments. Instead, they denied that AWB was making any payments outside the Programme, deflected attention from the issue and told IGB not to disclose any information about the payments. They also sought to disguise the payments and distance AWB from them by interposing shipowners and Ronly between AWB and Alia. The evidence before the Inquiry suggests that Messrs Flugge, Officer, Emons and Watson met with Mr Bali of Ronly at the beginning of 2000 and sought Ronly's assistance because of concerns that the inland trucking payments were in breach of the UN sanctions. An available inference is that the approach to Ronly was a response to the Canadian complaint.
31.82 The letter that Mr Emons drafted for Mr Flugge to sign in early April 2000 clearly demonstrates that the attitude of senior officers of AWB was that AWB would continue to pay the trucking fees to Iraq, as had been agreed, despite the fact that they knew that the Canadian government had raised with the United Nations the issue whether such payments were contrary to the sanctions.
31.83 Despite the knowledge that the contracts submitted to DFAT, and ultimately the United Nations, did not reveal the true arrangements between AWB and IGB, and did not clearly reveal the fact that as part of the arrangements AWB was paying fees in US dollars to Iraq, senior officers of AWB failed to reveal to DFAT the true arrangements and in particular the true arrangements in relation to the payment of the fee. Indeed, they took steps to conceal these arrangements from DFAT, both by ensuring that the payments in fact made pursuant to the arrangements were concealed and by denying, when the matter was raised with them in the context of the Canadian complaint, that AWB had entered into any arrangements involving payments to Iraq via accounts in Jordan. It may readily be inferred that this concealment was both intentional and dishonest. The evidence before the Inquiry supports the inference that AWB, through its senior officers, knew that if they disclosed to DFAT that AWB's arrangements were different to those set out in the contractual documents, or that they included a requirement that AWB pay substantial fees in US dollars to Iraq, DFAT would not have certified the documents and transmitted them to the UN, or would at the very least have drawn these matters to the attention of the UN. The result would be either that its contracts would not have been submitted to the United Nations at all (because DFAT would not have certified and sent the documents and the UN procedures required that contracts be submitted by member states) or the UN would have put the contracts on hold. It was for this reason that the fees and the payments were disguised in the first place. It was for this reason that AWB's payment of the fees was not disclosed to DFAT even when the payment of such fees was specifically raised with senior officers of AWB in the context of the Canadian complaint. It was for this reason that AWB never requested DFAT's advice whether the payment of the fees contravened the sanctions regime.
31.84 In summary, I make the following findings in relation to contracts A4653, A4654 and A4655:
(a) Senior officers of AWB, whose knowledge and intentions may be attributed or imputed to AWB, knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fixed fee of US$12.00 per tonne, to an Iraqi entity at the direction of IGB. The payment was to be made indirectly because of the sanctions. The amount of the fee was to be added to the contract price and in this way recouped by AWB from the UN controlled escrow account.
(b) The same officers knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements in relation to the payment of the fee of US$12.00 per tonne. Both the short and long-form contracts incorrectly recorded that the wheat was supplied on terms that required AWB to deliver the wheat to silos in all governates of Iraq. The long-form contract made no reference to AWB's obligation to pay the inland transportation fee. The short-form contract recorded that the terms included the payment of a 'discharge cost to a maximum of USD12.00 to the nominated Maritime Agents in Iraq.' However, this clause did not fully or accurately disclose the true arrangement in relation to the payment of that US$12.00 fee. It falsely represented that the payment was related to a contractual obligation that AWB had to discharge the wheat, that the amount of the payment was variable according to the actual cost of discharge and that it was payable to an entity responsible for supplying the discharge service. It did not expressly reveal that the payment was in fact a fee payable to an IGB nominated Iraqi entity in US dollars.
(c) The same officers knew that the payment of a US$12.00 fee to an Iraqi entity contravened the UN sanctions and that the United Nations had not approved the making of such a payment. For this reason, steps were taken to ensure that the payments were not made directly to Iraq, but were disguised, as payments to shipping companies, or payments to Alia, or both, ostensibly for transport services provided by Alia. Senior AWB officers were a party to, or knew of the steps to disguise the payments, and why they were necessary.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to these contracts, namely the period from July 1999 (when the contracts and UN Notification form were lodged with DFAT) to March 2000 (when the last permission to export wheat the subject of these contracts was issued), AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest. It was known that the facts were material to the decisions and actions to be taken by the DFAT officers and in due course the United Nations. The facts were concealed notwithstanding that it was known that these facts were material to the actions and decisions taken by DFAT and the United Nations. Indeed, they were concealed because it was known that the likely effect of disclosure would have been that the contractual arrangements, involving as they did the payment of substantial fees to Iraq, would not have been sent to the United Nations or approved by it.
31.85 The senior officers of AWB who were involved in, or knew about and authorised, the negotiation of the arrangements with IGB, the drafting and submission of the contracts to DFAT and the concealment of information relating to the arrangements were:
(a) Mr Hogan, who, together with Mr Emons, was responsible for negotiating the contracts, reporting back to senior officers in relation to the imposition of the US$12.00 fee and making suggestions and recommendations about how the payment of the fee could be disguised.
(b) Mr Emons, who negotiated the contract and was responsible for dealing with the IGB in relation to the payment arrangements, which were designed to disguise the true nature of the payments, and who knew of the steps taken to hide the fee by using shipowners to make the fee payments.
(c) Mr Watson, who was the officer primarily responsible for establishing the mechanisms by which the payments were disguised by the interposition of shipowners. Mr Watson knew that the reason for disguising the payments was to conceal this fact from DFAT and the United Nations.
(d) Mr Lister who was head of the Contract Administration Department. Mr Lister knew the precise terms of the short-form contracts that were submitted to DFAT. The action he took to change the terms of the letters of credit demonstrates that he knew that, despite the terms of the contracts, AWB did not deliver or transport the wheat within Iraq. Mr Lister was also primarily responsible for applying for permission to export each shipment under these contracts on behalf of AWB.
(e) Mr Officer, who was senior to and supervised Messrs Hogan and Emons and was a party to much of the internal correspondence and discussion about how the fees could be paid in the light of the restrictions created by the UN sanctions. His actions amounted to express or implied authorisation of the actions of Messrs Hogan and Emons.
(f) Mr Rogers was made aware by Mr Officer of the nature of the arrangements with IGB in relation to the payment of the fees and the mechanisms proposed for the payment of the fees. He participated in the meeting with the Director General of the IGB in October 1999 during which the fees were discussed. His actions amounted to the authorisation of the arrangements in relation to the fees.
(g) Mr Flugge, like Mr Rogers, was made aware of the arrangements in relation to the fees and participated in the meeting with the Director General of the IGB in October 1999. His actions amounted to the authorisation of the arrangements. His attitude was that Mr Emons should do whatever was necessary to retain the Iraq trade.
(h) Mr Ingleby, who as Chief Financial Officer approved the arrangements for use of third parties, including Ronly, that were designed to disguise and distance AWB from the payment of the fees. It is open to conclude that his actions amounted to an express or implied authorisation of the payments and their concealment.
31.86 These officers occupied positions within AWB such that their knowledge and intentions can be imputed or attributed to AWB. At the time, Mr Flugge was the Chairman, Mr Rogers was Chief Executive Officer, Mr Officer was General Manager, Global Sales and Marketing, Mr Emons was the Regional Manager, Middle East and Africa, Mr Hogan was an Account Manager for Iraq based in AWB's Cairo office, Mr Watson was the Chartering Manager of AWB Chartering, Mr Lister headed AWB's Contract Administration Department and Mr Ingleby was Chief Financial Officer. Collectively, these officers had actual or de facto delegated responsibility for all aspects of AWB's trade with Iraq, including negotiations, entry into contracts and dealings with DFAT in relation to the Oil-for-Food Programme.
31.87 Other senior officers of AWB were copied into correspondence that revealed that AWB's arrangements with IGB included paying a fee and that the payment of the fee was disguised, but were not in positions that made them responsible for negotiating or causing AWB to enter into the arrangements, or dealing with DFAT in relation to the arrangements, or otherwise authorising or approving such actions. Included in this category of officers is Mr Geary, who at the time was Pool Manager, Mr Owen, who at the time was National Trade Finance Manager, and Ms Scales who at the relevant time was Pricing Manager.
31.88 The evidence before the Inquiry also indicates that more junior AWB officers who carried out duties in relation to wheat sales to Iraq were also aware of the true nature of AWB's arrangements with IGB and were aware that those arrangements were not, and were not to be, revealed to DFAT. At the time of these contracts, and until January 2001 when he was transferred to AWB's Cairo office, Mr Borlase was a marketing executive within the International Sales and Marketing Division whose principal duties were to provide general administrative assistance to the Regional Manager and Account Managers, including Mr Emons. Mr Borlase was copied into correspondence that revealed that the fees were to be paid to an Iraqi entity and that AWB had taken steps to disguise the payments by paying them surreptitiously, through shipowners and Ronly. Mr Borlase is recorded as having authorised contracts A4653, A4654 and A4655 and was responsible for forwarding them to DFAT. As discussed below, Mr Borlase was also directly involved in negotiating later contracts with Russian grain traders that revealed the true nature of the so-called transport fees. He was involved in the decision to remove the US$12.00 discharge clause from later short-form contracts. Mr Borlase was a relatively junior officer, with little authority, who performed administrative tasks under direction of his superiors. Whilst I am satisfied of his knowledge of the nature of the payments and the way they were disguised, his junior position and the fact that he acted under direction means that his acts are not to be regarded as the acts of AWB.
31.89 The circumstances relating to contract A4822 are addressed in Chapter 14. It was entered into on 11 October 1999. Copies of the short and long-form contracts were sent by Mr Borlase to DFAT on 29 October 1999. The short-form contracts were signed by Mr Emons. Permission to export wheat referable to this contract was sought by Mr Lister on behalf of AWB and granted by delegates of the Minister between 16 March 2000 and 16 April 2000.
31.90 In most respects, the arrangements between AWB and IGB in relation to this contract and the way in which it was documented and presented to DFAT were exactly the same as contracts A4653, A4654 and A4655. Like those contracts, the arrangements in place between AWB and IGB included that AWB would be responsible for transporting the wheat to Umm Qasr (that is, the terms were CIF Free Out Umm Qasr) and IGB was responsible for discharge and transportation of the wheat within Iraq. AWB was, however, obliged to pay a fee of US$12.00 per tonne to Iraq and the fee payable was added to what would otherwise have been the negotiated CIF price of the wheat.
31.91 As was the case with contracts A4653, A4654 and A4655, the short-form and long-form contracts and the Notification form referable to this contract that were lodged with DFAT did not reveal the true arrangements between AWB and IGB. The long-form contract made no reference to the payment of a US$12.00 fee and the short-form contract contained a clause referring to the payment of a 'discharge cost' in the same terms as the clause in each of contracts A4653, A4654 and A4655.
31.92 The evidence concerning the knowledge of senior AWB officers in relation to the true arrangements between AWB and IGB in relation to this contract, and the fact that these true arrangements were concealed from DFAT and the United Nations has been discussed in the context of contracts A4653, A4654 and A5655. There is, however further evidence relating to the concealment of the true arrangements that relates to the period relevant to this contract and the shipments made under it.
31.93 Contract A4822 was negotiated together with, and entered into at the same time as, contract A4821. Contract A4821 was treated as a contract under phase IV of the Programme and was therefore not subject to IGB's requirement to pay the US$12.00 fee. The contract was expressed to be on CIF Free Out terms. The CIF Free Out price in contract A4821 was exactly US$12.00 per tonne less than the CIF Free in Truck price in contract A4822-thus demonstrating that the fee payable under contract A4822 was simply added to the negotiated CIF Free Out price. Despite there being no contractual or other obligation to pay fees in respect of wheat shipped under contract A4821, AWB paid US$12.00 per tonne to Tse Yu Hong Metal Limited for payment on to Alia.
31.94 The terms of other contracts entered into by AWB at about the same time as A4822 are also illustrative of the true arrangements between AWB and IGB. In particular, AWB entered into contracts to sell wheat to two grain trading companies in December 1999. AWB entered into these contracts to enable the grain traders to fill contracts that they had earlier concluded with IGB. Despite the fact that the grain was to be shipped to Iraq, because the grain traders had contracted with IGB, it was their grain trader's contracts with IGB that were ultimately submitted to the United Nations for approval. AWB's contracts were not submitted to DFAT because it was unnecessary for AWB to obtain United Nations approval in respect of these contracts. The clear inference is that the contracts were drafted with knowledge that they would not be seen by DFAT or the United Nations. It is of considerable significance that the contracts entered into by AWB with the grain traders included the following clause:
This price includes a fee of USD12.00 per tonne to be paid directly by Sellers to Grain Board of Iraq advised account, for each shipment at latest 3 days prior to the arrival of each shipment.
31.95 This clause is to be contrasted with the clause in the near contemporaneous AWB contracts that were submitted to DFAT, including contracts A4653, A4654, A5655 and A4822. It is to be noted that it is explicitly stated in the clause that the contract price includes the payment of US$12.00 per tonne and that the payment is described as a fee. It is not described as a 'discharge cost' to a maximum of US$12.00. It is also stated that the money is to be paid to 'Grain Board of Iraq advised account', as opposed to the 'nominated Maritime Agents in Iraq.' There is also no reference to the clause being subject to UN approval of the Iraq distribution plan.
31.96 In short, the clause in AWB's contracts with the grain traders accurately described the true arrangements in place relating to the payment of the US$12.00 fee. There is no explanation as to why these arrangements, and particularly the US$12.00 per tonne fee, were not accurately described in the AWB short from contract A4822. The only reasonable inference is that AWB's contracts with the grain traders accurately recorded the arrangements because there was no requirement to disclose it to DFAT or the United Nations. On the other hand, the clause in the contracts that were to be submitted to DFAT and the United Nations was drafted in such a way as to misrepresent the true nature of the arrangements.
31.97 The actual payments of the fees referable to A4821 and A4822 contracts were made to Alia through the Liechtenstein registered nominee of Ronly Holdings Limited, Tse Yu Hong Metal Limited. Alia in turn transferred the fees to Iraq. It was known to all officers at AWB who were involved with the Iraq trade and the fee payments that Ronly and its nominee performed no service relating to the transport of the wheat. The only service they provided was as a conduit in relation to the payments, for which service AWB remunerated Ronly. The only rationale for the convoluted payment mechanism was to disguise the payments and distance AWB from what was recognised by senior officers of AWB to be payments that contravened the sanctions. Mr Emons' email to Mr Bali of Ronly on 7 March 2000 makes this clear.
31.98 Further, correspondence during the period referable to this contract and the shipments made under it clearly indicated that AWB was aware that the United Nations did not know that AWB's arrangements with IGB included the payment of fees to Iraq. In a fax to IGB on 7 April 2000, Mr Emons wrote that 'you [IGB] will be aware of the restrictions that the UN has placed on such payments …we can discuss with the UN as to the appropriate method for paying the trucking fee.' As discussed below, Mr Emons' evidence was that the purpose of this letter was to threaten IGB with disclosure to the UN of the trucking fee 'system.' It is implicit in this that the United Nations was ignorant of, and certainly had not approved, the payment of the fees to Iraq, as AWB knew.
31.99 I made the same findings as I made in relation to contracts A4653, A4654 and A4655 in relation to contract A4822, namely:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contract A4822 included that AWB was to supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but pay a fixed fee of US$12.00 per tonne, to an Iraqi entity at the direction of IGB.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements in relation to the payment of the fee of US$12.00 per tonne. The clause that recorded AWB's obligation to pay a 'discharge cost' to a maximum of US$12.00 did not fully or accurately record the arrangements.
(c) The same officers knew that the payment of a US$12.00 fee to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to this contract, namely October 1999 and April 2000, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contract and the UN Notification forms referable to them, and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contract and shipments made under it.
31.100 The officers who were involved in, or knew about and authorised, the negotiation of this contract and the associated arrangements with IGB, the drafting and submission of the contracts to DFAT and the concealment of information relating to the arrangements were the same as those involved in contracts A4653, A4654 and A4655, namely Messrs Rogers, Flugge, Ingleby, Officer, Emons, Hogan, Watson, and Lister.
31.101 In December 1999, AWB concluded contracts with foreign grain trading companies in relation to the supply of wheat to Iraq. The grain traders entered into these contracts in order to fulfil contracts that the Russian companies had with IGB. Because AWB's contracts were not with IGB, it was not necessary for AWB to seek approval from the United Nations under the Oil-for-Food Programme. Such approval was sought by the Russian companies through the mission of the country in which they were based, namely the Russian Federation. Accordingly AWB did not submit these contracts to DFAT. However, because the wheat the subject of these contracts was shipped from Australia, it was necessary for AWB to obtain permission to export under the Customs (Prohibited Exports) Regulations.
31.102 AWB entered into contract A4908 with Commodity Specialists Company (CSC) on 2 December 1999. It was negotiated and authorised by Mr Borlase under the supervision of Mr Emons. The written contract was signed by Mr Emons. As indicated above, the contract included the following clause:
6. PRICES
USD [deleted] per tonne CIF FOT to silo at all governates of Iraq via Umm Qasr port.
This price includes a fee of USD 12.00 per tonne to be paid directly by Sellers to Grain Board of Iraq advised account, for each shipment at latest 3 days prior to the arrival of each shipment.
31.103 As previously indicated, it is of significance that this clause makes it clear that the payment of US$12.00 was:
(a) a fee
(b) payable directly to an account nominated by IGB
(c) included in the specified price per tonne.
31.104 The fee was not said to be for 'discharge' or 'transportation.'
31.105 In short, this clause more accurately described the true nature of the arrangements between AWB and IGB than did the clause that referred to the payment of the 'discharge cost' in contracts A4653, A4654, A4655 and A4822. It can have been no mere coincidence that the contracts that did not go to DFAT and the United Nations clearly and accurately described the nature of the arrangements concerning the payment of the fee, whereas contracts that did go to DFAT and the United Nations did not.
31.106 Despite the fact that this clause referred to the price being on terms CIF FOT to silos in all governates, it is clear that AWB did not regard itself as contractually bound to discharge and deliver the goods within Iraq. AWB had made no arrangements with any company for the transport of the wheat the subject of these contracts to silos throughout Iraq. The fact that AWB did not regard itself as contractually obliged to deliver the goods is also apparent from correspondence between Mr Lister of AWB and CSC in which Mr Lister requested that the letter of credit be amended by deleting any reference to delivery to silos in all governorates and inserting instead clauses that made it clear that the price and destination were described as CIF Umm Qasr. As Mr Lister put it in a telex to CSC: 'what happens to the goods after that [arrival and discharge] is strictly beyond our/your control and as such should not impinge on L/C requirements.' Mr Emons was aware of, and involved in, Mr Lister's efforts to have the letter of credit amended.
31.107 Consistent with clause 6 of the contract, AWB Chartering paid fees of US$12.00 per tonne in respect of the two shipments of wheat under this contract. AWB paid these fees despite the fact that it had no contractual obligation to transport or deliver the wheat to silos in Iraq. The fees in respect of the first shipment were paid to Alia and the fees in respect of the second shipment were paid to Tse Yu Hong Metal Limited for payment on to Alia. It follows that Alia's account in Jordan was the IGB 'advised account.' The only purpose of the interposition of Tse Yu Hong Metal Limited was to 'disguise the fee.'
31.108 Mr Lister, on behalf of AWB, applied for and obtained approval from a delegate of the Minister to export wheat the subject of contract A4908 on 22 and 23 February 2000 (in respect of the first shipment under the contract) and 24 March 2000 (in respect of the second shipment). In seeking permission to export this wheat, AWB provided DFAT with copies of United Nations approvals that had been obtained by the Russian Federation on behalf of a Russian based grain trader associated with CSC. AWB did not provide DFAT with a copy of its contract with CSC, or otherwise advise it that the contractual arrangements it had with CSC included a requirement that it pay substantial fees direct to IGB.
31.109 The criterion for the grant of permission to export under the Customs (Prohibited Exports) Regulations is that the Minister be satisfied that the export would not infringe Australia's international obligations. For the reasons given above, by the time that permission to export was sought in relation to the shipments under contract A4908, senior officers of AWB knew that AWB had agreed to, and would pay fees of US$12.00 per tonne to Iraq before the shipments were discharged in Iraq, that the payment of these fees was indirectly a payment to Iraq and as such a breach of UN sanctions, and that the making of these payments had not been approved by the United Nations. They must, therefore, have known that the fact that AWB had agreed to, and would, pay these fees before the shipments were discharged in Iraq was a fact material to DFAT's consideration of whether the export of this wheat would infringe Australia's international obligations and whether permission to export should be granted. They must therefore have known that they were obliged to disclose this to DFAT. Yet there is no suggestion that this information was disclosed to DFAT. Indeed, as already indicated, the payments that were to be made to IGB under the terms of this contract were disguised as payments to Tse Yu Hong Metal Limited and Alia because it was known that DFAT and the United Nations did not know about the payments. Tse Yu Hong Metal and Alia were interposed to distance AWB from the payments to avoid detection of the fact that the payments contravened or circumvented the UN sanctions.
31.110 The circumstances surrounding contract A4906 were relevantly the same as contract A4908. It was entered into with Savas Grain & Commodities Ltd on 14 December 1999. It was negotiated and authorised by Mr Borlase and signed by Mr Emons. It contained a price clause in identical terms to the clause in contract A4908 considered above. AWB Chartering paid fees of $US 12.00 referable to the two shipments under this contract to Alia in two instalments in March 2000. Mr Lister sought and obtained permission for AWB to export the two shipments of wheat referable to this contract on 14 February 2000. In applying for permission, AWB sent DFAT a copy of the United Nations approval obtained by the Russian Federation on behalf of a Russian-based company associated with Savas Grain. AWB did not provide DFAT with a copy of its contract with Savas Grain or otherwise advise it that under its arrangements to supply the wheat it was obliged to pay fees of US$12.00 to IGB.
31.111 Contract A4907 was also with Savas Grain and was also entered into on 14 December 1999. A significant difference between A4906 and A4907 was that, because A4907 related to the supply of wheat under phase V of the Oil-for-Food Programme, Savas Grain advised AWB that no payment of US$12.00 was required. Accordingly the contract provided that the price was on terms 'CIF Free Out Umm Qasr port' and the price was exactly US$12.00 per tonne less than the price in A4906. Despite there being no contractual or other obligation to pay fees in respect of wheat shipped under this contract, AWB paid US$12.00 per tonne to Tse Yu Hong Metal Limited for payment on to Alia. In this respect it was similar to contract A4821 considered above.
31.112 The AWB officers who were directly involved in these contracts and the obtaining of permission to export the wheat the subject of them were Mr Emons, Mr Borlase and Mr Lister. Whilst the evidence before the Inquiry does not indicate that Messrs Rogers, Flugge, Ingleby and Officer were directly involved in these contracts, it is nevertheless clear that they had previously authorised contracts or arrangements that provided for the payment of fees to IGB or an Iraqi entity, and that they knew that these arrangements had not been, and could not be, disclosed to DFAT and the United Nations. It is unlikely that Messrs Borlase and Emons would have agreed to such an extraordinary clause in an AWB contract without approval from senior management. In these circumstances, it should be inferred that they either expressly or impliedly authorised or approved the payments to Iraq in relation to these contracts. Mr Watson was responsible for arranging the payment mechanism through Tse Yu Hong Metal and the fees were paid for by the Chartering Division that he headed.
31.113 The circumstances relating to these contracts are addressed in Chapter 15. They were entered into on 2 February 2000. Copies of the short and long-form contracts were sent by Mr Borlase to DFAT on 4 February 2000. The short from contracts were signed by Mr Emons. Permissions to export wheat referable to these contracts were sought by Mr Lister on behalf of AWB and granted by delegates of the Minister between 31 March 2000 and 4 September 2000.
31.114 These contracts were under phase VII of the Programme. The relevant Iraqi wheat tender for this phase included, in relation to price:
CIF Free on Truck to all silo to all governate of Iraq. Cost of discharge at Umm Qaser and land transport will be U.S.D. (14) per metric ton. To be paid to the Land Transport Co. For more details contact Iraqi Maritim in Basrah.
31.115 As was the case with the earlier contracts, it was apparent that to secure a contract under this tender, AWB would be required to pay a fee of US$14.00 to the 'Land Transport Co,' an Iraqi entity. Following negotiations between IGB and Mr Emons, IGB and AWB struck an agreement the effect of which was that AWB would pay IGB a fee of US$15.00 per tonne and that this fee would be included in the price. It is unclear why Mr Emons agreed to pay fees in excess at those identified in the tender. AWB drafted short-form contracts that contained a clause in substantially the same terms as the 'discharge cost' clause in the earlier contracts, except that the 'discharge cost' was specified as being a maximum of US$15.00. By the time that the short-form contracts came to be executed, however, this clause had been deleted from the contracts. The IGB prepared long-form contract also made no reference to the payment by AWB of a discharge cost, transport cost, or fee. Both forms of the contracts expressed the terms to be 'CIF Free on Truck to all silos within all governates of Iraq.' Neither forms of the contract revealed that the CIF Free on Truck price had included in it the fee payable by AWB to Iraq.
31.116 Thus, despite the terms of the agreement between AWB and IGB, the contracts that were submitted to DFAT and ultimately to the United Nations did not reveal in any way AWB's obligation to pay a fee, or that the fee had been included in the price, or that the fee was payable to an Iraqi entity. The contracts also recorded that the terms were CIF Free in Truck, thus suggesting that AWB's contractual obligations included discharge and delivery. In truth, however, nothing had changed from the position that existed in the earlier contracts. That is, AWB had no contractual obligation to discharge or transport the wheat to all governates, only an obligation to pay a fee to an Iraqi entity. AWB made no arrangements for either discharge or trucking within Iraq.
31.117 In short, the documents submitted to DFAT and the United Nations did not accurately reflect the arrangements in fact in place between AWB and IGB.
31.118 The only reasonable inference to be drawn from the deletion from the draft short-form contracts of any reference to the payment of a 'discharge cost' is that it was intended to conceal from DFAT and the United Nations AWB's agreement or obligation to pay the fee. These contracts were negotiated and finalised within weeks of the Canadian complaint having been raised with AWB. It was apparent to senior officers of AWB that both the United Nations and DFAT were looking into the very matter of payments of US$14.00 per metric tonne of wheat 'outside the Oil-for-Food Programme' to an account in Jordan. It must have been apparent to officers at AWB that the implication was that the United Nations considered such payments to be suspect. An available inference is that a decision was made at AWB to delete any reference in the short-form contract to the requirement to pay a discharge cost because this was more likely to be scrutinised by DFAT and the United Nations as a result of the Canadian complaint.
31.119 This was effectively conceded by Mr Officer in his evidence to the Inquiry. Mr Borlase, on the other hand, said that the change was made in compliance with instructions from Mr Emons to bring the terms of the short from contract into line with the long-form contract. Whilst he had no specific recollection of the circumstances in which the change was made, Mr Emons thought it may have been made because of a desire not to 'advertise the fact we were paying a fee'. I do not doubt that was the reason for the change.
31.120 There can be no question that the contracts that AWB submitted to DFAT did not record the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts because:
(a) AWB was not contractually responsible for delivering the wheat free in truck to all governates.
(b) AWB was, as part of the agreement with IGB, obliged to pay a fee of US$15.00 per tonne to an Iraqi entity. This is not revealed in any way in the contracts.
(c) The fee payable by AWB to an Iraqi entity was added to, or included in, the contract price. This was not revealed in the contracts.
31.121 Nor could there be any doubt that these aspects of the actual arrangements between AWB and IGB were deliberately and dishonestly concealed from DFAT and the United Nations. Four things that occurred contemporaneously with these contracts and the permissions to export related to them make this clear. The first is the Canadian complaint, which included a denial by senior officers of AWB that its contracts involved the making of any payments to accounts in Jordan outside the terms of the Oil-for-Food Programme when clearly it was making payments to Alia at this time. Second, Messrs Flugge, Officer, Emons and Watson met with Mr Bali of Ronly in early 2000 to arrange for Ronly to act as a conduit in relation to the payment of the fees because of concerns that the fees breached the UN sanctions. Mr Emons' 7 March 2000 email to Ronly demonstrates that the intention of interposing Ronly was to disguise the fees. An available inference is that the approach to Ronly was motivated by the Canadian complaint.
31.122 Third, the letter that Mr Emons drafted for signature by Mr Flugge in early April 2000 makes it plain that AWB 'intended to remain committed to the terms of trade agreed between IGB and AWB' despite the Canadian complaint and AWB's knowledge that the payments were contrary to the sanctions. The fourth matter was a letter that Mr Emons sent to the Director General of IGB In on 7 April 2000 on the eve of his trip to Iraq with Mr Watson. In that letter, which was sent in the context of a suggestion that the Director General may not meet with the AWB delegation in Iraq, Mr Emons referred to the 'restrictions that the UN has placed on' the payment of the 'trucking fee' and threatened that if the Director General of IGB did not meet with the AWB delegation, AWB would 'discuss with the UN as to the appropriate method of paying for the trucking fee.' Mr Emons agreed in evidence that he was using the fact of illegality as a threat, the threat being that 'we would make the UN aware completely of the trucking arrangements for everybody.' The threat was credible only if Mr Emons knew the United Nations had not approved the fee payments. Mr Emons agreed that because the Director General agreed to meet with Messrs Emons and Watson, he never followed through on his threats to go to the UN about the trucking fee and the manner of payment.
31.123 As with the earlier contracts, AWB disguised and distanced itself from the payments to Iraq by the interposition of shipping companies, Ronly, Tse Yu Hong Metal Limited and Alia.
31.124 In summary, I make the following findings in relation to contracts A4970, A4971 and A4972:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contracts A4970, A4971 and A4972 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fixed fee of US$15.00 per tonne, to an Iraqi entity via Alia.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts. They did not disclose AWB's obligation to pay the US$15.00 fee or that this fee had been incorporated in the contract price.
(c) The same officers knew that the payment of a US$15.00 fee to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to these contracts and the wheat shipments made under them, namely February 2000 to September 2000, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them, and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contracts and shipments made under them.
31.125 The officers who were involved in, or knew about and authorised, the negotiation of these contracts and the associated arrangements with IGB, the making or payments pursuant to the arrangements, the drafting and submission of the contracts to DFAT and the concealment of information relating to the arrangements and payments were Messrs Rogers, Flugge, Ingleby, Officer, Emons, Watson, Lister and Borlase. As discussed below, Mr Stott rejoined AWB during the time that Permissions to export referable to these contracts were issued. Mr Hogan also returned to AWB's Melbourne office during that time.
31.126 Mr Rogers left AWB in April 2000. Whilst the evidence does not indicate that he had any direct involvement in relation to these contracts, he had previously authorised the payment of the so-called transport fees and the mechanism by which they were paid.
31.127 In relation to Mr Flugge, Mr Emons' evidence was that he discussed with Mr Flugge the fact that the trucking fee had increased and that Mr Flugge needed no explanation about the nature of the trucking fee or the complicated mechanism by which it was paid. As discussed below in the context of contract A0265, A0266 and A0267, prior to his trip to Iraq in April 2000, Mr Emons discussed the 'finer points' of the trucking fee with Mr Flugge, including the complicated payment mechanism through the shipping companies, Ronly and Alia, and Mr Flugge advised that he was happy for the trade to continue on this basis so as to avoid threats from AWB competitors.
31.128 By July 2000, Mr Stott had returned to AWB and was appointed to the office of General Manager, Sales and Marketing. In this position he was in charge of the division in AWB that was responsible for contracting with Iraq. As discussed below in the context of contracts A0265, A0266 and A0267, shortly following his appointment Mr Stott became fully apprised of the arrangements in place between AWB and IGB, including the arrangements in relation to the payment of fees, and the fact that these arrangements had been concealed from DFAT and the United Nations. Shipments of wheat under contracts A4970, A4971 and A4972 continued until September 2000. Permissions to export were sought and granted by delegates of the Minister in relation these shipments. Despite his knowledge of the arrangements and the fact that they had not been disclosed to DFAT and the United Nations, Mr Stott took no steps to ensure that DFAT was apprised of the true arrangements between AWB and IGB. It follows that, even though the contracts were submitted to DFAT before his appointment, Mr Stott was nonetheless involved in the concealment of information from DFAT in relation to the contracts.
31.129 Mr Hogan had little or no direct involvement in the negotiation of these contracts or the associated arrangements and the payment of the fees to Iraq. He was located in AWB's Cairo office during the period that the contracts were negotiated and entered into. However, in about July or August 2000 Mr Hogan returned to AWB's Melbourne office and took up an appointment as Regional Manager-Middle East. Mr Hogan's evidence was that he learnt about the Canadian complaint upon his return to the Melbourne office. After his return he took no steps to ensure, in relation to permissions to export that were applied for in respect of these contracts, that DFAT was notified of the arrangements in relation to the fees paid and payable to Iraq that he knew had not been disclosed to, let alone approved by, DFAT and the United Nations.
31.130 Messrs Emons and Officer departed AWB in June and July 2000 respectively.
31.131 The circumstances relating to these contracts are similar to those relating to the contracts entered into between AWB and Savas Grain and CSC in December 1999 (A4906, A4907 and A4908) considered above. Contract A4993 was entered into on about 4 February 2000, contract A0662 was entered into on 15 March 2000 and contract A0101 was entered into on 6 April 2000. In each case the contract entered into by AWB included a clause requiring AWB to pay either an 'IGB nominated trucking fee' or a fee of $US15.00 per tonne to either 'Trucking Company advised account' or 'Grain Board of Iraq advised account.' Fees amounting to US$15.00 per tonne for all shipments under these contracts were paid by AWB in the same way as it paid the fees payable under its contracts with IGB-that is to Iraq via Tse Yu Hong Metal Limited and Alia.
31.132 Mr Emons negotiated and signed contract A4993 and was aware of the term obliging AWB to pay the 'trucking fee.'
31.133 AWB was provided with a copy of the contract between Savas Grain and IGB. It made no reference to the payment of any fee of US$15.00.
31.134 As was the case with the earlier Russian contracts, AWB did not seek United Nations approval of its contracts with Savas Grain or CSC and therefore did not send its contracts to DFAT. United Nations approval was sought and obtained by the Russian Federation on behalf of Russian companies associated with Savas Grain and CSC. AWB relied on the approvals obtained by the Russian Federation when seeking permission to export the shipments of wheat under these contracts from a delegate of the Minister during the period August to October 2000. When seeking permission to export, Mr Lister, on behalf of AWB, did not advise DFAT, or through it the Minister, that its arrangements to ship this wheat to Iraq included that it was required to pay a fee of $US15.00 to Iraq. The payments that were made by AWB pursuant this requirement were disguised so as to avoid detection of the payments by DFAT or the United Nations.
31.135 As was the case with the earlier Russian contracts entered into in December 1999, AWB's non-disclosure to DFAT of the fact that its arrangements relating to these shipments included a requirement to pay a fee to Iraq was deliberate. At the time that these arrangements were entered into, senior officers of AWB knew that such payments were not permitted under the sanctions. They must have known that if DFAT had been informed of these arrangements, it would have been obliged to advise the Minister, or his delegate, not to issue permissions to export the wheat the subject of these contracts.
31.136 The officer principally involved in negotiating and causing AWB to enter into these contracts was Mr Emons. However, the following officers were also responsible for documenting and authorising the arrangements and the payments made pursuant to them. Mr Lister was responsible for applying for permission to export. Mr Watson was involved insofar as the Chartering Division, which he headed, was responsible for paying the fees. He also was responsible for establishing the payment mechanism. As with the previous Russian contracts, it may be readily inferred that Messrs Rogers, Flugge, Ingleby and Officer knew about and authorised these contracts or the arrangement to pay the fees to an Iraqi entity pursuant to them, and that they knew that these arrangements and payments had not been disclosed to DFAT and the United Nations. By the time permission to export the shipments referrable to these contracts was sought and given (August to October 2000), however, Messrs Rogers, Officer and Emons had all left AWB. Mr Hogan had returned to AWB's Melbourne office as Regional Manager-Middle East by this time. Mr Stott had also taken up his position as General Manager, Sales and Marketing by this time. Having regard to their positions and knowledge of the arrangements in relation to earlier contracts, it is open to infer that, by the time that permissions to export were sought in relation to these contracts, Messrs Stott and Hogan were aware of AWB's agreement to pay fees to Iraq referrable to them and that these fees were not disclosed to DFAT when the permissions to export were applied for. They were both in positions with authority to ensure that permissions were not sought from DFAT without disclosure of the arrangements in relation to payment of fees. Their failure to act amounted to implicit, if not express, authorisation of the concealment of the facts from DFAT.
31.137 The circumstances relating to these contracts are addressed in Chapter 17. They were entered into on about 16 July 2000. The short-form contracts were signed by Mr Stott. Copies of the short and long-form contracts were sent by Mr Hogan to DFAT on 14 August 2000. Permission to export wheat referable to this contract was sought by Mr Lister and granted by delegates of the Minister between 12 October 2000 and 5 March 2001.
31.138 These contracts were under phase VIII of the Programme. The Iraqi tender was in essentially the same terms as the phase VII tender in that it required the supplier to pay US$14.00 per tonne to the Iraqi State Company for Water Transport. Like contracts A4970, A4971 and A4972, the short and long-form contracts A0265, A0266 and A0267 that AWB submitted to DFAT (and ultimately the United Nations) did not contain any reference to any obligation on the part of AWB to pay a 'discharge cost' or fee of any sort, or that this fee was added to or included in the contract price. It is clear, however, that the arrangements between IGB and AWB did include the payment of a fee: fees of US$14.00 per tonne were paid in respect of each of the shipments made by AWB under these contracts. All the fees were paid by AWB Chartering direct to Alia.
31.139 The evidence concerning the knowledge of senior AWB officers in relation to the true arrangements between AWB and IGB in relation to the payment of fees, and the fact that these true arrangements were concealed from DFAT and the United Nations has been discussed in the context of the earlier contracts. Of significance, however, is that by the time that these contracts were entered into and performed, there had been a significant management restructure at AWB following the appointment of Mr Lindberg as Chief Executive Officer in April 2000. This restructure is addressed in Chapter 18. In addition to the appointment of Mr Lindberg, the main changes relevant to the Iraq trade were the departure of Messrs Officer and Emons and the return of Mr Stott. Mr Hogan also returned to AWB's Melbourne Office in about August 2000 and took up the position of Regional Manager-Middle East.
31.140 Prior to his departure in June 2000, Mr Emons travelled to Iraq in April and May, together with Mr Watson. Communications prior to, and reporting on, these trips reveal clearly that Mr Emons, Mr Watson and those to whom they reported, in particular Mr Officer, were aware that AWB's arrangements with IGB involved the paying of fees to Iraq and that the UN neither knew of, nor approved, these payments. In particular:
31.141 Mr Lindberg was appointed Chief Executive Officer in April 2000. Mr Emons' evidence was that he had discussions with Mr Lindberg after his appointment and that during those discussions he referred to the payment of trucking fees and that AWB had been instructed by IGB to pay those fees. Mr Lindberg's evidence was that he became aware of the Oil-for-Food Programme and the fact that a trucking cost was incorporated in AWB's contracts during Corporate Risk Committee meetings during 2000, though he said that he was also told that this had been approved by the United Nations. The evidence does not suggest that Mr Lindberg's knowledge of the trucking fees at this time extended beyond this limited knowledge.
31.142 The same cannot be said of Mr Stott. The evidence before the Inquiry supports a finding that Mr Stott, who replaced Mr Officer as General Manager, International Sales and Marketing, quickly became fully apprised of the arrangements in place between AWB and IGB, including the arrangements in relation to the payment of fees, and the fact that these arrangements had been concealed from DFAT and the United Nations. Whilst Mr Stott put an end to the involvement of Ronly (and its nominee, Tse Yu Hong Metal Limited) in channelling the fee payments to Iraq, he approved and authorised direct payments of the fees to Alia, knowing that Alia was also acting as a mere conduit and was not in fact providing any trucking or transport services for AWB. He took no steps to advise DFAT of the payments of trucking fees, and indeed assisted in concealing this from DFAT. The following material supports this finding.
31.143 Perhaps the clearest evidence of Mr Stott's knowledge and his intention to conceal the true arrangements between AWB and IGB in relation to the payment of fees is the correspondence he initiated with DFAT in late October 2000. The evidence in relation to this correspondence is addressed in Chapter 20. Despite apparently having had concerns about the trucking fees following his trip to Iraq during October 2000, the letter that Mr Stott sent to DFAT in late October made no reference to the fact that AWB's arrangements with IGB included paying a fee. Indeed, Mr Stott amended a draft of the letter prepared by Mr Hogan by removing a reference to the contracts including a 'predetermined and UN approved transport fee.' The letter sent to DFAT also did not reveal to DFAT that AWB already had any existing relationship with Alia, despite the fact that AWB had been paying fees to Alia during the previous year. The explanation given by Mr Stott, in his evidence before the Inquiry, for the absence of any reference to the trucking fee or Alia in this letter lacks credibility and is rejected. Further, for the reasons given in Chapters 20 and 30, Mr Stott's evidence that he discussed Alia with Ms Drake-Brockman should also be rejected. When he was interviewed by AWB's solicitors in 2004, Mr Stott told them that his purpose in writing to DFAT was that he wanted a 'paper trail.' He also stated that he did not discuss drafts of the letter with DFAT. He did not suggest that he had told anyone at DFAT about Alia. The only reasonable inference to be drawn from Mr Stott's correspondence with DFAT is that he was attempting to obtain correspondence from DFAT that would appear to justify AWB's dealings with Alia and the payment of trucking fees (including a proposal that AWB had raised with IGB and wished to continue to explore with IGB for using the trucking fees as a mechanism for the payment of despatch and demurrage as between AWB and IGB) without revealing to DFAT the true arrangements AWB had in place, or hoped to put in place, with IGB and Alia in relation to the payment of the fees. This was a matter that Mr Stott and AWB at all times intended to conceal from DFAT.
31.144 Mr Goodacre was also appointed during this period. There was led from Mr Emons evidence that he told Mr Goodacre 'the true nature of the payments that were being made as trucking payments', the 'methods by which payments were being made' but he did not tell Mr Goodacre that 'Alia didn't do the trucking'. In substance, Mr Emons said he told Mr Goodacre that 'a fee… was charged by IGB to ensure our vessels were discharged'.[413] However when cross examined Mr Emons accepted that his discussion with Mr Goodacre was 'in the briefest terms' and that 'the only issue that was occupying Mr Goodacre's attention at the time in international marketing was the fact that we had an enormous demurrage bill in Iraq and how we were going to solve it.'[414]
Mr Goodacre denied being told by Mr Emons of the 'true nature of the trucking fees or their link with IGB'. He acknowledged that Mr Emons may have referred to 'trucking fees' but not in any context of there being concerns or problems in relation to such fees.
I am satisfied that whatever may have been said in the brief conversation, nothing was said sufficient to inform Mr Goodacre of the true arrangements between AWB and IGB. Nothing was said which raised in Mr Goodacre's mind any question of impropriety or illegality.
31.145 By late October the review being conducted by Arthur Andersen was nearing completion. The Arthur Andersen report is addressed in Chapter 22 and considered further below. Suffice it to say that drafts of the report included references to the Canadian complaint and the payment mechanism, including the involvement of shipowners and Ronly and its Liechtenstein registered subsidiary.
31.146 Following Mr Emons departure, Mr Hogan returned to AWB's Melbourne office, took up the appointment as General Manager-Middle East and became directly involved again in the Iraq trade, the arrangements with IGB and liaison with DFAT. Upon his return he became aware of Canada's complaint to the United Nations concerning the trucking fee. He travelled to Iraq with Mr Watson in July 2000 and met with the Director General of IGB and the Minister for Trade in Iraq. In August and September 2000 he corresponded with DFAT concerning the possibility of changing various terms of AWB's contracts with IGB, in particular in relation to despatch and demurrage, and other aspects of AWB's trade with Iraq. He did not inform DFAT or otherwise seek its advice or assistance in relation to AWB's payment of trucking fees to Iraq. Having regard to his knowledge of the nature of the trucking fees and the arrangements AWB had entered into to pay the fees, the reference to a 'UN approved transport fee' in the draft of the letter that he provided to Mr Stott in October 2000 was disingenuous. Mr Hogan did not genuinely believe that the United Nations had approved the payment of the fee.
31.147 In summary, the following findings should be made in relation to contracts A0265, A0266 and A0267:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contracts A0265, A0266 and A0267 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fixed fee of US$14.00 per tonne, to Iraq via Alia. This fee was to be added to the CIF price but not separately disclosed as a component of the price in the contract.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts.
(c) The same officers knew that the payment of a US$14.00 fee to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised as payments to Alia for transport services.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to these contracts, namely between July 2000 and March 2001, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contract and shipments made under it.
31.148 The officers of AWB who were involved in, or knew about and authorised, the negotiation, drafting and submission of these contracts to DFAT and the concealment of information relating to the arrangements were Messrs Hogan, Watson, Stott, Lister and Borlase. Whilst Messrs Flugge and Ingleby were not directly involved with these particular contracts or the payments made under them, their knowledge of and express or implicit authorisation of previous contracts that involved substantially the same arrangements and payments provides the basis for an inference that they implicitly, if not expressly, authorised the same arrangements and payments in relation to these contracts.
31.149 By the time these contracts were entered into and submitted to DFAT, Messrs Emons and Officer had left AWB.
31.150 Other officers of AWB at this time may have possessed some knowledge in relation to the payment of fees to Iraq as part of the arrangements with IGB. It does not follow that they knew about, were involved in, or authorised the concealment of facts relating to the fees from DFAT and the United Nations. In the case of Mr Lindberg, there is some evidence that Mr Emons told him that AWB's arrangements with Iraq included the payment of fees, however there is insufficient evidence to support a conclusion that Mr Lindberg knew that these arrangements had been concealed from DFAT and the United Nations.
31.151 Other officers whose duties and responsibilities did not directly relate to the Iraq contracts may also have known about the arrangements by reason of being copied into correspondence that, had it been read and considered, would have revealed the nature of the fees AWB was paying as part of its contractual arrangements with IGB and the fact that they were being paid indirectly to Iraq via intermediaries because of issues relating to the sanctions. These officers include Ms Scales and Mr Geary, each of whose responsibilities related more to the National Pool. By July 2000, when these contracts were entered into, Ms Scales and Mr Geary had been sent copies of the following emails:
(a) Mr Hogan's email of 24 June 1999 that reported on IGB's request that offers include a payment of US$12.00, outlined the problem in finding a payment mechanism because Iraq's accounts had been frozen and suggested that the payments be made to an Iraqi bank in Jordan
(b) Mr Hogan's email of 25 June 1999 that again referred to difficulties in implementing payments to the 'Land Transport Company,' pointed out that the payment was financially neutral to AWB because it was added to the CIF price and pointed out that 'discretion' was required
(c) Mr Jones' email of 10 July 2000 that attached a market brief, prepared by Mr Borlase, that referred to the fact that IGB had indicated that the 'fee' would be reduced from US$15.00 to US$14.00 for future business and that '[c]urrent mechanism of payment is via transport company/s in Jordan.'
31.152 By the time that these contracts were entered into, Ms Scales was National Pool Manager and Mr Geary was General Manager of the National Pool. The relationship between AWB and the National Pool (AWB International) is addressed in Chapter 9. In short, when it negotiated and entered into contracts with IGB, AWB was providing services for and acting on behalf of the National Pool in selling the Pool's wheat. AWB was remunerated by the Pool for the services it provided and the Pool received the proceeds of sale, net of expenses such as ocean freight. It was the Pool that ultimately bore the cost of the transport fee, although because the fee was added to the contract price, this cost was essentially revenue neutral. By reason of the relationship between AWB and the National Pool and their respective responsibilities, Mr Geary and Ms Scales would no doubt have been interested in the contracts between AWB and IGB and any associated arrangements, particularly if the arrangements resulted in a cost ultimately borne by the Pool. They were not, however, directly involved in negotiating those arrangements, or documenting the contracts, or in any of the procedures relating to DFAT. Having regard to their particular duties and responsibilities and their limited, if any, involvement in the negotiation of the contracts and the arrangements relating to the payment of the fees, the documentation of these contracts and the provision of contracts to, or liaison with, DFAT, the evidence does not establish they were involved in, or assisted in any way, the concealment of information concerning these particular contracts from DFAT or the United Nations. Nor, at this stage, could it be said that they approved or authorised the arrangements or the payments made by AWB pursuant to them.
31.153 The circumstances relating to this contract are addressed in Chapters 19 and 21. It was entered into on about 2 November 2000. Copies of the short and long-form contracts were sent by Mr Hogan to DFAT on the same day. The short-form contract was signed by Mr Hogan. Permission to export wheat referable to this contract was sought by Mr Lister and granted by delegates of the Minister between 5 March 2001 and 2 April 2001.
31.154 The significant difference between the arrangements ultimately agreed between AWB and IGB in relation to this contract, and the arrangements that had existed in relation to earlier contracts, was that the inland transportation fee imposed by IGB was US$25 per tonne-a significant increase (though less than the increase-to US$35.00 per tonne-that had been foreshadowed to Mr Hogan during his October 2000 trip to Iraq in respect of phase IX contracts). Further, AWB was notified by IGB that it was also required to pay a 'handling fee' calculated at the rate of 10% of the contract price. The contract negotiations between AWB and IGB proceeded on the basis that the price was to include both the US$25 per tonne transport fee and the 10% handling fee and on the further basis that the increased fee and the 10% handling fee would be paid to Alia. Neither the short-form or long-form contract submitted to DFAT and the United Nations made any reference to the arrangements between AWB and IGB including the payment of a US$25 per tonne fee or a 10% handling fee, or that these fees had been incorporated in the contract price. Nor were these matters otherwise disclosed to DFAT and the UN.
31.155 Mr Hogan conducted the contract negotiations on behalf of AWB. He obtained authorisation from Mr Stott before finalising the contract with IGB. The following points may be made about AWB's reaction to the increase in the transportation fee and the imposition of the new 'handling fee.'
31.156 In summary, I make the following findings in relation to contract A0430:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contract A0430 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fee of US$25.00 per tonne, and a fee amounting to 10% of the contract price, to Iraq via Alia. These fees were to be added to the negotiated CIF price but not separately disclosed as a component of the price in the contract.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts.
(c) The same officers knew that the payment of a fee or fees totalling US$44.50 to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised as payments to Alia for transport services.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to this contract, namely between November 2000 and April 2001, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contract and shipments made under it
31.157 The senior officers of AWB who were involved in, or knew about and authorised, the negotiation, drafting and submission of these contracts to DFAT and the concealment of information relating to the arrangements were Messrs Hogan, Stott, Lister, Ingleby and Flugge. Mr Watson left AWB in November 2000.
31.158 Mr Stott claimed that he told Mr Goodacre in November when the 10% occurred that he, Mr Stott, would only accept that increase in fees if he was satisfied by documentary evidence that the United Nations approved of the fee.[415] It was then, he said that he told Mr Goodacre about seeing a contract which the United Nations had approved which showed on its face a trucking fee of '$44 or $45 a tonne'.[416] Mr Goodacre had no recollection of ever being informed of a 10% service fee imposed on contracts, although he accepted he had learnt of a significant trucking fee in excess of '$45'.[417] All of the payments Mr Goodacre approved were in the seven months between May and December 2001 when all trucking fees were of a similar level. I do not accept that Mr Stott told Mr Goodacre either of seeing a contract with a disclosed fee of $44 or $45, or that he told Mr Goodacre of the increased 10% charge. I accept the evidence of Mr Goodacre that he approved payments on the basis that he believed the payments to be legitimate and approved by the United Nations.
31.159 Whilst there is no direct evidence of Mr Flugge's involvement in relation to this particular contract, having regard to his knowledge and authorisation of the payment of fees relating to earlier contracts, it should be inferred that Mr Flugge authorised the payment of fees relating to this contract.
31.160 Mr Geary and Ms Scales also knew about, and were involved in, the payment of fees to Alia in respect of this contract. After Mr Stott put an end to the arrangements whereby the fees were paid via Ronly and the shipowners, the fees were paid direct to Alia by AWB. Internally, the cost of the fees was met by the Pool. The internal AWB procedure involved in generating this payment included that a payment request was made by an officer of the International Sales and Marketing Division, usually Mr Hogan or Mr Edmonds-Wilson. The payment request was required to be authorised by two managers. Pursuant to this procedure, both Mr Geary and Ms Scales authorised significant payments to Alia referable to this contract in April and June 2001 (in the case of Ms Scales) and August 2001 (in the case of Mr Geary). However Mr Geary was not involved in sales until he became General Manager Trading in March 2001.
31.161 Ms Scales' evidence was that she did not inquire into the increase of the trucking fee and did not turn her mind to the fact that the fees now also included an additional component being 10% of the contract price. She also claimed that she worked on the basis that the fee had received the approval of the United Nations. I accept that evidence.
31.162 The circumstances relating to these contracts are addressed in Chapter 23. They were entered into on about 2 February 2001. Copies of the short and long-form contracts were sent by to DFAT by Mr Hogan on 27 February 2001. Mr Hogan signed the short-form contracts. Permission to export wheat referable to these contracts was sought by Mr Lister and granted by delegates of the Minister between 11 April 2001 and 9 August 2001.
31.163 These contracts were under phase IX of the Oil-for-Food Programme. The Iraqi wheat tender for this phase specified that offers to supply under this phase were required to include the payment of the equivalent of US$25.00 in any exchangeable currency to the Iraqi State Company for Water Transport prior to the arrival of the vessel in Umm Qasr. The tender made no reference to any requirement to pay an additional 10% fee. Nonetheless, it is clear that the arrangements negotiated by AWB and IGB in relation to these contracts included the payment of an additional 10% fee, now referred to as a 'service' or 'after-sales-service' fee, and the inclusion of that fee, as well as the US$25.00 per tonne fee, in the contract price. As with the previous contract, AWB treated the 10% fee as an addition to the trucking fee: making a total fee payable in respect of A0552 of US$44.80 per tonne and a total fee payable in respect of A0553 of US$45.00 per tonne. AWB successfully negotiated with IGB for the fees to be paid in two instalments: the first instalment being US$14.00 payable prior to arrival of the vessel and the balance being paid within a week of AWB's receipt of the proceeds of sale of the relevant shipment.
31.164 The short and long-form contracts that were presented to DFAT and the United Nations did not refer to AWB's agreement or obligation to pay either the US$25.00 fee, or the 10% 'service' fee. Nor was this revealed in any way in the UN Notification form. Nor did anyone at AWB take any steps to inform DFAT or the United Nations that its arrangements with IGB included the payment of those fees.
31.165 The evidence concerning the knowledge of senior AWB officers in relation to the true arrangements between AWB and IGB in relation to this contract, and the fact that these true arrangements were concealed from DFAT and the United Nations, has been discussed above in the context of contract A0430 and the earlier contracts. There is, however, some further evidence relating to the knowledge of AWB in relation to the payments and the concealment of the true arrangements that relates to the period relevant to this contract and the shipments made under it. That evidence includes the following:
31.166 By February 2001, Arthur Andersen had, pursuant to its engagement by AWB, produced a report concerning the integrity of transactions conducted by the International Marketing Group. The report is addressed in Chapter 22. Arthur Andersen's report was seen by, and was the subject of discussions between, senior management including Messrs Lindberg, Goodacre and Stott. The report referred to a number of 'red flags,' or warning signs, including the fact that the United Nations had made inquiries in relation to the payment of trucking fees, that there had been management pressure to maintain the sales to Iraq despite the United Nations inquiry concerning the trucking fee payments and the concerns that it created, that officers of AWB had sought to disguise the payment of the trucking fee and that the trucking fees appeared to be excessive and that there was therefore a risk that the fees or a portion of them were being diverted to purposes other than trucking.
31.167 For the reasons already considered, by the time that he saw the Arthur Andersen report, Mr Stott already knew about the 'red flag' matters outlined in it. He had been involved in authorising AWB's agreement to the fees in November 2000. Arthur Andersen was not asked to pursue the matter further. The investigations were not pursued further. Whilst Mr Stott was nominated to follow up some of the matters in the report, he did not further investigate matters raised in it. The report was discussed at a meeting of the Executive Leadership Group, but copies of the report were not distributed to its members. The fact that Arthur Andersen was conducting a review of some sort was disclosed at a Board meeting, but the Board was not given a copy of the report or even a summary of Arthur Andersen's findings.
31.168 Of particular significance is that the Arthur Andersen report referred to the recent increase in the trucking fees to US$45.00 and noted that this 'appears to be high' and 'excessive' and that there was a 'risk that this money is being diverted to other purposes.' Despite this warning, AWB continued to pay fees to Iraq that exceeded US$45.00 per tonne. Mr Goodacre's evidence was that Mr Stott undertook to investigate Arthur Andersen's concerns about the trucking fees and that at some later stage Mr Stott told him that he had spoken to DFAT and that he was satisfied that the level of trucking fees was justified and the Alia was legitimate. On Mr Goodacre's evidence, he did not ask for, and Mr Stott did not give him, any further detail or supporting material beyond this very general assurance. Mr Stott's evidence, to the extent that it is able to be comprehended, is that following his October 2000 trip to Iraq he was concerned that Iraq was benefiting from the trucking fees and that he did a number of tests to satisfy himself that this was not the case. Mr Stott claimed that he discussed his conclusion that the fee was justifiable with Mr Goodacre and Mr Hogan and also discussed it at a meeting with Arthur Andersen, also attended by Mr Goodacre, in December 2000. Mr Stott also claims that he told Mr Goodacre about the conversation that he claimed he had with Ms Drake-Brockman at DFAT in November 2000. I reject that evidence.
31.169 The evidence of Mr Stott in relation to the response to the Arthur Andersen report lacks credibility, is uncorroborated by documentary evidence and is inconsistent and contradictory. Mr Stott's evidence concerning the tests he performed to ascertain whether the fees were justifiable is discussed in detail in Appendix 18. For the reasons there given, it should be rejected. Mr Stott's evidence concerning his supposed discussion with Ms Drake-Brockman is discussed in Chapter 20 and 30. For the reasons there given, it should be rejected. Because Mr Stott neither performed the tests nor discussed Alia with Ms Drake-Brockman, his evidence that he discussed these matters with Mr Goodacre and others should also be rejected.
31.170 Mr Lindberg, on his evidence, left the issues and recommendations arising from the Arthur Andersen report entirely up to Messrs Goodacre and Stott. He was entitled to rely upon his managers to investigate and implement the report recommendations. Mr Lindberg did nothing more having regard to his position. In the absence of any direct evidence that he had been informed about the true nature of the trucking fees, it cannot be inferred that he knew the true nature of the trucking fees at this time.
31.171 In summary, I make the following findings in relation to contracts A0552 and A0553:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contracts A0552 and A0553 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fee of US$25.00 per tonne, and a fee amounting to 10% of the contract price, to Iraq via Alia. These fees were to be added to what was otherwise the CIF price of the wheat. The contracts did not reveal that the fees were a component of the price.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts.
(c) The same officers knew that the payment of a fee or fees totalling US$44.80 and US$45.00 to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised as payments to Alia for transport services.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to these contracts, namely between February 2001 and August 2001, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contract and shipments made under it
31.172 The officers who were involved in, or knew about and authorised, the negotiation of this contract and the associated arrangements with IGB, the drafting and submission of the contracts to DFAT and the concealment of information relating to the arrangements were Messrs Hogan, Stott, Lister, Flugge and Ingleby. Payments of fees to Alia under these contracts were authorised by Messrs Goodacre and Ingleby and Ms Scales.
31.173 The circumstances relating to these contracts are addressed in Chapter 23. They were entered into on or about 6 June 2001. Copies of the short and long-form contracts were sent by to DFAT by Mr Hogan on or about 27 June 2001. The short-form contracts were signed by Mr Hogan. Permission to export wheat referable to this contract was sought by Mr Lister and granted by delegates of the Minister between 10 September 2001 and 24 December 2001.
31.174 Like contracts A0552 and A0553, these contracts were under initially under phase IX of the Programme (and later transferred to phase X). The arrangements that AWB agreed with IGB in relation to these contracts were that AWB would pay fees to IGB totalling US$46.70 (contract A0784) and US$46.90 (contract A0785). These fees included the so-called trucking fee, the 10% service fee and an amount of 50 cents per tonne referable to port fees.
31.175 The short and long-form contracts that were presented to DFAT and the United Nations did not refer to AWB's obligation to pay these fees to Iraq. Nor was this revealed in any way in the UN Notification forms. Nor did anyone at AWB take any steps to inform DFAT or the United Nations that its arrangements with AWB included the payment of those fees.
31.176 The evidence concerning the knowledge of senior AWB officers in relation to the true arrangements between AWB and IGB in relation to these contracts, and the fact that these true arrangements were concealed from DFAT and the United Nations, has been discussed above in the context of the earlier contracts. A number of matters occurred between the negotiation and submission to DFAT of contracts A0552 and A0553 and these contracts that further reveal the knowledge and intention of senior officers of AWB in relation to AWB's arrangements with IGB and their disclosure to DFAT. That evidence includes the following.
Using their own infrastructure. They [IGB] used rail and truck. Then they change it and they put inland transport fee, $12 per tonne, which I understood was to ease inflation and problems internally with the company, and so that that cost would then be recovered from the escrow account. Why would a company then subcontract that out to an Alia transport?
31.177 In summary, I make the following findings in relation to contracts A0784 and A0785:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contracts A0784 and A0785 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fee to an Iraqi entity totalling US$46.70 (contract A0784) and US$46.90 (contract A0785) per tonne. This fee was added to what was in effect the CIF price, but the contract did not reveal that the fee was a component of the price.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts.
(c) The same officers knew that the payment of a fee or fees totalling US$46.70 (contract A0784) and US$46.90 (contract A0785) per tonne to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised as payments to Alia for transport services.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to this contract, namely between June 2001 and December 2001, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to these contracts and shipments made under it
31.178 The officers who were involved in, or knew about and authorised, the negotiation of these contracts and the associated arrangements with IGB, the drafting and submission of the contracts to DFAT and the concealment of information relating to the arrangements were the same as those involved in contracts A0430, A0552 and A0553: namely Messrs Hogan, Stott, Ingleby, Lister, and Flugge. Payments of fees to Alia under these contracts were authorised by Messrs Goodacre, Ingleby, Geary and Ms Scales amongst others. As with previous contracts, whilst Mr Flugge may not have been directly involved with these contracts, it may be inferred that he expressly or impliedly authorised the arrangements and the payment and concealment of the fees. The same can be said of Messrs Ingleby and Stott.
31.179 As discussed below in the context of contracts A1111 and A1112, by November 2001 Mr Long had taken up his position as General Manager, International Sales and Marketing and had learnt about the arrangements relating to the inland transportation fees. Permissions to export referrable to these contracts were issued up to December 2001. Mr Long was in a position to, but did not, ensure that DFAT and the United Nations knew about the arrangements.
31.180 The circumstances relating to these contracts are addressed in Chapter 23. They were entered into on or about 20 December 2001. Copies of the short and long-form contracts were sent by to DFAT by Mr Hogan on 22 January 2002. The short-form contracts were signed by Mr Hogan. Permission to export wheat referable to these contracts was sought by Mr Lister and granted by delegates of the Minister between 19 March 2002 and 2 October 2002.
31.181 These contracts were under phase XI of the Oil-for-Food Programme. The Iraqi wheat tender for this phase specified that offers to supply under this phase were required to include the payment of the equivalent of US$26.50 in any exchangeable currency to the Iraqi State Company for Water Transport prior to the arrival of the vessel in Umm Qasr. Thus, the transport fee had once again been increased by the Iraqis. The tender made no reference to any requirement to pay an additional 10% fee. Nonetheless, as was the case with all contracts since November 2000, it is clear that the arrangements negotiated by AWB and IGB in relation to these contracts included the payment of an additional 10% 'after-sales-service' fee, as well as the US$26.50 (or euro equivalent) per tonne fee, in the contract price. As with previous contracts, AWB treated the 10% fee as an addition to the trucking fee. The agreement struck between AWB and IGB was that the fee payable was €55.17 per tonne in respect of A1111 and €55.40 per tonne in respect of A1112.
31.182 The short and long-form contracts that were presented to DFAT and the United Nations did not refer to AWB's obligation to pay these fees. Nor was this revealed in any way in the UN Notification form. Nor did anyone at AWB take any steps to inform DFAT or the United Nations that its arrangements with AWB included the payment of those fees. As the evidence relating to the earlier contracts clearly demonstrates, the reason that the contracts made no reference to AWB's obligation to pay the fees was that senior officers of AWB were well aware that these fees were being paid to Iraq, were contrary to the sanctions, plainly had not been disclosed to DFAT and the United Nations and would have been disallowed if they had been disclosed. A number of further dealings contemporaneous with these contracts further establishes these matters.
31.183 A matter of some significance is that in November 2001 Mr Long took up the position of General Manager, International Sales and Marketing after Mr Stott joined the Executive Leadership Group of AWB as head of mergers, acquisitions, strategy and business development. Following his appointment, Mr Long learnt that the arrangements between AWB and IGB in relation to sales to Iraq included that AWB had agreed to, or was required to, pay substantial fees, referred to as 'inland transport fees' to Iraq via Alia. He did not know if AWB had a written contract with Alia in relation to the transportation of the wheat, but thought there was a 'contract by conduct', that the fees were not genuinely related to the cost of the provision of transport or any contractual obligation that AWB had to discharge and deliver the wheat within Iraq, and that the payment of the fees was not referred to in the contracts or otherwise approved by DFAT or the United Nations. The following evidence supports this finding:
31.184 Another matter of significance in relation to these contracts is that in mid August 2002, a high level AWB delegation comprising Messrs Flugge, Lindberg, Long and Cracknell travelled to Iraq and met with the Iraqi Minister for Trade. Before the delegation departed for Iraq, an executive brief was prepared and provided to the members of the delegation. Mr Long read and checked the brief to ensure it was accurate. Under a heading entitled 'Iraq at a Glance,' the brief included a number of basic facts concerning AWB's trade with IGB, including that 'AWB also pays a fee, covered under sales contract, to the Ministry of Transport covering inland transport fees and discharge costs.' This statement made it clear that the fee was paid to Iraq. Each of Messrs Flugge, Lindberg and Long claimed in their evidence before the Inquiry that they did not recall reading the brief or this particular part of the brief. For the reasons already given, Messrs Flugge and Long already knew by August 2002 that the fees were paid to Iraq. In relation to Mr Lindberg, even assuming that he read the quoted passage, that would not convey to a reader who believed that the trade with Iraq was being conducted lawfully and in accordance with sanctions, knowledge to the contrary. Mr Lindberg's evidence was that he was told by Mr Long or Mr Flugge whilst travelling to Iraq that AWB was required by IGB to use a particular trucking company. That is not sufficient to attach to Mr Lindberg knowledge of the true arrangements between AWB and IGB, or that payments were being made by AWB to Iraq.
31.185 In summary, I make the following findings in relation to contracts A1111 and A1112:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contracts A1111 and A1112 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fee to an Iraqi entity totalling was €55.17 per tonne (A1111) and €55.40 per tonne (A1112). These fees were added to what was otherwise the CIF price, but the contracts did not reveal that the fees were a component of the price.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts.
(c) The same officers knew that the payment of a fee or fees totalling €55.17 per and €55.40 per tonne to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised as payments to Alia for transport services.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to these contracts, namely between 20 December 2001 and October 2002, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contract and shipments made under it.
31.186 The senior officers who were involved in, or knew about and authorised, the negotiation of these contracts and the associated arrangements with IGB, the drafting and submission of the contracts to DFAT and the concealment of information relating to the arrangements were Messrs Hogan, Long, Ingleby, Lister and Flugge. By January 2002 Messrs Stott and Mr Goodacre had taken up positions that did not include duties and responsibilities in relation to the Iraq trade. Mr Flugge left AWB in March 2002, the same month that these contracts were entered into. Whilst he may have had little direct involvement in these particular contracts, his knowledge and authorisation of past arrangements relating to the payment of the fees means that he implicitly, if not expressly, authorised the same arrangements in relation to these contracts. He also returned to AWB as a consultant and travelled to Iraq with Messrs Lindberg and Long in August 2002.
31.187 There were more junior officers at AWB who were directly involved in the Iraq contracts and who knew that the beneficiary of the fees was an Iraqi entity, that the fees were not genuinely referrable to transport services, that the contracts submitted to DFAT made no reference to the fees and that DFAT and the United Nations had not been, and were not to be, told about the payment of the fees. Mr Edmonds-Wilson was an officer who, like Mr Borlase before him, assisted the Regional Manager from time to time. In addition to assisting Mr Hogan, one of Mr Edmonds-Wilson's responsibilities was to monitor payments to Alia. As a result of being the recipient of, or instigator of, some of the correspondence or communications referred to above, Mr Edmonds-Wilson learnt that the fees were ultimately paid to ISCWT or the Ministry of Transport in Iraq. Mr Edmonds-Wilson was also responsible for sending AWB's contracts to DFAT for submission to the United Nations. However, Mr Edmonds-Wilson's role was purely administrative involving no decision making or exercise of authority. His was not of sufficient seniority to make his acts those of AWB.
31.188 Payments of fees to Alia under these contracts were authorised by Messrs Ingleby, Geary and Mr Long.
31.189 The circumstances relating to this contract are addressed in Chapter 23. It was entered into on or about 23 June 2002. Copies of the short and long-form contracts were sent to DFAT by Mr Edmonds-Wilson on 24 July 2002. The short-form contract was signed by Mr Hogan. Permission to export wheat referable to this contract was sought by Mr Lister and granted by delegates of the Minister between 29 October 2002 and 28 April 2003.
31.190 Like contracts A1111 and A1112, this contract was under phase XII of the Oil-for-Food Programme. The agreement struck between AWB and IGB in relation to this contract was that AWB was obliged to pay a fee of US$47.75 per tonne or its equivalent in Euros (€48.53 per tonne). As was the case with previous contracts, the short and long-form contracts that were presented to DFAT and the United Nations did not refer to AWB's obligation to pay these fees. Nor was this revealed in any way in the UN Notification form. Nor did anyone at AWB take any steps to inform DFAT or the United Nations that its arrangements with AWB included the payment of those fees.
31.191 The evidence demonstrating that senior officers of AWB knew that the true arrangements between AWB and IGB, that they included the payment of substantial fees to an Iraqi entity and that this was concealed from DFAT and the United Nations has been addressed in the context of previous contracts.
31.192 Mr Long led the contract negotiations in relation to this contract during a visit to Iraq with Mr Hogan in June 2002. During this trip, Mr Long was made aware that Iraq was insisting on the payment of a 10% fee in addition to the fixed amount in relation to the trucking fee. Mr Hogan briefed Mr Long on the method of calculating the 'trucking' fee, including that it was a fee the Iraqis imposed on all suppliers under the Programme.
31.193 After the trip, Mr Long claimed that he 'rationalised' the inland transportation fee and discussed with Mr Geary how it was calculated, including the fact that it had been set by IGB, that it had significantly increased and involved an 'unusual' and 'absolutely extraordinary' calculation, a clear reference to the 10% charge, and the fact that it was paid to Alia. His rationalisation comprised comparing the amount of the fee with the amount it would cost to transport grain in Australia. It did not include asking the IGB or Alia to explain or justify how the fee was set. Nor did it involve contacting DFAT or, through it, the United Nations to seek their view on the fees. This was despite the fact that Mr Long knew that the 'extraordinary calculation' was not disclosed in the documents sent to the United Nations.
31.194 In his evidence before the Inquiry, Mr Long claimed that he relied on a reference in an email from Mr Hogan dated that 1 July 2002 that 'all payment processes for Inland Transport are UN approved.' I do not accept Mr Long's evidence that he relied on this email and on that basis believed that the payment of fees to Iraq was known to and approved by the United Nations. On his own evidence, Mr Long was concerned about the probity of the fee. If Mr Long had genuinely believed the fee to be approved, there would have been no need for him to attempt to rationalise or justify the amount of the fees and how they were calculated-particularly since he knew the fees to be essentially revenue neutral as far as AWB was concerned. The real reason for Mr Long's exercise was to satisfy himself and Mr Geary that the amount of the fee and the ultimate contract price was not such as to arouse the suspicions of the United Nations, or that if it was challenged he could justify it.
31.195 Mr Long was also privy to other correspondence that demonstrated that he knew the true nature of the fees. Along with Messrs Flugge and Lindberg, Mr Long received an executive brief prior to his trip to Iraq in August 2002. He said he checked it for accuracy, later qualifying his evidence to say he checked it to ensure that it 'accorded with the objectives of the trip and the background to the market'. This brief clearly stated that the fees were paid to the Iraqi Ministry of Transport. By this time, at least, it was no secret within senior management at AWB that the fees were paid to Iraq. In September 2002, Mr Long also sent an email to Mr Geary in which he revealed his knowledge that in 2000 AWB had interposed Ronly and 'some shelf company' between it and Alia 'because of alleged problems with the UN/IGB.'
31.196 In summary, I make the following findings in relation to contracts A1111 and A1112:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contracts A1111 and A1112 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fee to an Iraqi entity totalling US$47.75 per tonne (€48.53 per tonne). These fees were added to what was otherwise CIF price, but the contracts did reveal that the fees were a component of the price.
(b) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts.
(c) The same officers knew that the payment of a fee or fees totalling US$47.75 per tonne (€48.53 per tonne) to an Iraqi entity contravened the sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised as payments to Alia for transport services.
(d) Throughout the period that officers of DFAT and the United Nations were responsible for making decisions or taking action relevant to these contracts, namely June 2002 and April 2003, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions.
(e) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contracts and shipments made under them.
31.197 The officers who were involved in, or knew about and authorised, the negotiation of this contract and the associated arrangements with IGB, the drafting and submission of the contracts to DFAT and the concealment of information relating to the arrangements were the same as those involved in contracts A1111 and A1112: namely Messrs Hogan, Long and Lister. Payments to Alia referrable to this contract were authorised by Messrs Long, Geary and Johnson.
31.198 The circumstances relating to these contracts are addressed in Chapters 24 and 27. They were entered into on 12 December 2002. Copies of the short and long-form contracts were sent to DFAT on 23 December 2002. UN approval was given in respect of A1680 on 17 January 2003 and in respect of A1670 on 22 January 2002 (though the approval was not issued in respect of A1670 until 2 September 2003). Permissions to export referable to these contracts were issued by delegates of the Minister between February and May 2003.
31.199 Like the earlier contracts that have been considered, the agreement struck between IGB and AWB in relation to these contracts included that AWB would pay fees to Iraq totalling €51.30 per tonne and that these fees would be added to what was otherwise the negotiated CIF price for the wheat. AWB had no contractual obligation beyond this to discharge or deliver the wheat within Iraq. As with previous contracts, the short and long-form contracts that were presented to DFAT and the United Nations did not refer to AWB's obligation to pay these fees, the payment of the fees was not revealed in any way in the UN Notification forms and nobody at AWB took any steps to inform DFAT or the United Nations that its arrangements with IGB included the payment of fees.
31.200 In addition to the payment of fees to Iraq, there were two other critical aspects of the agreement struck between AWB and IGB in relation to these contracts that were not revealed in the written contracts or otherwise disclosed in any way to DFAT or the United Nations. The additional terms of the agreement were:
(a) The price of the wheat in the contracts was inflated or 'loaded up' by €8.40 per tonne. This amount was added to the agreed price for the wheat to facilitate the repayment by IGB of a debt supposedly owed to Tigris Petroleum arising from a shipment of wheat in 1996. Because this amount was added to the wheat price, it was ultimately paid out of the UN escrow account. AWB entered into separate arrangements with Tigris in relation to the recovery of this supposed debt and AWB's remuneration (US$500,000) for assisting in the debt recovery.
(b) AWB would pay IGB US$2.017 per tonne as agreed compensation for a previous delivery of wheat that was alleged by IGB to be contaminated. This payment was to be added to, and therefore paid in the same way as, the so-called inland transportation fee, that is, by payment through Alia. Whilst the compensation payments were to be paid under the guise of the transportation fee, unlike the transportation fee the compensation was not added to the wheat price and therefore not extracted from the escrow account.
The evidence relating to the loading up of the contract price with the Tigris debt and the agreement struck between AWB and IGB in relation to IGB's compensation claim is detailed in Chapter 27.
31.201 In September 2000, the debt said to arise from the 1996 shipment was assigned to Tigris by BHPP. Two days later, Tigris sought AWB's assistance in recovering the debt said to exist as a result of the 1996 shipment. In October 2000, Mr Hogan, on the instructions of Mr Stott, raised the issue with IGB. The issue was also the subject of discussion and correspondence involving, amongst others, Mr Hogan, Mr Stott and representatives of IGB in the first half of 2001. The issue was also raised directly with senior representatives of the Iraqi government by Mr Davidson Kelly, on behalf of Tigris. Mr Stott liaised with Mr Davidson Kelly in relation to efforts to recover the debt.
31.202 In July 2002, IGB claimed that AWB wheat aboard a vessel seeking to discharge at Umm Qasr was contaminated with traces of iron powder. IGB requested that the claim be settled by AWB paying compensation of US$7.00 per tonne. In mid August 2002, an AWB delegation including Messrs Flugge, Lindberg and Long travelled to Iraq primarily to deal with the compensation claim. An agreement was reached that AWB pay IGB US$6 per tonne for cleaning contaminated grain as compensation. The agreement was confirmed by Mr Whitwell in an email to the Director General of IGB on 26 August 2002.
31.203 In an email to Mr Whitwell on 22 August 2002, Mr Hogan noted that AWB needed to think how it could 'legally' pay IGB the compensation. It should be observed in this context that there was a straightforward response to Mr Hogan's note: clause 9F of the long-form contract in relation to this shipment of wheat provided (as did all other IGB long-form contracts) that compensation payments were to be made to the UN escrow account. However, in Mr Whitwell's 26 August email to the Director General of IGB, Mr Whitwell raised, as an option for payment, that the compensation payment be offset against monies said to be owing to Tigris. This email was copied to Messrs Long, Hogan and Edmonds-Wilson.
31.204 In September 2002, Mr Long raised issues concerning both the payment of the compensation claim and AWB's role in relation to the recovery of the Tigris debt with the Corporate Risk Review Committee. At a CRRC meeting on 12 September 2002 and in a memorandum sent to CRRC members dated 16 September 2002, Mr Long raised as a possibility that the compensation payment be offset against the Tigris debt. In the memorandum, Mr Long noted that 'UN Regulations prohibit direct payment of funds to Iraq whilst Iraq is under UN sanctions.'
31.205 In late October 2002, Messrs Hogan and Whitwell travelled to Iraq and met with the IGB in relation to both the recovery of the Tigris debt and the payment of the compensation claim. A report of their meeting with IGB was sent to a number of senior officers, including Messrs Lindberg, Stott, Ingleby, Geary, Long, Edmonds-Wilson, Goodacre, Fuller and Ms Scales as an annexure to a 'summary'. The 'summary' stated:
Iron powder rebate (USD6pmt) is separate from other debt issues. The Minister has asked for repayment through inland transport mechanism.
and
Tigris debt has cabinet approval for repayment-final amount to be agreed during the next month by Tigris/Iraqis and then mechanism for repayment to be agreed during next visit.[418]
31.206 However the annexed trip report was somewhat different. Regarding the Tigris debt it recorded that in a meeting with IGB a proposal had been put in the following terms:
1. Offsetting vessel claims (iron filings) against Tigris (BHP) debt-approx. USD2 million.
2. Balance of debt to be recovered against new business (load up contract)-approx. USD7.5million (if using compound)
3. No further vessel claims would be used as offset-would need to be redirected through UN account.
It makes clear no agreement was reached either as to the amount of the Tigris debt or the method of its recovery, and that AWB had clarified that it was not involved in the amount of debt, only the 'mechanism' for recovery.
It later recorded that in a meeting with the Iraqi Minister under the heading 'Tigris issue':
Simple interest amount to be recovered by Tigris through loading up the next Phase 13 wheat business.
Vessel rejection claims as per original agreement to be paid through inland transport payment system against next contract-Phase 13…
AWB to advise re payment mechanism of rebate and to brief Tigris re Iraqi position on their debt. Tigris to have arranged figures and agreed prior to AWB visit to Iraq in December.[419]
This made clear that AWB had not, at that time, accepted that the compensation claim was to be repaid through the 'transport payment system'.
31.207 In relation to the meeting with the Oil Board representative, the report recorded the possible difficulties that may be encountered if the entire Tigris debt was incorporated in one 500,000 tonne wheat contract. The nature of Messrs Hogan and Whitwell's concern must have been apparent to the readers of the report: if the entire Tigris debt was added to the wheat price, it would be likely to be detected by the United Nations because the increased price would be anomalous and obvious. Thus, there was a clear understanding that the recovery of the Tigris debt by 'loading up' the price in the next wheat contract would involve a deception of the United Nations.
Mr Lindberg's evidence was that whilst he read the summary of the October meeting, he did not read the detailed trip report. For the reasons considered later in this chapter, I accept Mr Lindberg's evidence in this regard. Mr Lindberg did not learn from this report that the Tigris debt was to be recovered by loading up the contracts then under discussions with the IGB.
31.208 Mr Whitwell travelled to Iraq again in mid November 2000, this time with Mr Long. Mr Whitwell and Mr Long met with representatives of IGB and the Minister for Trade. At both meetings, Mr Long requested that consideration again be given to the mechanism by which the compensation payment was to be made. In the meeting with IGB, Mr Long asked for the mechanism to be reconsidered 'for corporate governance reasons.'
31.209 In late November 2002, AWB sought DFAT's preliminary advice concerning how a compensation claim could be paid to IGB. DFAT's advice was that the United Nations had advised that there were two ways in which compensation could be paid: either by discounting invoices in relation to future wheat shipments or paying the compensation into the UN escrow account. Mr Hockey, who dealt with DFAT in relation to this issue, advised Messrs Long, Whitwell and Hogan of this advice.
31.210 On 4 December 2002, Mr Whitwell, on behalf of AWB, struck an agreement with IGB in relation to the supply of 1 million tonnes of wheat. The agreed price incorporated an amount referable to the repayment of the Tigris debt, but did not include the inland transportation fee. That was to be agreed later.
31.211 The agreement to supply one million tonnes of wheat was subsequently divided into two contracts that were allocated the numbers A1670 and A1680. These contracts were executed on 12 December 2002. The short-form contracts were signed by Mr Hogan and the long-form contracts were signed by Mr Long. Both were authorised by Mr Geary. Reports containing details of these contracts were sent by Mr Edmonds-Wilson to, amongst others, Messrs Lister, Geary, Long, Whitwell, Hogan, Johnson and Ms Scales. The reports clearly disclosed that the price included transport fees of €51.30 per tonne and €8.40 per tonne to recover the Tigris debt. None of the recipients of the reports queried, or objected, to the contracts including the transportation fees or an amount referable to the recovery of the Tigris debt.
31.212 Despite the fact that Iraq's position in relation to the compensation claim had been made clear in previous communications, in an email sent on 17 December 2002, Mr Whitwell again raised with IGB the question of how the compensation payment would be made and its effect on the contract pricing. The Director General of IGB sent an email to Mr Hogan on the same day advising again that the compensation payment of US$2.017 was to be added to the inland transport payment. There is no suggestion that this was to be added to the contract price. Mr Hogan forwarded this email to Messrs Whitwell and Edmonds-Wilson on 23 December 2002.
31.213 Mr Edmonds-Wilson sent DFAT copies of the short-form contracts and accompanying Notification forms on 23 December 2002. None of these documents disclosed that the price included a fee of €51.30 per tonne, ostensibly relating to inland transport, or €8.40 per tonne, relating to the recovery of a debt, or that AWB had agreed to pay US$2.017 to Iraq as compensation for a past shipment and proposed to use the contracts as a vehicle to do so. Senior officers of AWB knew and intended that these matters would not be disclosed in the documentation that was to be sent to DFAT.
31.214 Following the finalisation of these contracts with IGB, Mr Whitwell, in consultation with Messrs Geary and Long, prepared a memorandum to Mr Lindberg in relation to these contracts.
31.215 There were various iterations of this memorandum. The final version was settled and circulated to Messrs Geary, Long, Hogan, Johnson, Cooper, Hockey, Ms Scales and Ms Lyons. It was 'recommended' by Mr Long and 'approved' by Mr Geary. It was probably forwarded to Mr Lindberg's office. The memorandum:
(a) confirmed 'for the record' that International Sales & Marketing had, 'through an uplift in price' and 'by allowing the new contract to be the conduit,' negotiated the recovery of the US$8.375 million Tigris debt by IGB
(b) confirmed the agreement to pay the IGB the agreed 'quality rebate' in respect of the allegedly contaminated wheat 'through the inland transport payments for the new contract'
(c) noted that the Iraqi Minister of Trade had insisted that the compensation be repaid through the inland transport system, that this had been his understanding of the agreement he had reached with Mr Lindberg and that Mr Long, who was present during those discussions, confirmed that 'this was discussed'
(d) after referring to UNSCR 661, noted that 'the Government of the Commonwealth of Australia would be obliged to prevent AWB Limited from making any remittance of funds to the IGB'
(e) set out the terms of an 'AWB Legal opinion', the effect of which was that if AWB management determined to make the payment to Iraq, it should be made in instalments over time coinciding with shipments of wheat and to a company other than IGB and in a jurisdiction other than Iraq
(f) referred to the advice that had been received from DFAT-referred to (in the final version of the memorandum) as an 'informal discussion'-to the effect that the 'quality rebate' should be either repaid into the escrow account or as a future contract price reduction
(g) referred to the concern expressed by AWB Public Affairs that this 'may not be well received by the United Nations' and that 'there was a reasonable chance of them finding out' and, in that context, to the view expressed by International Sales & Marketing that it did not want the United Nations involved and that it was confident that 'this issue could be handled without the need for the United Nations to be consulted'
(h) recommended that the debt be repaid to Iraq in the way outlined in 'AWBs legal opinion'-that is, by payment through Alia Transport in Jordan in instalments
(i) recommended that Mr Lindberg only convey AWB's 'intentions' to the Australian Government after letters of credit were in place.
The United Nations approved contract A1680 on 17 January 2003. Contract A1670 was approved on 22 January 2003, but the approval was not issued until 2 September 2003.
31.216 Regarding whether Mr Lindberg received or saw the memorandum, his evidence was that he neither received or saw the document or discussed it with any executive.[420] He did not waiver in that evidence. The evidence establishes that on 10 February 2003, Mr Geary prepared a file note addressed to Mr Lindberg to attach the signed memorandum by which he 'approved' Mr Whitwell's document. He said he forwarded it to Mr Lindberg's office, and there is other evidence suggesting he did. However, no document signed by Mr Geary to Mr Lindberg has been produced in answer to notices nor has any document bearing Mr Lindberg's initials been produced. Mr Geary's memorandum makes clear that it was intended to have a discussion of the contents with Mr Lindberg at which Mr Long and Ms Lyons were to be involved. No such discussion ever occurred.
I accept Mr Lindberg's evidence that he did not receive, see or discuss the document.
31.217 Ms Scales was on leave in early February until 14 February. At some time after her return she read the memorandum. Although the memorandum noted the recovery of the Tigris debt by inflating the contracts, the endeavours to offset the iron filing compensation, and the US$500,000 fee, the real subject of the memorandum was the proposal to pay back the iron filings compensation through the inland transport mechanism. Ms Scales said, and I accept, that she assumed the contract, including the US$8.375 million in the price, would be information produced to the United Nations for approval, and that such approval would be obtained. She did not turn her mind to the mechanism of how that sum would appear in the contract, she never having seen contracts submitted to the United Nations.[421] Regarding the iron filings compensation she understood International Sales and Marketing were putting up a proposal, which was supported by legal advice, and which required management approval. The statements of the views of the Pool in the 7 February memorandum were not views emanating from her.
Ms Scales' evidence gains great support from her conduct in July 2004 when she learnt, for the first time, that there had not been disclosure in the contracts to the United Nations of the inflation by inclusion of the Tigris debt. She was immediately concerned, fearing AWB may have breached sanctions and the Oil-for-Food Programme. She immediately suggested a meeting with Messrs Lindberg, Geary, Long, Johnson and Cooper, and required senior legal advice before any pay out to Tigris was made.[422]
31.218 Although the memorandum is shown as having been sent to Mr Hockey, the evidence establishes:
(a) Mr Hockey was overseas at the time of distribution of the memorandum.
(b) There is no evidence that the memorandum was received by him.
(c) Mr Hockey disagreed with the course proposed in the memorandum.
(d) Mr Hockey took steps to obtain and then convey the advice of DFAT as to the appropriate means by which the compensation claim ought to be addressed by AWB. What was proposed in the memorandum was contrary to the advice which Mr Hockey had obtained and conveyed.
(e) Mr Hockey had no prior or subsequent knowledge about the inland transportation payments that were to be made as part of contracts A1670 and A1680, and thus had no knowledge that DFAT and the United Nations were unaware of such arrangements.
(f) Mr Hockey had no knowledge of the loading up of the contracts with the Tigris debt.
31.219 In summary, I make the following findings in relation to contracts A1670 and A1680:
(a) Senior officers of AWB knew that the arrangements between AWB and IGB in relation to the supply of the wheat the subject of contracts A1670 and A1680 included that AWB would supply the wheat to Iraq on terms CIF Free Out Umm Qasr, but would pay a fee to an Iraqi entity totalling €51.30 per tonne. These fees were to be added to what was otherwise the CIF price, but were not revealed in the contracts as being components of the price.
(b) Senior officers of AWB also knew that the arrangements between AWB and IGB in relation to these contracts included that the price would be inflated by €8.40 per tonne to achieve recovery by AWB from the UN escrow account of US$8.2375 million to be used by AWB to facilitate the repayment by Iraq of a debt supposedly owed to Tigris and that AWB would be paid US$500,000 by Tigris for its participation.
(c) Senior officers of AWB also knew that the arrangements between AWB and IGB in relation to these contracts included that AWB would pay an additional US$2.01389 per tonne (or the euro equivalent) to IGB in respect of compensation due to the escrow account for a previous shipment of wheat. This payment was to be added to the so-called inland transportation fees of €51.30 per tonne.
(d) Senior officers also knew that the contractual documents that AWB supplied to DFAT for transmission to the United Nations did not disclose the true arrangements between AWB and IGB in relation to the supply of the wheat the subject of these contracts-and in particular did not disclose any of the arrangements in (a) to (c) above.
(e) The same officers knew that the payment of a fee or fees totalling €51.30 per tonne, and the payment of US$2.01389 per tonne, to an Iraqi entity contravened the UN sanctions and that the United Nations had not approved the making of such a payment. For this reason the payments were disguised as payments to Alia for transport services.
(f) The same officers knew that DFAT and the United Nations did not know, would not be told and had no way of finding out, that the contract price had been inflated by the amount of the Tigris debt.
(g) Throughout the period that officers of DFAT were responsible for making decisions or taking action relevant to this contract, namely between 20 December 2002 and May 2003, AWB, through its senior officers, concealed from DFAT the fact that its arrangements with IGB were materially different to those recorded in the contracts and the UN Notification forms referable to them and that the arrangements included payments by AWB indirectly to Iraq in contravention of the sanctions. It concealed the facts from the United Nations until after the last payment for A1670 was made.
(h) The concealment of those facts was intentional and dishonest and intended to influence the actions of DFAT and the UN in relation to the contract and shipments made under it.
31.220 The officers of AWB who were involved in, or knew about and authorised, the negotiation of these contracts and the associated arrangements with IGB, including the loading up of the contracts with the Tigris debt and the agreement to pay IGB compensation disguised as part of the transportation fees, and the concealment of information relating to the arrangements from DFAT are Messrs Geary, Long, and Whitwell. Mr Edmonds-Wilson performed only administrative functions in relation to these contracts. For reasons given above in the context of contracts A1111 and A1112, Mr Edmonds-Wilson's position was such that his acts and knowledge were not attributable to AWB.
31.221 In the report I have addressed the circumstances surrounding the agreements between AWB and IGB for the sale and delivery of wheat between June 1999 and March 2003, the contracts signed in respect of such agreements, the submission of such contracts and associated documents to DFAT and the United Nations for approval for payment from the United Nations escrow account under the Oil-for-Food Programme, and the application by AWB for permission to export from Australia to Iraq the wheat sold under those contracts. In that context, the question arises whether AWB might, prior to 24 May 2001, have contravened sections 29D, 29A or 29B of the Crimes Act 1914, or after 24 May 2001, contravened sections 135.1(7) and 136.1 of the Criminal Code and whether AWB might through out the whole of the period between June 1999 to March 2003 have contravened section 82 of the Crimes Act 1958 (Vic).
If, as I have found:
- the contracts submitted did not disclose:
(1) AWB's agreement to include in the wheat price an inland transportation (or trucking) fee which varied between the US$12.00 per tonne and US$51.15 so that such fee was paid to AWB from the escrow account
(2) AWB's agreement to pay such fee to Iraq or an Iraqi entity
(3) that the fee was a fixed fee for each phase determined by Iraq as a condition of tender
(4) that IGB had the obligation to discharge the wheat at Umm Qasr, and transport it to all governorates of Iraq
(5) that the above fee was not related to any contractual obligation that AWB had with IGB for discharge or transport of wheat
(6) AWB's agreement to pay the fee to an account nominated by the IGB
(7) that the fee would be paid to a third party to disguise the payment of the fee to an Iraqi entity
(8) in the case of contracts from November 2000, that the wheat price in the contracts also included an additional 10% fee imposed by Iraq, to be recovered from the escrow account, and which was payable to Iraq by AWB
(9) AWB's agreement to pay this additional fee to Iraq or an Iraqi entity
(10) AWB's agreement to pay such fee along with and as if it were part of the inland transportation fee
(11) in the case of contracts A1670 and A1680, that the price included the sum of US$8.375 per tonne not related to the price of wheat but being the amount of an alleged debt to Tigris that AWB had agreed with IGB and Tigris would be recovered from the United Nations escrow account for payment by AWB to Tigris. The US$8.375 per tonne included a sum of US$500,000 (equivalent to US$0.50 per tonne) to be retained by AWB as its commission for recovering the Tigris debt
(12) in the case of contracts A1670 and A1680, that AWB had agreed to pay to Iraq via payments to Alia, in addition to the 'trucking' fee, including a 10% service fee, an additional sum of US$2.016 per tonne as payment of compensation for an iron filings contamination claim.
- contrary to the terms of the contracts submitted, AWB did not have any obligation
(1) to discharge wheat at Umm Qasr or arrange or pay for such discharge
(2) to transport, or arrange or pay for transport of the wheat within Iraq.
and that under the terms of the agreement reached between AWB and IGB, those obligations remained at all times with IGB
- in the case of contracts A4653, A4654, A4655 and A4822, although the contracts submitted did refer to an obligation on AWB to pay 'discharge costs' of up to a maximum of 'USD12.00' (per tonne) 'to nominated Maritime Agents in Iraq':
(1) that clause did not accurately state or reflect AWB's agreement with IGB to pay the inland transportation fee
(2) the fee that AWB had agreed to pay under its agreement with IGB was not, as represented by that clause, a variable cost related to the discharge of the vessels and payable to the maritime agents in Iraq responsible for the discharge of the vessel's on AWB's behalf
and
and
and
and
then, in my view, there might have been such a contravention.
It is a serious matter to mislead DFAT into certifying and sending documents to the United Nations and granting permission to export on a false basis, to mislead the United Nations to agree to provide payment for wheat on a false basis, and to agree to make payments to Iraq in known contravention of United Nations sanctions.
I recommend that this matter be referred to the Task Force for consideration whether proceedings under sections 29D, 29A and 29B of the Crimes Act 1914 and sections 135.1(7) and section 136.1 of the Criminal Code and section 82 of the Crimes Act 1958 (Vic) be instituted against AWB.
31.222 Chapters 14 and 15 deal with circumstances surrounding the agreements between AWB and Savas Grain & Commodities Limited (Savas Grain) and Commodity Specialists Company (CSC) for the sale and delivery of wheat under contracts A4906, A4907, A4908, A4933, A0062 and A0101 and AWB's applications for permission to export from Australia to Iraq the wheat sold under those contracts between December 1999 and September 2000.
In that context, the question arises whether AWB might have contravened sections 29D, 29A or 29B of the Crimes Act 1914 in respect of those contracts and the applications for permission to export the wheat sold under those contracts.
If, as I have found:
(1) AWB's agreement under those contracts to pay a fee of US$12 (in respect of contracts A4906 and A 4908) and US$15 per tonne (in respect of contracts A4933, A0062 and A0101) to an Iraq nominated account and thereby to Iraq or an Iraqi entity
(2) the payment of the above fee had not been approved by the United Nations
(3) the payment of the above fee had not been disclosed to the United Nations in obtaining its approval to the underlying sale under the Oil-for-Food Programme
(4) the wheat price for which the wheat was sold under these contracts included the abovementioned fee
(5) the above fee would in effect be paid from the UN controlled escrow account (through its inclusion in the underlying contracts with the IGB which these contracts were to fulfil)
(6) the fee was a fixed fee for each phase determined by Iraq as a condition of tender
(7) contrary to the written terms of these contracts AWB did not in truth have any obligation
(a) to discharge wheat at Umm Qasr or arrange or pay for such discharge
(b) to transport, or arrange or pay for transport of the wheat within Iraq
(8) contrary to the written terms of these contracts, IGB had the obligation to discharge the wheat at Umm Qasr and transport it to all governorates of Iraq
(9) the fee payable by AWB was not related to any contractual obligation that AWB had under the contract for discharge or transport of wheat
(10) the fee would be paid to a third party to disguise the payment of the fee to an Iraqi entity
then, in my view, there might have been a contravention of sections 29D, 29A or 29B of the Crimes Act 1914 in respect of the granting of permission to export wheat shipped under contracts A4906, A4908, A4933, A0062 and A0101.
It is a serious matter to agree to make payments to Iraq in known contravention of UN sanctions, to assist in and facilitate such an agreement, to conceal that agreement from DFAT, and to mislead DFAT into granting permission for the export of wheat on a false basis.
I recommend that this matter be referred to the Task Force for consideration whether proceedings under sections 29D, 29A and 29B of the Crimes Act 1914 be instituted against AWB in respect of its applications for permission to export the wheat sold under contracts A4906, A4908, A4933, A0062 and A0101.
31.223 I am required by my Letters Patent to report whether any person associated with AWB Limited, as defined in the Letters Patent, might have, by decision, action, conduct, payment or writing, committed a breach of any law of the Commonwealth, State or a Territory.
31.224 Accordingly I must consider whether any directors or executives of AWB Limited or AWB International Limited might have accessorial liability for breaches of such laws which I have found AWB Limited might have committed.
31.225 The principles relating to accessorial liability for criminal offences are addressed in Appendix 26. Speaking generally, to establish accessorial liability, the following elements are required:
(1) the commission of the offence or offences by the principal offender (AWB):
(2) The accessory (the AWB officer) knew all the essential facts or circumstances which must be established in order to show that the offence was committed by the principal offender (AWB), whether or not the accessory knew that those facts amounted to an offence. Actual knowledge of essential facts and circumstances is required. Recklessness or negligence is insufficient. However, actual knowledge can in some circumstances be inferred from a deliberate failure to make inquiries. Such an inference is commonly referred to as 'wilful blindness'.
(3) With that knowledge, the accessory (the AWB officer) intentionally assisted or encouraged the principal offender (AWB) to carry out the acts that constitute the principal offence.
· The accessory (the AWB officer) must, by his words or conduct do something to bring about or render more likely the commission of the offence by the principal offender (AWB) and must intend that result-or be 'linked in purpose' with the principal offender.
31.226 Counsel Assisting have also contended that some officers might have breached the provisions of sections 180 to 184, and s. 1309 of the Corporations Act 2001, and s. 82 of the Crimes Act 1958 (Vic). The elements for breaches of those sections are also set out in Appendix 26.
31.227 The submissions of breach of each statutory provision is based on similar factual allegations. Accordingly it is convenient to address all submissions regarding each person whom Counsel Assisting submit might have breached any statutory provision. I will address the persons in alphabetical order. If a person is not addressed who has been mentioned in the report, that is because Counsel Assisting has not considered there is any material which would suggest that such person might have offended against any law of the Commonwealth, a State or a Territory. It is important that it be understood that because it is necessary to mention a person by name in the recounting of the events which have occurred that does not mean such person might, in any way, have been guilty of any impropriety.
31.228 Where I refer to 'accessorial liability' I am referring to possible accessorial liability in respect of possible offences by AWB against ss 29A, 29B and 29D of the Crimes Act 1914 ss 135.1(7), 135.4(7) and 136.1 of the Criminal Code and s. 82 of the Crimes Act 1958 (Vic).
31.229 It was submitted that Mr Borlase might have accessorial liability.
31.230 Mr Borlase joined AWB in 1995. In late 1998 he commenced with the International Sales and marketing desk as an entry level marketing executive. He was the most junior person on that desk, providing administrative assistance to his managers, Mr Emons and later Mr Hogan. At all times during his involvement with the trade with Iraq between June 1999 and November 2000 when he took up other duties, he acted under the supervision of his managers. As part of his administrative role he wrote correspondence to traders and DFAT, and performed the function, in respect of several contracts, of forwarding contracts to DFAT for submission to the United Nations.
31.231 Mr Borlase, along with superior officers, was the recipient of Mr Hogan's email of 16 June 1999 seeking information prior to his visit with Mr Emons to Baghdad to discuss the new tender requirements. He was also the recipient of Mr Hogan's email of 11 October 1999 with suggestions of how to overcome the difficulties of making payments to Iraq. It must have been obvious to Mr Borlase that that issue was being discussed. In December 1999, under the supervision of Mr Emons, Mr Borlase negotiated, booked and authorised contracts A4908 and A4906 with Russian grain traders which contracts, prepared by Mr Borlase, provided:
This price includes a fee of USD12.00 pmt to be paid directly by seller to Grain Board of Iraq advised account.[423]
He also booked and authorised contract A4907 with the same traders. A letter to Mr Borlase from the traders noted:
As the contract is less recent, the payment of USD12.00 per m ton for inland transportation is not required.[424]
Mr Borlase must have been aware that when a transportation fee was required to be paid, it was a payment required to be made by and to Iraq.
31.232 In January and February 2000, Mr Borlase was involved in the removal of the clause from the AWB's short-form contract which disclosed payment of a fee to an Iraqi entity. Working under the supervision of Mr Emons until June 2000, it would seem unlikely he was unaware that the contract he prepared and submitted to DFAT for United Nations approval did not disclose the true arrangements made with IGB.
31.233 In January 2001, Mr Borlase was transferred to AWB's Cairo office as an Account Manager responsible for sales in Egypt and Yemen. In February 2001, he accompanied Mr Hogan to Iraq to negotiate further sales. His evidence was that, on the way to Baghdad, Mr Hogan explained to him the negotiations which had occurred in November 2000 that resulted in an increased 'trucking fee as well as the addition of a sum of 10% of the contract price as part of the undisclosed 'trucking fee' in the contract. He said that this was the first occasion he understood the arrangements, and it was not until this trip that 'the penny dropped'. In the trip report he prepared on the Iraqi trip he wrote:
Trucking fee/service fee: The trucking fee is now USD25.00 pmt all Governates of Iraq with a 10% service fee on the entire FIT value of the contract. We believe the increase in trucking fee and addition of the service charge is a mechanism of extracting more dollars from the escrow account.[425]
31.234 Undoubtedly Mr Borlase understood the true arrangement at least by then and that trucking fees and surcharges AWB was paying were payments back to Iraq.
31.235 The evidence of participation of Mr Borlase in activities relating to contracting with Iraq and any deception by AWB of DFAT and the United Nations which might attract accessorial liability is limited to the period June 1999 to February 2000, and contracts A4653, A4654 and A4655 (July 1999) and A4970, A4971 and A4972 (January 2000), and the removal of the clause in the AWB short-form contract which referred to payments to an Iraqi entity. In each instance, the activity Mr Borlase engaged in was of an administrative nature performed at the direction of Mr Emons. In my view having regard to Mr Borlase' junior position and lack of authority, such participation is not sufficient to attach to Mr Borlase any accessorial liability.
31.236 I make no adverse findings against Mr Borlase.
31.237 It was submitted that Mr Cooper might have committed offences against ss 180, 181, 1307 and 1309 of the Corporations Act 2001, and ss 194 and 195 of the Crimes Act 1958 (Vic).
31.238 For reasons given, s. 1307 of the Corporations Act 2001 and ss 194 and 195 of the Crimes Act 1958 (Vic) have no application
31.239 Mr Cooper was General Counsel at AWB. At relevant times he reported to Mr Lindberg. His role was to oversee and manage the legal division within AWB. He played no role in relation to sales of wheat to Iraq or contracts related to those sales. His advice was not sought prior to AWB entering into contracts A1670 and A1680 and the inflation of those contracts by inclusion of the Tigris debt.
31.240 In about July 2004 Mr Cooper was instructed to investigate issues related to the Tigris matter. That occurred when Ms Scales learnt for the first time that contracts A1670 and A1680 as submitted to the United Nations were 'silent on Tigris'. She required that senior legal advice be obtained before any monies were paid out to Tigris. Mr Cooper instructed Mr Quennell, who had been investigating Project Rose, to investigate the matter. The investigation became known as Project Water.
31.241 From at least March 2003 various draft agreements between AWB and Tigris had been passing between Mr Whitwell, Ms Lyons, Mr Long and Mr Davidson Kelly. Mr Cooper was not involved in those exchanges.
31.242 On 9 September 2004 Mr Cooper advised Ms Scales:
Conclusion is that on the facts we have been provided there is no breach of Australian law. Facts are however quite patchy. There appears to be breach of UN Resolution 661 because the increase in contract payments to repay the Tigris debt and the processing of this higher amount through the OFF programme was never disclosed and was not a payment for a humanitarian purpose.[426]
That was the advice Mr Cooper received from Mr Quennell of Blake Dawson Waldron.[427]
31.243 On informing Mr Lindberg of this on 10 September 2004, Mr Lindberg required the advice of senior counsel before the matter proceeded to payment. Mr Cooper told Mr Lindberg the debt had been recovered by inflating the contract price for wheat.[428]
31.244 Advice was then obtained from Dr Donaghue, Mr Tracey QC and Mr Richter QC. The advice received was based on a draft statement of facts prepared by Mr Quennell as a result of his inquiries, which was to be signed off by Messrs Stott, Long and Whitwell.
31.245 On 30 September 2004 Ms Peavey forwarded to Mr Cooper a draft agreement which he forwarded to Mr Davidson Kelly, who approved it with minor amendments.
31.246 On 14 October 2004, on Mr Cooper's instructions, Mr Quennell briefed Mr Tracey QC and Mr Richter QC. Each was informed of the inflation of contracts A1670 and A1680 to recover the Tigris debt.
31.247 By 26 October 2004, Mr Quennell had received advice from Mr Tracey QC that resolution 661 had not been breached, and from Mr Richter QC that the crimes on which he had been asked to advise had not been committed. He advised that the payment to Tigris could be made. Mr Quennell passed that advice to Mr Cooper.
31.248 On 10 November 2004, Mr Cooper wrote to Mr Lindberg and Ms Scales advising that Messrs Stott, Long and Whitwell had 'signed off' on the chronological review of the facts, that each senior counsel confirmed 'there was no breach of the law involved in the transaction', that the transaction did not require board approval but it was 'required to be reported' to the board, that an agreement had been drawn up between AWBI and Tigris Petroleum which was attached, and that in Mr Cooper's view, Tigris had assisted AWBI in securing the IGB grain market in 2002.
31.249 On 19 November 2004, Mr Lindberg gave approval in principle to proceed, with formal approval to occur the following week. Mr Lindberg advised through Dr Fuller that the 'success fee 100% to AWBI.'
31.250 On 21 November 2004, Mr Cooper forwarded the draft agreement to Mr Quennell for necessary amendments, and sought tax advice regarding it.
31.251 On 26 November 2004, Mr Quennell provided Mr Cooper with an amended draft which Mr Cooper sent to Mr Davidson Kelly as the 'final draft'. He replied suggesting one amendment.
31.252 On 1 December 2004, Tigris faxed an invoice for a 'service fee' for the agreed amount payable by AWBI.
31.253 On 2 December 2004, Mr Cooper asked Mr Lindberg to sign off on the agreement. Dr Fuller signed the agreement for AWBI. The monies were paid to Tigris on 9 December 2004.
31.254 At the joint information sessions and the board meetings on 14 and 15 December 2004, Mr Lindberg informed the boards of the transaction.
31.255 Against this background, the question arises whether Mr Cooper might have breached s. 1309 Corporations Act 2001 in that he furnished or authorised the furnishing of information to directors, including Mr Lindberg, in relation to the Tigris matter which was false or misleading in the following respects:
(i) the information provided included information that Tigris had assisted AWB in recovering threatened wheat sales to Iraq, when in fact it had not done so
(ii) in consideration of that assistance AWB had assisted Tigris to recover its debt, when that was not the reason it had done so
(iii) Mr Cooper did not tell the Boards that the agreement AWB had executed with Tigris and under which it had paid it approximately US$7 million, was a sham agreement because it falsely portrayed that the payment was a service fee when in truth no service had been provided by Tigris and the money was payment of a collected debt
(iv) Mr Cooper failed to tell the Boards the manner in which AWB had recovered the Tigris debt, namely by 'loading up' the contract price, and deceiving DFAT and the United Nations
(v) Mr Cooper failed to inform the Boards that legal advice obtained included legal advice from junior counsel which suggested the law had been breached, and the advice from senior counsel was qualified in certain aspects.
31.256 Regarding the meetings on 14 and 15 December 2004 with the directors, it is not clear whether Mr Cooper spoke at all, whether he provided notes to Mr Lindberg to which Mr Lindberg spoke, or whether Mr Lindberg spoke and Mr Cooper noted what he said. If Mr Cooper did speak, what he said is not clear.
31.257 It was submitted by Mr Cooper that the duty to inform the Board of the Tigris matter lay either solely or principally with Mr Lindberg as Managing Director. Mr Cooper had advised him of that obligation on 10 November 2004. Mr Cooper had no right to address the boards unless invited to do so. The probability is it was Mr Lindberg who spoke of the matter to the boards. There is substance in those submissions.
31.258 Regarding the substance of the submission against Mr Cooper that he knew that the agreement signed between AWB and Tigris did not reflect the true factual circumstances in that it did not mention debt recovery but referred to payment of commission when he knew there was no agreement for provision of service by Tigris to AWB, Mr Cooper's submission was, in substance, that the evidence he had been able to give was constrained by AWB's claim for legal professional privilege. Nonetheless, Mr Quennell had explained to him that there were two parts to the Tigris transaction, the second presumably being the provision of services in Iraq to retain the IGB market; he had spoken to Mr Davidson Kelly in September 2004 regarding the influence of Tigris in Iraq in 2004 and this was an indication of a view or belief that Tigris had assisted AWB; there were other references in the notes of lawyers involved in examining the Tigris transaction including Blake Dawson Waldron, and Ms Peavey which supported the view that Tigris may have assisted AWB, that Ms Lyons and Ms Peavey, and Mr Quennell had all given evidence of instructions that Tigris may have assisted AWB, and that paragraph 19 of the final Project Water chronology states 'Tigris offered assistance to AWB in 2002 in procuring contracts between AWBI and IGB. Informal understanding reached with Tigris to this effect (no written agreement).' This last reference was to a document produced after the privilege hearing which apparently was a working document. The source of the quoted passage is noted as 'C. Whitwell, interview'. The comment regarding the passage was: 'What did Davidson Kelly do? Was the restoration of the 1m MT sale a result of his efforts? We don't know. It was possibly a combination of AWB's and Tigris's efforts.'[429] This document was not the 'final Project Water chronology', and was not signed off by Messrs Stott, Long and Whitwell as correct. However assuming it was the document to which Mr Cooper was making reference, contrary to paragraph 1 of his memorandum, it was no basis for the opinion expressed in paragraph 7 that Tigris had assisted in securing the Iraqi trade. The words quoted make clear to a reader of them that it was not known whether any such effective assistance had been given by Tigris.
The final summary signed as correct by Mr Stott, Mr Long and Mr Whitwell makes no reference at all to Tigris offering assistance to AWB in 2002.[430] Further, Mr Whitwell endorsed above his signature the following:
It should be noted, however, that I had no involvement in, or knowledge of, the Tigris issue until October 2002. It follows that the matters noted in paragraph 1-27 are not within my personal knowledge.
31.259 Nobody familiar with the 'Project Water-Summary' of facts would draft or approve the agreement in the form in which it was signed. The facts summary makes no mention of Tigris providing any service to AWB. The facts summary provides no basis for any view that Tigris 'secured' for AWBI the Iraq market as Mr Cooper's email of 10 November states in paragraph 7. That email in paragraph 1 states that the factual review had been completed and that the relevant business managers had signed off the document. They had not. The Tigris agreement was a sham and Mr Cooper must have known that. Once the transaction had been cleared by Counsel as not being contrary to law, it appears from paragraph 7 of the email that there still remained the need to provide an apparent basis on which Mr Lindberg and Ms Scales could justifiably be asked to pay the monies from the pool. They could do so if the payment 'maximises the net pool to growers… by securing… markets'. Mr Cooper expressed the view that it did to provide a justification for payment out of the pool. He must have known there was no factual basis for his advice in that regard to his Managing Director, Mr Lindberg.
31.260 He allowed Mr Lindberg to approve execution of the agreement on a false basis, and inform the other directors of the Tigris transaction ignorant of the truth.
31.261 If, as I have found, on 10 November 2004 Mr Cooper, as an officer of AWB:
- information to the effect that in 2002 Tigris Petroleum provided assistance to AWBI which substantially contributed to AWBI saving its wheat market with the IGB after it was threatened to be cut in half because of Australia's political support of the US against Iraq and that, in return for this assistance from Tigris, AWBI agreed to assist in recovering the debt owed by IGB to Tigris Petroleum
- Mr Cooper's view that 'this transaction' assisted AWBI in securing the Iraqi grain market
and
- Tigris provided no assistance to AWBI in 2002 which assistance substantially contributed to AWBI saving its wheat market with the IGB
- There was no factual basis for Mr Cooper's view that anything done by Tigris assisted AWBI to secure the Iraqi grain market
then in my view, Mr Cooper might have committed an offence against section 1309(1) of the Corporations Act 2001.
Even if Mr Cooper did not know that the information he furnished, or permitted or authorised to be furnished to Mr Lindberg was false or misleading as indicated, if, as I have found, Mr Cooper nevertheless failed to take reasonable steps to ensure that the information was not false or misleading, in my view he might have committed an offence against section 1309(2) of the Corporations Act 2001.
It is a serious matter for an officer of a public corporation to knowingly provide materially misleading information in relation to the affairs of the corporation to a director of the corporation or to fail to take reasonable steps to ensure that information provided to directors is not misleading. Mr Cooper's actions were particularly serious because they resulted in Mr Lindberg approving the execution of the agreement with Tigris on a false basis and caused Mr Lindberg, who remained ignorant of the true position, to in turn provide the same false or misleading information to the other directors of AWB and AWBI.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under section 1309(1) or section 1309(2) of the Corporations Act 2001 be instituted against Mr Cooper.
31.262 It was submitted that Mr Edmonds-Wilson might have accessorial liability.
31.263 Mr Edmonds-Wilson was a marketing assistant in AWB's International Sales and Marketing Division from April 2001 to May 2003. He was the most junior employee in that division. His role was to provide administrative assistance to his superiors. He was not responsible for negotiating wheat sales contracts or preparation of the written agreements reflecting agreements reached.
31.264 When he took up his position in April 2001, the arrangements for payment to Alia were in place. He continued payments under those structures without inquiry.
31.265 I am satisfied that because of his junior administration role, no conduct of Mr Edmonds-Wilson was of such quality or character to attract any accessorial liability.
31.266 I make no adverse findings against Mr Edmonds-Wilson.
31.267 It was submitted that Mr Emons might have accessorial liability, and might have committed offences against s. 184 of the Corporations Act 2001.
31.268 Mr Emons did not dispute that he was fully familiar with the true arrangements between AWB and the IGB. He was involved in making those arrangements. He was also familiar with AWB contracts lodged with DFAT and the United Nations, signing many of them. It necessarily follows that he knew the contractual arrangements disclosed to DFAT and the United Nations did not disclose the true arrangements.
31.269 Mr Emons' evidence was supported by the documentary evidence. His recollection was generally sound. In its Project Rose investigation, AWB did not interview Mr Emons although advised to do so. Nor did AWB facilitate the IIC interviewing Mr Emons. I do not doubt that Mr Emons would have told the truth in either instance. I am satisfied that Mr Emons' evidence is generally accurate. Without his assistance, the task of this Inquiry would have been even more difficult. No doubt these are matters that the prosecuting authorities will consider.
31.270 I am satisfied Mr Emons was an officer within the meaning of s. 9 of the Corporations Act 2001.
31.271 If, as I have found:
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB referred to above
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme
and
(1) negotiating, together with Mr Hogan, the agreement with IGB which included payment of the fees
(2) signing, on behalf of AWB, some of the contracts with the IGB that were to be provided to DFAT and the UN (knowing that they did not accurately reflect the agreements between AWB and IGB)
(3) informing other senior persons within AWB, including Mr Officer, Mr Flugge, Mr Ingleby, Mr Rogers and Mr Snowball of the conduct AWB was engaging in and proposing to engage in and obtaining their consent or approval or assistance to engage in, and continue to engage in, that conduct
(4) arranging with others, including Mr Watson, Mr Owen, Mr Lister and Mr Hogan to create and implement systems giving effect to the true contract between IGB and AWB, including systems designed to disguise or conceal from DFAT and the UN that a payment was being made to Iraq or to an Iraqi entity
(5) not informing DFAT or Austrade during his dealings with them concerning the Canadian complaint that AWB was in fact making the payments the subject of the complaint
(6) writing to IGB to ensure that it did not disclose the fact of the payments
(7) causing, or directing, Mr Borlase to delete from the short-form contracts with IGB any reference to payments to 'the nominated Maritime Agents in Iraq'
(8) directing his subordinate, Mr Borlase, to forward the written contracts which did not contain the true arrangements to the UN for approval
and
or
then, in my view, Mr Emons might have aided, abetted, counselled or procured the offences that AWB might have committed against sections 29D, 29A and 29B of the Crimes Act 1914 and section 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of section 5 of the Crimes Act 1914, and sections 323 and 84 of the Crimes Act 1958 (Vic) respectively.
31.272 If, as I have found that:
- that AWB was required to submit applications for permission to export wheat from Australia to Iraq
- that AWB did not disclose to DFAT at the time of those applications, and concealed from DFAT thereafter, information relating to the contracts under which the wheat was sold that was material to the granting of these permissions, namely:
(1) that the contracts included an agreement to pay a fee of US$12 per tonne to an Iraq nominated account and thereby to Iraq or an Iraqi entity
(2) that the payment of the fee had not been approved by the United Nations
(3) that the payment of the fee was otherwise in breach of United Nations sanctions
(4) that the fee would be paid to a third party to disguise the payment of the fee to an Iraqi entity
(5) that contrary to the terms of the written contracts, AWB did not in truth have any obligation to discharge the wheat at Umm Qasr or arrange for or pay for the cost of its discharge or any obligation to transport the wheat within Iraq or arrange for or pay for the cost of the transportation of the wheat within Iraq
(6) that contrary to the terms of the written contracts, these obligations remained with IGB
(7) that the abovementioned fee paid by AWB under these contracts was not being paid in discharge of any contractual obligation that AWB had under the above contracts to discharge and transport the wheat sold within Iraq
- that AWB failed to disclose this information with the intention of deceiving DFAT and thereby to dishonestly influence their actions or otherwise obtain a benefit relating to or arising from participation in or the shipment of wheat under the Oil-for-Food Programme
- that DFAT, unaware of the matters referred to above, granted permissions to export the wheat sold under the abovementioned contracts under the Customs (Prohibited Exports) Regulations
and
(1) negotiating and authorising AWB's entry into contracts A4906, A4908, A4993; A0662 and A0101 which included the contractual obligation to pay fees to an Iraqi entity or nominated account
(2) failing to disclose to DFAT, or failing to direct or cause other officers or employees of AWB to disclose to DFAT, the fact that AWB's contractual arrangements included the payment of fees to Iraq or an Iraqi entity and that the fees were incorporated in the contract price, in circumstances where he had a duty to disclose, or direct disclosure, because:
(i) he knew that those facts were material to the decisions or conduct of DFAT relating to the issuing of permissions to export
(ii) he knew that those facts had not been, and would not otherwise be disclosed to DFAT
and
then, in my view, between July 1999 and his departure from AWB in July 2000, Mr Emons aided, abetted, counselled and procured the offences that AWB might have committed against sections 29D, 29A and 29B of the Crimes Act 1914 in respect of contracts A4906, A4908 A4993, A0662, and A0101 and therefore might himself have committed offences against those sections by reason of section 5 of the Crimes Act 1914.
It is a serious matter to agree to make payments to Iraq in known contravention of UN sanctions, to assist in and facilitate such an agreement, to conceal that agreement from DFAT and to mislead DFAT into granting permission for the export of wheat on a false basis. It is also a serious matter to intentionally participate and assist in such conduct and to thereby aid and abet in such conduct by AWB.
I therefore recommend that this matter be referred to the Task Force for consideration whether proceedings under sections 29D, 29A and 29B of the Crimes Act 1914 be instituted against Mr Emons in relation to contracts A4906, A4908, A4993, A0662, and A0101.
31.273 If, as I have found, Mr Emons, in the period from about June 1999 to July 2000:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to Alia (or to Alia via other third parties) to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
and
- there was no contract between AWB and Alia in relation to the payment of the fees
- Alia performed no services for AWB
- Alia paid the fees on to Iraq or an Iraqi entity in contravention of the UN sanctions
- the above facts were concealed from DFAT or the United Nations
then, in my view:
It is a serious matter for an officer of a public corporation such as AWB to authorise the corporation to enter into agreements in breach of statutory duties that the officer owes to the corporation, particularly where the officer acts intentionally, dishonestly or recklessly in breach of those duties.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under section 184 of the Corporations Act 2001 be instituted against Mr Emons.
I make no findings against Mr Emons in relation to the civil penalty provisions of the Corporations Act 2001 because any proceedings against Mr Emons for any possible contravention of these provisions would be time barred by reason of s. 1317K of the Corporations Act.
31.274 It was submitted that Mr Flugge might have accessorial liability, and might have committed offences against ss 180, 181 and 184 of the Corporations Act 2001.
31.275 Mr Flugge has had a long association with the Australian Wheat Board and after its privatisation in 1998, with AWB. He was appointed a director of the Australian Wheat Board in 1984, became Deputy Chairman in 1991, and non-executive Chairman in 1995, retaining that position until March 2002. He visited Iraq in 1996, 1998, October 1999, June 2001 and August 2002. His evidence was that as Chairman he was responsible for the strategic direction of the company, but not its day to day management. Nonetheless he said he was 'generally aware that our contract with Iraq included a transportation component', but was not aware of 'who provided the transportation or at what cost'.[431]
31.276 His evidence was:
I understand that the contracts also contained the provision for inland freight to the various Governorates or from Aqaba to Iraq by road. The contracts were in effect 'CIF all Governorates Iraq'. My understanding (and I am not certain … how I came about this understanding and the source of it) was that this was acceptable to the UN as the road freight was similar in nature to the sea freight.[432]
And later:
From 1999 to 2002, I was never informed of the manner in which inland transportation fees were negotiated or the identity of the transportation company.[433]
31.277 Mr Flugge believed that UN sanctions did not permit AWB to make payments to an Iraqi entity or to Iraq, unless approval was sought and obtained from the United Nations.[434]
31.278 There is evidence before the Inquiry that suggests Mr Flugge had a greater involvement in approving the changed contractual arrangements with Iraq in June 1999 than he maintained.
31.279 In June 1999, Mr Flugge together with Mr Officer and Mr Emons attended an International Grains Conference in London. Evidence I have accepted indicates there was publicly discussed the payment of trucking fees in Iraq, with an officer of Ronly suggesting that the company might be able to help AWB in relation to such payments. Mr Flugge could not recall hearing any such conversation.
31.280 The requirements of Iraq under the phase VI tender in June 1999 introduced for the first time in AWB's experience, a supposed obligation for AWB to both discharge and transport grain within Iraq. In truth they required AWB merely to pay a fee into an account nominated by Iraq. Mr Officer gave evidence that he spoke to Mr Flugge about the new contractual terms on the basis that if the US$12 payment was not made there would be no business. His evidence was that Mr Flugge said:
this was a necessary part of doing business with Iraq and that the role we had at AWB was to maximise opportunities and sales returns for the commodities we were dealing with, and that we should proceed.[435]
31.281 In October 1999, Mr Flugge headed a delegation comprising Mr Rogers and Mr Hogan (who substituted for Mr Emons at the last minute) to Iraq. Mr Hogan's evidence was that, although he could not recall giving Mr Flugge the brief, Mr Flugge would have been briefed 'about any matters which were on the table, including the inland transport fee'.[436] That is as one would expect. At a meeting between Mr Daoud, Mr Flugge, Mr Rogers and Mr Hogan, the inland transport fee of US$12 per tonne was discussed, Mr Hogan protested against the requirement that the sum be prepaid, and proposed mechanisms for payment were discussed. Mr Daoud explained that the President of Iraq had decreed that all suppliers to Iraq must make the payment before vessels would be unloaded. Mr Flugge's evidence was that he did not pay attention to the conversation and had no recollection of it. It is inherently improbable that, having come from Australia, Mr Flugge would not have paid attention to discussions regarding new and unique payments AWB was required to make. The matters referred to were undoubtedly discussed. Whether Mr Flugge heard them gives rise to the question of whether Mr Flugge's evidence of non hearing or non recall is accepted.
31.282 On 9 November 2000, Mr Flugge, accompanied by Mr McConville and Mr Snowball, met Mr Nicholas of the Australian Trade Commission in Washington DC. Mr Nicholas raised with him what was in substance the Canadian complaint, namely whether there were irregularities in AWB's dealings with Iraq outside the purview of the Oil-for-Food Programme. Mr Nicholas told Mr Flugge the issue had been raised by the United Nations. Mr Snowball related the United Nations query to 'discharge/trucking' arrangements. There is no evidence of any conversation between him and Mr Flugge on that topic, although he gave evidence that the main discussion was between Mr Flugge and Mr Nicholas. Mr Snowball's email reporting on the meeting recorded 'we played down the issue'.[437] Mr Flugge understood that AWB would 'provide a full response', yet so far as the evidence extends, did nothing to ensure a response was provided. Either Mr Flugge knew what was being spoken of at this meeting or he did not. If the evidence of Mr Officer is accepted, or if it were found that he had heard the discussion in October 1999 between Mr Daoud and Mr Hogan, or if he had been briefed by Mr Hogan before that October trip, he would have known that what was being discussed was the trucking fee payments. If he did not know what was being spoken about, one would reasonably expect him to have asked Mr Snowball who undoubtedly knew for he said as much in both telephone conferences with Mr Emons and in an email shortly after the meeting. It is likely Mr Flugge did know what was being spoken about. Yet again, Mr Flugge could not recall the meeting.
31.283 In late March 2000, some three weeks after the meeting in Washington, Mr Emons spoke to Mr Flugge about trucking fees in Iraq. He recorded in an email to Mr Watson dated 4 March 2000 the following:
For your information I had a discussion with Trevor Flugge last week to discuss some of the finer points of the trucking fees. He is happy for us to carry on in fact he is determined that we should be accommodating to the Iraqi's so that our business does not come under threat from our US or CWB friends.[438]
31.284 There is no basis whatsoever for doubting Mr Emons' evidence, or the substance of his discussion with Mr Flugge as recorded in the email. It was contemporaneous; it was written prior to Mr Emons going to Iraq to 'clarify when we get to Baghdad that the fee on the new contract is USD15 and that the method of payment remains the same to Alia etc and in what amounts',[439] and Mr Emons had no reason to record anything other than what had happened. He would not have expected that his email would later be studied. If the contents of the email accurately record the substance of the discussion it must be the case that Mr Flugge was, at the very least from late March 2000, fully informed about the details of the payments of fees to Iraq through Alia because Mr Emons was fully aware of the true arrangements with Iraq, and there was no reason for him not to fully inform Mr Flugge as he recorded he did. Urging Mr Emons to be accommodating to the Iraqis to retain the trade was the same sentiment Mr Officer said Mr Flugge had expressed to him. Again, Mr Flugge had no recollection of the discussion with Mr Emons.
31.285 At the latest, from March 2000, officers in AWB proceeded upon the basis that payment of the trucking fees to Iraq through the mechanism of Alia, had the approval of the Chairman, Mr Flugge, as being a necessary step to keep the Iraqi business and repulse threats from American and Canadian competitors.
31.286 On 5 April 2000, Mr Emons drafted a letter in the name of Mr Flugge as Chairman, to be sent to Minister Saleh in Iraq.[440] It is now known the letter was drafted on 5 April 2000 the day following Mr Emons record of his discussion with Mr Flugge of the previous week. Mr Emons said he left the letter for Mr Flugge's signature and later collected it. The letter was delivered by Mr Laskie to Minister Saleh on 15 April 2000 in Baghdad.[441] It is unlikely an unsigned letter would have been delivered. Mr Flugge had no recollection of ever seeing the letter before it was shown to him in the witness box.
31.287 The letter included:
While in Baghad I will ask AWB to discuss recent communication from [the] United Nations concerning trucking fees. As you are aware both the Canadian and American Governments have raised this issue with the United Nations. It is our intention to remain committed to the terms of trade agreed between IGB and AWB. The Australian Government equally supports this commitment to our trade.[442]
This paragraph restates the sentiment expressed by Mr Flugge to Mr Emons in their conversation at the end of March 2000. It is an endorsement by Mr Flugge of the arrangements to pay trucking fees to Iraq via Alia.
31.288 On 22 July 2002, Mr Nori Bali, a director of Ronly, wrote to AWB's Corporate Counsel, Ms Peavey, concerning a commercial dispute:
I was present during the meetings and discussions which took place with Trevor Flugge, the then Chairman of AWB; Michael Watson, the then head of chartering and Nigel Officer and Mark Emons who, at the time were responsible for AWB's business with Iraq. Paul Ingleby head of AWB's finance department was also fully aware of and authorised those transactions.
Prior to being approached by the AWB we had no involvement either direct or indirect with the AWB's sales of wheat to Iraq. In early 2000 the AWB became concerned at whether payments which they were making for inland trucking in Iraq were in breach of UN sanctions against Iraq. The AWB approached us for assistance. At the time when the relevant discussions took place the AWB had already concluded the contract of affreightment with Atlantic and Orient pursuant to which the 'Amarantos' was chartered. Atlantic and Orient only agreed to the transfer of the contract on the basis that the AWB would remain responsible for the management and control of the vessels chartered for all financial obligations. Equally we were about to enter into a joint venture partnership with the AWB. We required and were given the assurance that this business would be fronted by us and an offshore company on a full indemnity basis.[443]
31.289 Mr Flugge thought he was never at such a discussion with Mr Bali, and Mr Bali was not called. Messrs Watson, Officer and Emons were not asked about any such meeting because the document was not produced until later in the hearings. It was submitted the document might not be admissible against Mr Flugge. Nonetheless, if on further investigations, it were to be found that Mr Flugge did partake in such meetings in March 2000 when it is known arrangements were made with Ronly by AWB to hide payments to Iraq by channelling them through a Liechtenstein company with a Chinese name, it would be strongly indicative of knowledge by Mr Flugge of the detail of arrangements with Iraq and the reason for AWB seeking to hide payments to Iraq by channelling them through Ronly or its nominee to Alia. On any view the letter gives strong support to the evidence of Mr Officer and Mr Emons that Mr Flugge had knowledge of AWB's arrangements for circumventing United Nations sanctions.
31.290 In 2004, Mr Quennell was making inquiries as part of Project Rose. He and Mr Cooper had a telephone conference with Mr Flugge. Mr Quennell's notes read, in part:
I can recall talking to the management team (Mark Emons).
Some discussion re transport thing.
Effectively we paid money back to IGB then they did inland transport-
we paid it back through Ronly-they paid Alia Transport.
I can remember discussions with Emons-in contract-yes we can do this-
never detailed discussion-not issue for board-management issue.
Canadians had trouble-ships turned away from port
I recall this payment would be made through Ronly-
my suspicions were it was a set-up between Emons & Ronly.
Once AL came on board-clean out of staff-we were paying Alia direct-life went on
I thought it was approved by UN-always upfront-money went for inland transport
I have no idea where money actually went-some money would have been spent on inland transport-
Some transport from Jordan-
Significant costs for transportation
IGB had no money-need for infrastructure to be built-needed source of income to do that-
Extensive bunker building programme IGB were involved in.
Even Umm Qasr itself port improvements-
We're all looking for 'hidden dollar'-
most of money legitimately spent
This comes more from hindsight now as opposed to the time.
…
7/4/00.
Fair degree of openness about this
…
UN weren't saying don't pay, but this is how to pay
Don't Breach Rules!
My reason concern was Ronly link-[444]
31.291 These notes are, to some extent, equivocal. There is difficulty in establishing with precision what knowledge disclosed by them related to the date of the teleconference, and which to an earlier period. They do display, however, a far greater understanding of events than Mr Flugge deposed to before me. They confirm discussions with Mr Emons about transport, and that must have been prior to June 2000. They disclose an understanding that money was being paid back to Iraq through Ronly and Alia. They acknowledge an understanding of the use of Ronly, which gives support to the evidence of Mr Emons and the letter from Mr Nori. The tenor of the notes suggests an understanding that the 'transport' fees paid back to Iraq were used in part for transport and in part for infrastructure development in Iraq, it otherwise having no funds to build infrastructure. And they suggest a belief that the payments were approved by the United Nations.
31.292 Alone, Mr Emons' evidence supported by his email of 4 April 2000 is strong evidence that Mr Flugge had full knowledge of the true arrangements between AWB and the IGB, and understood and approved of AWB continuing with such arrangements in order to preserve AWB's trade in Iraq. That view is given strong support by reference to the other material to which I have referred. I do not accept Mr Flugge's denials of knowledge of the true arrangements. I find that he did know the true arrangements and, as Chairman of AWB, approved of them. Those arrangements involved circumventing UN sanctions by paying money to Iraq using Ronly, shipowners and Alia to hide the making of such payments. By authorising officers of AWB to proceed with the arrangements insisted on by IGB in its phase VI tender and agreed to by AWB, Mr Flugge implicitly authorised officers of AWB to submit to DFAT and the United Nations contracts which did not disclose the true agreements reached with IGB. Mr Flugge approved of this course in order to preserve AWB's trade with Iraq which he knew would otherwise be lost.
31.293 If, as I have found:
and
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB referred to above
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme :
and
(1) participating in discussions concerning and authorising, either expressly or impliedly, the payment of the inland transportation fee to Iraq and the mechanisms adopted to pay it
(2) expressly or impliedly authorising AWB to enter into arrangements with Ronly to make the payments
(3) concealing material facts in relation to AWB's arrangements with IGB from DFAT and the United Nations
and
or
then, in my view, Mr Flugge might have aided, abetted, counselled or procured the offences that AWB might have committed against sections 29D, 29A and 29B of the Crimes Act 1914 and sections 135.1(7) and 136.1 of the Criminal Code and section 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of section 5 of the Crimes Act 1914, section 11.2 of the Criminal Code and sections 323 and 84 of the Crimes Act 1958 (Vic) respectively.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under the sections referred to should be instituted against Mr Flugge.
31.294 If, as I have found, Mr Flugge, in the period from about June 1999 to March 2002, used his position or exercised his powers as an officer:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT, and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to a nominated third party (or to that third party via other third parties) to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
- the concealment of the above facts from DFAT and the United Nations.
then, in my view:
It is a serious matter for an officer of a public corporation such as AWB to authorise the corporation to enter into agreements in breach of statutory duties that the officer owes to the corporation, particularly where the officer acts intentionally, dishonestly or recklessly in breach of those duties.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under sections 180, 181 and 184 of the Corporations Act 2001 be instituted against Mr Flugge.
I note that section 1317K of the Corporations Act 2001 imposes a six year limitation period for the commencement of proceedings arising from contraventions of civil penalty provisions. Accordingly, the referral to ASIC should only be in relation to the conduct of Mr Flugge that occurred from 2001 onwards.
31.295 It was submitted that Dr Fuller might have committed offences against ss 180, 181, 1307 and 1309 of the Corporations Act 2001.
31.296 Dr Fuller was the Company Secretary. He played no part in the transactions related to the sale of wheat to Iraq.
31.297 On 16 November 2004 he was advised by Mr Cooper, General Counsel at AWB, that he might be required to execute the Tigris agreement. Prior to that time he had no involvement in the transaction whatsoever, and had no knowledge of it.
31.298 In signing the Tigris agreement on behalf of AWB, Dr Fuller relied entirely upon what he was told by Mr Cooper. He was told by Mr Cooper that advice had been received from two Senior Counsel that it was legal to pay the Tigris debt to Tigris. He asked Mr Cooper if it was 'ok to sign the agreement. He said yes.'[445] He understood from Mr Cooper that the transaction had been thoroughly investigated from a factual and legal view point. Dr Fuller was entitled to rely on that advice in signing the agreement on behalf of AWB as Company Secretary. He had no knowledge that the Tigris agreement did not represent the true arrangement between AWB and Tigris.
31.299 Dr Fuller was present at the joint information session and board meetings on 14 and 15 December 2004. No criticism can be made of him concerning any supposed failure to inform the boards of additional information regarding the Tigris transaction because he had no knowledge of it other than that which he had gained from Mr Cooper, and that knowledge was that the transaction had been investigated, and found to be factually and legally acceptable.
31.300 For the reasons given above and elsewhere in relation to s. 1307, no question of any breach of ss 180, 181, 1307 or 1309 of the Corporations Act 2001 arises.
31.301 I make no adverse findings against Dr Fuller.
31.302 It was submitted that Mr Geary might have accessorial liability, and might have committed an offence against s. 184 of the Corporations Act 2001, and contravened s. 180, 181 and 182 of the same Act.
31.303 In 1998 Mr Geary was appointed Pool Manager of the National Pool. In 2000 he was appointed General Manager of the National Pool and in March 2001 he was appointed Group General Manager Trading.
31.304 In his capacity as Pool Manager or General Manager, Mr Geary had an interest in matters which might affect pool performance. However it was not his function to become involved in issues relating to the sale of wheat and the terms on which it was sold. That was the task of International Sales and Marketing. Whilst Mr Geary was included in or copied with emails addressing aspects of sales from members of the IS&M desk, the evidence is not sufficient to establish that Mr Geary read these emails with any care, or derived knowledge from them.
31.305 It would seem improbable that Mr Long would not have discussed with his superior, Mr Geary, the Iraq market. It was a unique and profitable market, subject to difficulties of operating under the Oil-for-Food programme and subject to the risk of the trade being threatened by war. However, whilst Mr Geary said that he had with Mr Long 'conversations all the time on Iraq'[446] the evidence of any such discussions is slight and not sufficient to attach Mr Geary with Mr Long's knowledge of the true arrangements in that trade.
31.306 Mr Geary provided the Inquiry with two statements which were of no assistance.[447] He prevaricated in his evidence, declined to address questions put to him, and obfuscated. I am not able to accept him as a frank truthful witness, nor can I accept that he had as little knowledge as he said. Some matters in his statement were wrong as ultimately Mr Geary accepted.[448]
31.307 On 10 July 2000, Mr Jones sent an email to Mr Geary.[449] It addressed all the problems that required attention in the Iraqi market and asked for strategies to address them. It attached an Iraq market brief which specified the 'mechanism for payment of trucking fee' as follows:
In existing contracts the fee is $15.00 per tonne. IGB have indicated the fee will be reduced to $14.00 for future business. Current mechanism of payment is via transport company/s in Jordan.[450]
I do not accept that Mr Geary did not read or understand this email. On 30 May 2000, Mr Geary had 'skim read' an email from Mr Officer dated 29 May addressing demurrage expenses being incurred by AWB in Iraq, a matter of concern to the pool as it was unresolved whether the pool or AWB was to bear the demurrage costs. It stated:
UN contract does not allow for payment of demurrage/dispatch, ie no transfer of funds, with exception of trucking fees, as agreed in the contract and approved by UN security council.[451]
Demurrage and capacity to make payments to Iraq was a matter at the forefront of concerns to AWB and the pool at that time. It was those and other concerns which Mr Jones addressed in his email of 10 July 2000 to Mr Geary.
31.308 Mr Geary authorised significant payments to Alia under contracts A0784, A0785, A1111, A1112 and A1441. In so doing he was obliged to ensure the fees were properly payable by AWB. He failed to do so.
31.309 By December 2002, Mr Geary was Group General Manager Trading, and had been since March 2001. As he said, he and Mr Long had many discussions about Iraq. It is inconceivable that he was not aware of the sale of 1 million tonnes to Iraq. Counsel for Mr Geary accept that he was and that Mr Geary:
(a) was aware of the inflation of contracts A1670 and A1680
(b) became aware of that some time after 12 December 2002
(c) knew the inflation was due to recoupment of the Tigris debt
(d) did not object to the recovery of the debt in this manner
(e) recognised that one means of paying the iron filings debt was to offset it against the Tigris recovery, and 'he recommended this course be explored on 7 February 2003'
(f) was not prepared to proceed with the iron filings payment under contracts A1670 and A1680 until such time as AWB had both the Managing Director's and the Commonwealth's approval.[452]
31.310 Mr Geary accepted in evidence that contracts A1670 and A1680 were entered into by AWB in the form signed on his authority.[453]
31.311 Mr Geary signed the 7 February 2003 memorandum as 'approved'. There is no evidence to suggest that any of the material in the memorandum came as a surprise to him, or required Mr Long to explain the background to the proposals to circumvent the United Nations sanctions. Mr Geary was a recipient of Mr Whitwell's email of 7 November 2002.[454] That advised the Tigris debt had been approved by the Iraqi cabinet for repayment with the mechanism for repayment to be agreed during the next visit. It also noted that the Minister had asked for payment of the iron filings compensation through the 'inland transport mechanism.'[455] He had also received Mr Hogan's and Mr Whitwell's report on their discussions with Iraq in which proposals to load up a contract for new business to recover the Tigris debt had been discussed.[456] Mr Geary did nothing to stop those arrangements being finalised.
I am satisfied that prior to the execution of contracts A1670 and A1680 Mr Geary was aware that they would be 'loaded up' to recover the Tigris debt, and that the Iraqi Minister required the iron filings compensation to be repaid via the 'inland transport mechanism', and approved of those arrangements.
31.312 If, as I have found:
and
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB referred to above
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme
and
(1) in his capacity as Group General Manager Trading, with authority to countermand arrangements entered into by the International Sales and Marketing Division and to give directions to its staff, permitting that Division to engage in the said conduct
(2) authorising the payment of fees to Alia in respect of contracts A0784, A0785, A1111, A1112 and A1441
(3) approving the Tigris transaction and the iron filings compensation arrangements prior to the submission of the contracts to DFAT
and
or
then, in my view, Mr Geary might have aided, abetted, counselled or procured the offences that AWB might have committed against ss 135.1(7) and 136.1 of the Criminal Code and s. 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of s. 11.2 of the Criminal Code and ss 323 and 84 of the Crimes Act 1958 (Vic) respectively.
As I have already indicated, AWB's deception of DFAT and the United Nation, the payment of money to Iraq in known contravention of the United Nations sanctions and the concealment of those payments are serious matters. The aiding and abetting of this conduct by officers and employees of AWB is equally serious.
I recommend that this matter be referred to the Task Force for consideration whether proceedings under sections 135.1(7) and section 136.1 of the Criminal Code and section 82 of the Crimes Act 1958 be instituted against Mr Geary.
31.313 If, as I have found, Mr Geary, in the period from about March 2001 to March 2003, used his position or exercised his powers as an officer or (in the case of s. 184(2) of the Corporations Act 2001) as an employee of AWB:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT, and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to Alia (or to Alia via other third parties) to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
- the concealment of the above facts from DFAT and the United Nations
and
- there was no contract between AWB and Alia in relation to the provision of any discharge and transportation services for which the fees were properly payable
- IGB had the obligation to discharge the wheat at Umm Qasr, and transport it to all governorates of Iraq
- Alia performed no discharge or transportation services for AWB in respect of wheat sold by AWB to IGB
- Alia was a mere conduit and the fees were paid on to Iraq or an Iraqi entity in contravention of the UN sanctions
- the above facts were concealed from DFAT or the United Nations.
and
- that the price included the sum of US$8.375 per tonne not related to the price of wheat but being the amount of an alleged debt to Tigris that IGB had agreed with AWB would be recovered from the United Nations escrow account for payment by AWB to Tigris (the US$8.375 per tonne also included a sum of US$500,000 (equivalent to US$0.50 per tonne ) to be retained by AWB as its commission for recovering the Tigris debt)
- the relevant written contracts between AWB and IGB that were submitted to DFAT and thus to the United Nations did not disclose that this sum was included in the price and this fact was otherwise concealed from DFAT and the United Nations
then, in my view:
In the case of section 180, even if Mr Geary did not know all or any of the matters referred to above in relation to the payments to Alia that he authorised, in my view having regard to the size of the payments authorised by him and the fact that there was no written contract between AWB and Alia pursuant to which the payments were properly made, and if, as I have found, Mr Geary nevertheless failed to satisfy himself that the payments were properly and lawfully payable to Alia, then in my view he therefore might have failed in any event to exercise his powers and discharge his duties with the required degree of care and diligence and therefore might have contravened s. 180 of the Corporations Act 2001.
It is a serious matter for an officer of a public corporation such as AWB to authorise the corporation to enter into agreements in breach of statutory duties that the officer owes to the corporation, particularly where the officer acts intentionally, dishonestly or recklessly in breach of those duties.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under s. 184 of the Corporations Act 2001 be instituted against Mr Geary.
Sections 180, 181 and 182 of the Corporations Act 2001 are civil penalty provisions. ASIC is the responsible entity for seeking relief in respect of alleged contraventions of civil penalty provisions. I recommend that this matter be referred to ASIC, in consultation with the Task Force, for consideration of whether proceedings under ss 180, 181 and 182 of the Corporations Act 2001 be instituted against Mr Geary.
I note that s. 1317K of the Corporations Act 2001 imposes a six year limitation period for the commencement of proceedings arising from contraventions of civil penalty provisions. Accordingly, the referral to ASIC should only be in relation to the conduct of Mr Geary that occurred from 2001 onwards.
31.314 It has been submitted that Mr Goodacre might have accessorial liability, and might have committed an offence against s.184 of the Corporations Act 2001, and contravened ss 180, 181 and 182 of the same Act.
31.315 Mr Goodacre was employed by AWB from 1990 until December 2002. Until 1998 he worked principally in the public affairs or corporate area. In 1998 he was appointed General Manager of Grower Services and then became a member of the executive management team. After the restructure by Mr Lindberg in 2000, he was appointed Group General Manager of Trading in June 2000. He had at least three managers reporting to him, namely the General Manager of International Sales and Marketing, the General Manager of AWB Australia (Domestic Trading) and the General Manager of Grower Services.
31.316 Mr Goodacre reluctantly accepted his new position because he had no prior experience in the commercial trading aspect of AWB's business. He had no prior knowledge or experience in relation to wheat contracts or Iraq. Mr Goodacre's focus from June 2000 was upon aspects related to the preparation of AWB for public listing. He delegated to and relied upon the managers of the various divisions reporting to him to take responsibility for their divisions.
31.317 In June 2000, Mr Goodacre was aware that trucking fees were being paid to a trucking company in Jordan. He was not aware of any probity issues regarding those payments. He understood the trucking fees and arrangements were UN approved. He was not told by anyone that the trucking fees breached UN sanctions, that the trucking company did not do the trucking, or that the fees were diverted to Iraq.
31.318 An early task of Mr Goodacre was to appoint a new General Manager of the International Sales and Marketing desk. Mr Officer had resigned and Mr Emons was acting in the position. He advanced to Mr Goodacre his credentials for appointment permanently to the position, but Mr Goodacre appointed Mr Stott. Mr Emons then went on immediate leave before resigning shortly afterwards. I am not satisfied on the material before me that Mr Emons raised with Mr Goodacre the terms of the Deed of Release signed by Mr Lindberg, or any reasons for it.
31.319 There was led from Mr Emons evidence that he told Mr Goodacre the 'true nature of the payments that were being made as trucking payments', the 'methods by which payments were being made' but he did not tell Mr Goodacre that 'Alia didn't do the trucking.'[457] In substance Mr Emons said he told Mr Goodacre that 'a fee … was charged by the IGB to ensure our vessels were discharged.'[458] However in cross examination Mr Emons accepted that his discussion with Mr Goodacre was 'in the briefest terms'[459] and that 'the only issue that was occupying Mr Goodacre's attention at the time in international marketing was the fact that we had an enormous demurrage bill in Iraq and how we were going to solve it.'[460]
31.320 The evidence of Mr Emons does not support a finding that Mr Emons told Mr Goodacre anything which suggested that the trucking payments were otherwise than legitimate commercial payments. Certainly Mr Goodacre did not understand from anything told to him by Mr Emons that there was anything illegitimate or improper about the trucking payments.
31.321 Mr Goodacre denied being told by Mr Emons of the true nature of the trucking fees, or their link with IGB.[461] He acknowledged that Mr Emons may have referred to arrangements regarding trucking but not in any context of there being concerns or problems in relation to such fees. Mr Goodacre took nothing from the brief conversation he had with Mr Emons which gave him concern in that respect. I am satisfied that whatever was said between Mr Emons and Mr Goodacre regarding trucking in Iraq was not sufficient to attach to Mr Goodacre knowledge of the true arrangements which had been reached between AWB and IGB in the second half of 1999 when Mr Goodacre was unassociated with trading in AWB. I am also satisfied that, in June 2000, Mr Goodacre did not suspect impropriety by AWB in relation to such payments.
31.322 After the appointment of Mr Stott as General Manager of International Sales and Marketing, Mr Stott raised with Mr Goodacre the use of Ronly to make such payments, the fact he had stopped such payments and his concerns regarding the integrity of persons who had been employed in that division. Mr Goodacre supported Mr Stott's decision to engage Arthur Andersen to examine the division, its operations and it personnel. At some time Mr Goodacre may briefly have been consulted about a draft of the report but Mr Stott was the point of contact for Arthur Andersen, and the obtaining of its report fell within his responsibility.
31.323 In February 2001, the Arthur Andersen report was discussed between Mr Goodacre, Mr Stott, Mr Tuohy and others from Arthur Andersen. Mr Goodacre learnt for the first time that there was a risk that some of the money paid to Alia was being diverted to other purposes than transportation, and that Ronly had been used to disguise payments.[462] He had previously understood from Mr Stott that there was no apparent purpose for the use of Ronly other than possibly to benefit individuals.[463] Mr Goodacre charged Mr Stott with the responsibility of implementing the recommendations of the Arthur Andersen report. Mr Stott said he would investigate the payments AWB was making to see if there was substance in the Arthur Andersen remarks that there was a risk monies from those payments were being diverted to Iraq.[464]
31.324 Later Mr Stott told Mr Goodacre, falsely, that he had made inquiries with both IGB and DFAT as part of his investigations into the issues relating to the trucking payments and was satisfied that the level of trucking fees was justified and that the trucking company Alia was legitimate.[465] Mr Goodacre accepted those assurances. On that basis he subsequently authorised payments to Alia for supposed transport fees. When he did so he believed the payments were legitimate and were United Nations approved.
31.325 No accessorial liability attaches to Mr Goodacre. His only involvement in relation to contracts with or payments to Iraq was approving payments to Alia between April and December 2001. He approved those payments in the belief that they were legitimate, acting on the assurances of Mr Stott.
31.326 I make no adverse findings against him. He did not act contrary to ss 180, 181 and 182 of the Corporations Act 2001.
31.327 It was submitted that Mr Hogan might have accessorial liability, and might have committed an offence against s. 184 of the Corporations Act 2001, and contravened ss 180, 181 and 182 of the same Act.
31.328 From August 1998, Mr Hogan was in charge of AWB's office in Cairo. From there he made several trips to Iraq, although primary responsibility for the Iraq market lay with Mr Emons until June 2000. In August 2000, Mr Hogan was appointed Regional Manager-Middle East and he returned to the AWB Melbourne office. He then assumed and maintained responsibility for the Iraq market between August 2000 and July 2002 when he took stress leave. He officially handed over responsibility for the Iraq market in October 2002 to Mr Whitwell. He resigned from AWB in July 2003.
31.329 Mr Hogan visited Iraq on many occasions-June and October 1999, July, August and October 2000, February and May 2001, and October 2002.
31.330 Mr Hogan has submitted that:
(a) after the June 1999 trip, he did not know whether the new arrangements including payment of a 'transport fee' back to Iraq was approved by the United Nations, but believed it would have to be so approved.
(b) having been provided in October 1999 with copies of July 1999 contracts which showed 'discharge cost will be a maximum of USD12.00 and shall be paid by sellers to the nominated maritime agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan',[466] and being told that such contracts had been approved by the United Nations, as they had, he assumed payments to Iraq for transportation costs were permissible and approved. He remained of that belief until February 2001 when he formed the view that the 'transport fee', which by then had risen to US$25.00 per tonne and had added to it a 10% surcharge, was no longer an approved fee but was a way of Iraq extracting US dollars from the UN escrow account to be used by Iraq to build infrastructure.
(c) His view held between October 1999 and February 2001 that the transport fee payment to Iraq was permitted was strengthened by the fact that in October 1999 at a meeting attended by him with the IGB at which the Chairman, Mr Flugge, and the Managing Director, Mr Rogers, were present, the question of the payment of such fee to Iraq and the method of making the payment was discussed. Neither of AWB's two most senior officers queried the making of the payment.
(d) In February 2001, having formed the view that the United Nations had not approved the increased trucking fee, or the 10% surcharge, and that the fee was being used in major part for non trucking purposes by Iraq, and having reported his view in writing in a trip report, he raised his concerns with his superior, Mr Stott. Mr Stott dismissed his concerns out of hand and instructed him to proceed as in the past.
(e) From February 2001, he did as instructed by Mr Stott. To have challenged Mr Stott's authority would have been employment 'suicide'. He did so unwillingly and to the detriment of his health knowing that AWB was acting in a manner not approved. Ultimately he felt obliged to resign due to the ill health caused by the pressure of acting improperly.
(f) Mr Hogan's honesty and integrity was demonstrated by his willingness, once he realised the fees were improper and unapproved, to record his view in writing and raise it with his senior management. He was the only officer within AWB to do so.
(g) Mr Hogan voluntarily and willingly assisted the Inquiry by providing a great deal of information which was of assistance and which, on one view, was against his interest.
31.331 It is necessary to consider closely the history of Mr Hogan's participation in, and knowledge of, the transactions between June 1999 and October 2002 when he ceased involvement with the Iraq trade.
31.332 Prior to going to Iraq with Mr Emons in June 1999 to discuss the phase VI conditions of tender, Mr Hogan sought a copy of 'UN contract conditions'.
31.333 After discussions in Iraq, Mr Hogan sent the email of 24 June 1999.[467] The difficulty identified was how to pay money to the 'maritime agents' as required by IGB. That had been discussed with the IGB. Mr Hogan suggested two methods of payment: one, to an Iraqi bank in Amman with the IGB to provide details of the banks which could be used, and two, by using shipowners to pay the maritime agents in Iraq. Mr Hogan always believed the payments were going to Iraq, and that payments to Iraq breached sanctions. Each method proposed was a means of circumventing those sanctions. Mr Hogan also understood that as the monies were reverting to Iraq to be used, at least in part, to cover the cost of transportation there was no need for AWB to arrange or contract with a transport company for inland transportation. Whatever else was contemplated, the quest within AWB, including by Mr Hogan, was to find a way of paying money back to Iraq, and to disguise that payment because it was known to be prohibited by sanctions.
31.334 Mr Hogan had been told by Mr Daoud that the fee had been included in the distribution plan and submitted for United Nations approval. However, Mr Hogan was not sure if it had been so approved, but was unwilling to have AWB raise the question formally with the United Nations for fear that it had not. And if it became known to IGB that AWB had raised the matter with the United Nations, and it had not been approved, Mr Hogan feared AWB would lose its wheat trade. So no formal inquiry was made of United Nations. However, Mr Hogan did write to Mr Snowball from Amman:
… we need to find a way to implement the payments as Iraq a/c's frozen. Discretion is required here.[468]
31.335 No discretion would be required, and no means of paying monies to Iraq would need to be found if it was believed then or later, that the United Nations had given approval of such payments to Iraq.
31.336 If Mr Hogan believed, after seeing the UN approved contracts of July 1999 before his trip to Iraq in October, that the UN had approved transport fee payments to Iraq, there would have been no need to find ways to secrete such payments. However, at the meeting with IGB, Mr Flugge and Mr Rogers, 'proposed mechanisms' were discussed. His email of 11 October 1999 after the meeting, set out his 'brilliant idea' how to make the payment, namely, retain the funds due to Iraq until they were sufficient to finance a cargo of grain to Iraq.[469] However, Mr Hogan had been told by the IGB that President Hussein required the US$12.00 per tonne to be paid to Iraq before vessels would be unloaded. So a system of setting up an account in Jordan was proposed, with the account to be 'nominated by IGB'. Mr Hogan made the comment:
We could probably bypass the Account in Jordan and transfer directly to the 'special' nominated account-as long as the link was not apparent that the funds were going into Irq.[470]
31.337 That is not consistent with a belief that payments to Iraq for such fees were permissible which belief was said to be gained from knowing contracts containing a US dollar payment clause to maritime agents in Iraq had been approved by the United Nations before the Iraq trip. It is consistent only with knowledge that they were not, and that there remained a need to find a discreet method of making payments to Iraq. The fact that Mr Flugge and Mr Rogers were present when Mr Daoud told Mr Hogan that President Hussein required the US dollar payments to be made to Iraq before unloading, and that they made no objection, does not mean that thereafter Mr Hogan believed the payments were approved by the United Nations: it means all three persons, and AWB, knew the payments were impermissible and in breach of sanctions, and that a hidden method of making such payments in breach of sanctions needed to be found in order to keep the Iraqi trade.
31.338 Mr Hogan, although not involved with Iraq thereafter until July 2000 must have realised that, as the Iraqi trade was not lost, a method of paying the fees in breach of sanctions must have been found. In the latter half of 2000 he learnt that funds had been paid through shipowners and Ronly, and was present with Mr Stott at a meeting with IGB in October 2000 when the issue of whether there were outstanding trucking fees arose.
31.339 In November 2000, Mr Hogan negotiated a contract on terms that the trucking fee was US$25.00 per tonne and in addition there was a 'handling fee' of 10% of the contract value to be added as part of the 'trucking fee'. He obtained Mr Stott's approval to that contract. In his note confirming the sale, Mr Hogan wrote:
** 10% will be added to px [price] and included into trucking fee-i.e. IGB will confirm USD … and T/fee will be USD44.50 … this has been approved by UN (as per IGB-I will get this in writing).[471]
31.340 Mr Hogan never did get any such approval in writing. The short-form contract signed by Mr Hogan and forwarded by him to DFAT for transmission to the United Nations made no reference whatsoever to any payment of a transportation fee or other payment to Iraq although the email from IGB to Mr Hogan, confirming the rate, dated 2 November 2000 referred to a price 'including 44.5 inland transportation to be paid to the water transport co.'[472] Mr Hogan must have known that the contract he signed and forwarded to DFAT did not reflect the true agreement he had, with Mr Stott's approval, reached with Iraq.
31.341 In February 2001, Mr Hogan visited Iraq. He learnt that at least some of the so called transport fee and the 10% 'service fee' was not being used to pay for transportation costs but was used for the development of infrastructure. He then knew that such inclusions in the contracts were a means of extracting US dollars from the escrow account. That was recorded in the trip report.[473] He raised his concerns with Mr Stott who dismissed them out of hand on the basis that he was making 'assumptions', and directed him to continue executing business as usual.
31.342 After February 2001, Mr Hogan agreed with IGB or signed contracts A0784, A0785, A1111, A1112, A1441, A1670 and A1680. Mr Stott was no longer his superior, having moved to a different department.
31.343 Accordingly, if, as I have found:
and
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB referred to above
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme
and
(1) Negotiating and dealing with IGB in relation to the said contracts in his capacity as the relevant account manager and subsequently as Regional Manager-Middle East
(2) Counselling within AWB entry into the contracts with IGB with the knowledge that the so-called trucking fee was imposed by the Iraqi government and in circumstances where the payments to Iraq should be disguised
(3) Permitting AWB to engage shipping companies to make the payments so as to disguise the payment of those fees to Iraq and to avoid a breach of UN Sanctions being detected
(4) After July/August 2000, in his capacity as Regional Manager-Middle East, authorising or permitting AWB to enter into the contracts with IGB notwithstanding that he knew that UN sanctions were being contravened
(5) Signing certain contracts-A0430, A0552, A0553, A 0265, A0266, A0267, A0784, A0785, A1111, A1112, A1141, A1670 and A1680-on behalf of AWB
(6) Forwarding certain contracts to DFAT-A0265, A0266, A0267, A0430, A0552, A0553, A0784, A0785, A1111, A1112
and
or
then, in my view, Mr Hogan might have aided, abetted, counselled or procured the offences that AWB might have committed against sections 29D, 29A and 29B of the Crimes Act 1914 and sections 135.1(7) and 136.1 of the Criminal Code and section 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of section 5 of the Crimes Act 1914, section 11.2 of the Criminal Code and sections 323 and 84 of the Crimes Act 1958 (Vic) respectively.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under ss 29D, 29A and 29B of the Crimes Act 1914 and ss 135.1(7) and 136.1 of the Criminal Code and s. 82 of the Crimes Act 1958 (Vic) be instituted against Mr Hogan.
In relation to the submissions that Mr Hogan might have committed offences or contravened sections 180, 181, 182 and 184 of the Corporations Act 2001, I am not satisfied that Mr Hogan's position at AWB at relevant times was such as to make him an 'officer' for the purposes of sections 180 and 181. Sections 182 and 184(2), however, require only that he be an 'employee' of AWB.
If, as I have found, Mr Hogan, in the period from about June 1999 to August 2002 (with the exception of the period from about November 1999 to July 2000[474]), used his position or exercised his powers as an employee of AWB:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT, and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to Alia (or to Alia via other third parties) to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
- the concealment of the above facts from DFAT and the United Nations
then, in my view:
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under section 184 of the Corporations Act 2001 be instituted against Mr Hogan.
Section 182 of the Corporations Act 2001 is a civil penalty provisions. ASIC is the responsible entity for seeking relief in respect of alleged contraventions of civil penalty provisions. I recommend that this matter be referred to ASIC, in consultation with the Task Force, for consideration of whether proceedings under s182 of the Corporations Act 2001 (Cth) be instituted against Mr Hogan.
I note that section 1317K of the Corporations Act 2001 imposes a six year limitation period for the commencement of proceedings arising from contraventions of civil penalty provisions. Accordingly, the referral to ASIC should only be in relation to the conduct of Mr Hogan that occurred from 2001 onwards.
31.344 It was submitted that Mr Ingleby might have accessorial liability and might have committed an offence against s. 184 of the Corporations Act 2001, and contravened ss 180, 181 and 182 of the same Act.
31.345 Mr Ingleby was the Chief Financial Officer of the Australian Wheat Board from 14 April 1998, and of AWB from 1 July 1999 when the Wheat Board was privatised.
31.346 Critical to Counsel Assisting's submissions is the knowledge of Mr Ingleby of AWB's decision to pay and the making of payments to Iraq as the tender dated June 1999 under phase VI required.
31.347 There was evidence from Mr Emons and Mr Watson that in about June or July 1999, when methods of how the trucking fees required to be paid to an Iraqi entity were being discussed, Mr Ingleby was involved in a discussion with those two persons and Mr Officer regarding how the payment could be made. Mr Officer did not give evidence of that specific meeting but said that 'we all within AWB, that is, the Middle East Desk and those Executive Team members with whom I spoke, including Murray Rogers, Paul Ingleby and others who attended the regular Executive Team meetings, were aware that the payment of those fees was the price for doing business in Iraq.'
31.348 Mr Ingleby submitted that the evidence was insufficient to attach to him knowledge of payments to Iraqi entities, or knowledge that payments of trucking fees not being permissible under sanctions. Although he had no recollection of the meeting with Messrs Emons, Watson and Officer, he contended that the evidence at best only supported that he was asked about and only approved of a process of making payments of trucking fees to third parties from an accounting viewpoint.
31.349 I am not able to accept that submission. The meeting with Messrs Officer, Emons and Watson occurred against the background that the tender required payment of trucking fees to an Iraqi entity. A method had to be found to make that payment because it was not permitted by sanctions. The only reason for considering the making of payments by using third parties such as shipowners or Ronly was to hide the fact that the payment was going to an Iraqi entity and being made by AWB. It is not credible that Mr Ingleby did not understand that.
31.350 By approving the process or mechanism for payment by AWB of fees to an Iraqi entity through third parties, Mr Ingleby facilitated the making of those payments. There was no legitimate commercial reason to hide payments through the use of shipowners or Ronly. Mr Ingleby must have known that and known why the device was being used.
31.351 There was evidence from each of Mr Emons and Mr Watson to the effect that a means had to be found to make the payment. Mr Emons said Mr Officer said to Mr Ingleby: 'you know we have to pay this trucking fee' before addressing possible use of third parties. If Mr Ingleby thought the payments were genuine trucking fees, and it was permissible to pay the payments to Iraq, one would have expected him to reply to the effect of 'pay them to the trucking company'. Mr Watson's evidence was to the same effect as Mr Emons.
31.352 There is other evidence which supports Mr Ingleby's knowledge of the use of fronting mechanisms to hide payments to Iraq. In September 2000, Mr Ingleby was enquiring whether 'Iraq trucking' was to 'chartering's account'. He was told by Mr Cowan from Chartering: 'Mark Emons and Nigel Officer wanted to disguise AWB payments into Iraq for trucking fees'.
In correspondence from Ronly in July 2002, Mr Bali wrote that Mr Ingleby, along with Mr Flugge, Watson, Officer and Emons, were fully aware of and approved arrangements whereby Ronly made payments to Iraq. The arrangements had been made because 'In 2000 AWB became concerned at whether payments which they were making for inland trucking in Iraq were in breach of UN sanctions against Iraq.'
31.353 As Chief Financial Officer, Mr Ingleby authorised significant payments to Alia. Yet AWB had no contract with Alia for any services.
31.354 If, as I have found:
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB referred to above
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme :
and
(1) Mr Ingleby was involved in the discussions within AWB concerning the use of third parties to make payment to Iraqi entities and he approved the mechanism for paying the fees to Iraq via such third parties, thereby assisting in the concealment of AWB's arrangements in relation to the payment of the fees to Iraq
(2) Mr Ingleby expressly authorised significant payments to Alia in relation to later contracts
(3) Mr Ingleby's actions amounted to an express or implied authorisation of the payments to Iraq via third parties and their concealment from DFAT and the United Nations.
(4) Whilst Mr Ingleby may not have been directly involved with all of the abovementioned contracts or the payments made under them, his knowledge of and express or implicit authorisation of previous contracts that involved substantially the same arrangements and payments provides the basis for an inference that he implicitly, if not expressly, authorised the same arrangements and payments in relation to these contracts.
and
or
then, in my view, Mr Ingleby might have aided, abetted, counselled or procured the offences that AWB might have committed against sections 29D, 29A and 29B of the Crimes Act 1914 and sections 135.1(7) and 136.1 of the Criminal Code and section 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of section 5 of the Crimes Act 1914, section 11.2 of the Criminal Code and sections 323 and 84 of the Crimes Act 1958 (Vic) respectively.
As I have already indicated, AWB's deception of DFAT and the United Nations, the payment of money to Iraq in known contravention of the United Nations sanctions and the concealment of those payments are serious matters. The aiding and abetting of this conduct by officers and employees of AWB is equally serious.
I recommend that this matter be referred to the Task Force for consideration whether proceedings under sections 29D, 29A and 29B of the Crimes Act 1914 and sections 135.1(7) and section 136.1 of the Criminal Code and section 82 of the Crimes Act 1958 be instituted against Mr Ingleby.
31.355 If, as I have found, Mr Ingleby, in the period from about June 1999 to March 2003, used his position or exercised his powers as an officer or (in the case of s 184(2) of the Corporations Act 2001) as an employee of AWB:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT, and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to Alia (or to Alia via other third parties) to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
- the concealment of the above facts from DFAT and the United Nations
and
- there was no contract between AWB and Alia in relation to the provision of any discharge and transportation services for which the fees were properly payable
- IGB had the obligation to discharge the wheat at Umm Qasr, and transport it to all governorates of Iraq
- Alia performed no discharge or transportation services for AWB in respect of wheat sold by AWB to IGB
- Alia was a mere conduit and the fees were paid on to Iraq or an Iraqi entity in contravention of the UN sanctions
- the above facts were concealed from DFAT or the United Nations
then, in my view:
In the case of section 180, even if Mr Ingleby did not know all or any of the matters referred to above in relation to the payments to Alia that he authorised, in my view having regard to the size of the payments authorised by him and the fact that there was no written contract between AWB and Alia pursuant to which the payments were properly made, if, as I have found, Mr Ingleby nevertheless failed to satisfy himself that the payments were properly and lawfully payable to Alia, then in my view he therefore might have failed in any event to exercise his powers and discharge his duties with the required degree of care and diligence and therefore might have contravened section 180 of the Corporations Act 2001.
It is a serious matter for an officer of a public corporation such as AWB to authorise the corporation to enter into agreements in breach of statutory duties that the officer owes to the corporation, particularly where the officer acts intentionally, dishonestly or recklessly in breach of those duties.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under section 184 of the Corporations Act 2001 be instituted against Mr Ingleby.
Sections 180, 181 and 182 of the Corporations Act 2001 are civil penalty provisions. ASIC is the responsible entity for seeking relief in respect of alleged contraventions of civil penalty provisions. I recommend that this matter be referred to ASIC, in consultation with the Task Force, for consideration of whether proceedings under ss 180, 181 and 182 of the Corporations Act 2001 be instituted against Mr Ingleby.
I note that section 1317K of the Corporations Act 2001 imposes a six year limitation period for the commencement of proceedings arising from contraventions of civil penalty provisions. Accordingly, the referral to ASIC should only be in relation to the conduct of Mr Ingleby that occurred from 2001 onwards.
31.356 It was submitted that Mr Lindberg might have accessorial liability, and might have breached ss 180, 181, 182, 184, 1307 and 1309 of the Corporations Act 2001, and ss 194 and 195 of the Crimes Act 1958 (Vic).
31.357 Mr Lindberg replaced Mr Rogers as Managing Director in April 2000. He was an experienced Chief Executive. His mandate was to transform a former statutory authority, concerned solely with the sale of Australian wheat, into a modern commercial diversified company.[475] He had no prior experience in agriculture or international trade. Between April 2000 and December 2005, under Mr Lindberg's stewardship, AWB grew greatly: its full time staff grew in number from 450 to 2800. Shareholders funds increased from $600 million to $1.1 billion. The emphasis within AWB changed. It acquired rural businesses and operates some 430 rural stores around Australia. Wheat exports now account for only 20% of its earnings.[476]
31.358 It is important when considering Mr Lindberg's evidence to recognise that his functions as Managing Director were diverse. He was responsible for leading change, giving direction to the various divisions within AWB, preparing it for public listing, and dealing with Government and stakeholders in the business. As the change he implemented progressed his attention and emphasis altered to address differing challenges. Whilst wheat transactions account for 20% of earnings, Iraq was but one market in export sales. As with most Chief Executives he delegated responsibility to divisional heads, expected them to manage their divisions, and expected them to be honest and report to him any major difficulties. He did not usually become involved in detailed operational matters. He played no part in the formation of contracts for sales of wheat. That was addressed by the International Sales and Marketing division. Nor was he concerned with the terms of such contracts or their submission to DFAT or the United Nations.
31.359 When Mr Lindberg joined AWB, United Nations sanctions against Iraq had been in place for about 10 years and the Oil-for-Food programme had been operating for four years. The provisions in contracts with Iraq relating to the payment of inland transport fees had been agreed for 10 months. Mr Lindberg had no cause to suspect that those within AWB dealing with the Iraq trade were doing so otherwise than legally and in accordance with UN sanctions. Following his interview with executives, he introduced changes shortly after his appointment which saw Mr Goodacre introduced as Group General Manager for trading. He recruited Mr Stott. Some executives in IS&M and Chartering left. As a term of the severance of Mr Officer and Mr Emons, Mr Lindberg on behalf of AWB, acknowledged authorisation of 'agency payments' from December 1999. The evidence does not make clear why Mr Lindberg agreed to such a clause, or to what it related. Mr Lindberg and Mr Flugge were in conflict regarding whether they had discussed this. Those who wanted releases left AWB and within three months of Mr Lindberg's arrival new senior management was in place in IS&M. Whilst Mr Officer and Mr Emons gave some generalised evidence of discussions with Mr Lindberg about the Iraq market and conditions therein, it does not support any finding that either told Mr Lindberg of the detail of the true manner in which AWB was contracting in that market, or of the knowledge that each of Mr Officer and Mr Emons had regarding the payment of inland transport to Alia, the absence of a contract with that company, the obligation only to pay a fee to Alia, the knowledge that the fee was in truth a payment back to the IGB, the failure of the contracts to disclose the inclusion of the inland transport fee, the use of Ronly to disguise payments to Alia, or the differences between the true arrangements between IGB and AWB and those disclosed in the contract submitted to DFAT and the United Nations.
31.360 So far as the evidence extends, after introducing the changes to IS&M in June 2000, Mr Lindberg left its management and the Iraq trade to Mr Stott under the authority of his manager, Mr Goodacre. He played no further part in its affairs until February 2001, when he received and discussed the Arthur Andersen report with Messrs Goodacre, Stott and Tuohy following its commissioning by Messrs Goodacre and Stott. That report raised questions relating to the use of Ronly (which had ceased), and the integrity of some executives (who had left). It raised the possibility that the trucking fees were of concern because the United Nations had made enquiries about AWB's payment of trucking fees for Iraqi contracts, there had been endeavours in the past to hide payment of such fees, some who had been asked to make payments on behalf of AWB had declined for fear of breach of sanctions or money laundering, and the recent increase in fees raised the risk that such fees may be being diverted for other purposes.
31.361 There was conflict regarding the evidence of the meeting and discussion, but in the result it was delegated to Mr Stott to enquire into the matters raised in the report, to resolve problems and to implement Arthur Andersen's recommendations. The report made by Mr Lindberg to the board about the Arthur Andersen report does not appear to have been as full as one might expect. However, Mr Lindberg relied upon his executives to implement necessary change. Mr Lindberg did not draw as much from the Arthur Andersen report as one does coldly reading it in 2006 with the advantage of hindsight, and the knowledge that trucking fees were used as a mechanism to pay large sums to Iraq. Whatever criticism one may make of Mr Lindberg in that respect, the Arthur Andersen report did not instil in Mr Lindberg knowledge of the detail of the arrangements in fact operating between AWB and the IGB or their differences from those shown in the contracts. Mr Lindberg as Chief Executive Officer was entitled to delegate responsibility for detailed consideration of the report and implementation of necessary reforms to his executives, as he did.
31.362 It was not until August 2002 that Mr Lindberg played any material role in the Iraqi trade. Early that month, the Iraqi's claimed initially one, and later more cargos were contaminated with iron filings. There were more ships on the water to Iraq. Mr Lindberg regarded the matter as of such seriousness that he decided to lead a delegation to Iraq to resolve the issue. The Chairman, Mr Stewart, agreed, and the former Chairman Mr Flugge was co-opted to accompany Mr Lindberg, Mr Long and Mr Cracknell to Iraq. Counsel Assisting have submitted that from the meetings held in Iraq in August, Mr Lindberg gained and retained knowledge that the trucking fee mechanism was a method of paying funds to Iraq, and that Mr Lindberg agreed to utilise that method to pay iron filings compensation of US$2 million to Iraq. This, together with knowledge gained of the loading up of contracts A1670 and A1680, and his approval of, or failure to prevent those contracts from proceeding, is said to attach accessorial liability to Mr Lindberg for any offence which AWB might have committed regarding the deceiving of DFAT and the United Nations flowing from forwarding those contracts for approval for permission to export to Iraq and payment from the escrow account, without disclosure of the inflation of the price or agreement to pay the iron filings compensation via the inland transport mechanism.
31.363 There were other objectives of the delegation. One was to try to clarify AWB's separation from Australian Government policy towards Iraq, and thus hopefully restore a 500,000 tonne contract Iraq was threatening to cancel. Another was to address some contractual issues such as demurrage.
31.364 Mr Lindberg's submissions regarding the trip to Iraq were:
(a) The evidence does not support a finding that he received the 'Executive Brief' which was prepared for the trip.[477]
(b) No agreement was reached by Mr Lindberg that AWB would pay the agreed iron filings compensation to Iraq by adding a fee per tonne to the inland transportation fees paid to Alia[478].
31.365 An Executive Brief was prepared headed 'Executive Brief Iraq-AWB Delegation August 2002'.[479] The brief contains a detailed statement of persons to be seen, their positions, the detailed objectives of the visit, the issues to be raised and arguments in support of AWB's position on those issues, a market overview, an Iraq overview, Iraq at a glance, an IGB customer profile, details of the last contract agreed (A1111-A1112), and details of recent vessel problems.
This was Mr Lindberg's first trip to Iraq, his first meeting with the Iraqi Minister of State, and with the Director of the IGB, and his first negotiation concerning the Iraq market. The brief contains all the information one would expect to find in a brief to a Managing Director about to go on such a trip. Indeed, one would expect Mr Lindberg to have demanded such a brief were one not provided to him. It is difficult to see how Mr Lindberg could have sensibly engaged in the discussions with a Minister of State and senior official without it. Somebody went to considerable trouble to prepare the brief for the delegation and the improbability of it not having been provided to members of the delegation is very high indeed.
Mr Lindberg said he could not recall receiving the brief. However Mr Long said the brief was prepared for Mr Flugge and Mr Lindberg.[480] He said it was likely he received it and read it. Whilst there may be no direct evidence that Mr Lindberg received it, in the sense there is no evidence of someone handing it to him, and he can't recall seeing it, common sense suggests he did receive it. It is not credible to think Mr Long received it and not the other delegates, or that Mr Lindberg would not have required such a brief. The evidence that he was orally briefed on the way to Baghdad does not negate the common sense position. Further, Mr Lindberg told the IIC that 'there was a written briefing document prepared for the trip'. He did not suggest to the IIC he did not see it.
31.366 The importance of the brief is the statement in it under the heading 'Iraq at a Glance':
AWB also pays a fee, covered under sales contract, to the Ministry of Transport covering inland transport fees and discharge costs.
31.367 However, assuming Mr Lindberg received and read the brief, reading that last of ten bullet points on page three of the brief, would not attach to a reader who believed the trade with Iraq was being conducted lawfully and in accordance with sanctions, knowledge to the contrary. It says nothing about such payments being contrary to sanctions, nor about the arrangements described being not approved by the United Nations. A lawyer, with hindsight and knowledge of UN sanctions might see unlawfulness, but it is not reasonable to expect that a Chief Executive unfamiliar with contractual details, approval processes, and the detail of UN resolutions, to do so. The brief, if read, did not attach to Mr Lindberg knowledge that AWB was making payments to Iraq in breach of sanctions.
31.368 Mr Lindberg's evidence was that he was first told there was an inland transport component to the contracts in discussion with Mr Long and Mr Flugge whilst they were in travel to Iraq. He thought he was told by Mr Long or Mr Flugge that AWB was required to use a particular trucking company and that the Director General of IGB had informed AWB staff of that[481]. He thought he was also told the amount of the fee was told to AWB by the IGB but he did not think that was strange because he thought it was all approved by the United Nations.[482]
31.369 Mr Lindberg agreed that, during the negotiations it was agreed AWB would pay a sum of US$6 per tonne as compensation to clean contaminated cargo. However he was adamant that during the conversations in which he participated there was no discussion about how that sum was to be paid. In particular, no agreement was reached during the visit that the compensation sum would be paid to Iraq 'via the inland transport mechanism'.[483]
Mr Lindberg's evidence of absence of discussion or agreement regarding method of payment is supported by Mr Long in his statement. Further Mr Whitwell said on his return from Iraq, Mr Long said to him: 'we've agreed to $6 per tonne, and we need to work through how this can be settled.'
31.370 After the August trip there was correspondence relevant to whether an agreement had been reached regarding manner of payment.
On 22 August 2002, IGB wrote to Mr Hogan who had not been at the Iraq meetings:
Reference to our email … and the agreement reached during the visit of yr delegation on 15-18/8/2002, you are kindly requested to confirm settlement of the contaminated quantities with iron powder that will be cleaned and screened in our silos by USD 6(six) per mt for total cargo to each vessel.[484]
Mr Hogan, unaware of the discussions in Iraq, wrote when forwarding the email to Mr Edmonds Wilson and Whitwell, neither of whom had been present:
We need to think how we 'legally' pay Iraq.
31.371 On 26 August 2002, Mr Whitwell sent to Mr Long a draft of an email he proposed to send to IGB in reply. It read:
Thank you for your email. We would like to confirm our agreement to the settlement of contaminated quantities as agreed by our delegation from the 15-18/8/2002. To that end we would ask for your proposal with regard to a settlement process that would abide by relevant United Nations guidelines with respect to the Oil for Food programme.
He attached a note to Mr Long:
Haven't mentioned anything from our side (eg. Tigris etc) yet since it is in our interests to prolong this process as long as possible.[485]
Later, no doubt after consulting Mr Long, he sent the email to IGB as in the draft but adding at the end:
An option might be to offset this amount against moneys outstanding to Tigris Petroleum and we would appreciate your view on this.[486]
31.372 On 16 September 2002, Mr Long sent a memorandum to CRRC members which read:
AWB has agreed to pay IGB USD6 per tonne on approximately 300 000 mt under contract No. A1111/A1112 on settlement for the 'iron filings' quality issues amounting to some USD1.8m. AWB raised the possibility of settlement of this quality claim by AWB paying Tigris on settlement of the Iraqi debt by Tigris. UN Regulations prohibit direct payments of funds to Iraq whilst Iraq is under UN sanctions.[487]
Mr Lindberg saw this memorandum.
31.373 There was no response from Iraq until Mr Hogan and Mr Whitwell went there in late October 2002.
On 31 October 2002 Mr Hogan emailed Mr Whitwell. His email stated in relation to a meeting with IGB on 28 October:
Suggested following proposal:
1. Offsetting vessel claims (iron filings) against Tigris (BHP) debt-approx USD2 million.
2. Balance of debt to be recovered against new business (load up contract) …
He reported on his meeting with the Minister:
Vessel rejection claims as per original agreement to be paid through inland transport payment system against next contracts-Phase 13.
Mr Hogan's evidence regarding this was:
I can't recall specifically that I would have seen a brief from the Lindberg/Long/Flugge/Cracknell trip, but obviously that the minister has said, and we've said: 'No, we want to offset it against the debt', and he said 'No. Its going to go as per the original agreement with Long, Lindberg and Flugge'.[488]
This makes plain that the Minister regarded there as having been an 'original agreement' that the method of payment was through the inland transport system. The only issue was method of payment, and the Minister was asserting an agreement had been reached regarding that matter.
31.374 On 7 November 2002 Mr Whitwell sent an email to Mr Lindberg and others which Mr Lindberg saw. It set out 'Key Outcomes' of the October visit. It noted
Iron powder rebate (USD6 pmt) is separate from other debt issues. The Minister has asked for repayment through the inland transport mechanism.
This is at variance with Mr Hogan's email of 31 October which recorded the Minister's requirement, as distinct from request, for the method to be 'as per original agreement.'
Attached to the summary email was a trip report. Mr Lindberg's evidence was that he read the summary email but not the attached trip report which the summary email said was 'a fuller trip report should you need further information or background.'[489] I accept Mr Lindberg's evidence that he did not read the attached trip report.
The attached report makes clear that at the conclusion of the meetings with the Minister in October:
The trip report recorded:
Vessel rejection claims as per original agreement to be paid through inland transport payment system against next contract-Phase 13.
AWB to advise re payment mechanism of rebate.
This makes clear the method of payment of the claim was still a matter of debate.
31.375 However, in Mr Whitwell's memorandum of 7 February 2003, he wrote:
However, in discussion with the 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 with Andrew Lindberg. Michael Long was present and confirms that this was discussed.[490]
Whilst this is Mr Whitwell's memorandum, it went through many iterations in discussion with Mr Long. And when it was finalised, Mr Long signed it as 'recommended'. It is improbable that Mr Long would have agreed to a memorandum to his superior, Mr Geary, which contained such a serious error. The subject of the memorandum was whether payment to Iraq of US$2 million via the inland transport mechanism was legal, carried corporate reputational risks, was likely to be discovered, and was contrary to sanctions. The document itself recommended that Mr Lindberg be consulted, and in any event Mr Long must have realised that Mr Geary would be likely to discuss it with Mr Lindberg. To include in it a statement that Mr Long witnessed an agreement between his Managing Director and the Iraqi Minister, if that statement was not true, would be extremely unlikely.
31.376 There are only three possibilities. First, that Mr Long made a mistake. That is improbable as this memorandum was developed by Mr Whitwell in consultation with Mr Long over about two months. Second, that Mr Long was affixing responsibility, wrongly, to Mr Lindberg for the method of payment which carried the risks for AWB addressed in the memorandum. This also is improbable because the accuracy of the statement in the memorandum could be readily confirmed not only with Mr Lindberg but also with Mr Flugge and Mr Cracknell. The third alternative is that the memorandum records the truth. That is the most probable.
31.377 On the material before me, a conclusion which is available is that Mr Lindberg did discuss with the Minister the means of paying the compensation to Iraq and it was agreed that would be by use of the inland transport mechanism. On Mr Lindberg's own evidence he had learnt the day before the meetings on the trip to Baghdad from Mr Long or Mr Flugge that AWB paid a fee fixed by AWB to a particular trucking company which AWB was required by IGB to use. The agreement reached was that it was through that mechanism that the compensation was to be paid. Later, AWB and in particular Mr Long sought to depart from that agreement 'for corporate governance' reasons, but the Iraqi Minister held AWB to the agreement reached. Faced with this dilemma Mr Long required the problem and risks to be clearly enunciated. Advice was sought from DFAT who clearly advised that such a payment was not permitted. External legal advice was obtained which likewise said such payments were contrary to sanctions. Internal legal advice was obtained which suggested a method of hiding such payment from detection. Mr Long and Mr Geary both recommended and approved the methodology in the memorandum, but Mr Geary wanted Mr Lindberg's imprimatur for he would be involved in the proposed solution which was to involve Mr Lindberg telling Mr Downer of the payments.
31.378 On 10 February 2003 Mr Geary prepared a file note to Mr Lindberg.[491] It stated:
This is a sensitive issue as you can understand.
…
My guess is that DFAT and the UN will have major problems with this and if they say 'no', then we will have to address another way to get the monies to Iraq-either reducing prices on future contracts or supplying additional wheat-whichever the Pool prefers.
Mr Geary said he signed Mr Whitwell's memorandum as 'approved' and forwarded it with his accompanying memorandum to Mr Lindberg's office.
31.379 No memorandum signed by Mr Geary was produced to the Inquiry. Mr Lindberg said he did not 'recall' seeing the document. No document bearing Mr Lindberg's initials was produced. Mr Geary said he did not have any later conversation with Mr Lindberg as his memorandum contemplated. It is probable Mr Geary's memorandum with Mr Whitwell's attached was sent to Mr Lindberg's office,[492] but the evidence does not support a finding that Mr Lindberg received, saw it or read it.
31.380 The issue I must resolve is whether I should reach the available conclusion mentioned. After considerable deliberation I have come to the view that I should not. Each of Mr Lindberg and Mr Long deny any such agreement was made. I assessed Mr Lindberg to be a witness of truth, placed in very difficult circumstances. Due weight is to be given to his insistent denial of such an agreement. The likelihood of others who attended the meeting in August 2002 being available or advancing evidence that such an agreement was made is remote. There is no contemporaneous note which records such an agreement. The evidence in support of such an agreement hinges upon Mr Whitwell's recording of Mr Long confirming the making of such an agreement, and Mr Long's signing of that memorandum. That memorandum was written six months after the meeting. Whilst I found Mr Long's responses regarding the critical passage in the memorandum unsatisfactory, on balance I do not think the existence of that memorandum is sufficient to support a finding, against Mr Lindberg, that he did make such an agreement. It is also to be borne in mind that apart from the meeting in August 2002, Mr Lindberg played no part whatsoever in relation to the negotiation of contracts A1670 and A1680, the drawing up of the terms of those contracts or their submission to DFAT or the United Nations.
31.381 I turn now to allegations that Mr Lindberg knew of the 'loading up' of contracts A1670 and A1680 to recover the Tigris debt.
31.382 Mr Lindberg's evidence was that prior to arriving in Baghdad in August 2002 he received a briefing regarding Tigris. He was told that in 1995-96 BHP had provided to Iraq a US$5 million shipment of wheat. He had a general understanding that BHP had assigned its rights to Tigris.[493] At some time he learnt that Tigris had been 'helpful in lobbying the Iraqis for the restoration of our wheat contracts',[494] and that AWB was assisting in the recovery of the debt. He received a copy of Mr Long's memorandum of 16 September 2002 which addressed the Tigris issues and requested advice from AWB legal regarding whether AWB was authorised to negotiate with IGB regarding settlement of the debt. That memorandum said nothing about any 'loading up' of AWB contracts. Mr Lindberg signed a letter dated 20 September 2002 to the Iraqi Minister for Trade seeking confirmation of Iraq's debt to Australia's wheat growers of US$500 million, and also referred to the Iraqi's acknowledgement of the Tigris debt of US$8.8 million.
31.383 Mr Lindberg acknowledged that he had read the summary of the October Iraq meetings contained in Mr Whitwell's email of 7 November 2002, but not the attached trip report. It was not his practice to read trip reports. There is no evidence to suggest that Mr Lindberg did read the trip report. The summary report stated:[495]
Tigris' debt has cabinet approval for repayments-final amount to be agreed during the next month by Tigris/Iraqis and the mechanism for repayment to be agreed during the next visit.[496]
It made no mention of any 'loading up' of AWB contracts to recover the debt.
31.384 On 4 December 2002, Mr Whitwell sent Mr Lindberg and many others an email advising of details of the sale of 1 million tonnes. It made no reference to any loading up of the contracts to recover the Tigris debt.
31.385 On 12 December, 2002, the contracts were signed.
31.386 In the witness box Mr Lindberg was shown a memorandum dated 11 December 2002 addressed to 'Senior Management' which stated:
After being approached by Tigris Petroleum AWB have agreed to allow the new contract to be a conduit for a repayment of USD8,375,000 owed to Tigris by IGB. IGB have agreed to this as a method of repaying the debt incurred for a cargo of wheat in 1996.[497]
Mr Whitwell's evidence was the memorandum went no further than Mr Long, although I am satisfied Mr Geary knew of it. There is no evidence Mr Lindberg saw it.
31.387 Mr Lindberg's evidence was that:
This Tigris matter was first raised in 2002, various options were considered. I wasn't privy to how it was finally done, but the payment was made and subsequently, on review that I requested, it became clear that that was how it occurred.[498] [by loading up]
I accept that evidence.
31.388 There is no evidence that Mr Lindberg was involved in any way in the negotiation of contracts A1670 and A1680, or the loading up of those contracts or approved of such loading up, or their submission to DFAT or the United Nations.
I find that Mr Lindberg has no accessorial liability for any offence which AWB might have committed in relation to the deception of DFAT or the United Nations regarding contracts for shipments of wheat to Iraq.
31.389 Counsel Assisting have submitted that Mr Lindberg might have committed an offence against s 1309 of the Corporations Act 2001 in that in December 2004 he furnished or authorised or permitted the furnishing of information to directors of AWB and AWBI in relation to the Tigris transaction which was false or misleading. It was said to be so because:
(i) the information provided included information that Tigris had assisted AWB in recovering threatened wheat sales to Iraq, when in fact it had not done so
(ii) in consideration of that assistance AWB had assisted Tigris to recover its debt, when that was not the reason it had done so
(iii) Mr Lindberg did not tell the Boards that the agreement AWB had executed with Tigris and under which it had paid it approximately US$7 million, was a sham agreement because it falsely portrayed that the payment was a service fee when in truth no service had been provided by Tigris and the money was payment of a collected debt
(iv) Mr Lindberg failed to tell the Boards the manner in which AWB had recovered the Tigris debt, namely by 'loading up' the contract price, and had thus deceived DFAT and the United Nations
(v) Mr Lindberg failed to inform the Boards that legal advice obtained included legal advice from junior counsel which suggested the law had been breached, and the advice from senior counsel was qualified in certain aspects.
31.390 According to the directors they were told that AWB had recovered a debt for Tigris and thus earned a commission, and that legal advice had been obtained and there had been compliance with all necessary laws. What else they were told is not clear. Mr Lindberg's evidence was that:
I told the board what I have told this Commission, and that is that we assisted Tigris to recover a debt, that I had been informed that Tigris had been helpful in assisting us achieve wheat sales in the market, we were going to receive a fee for the recover of the money, it would be paid to the pool, and the agreement was struck in this form.[499]
He could not recall whether he told the board that the debt had been recovered by inflating the price of wheat but believed he had. Mr Cooper was uncertain if Mr Lindberg had spoken of loading up wheat contracts to recover the debt but believed Mr Lindberg had told the board 'AWB had collected the debt through its contracts', but didn't go into any detail about what those contracts were or the mechanism.[500] When giving further evidence more than a month later, Mr Cooper's evidence was that after Mr Lindberg said the debt had been collected by AWB one of the directors asked: 'was the money collected through the payments for our contracts?' to which Mr Lindberg assented by gesture or words.
31.391 Regarding the other bases of possible breach, Mr Lindberg submitted that he had relied on senior legal advice in addressing the Tigris issue, and had done no more or less than convey his understanding of the substance of that advice. He had relied upon AWB's General Counsel, Mr Cooper, to address the legal issues and had assumed not only that what Mr Cooper told him of the substance of advice received from Senior Counsel was correct, but also he had assumed that the Tigris agreement as drawn would accord with the true circumstances. It was submitted:
Mr Lindberg was entitled to expect that the lawyers would create a document that was lawful and accurately set out the nature and terms of the agreement. Mr Lindberg was entitled to assume that when he was told that the advice of Senior Counsel was that the Tigris transaction did not breach any law and that UN sanctions were not breached, that the document that articulated the agreement did not itself cause a breach of law.
31.392 I agree with that submission. Mr Lindberg is not a lawyer. He had directed there be an inquiry into the Tigris transaction, known as Project Water. He knew external lawyers had been engaged in an investigation of the matters for some time. He was told by Mr Cooper that there had been a chronological review of the facts, that such facts had been documented and signed off by the relevant AWB business managers, Messrs Stott, Long and Whitwell, that the chronology recorded that Tigris had been of assistance to AWB in sourcing its wheat market in Iraq in 2002, and he was told that two senior counsel had advised that the transaction did not breach the law or sanctions. Further on 10 November 2004, Mr Cooper gave Mr Lindberg advice when he was considering whether he should approve or sign off the Tigris transaction. Mr Cooper wrote to Mr Lindberg and Ms Scales:
To assist you in making this decision, I refer you to the factual chronology which records that assistance from Tigris Petroleum in 2002 substantially contributed to AWBI saving its wheat market with IGB after it was threatened to be cut in half, because of Australia's political support of the US against Iraq. In return for this assistance from Tigris Petroleum, AWBI agreed to assist in recovering the debt owed by IGB to Tigris Petroleum. My view is that this transaction did assist AWBI in securing the Iraqi grain market.[501]
Mr Lindberg was entitled to act on that advice. There is nothing to suggest that Mr Lindberg informed the board otherwise than in accordance with the advice given to him on which he was entitled to, and did, rely. He assumed the Tigris agreement was a proper agreement recording the true arrangements, which did not breach the law.
31.393 On the material before me, there is no basis for any finding that Mr Lindberg might have breached s. 1309 Corporations Act 2001. I make no such finding. Nor is there any basis for finding contravention of ss 180, 181 and 182 of the Corporations Act 2001. For reasons given elsewhere, s. 1307 of the Corporations Act 2001, and ss 194 and 195 of the Crimes Act 1958 (Vic) have no application.
31.394 Mr Lindberg has resigned as Managing Director of AWB. In so doing he has accepted responsibility for events which happened during his stewardship. As he said in evidence, speaking of the payments to Iraq via Alia:
It would appear that it was set up before I arrived by former employees and it continued under my stewardship, and it shouldn't have.[502]
31.395 That was a correct statement.
31.396 Mr Lindberg was not well served by some of those who reported to him, and on whom he relied. He has paid a very considerable price in reputational and no doubt monetary terms. I wish to make clear that on the material before me he has not been guilty of any criminal conduct.
31.397 It has been submitted that Mr Long might have accessorial liability, and might have breached ss 180, 181, 182 and 184 of the Corporations Act 2001.
31.398 Mr Long was appointed General Manager, International Sales and Marketing in November 2001, succeeding Mr Stott. He reported to Mr Goodacre and subsequently Mr Geary. Mr Long was never a member of the Executive Leadership Group.
31.399 Counsel Assisting submitted that Mr Long might have attached to him accessorial liability in respect of offences against s. 135.1(7) and s.136.1 Criminal Code and s. 82 of the Criminal Act 1958 (Vic) in relation to offences which AWB might have committed in relation to contracts A0784, A0785, A1111, A1112, A1441, A1670 and A1680 being contracts entered into or executed between November 2001 and March 2003.
31.400 The Permissions to Export in respect of contracts A0784 and A0785 were granted between 13 November 2001 and 15 March 2002 (17 shipments), although the contracts were entered into and United Nations approval was obtained before Mr Long became General Manager in November 2001. The remaining contracts were signed, and submitted for approval of the United Nations through DFAT whilst Mr Long was General Manager.
31.401 Counsel Assisting contended that Mr Long was aware in 2001 or 2002 of the true arrangements between AWB and IGB, and in particular was aware that AWB had agreed to pay inland transport fees to Iraq via Alia. They contended that Mr Long was aware that such fees were not related to any true obligation to discharge or transport wheat within Iraq, and that the payment of such fees had not been approved by DFAT or the United Nations. Each factor relied upon in support of the contentions of Counsel Assisting was challenged by Mr Long in submissions.
31.402 Mr Long's position was that, prior to taking up the position of General Manager, IS&M, he was aware of the Oil-for-Food programme, that it was run by the United Nations, and that applications to export had to be made to the United Nations through government.[503] Upon taking up his appointment he asked whether AWB's contracts were acceptable to DFAT. He was told by Mr Stott that he had written to DFAT, and showed Mr Long a copy of his letter and the reply. That satisfied Mr Long that the contracts had been 'checked by government.'[504]
I reject the evidence of satisfaction by Mr Long. The letter Mr Stott showed him was that of 30 October 2000 and the reply from DFAT of 2 November 2000. Those letters did not address in any way the question whether AWB's contracts were 'acceptable to' or 'checked by' DFAT. If Mr Long read those letters, as he said he did, he must have known that.
31.403 Mr Long also said he had learnt from colleagues that Alia was a Jordanian trucking company that provided trucking services in Iraq, and he had no reason to doubt that.[505] He learnt this prior to November 2001.[506]
31.404 Mr Long knew of the terms of AWB contracts which provided for a price quoted 'CIF FOT to silo all governorates of Iraq via Umm Qasr port.' He said he did not know if there was a written contract between AWB and Alia to effect such delivery, but thought there was a 'contract by conduct'[507] because grain was delivered away from the port when vessels were unloaded. He had seen many trucks at the port of Umm Qasr endorsed with Arabic writing. However in his statement he said that 'when I became responsible for IS&M, I noted there was no official contract in place.'[508]
31.405 Shortly after Mr Long assumed the position of General Manager IS&M, Mr Hogan agreed with IGB contracts A1111 and A1112 for 1 million tonnes. Mr Hogan sent an email to Mr Lindberg copied amongst others to Mr Long. The email analysed the price received and showed as an ingredient item in the price 'inland transport €55.17', or €55.40. There was later dispute between AWB and IGB about confirmation of the prices in those contracts in the course of which Mr Hogan suggested a compromise solution not just for those contracts but for future contracts. The proposals advanced by AWB were, first, IGB guarantee a rate of discharge at Umm Qasr with demurrage and despatch to be settled after each shipment 'by an adjustment to the final inland transport payment', and second, IGB accept the additional war risk premium to be for IGB's account, with the premium to 'be settled by an adjustment to the final inland transport payment.'[509] It is unlikely Mr Hogan would have made such proposals affecting future contracts without consulting with his manager, Mr Long. Each proposal indicated an understanding that the 'inland transport payments' system involved payments to IGB and thus to an Iraqi entity. The matter was not then resolved and Mr Long became involved in the correspondence. On 4 January 2002, he wrote to Mr Yousif, the Director General of IGB, stating that 'I have personally reviewed the file' and confirmed the arrangements previously made. Accepting what Mr Long wrote, he must have been aware of the size of the 'inland transport payment' of more than €55 per tonne , of the fact that that sum was included in the price of the wheat, and of the proposals to resolve the dispute by making adjustments to the 'final inland transport payments' which necessarily meant it was not a true fee for trucking services provided by Alia, the Jordanian company. Mr Long on 18 January 2002 confirmed to the Chairman, Mr Flugge, that the sale had been finalised as originally agreed. As Mr Long was aware of at least the long-form contract provisions, he must have known that that contract submitted to DFAT and the United Nations did not reflect the true arrangements between AWB and IGB, and in particular that the contract did not inform DFAT or the United Nations that included in the price of wheat was the sum of €55 which was to be paid to Alia as part of a payments system that AWB knew was capable of adjustment, not with Alia but with IGB.
31.406 In June 2002, Mr Long and Mr Hogan visited Iraq. Mr Long led negotiations which resulted in a further contract for 500,000 tonnes. The contract included an 'inland transportation fee' of US$47.75 per tonne , which sum included the 10% surcharge. It is not credible that Mr Long did not understand the constituent elements in the price he negotiated, or the manner in which AWB conducted its trade with Iraq. Plainly he did know of the contract conditions submitted to DFAT and the United Nations. Mr Long's evidence was that prior to the negotiations he asked Mr Hogan how AWB 'priced the Iraqi business',[510] and was told by Mr Hogan that 'there was an inland trucking fee that was determined by the IGB once we had negotiated the CIF price.'[511] He explained 'the trucking price was determined by adding 10% to the CIF price and adding that to the base trucking fee.'[512] Mr Long said he asked Mr Hogan if 'this was approved by the UN to which he said, yes',[513] although in oral evidence he could not recall whether Mr Hogan had told him the UN had approved the 10% charge, or that the Iraqis had told Mr Hogan the UN had approved the 10% charge.[514] Mr Long knew from the course of the negotiations in Iraq which he conducted, that the Iraqis required both the payment of a fixed sum for trucking plus a further sum equivalent to 10% of the contract price. He thought the arrangement strange but did not raise it with the Iraqis.[515] The reason he asked Mr Hogan whether the transport fee was UN approved was because of concern arising from the 'unusual calculation'.[516] He said he subsequently asked for some 'follow up' on the UN approval issue, and received on 1 July 2002 an email from Mr Hogan.[517] That email was not a follow up to any request by Mr Long. Rather it was a response by Mr Hogan to Mr Foran, AWB's Government Relations Manager, concerning a Reserve Bank decision regarding Iraq and Libya. It was a response to an article noted by Mr Foran in a Canberra journal. It was copied to Messrs Molan, Long and Aucher and read:
Subject: Re: Iraq & Libya Reserve Bank Decision
- Sanctions do not allow FX trade with Iraq.
- all payment processes for Inland Transport are UN approved.
- Libya-payment is via principles in Cyprus[518]
Whilst the document is supportive of the view that Mr Hogan was of the belief, that 'payment processes for Inland Transport are UN approved', although he had expressed the view in the trip report of February 2001 that the 10% surcharge was a means of extracting funds from the escrow account for remission to Iraq, I doubt that Mr Long placed any reliance on this email prior to giving evidence. His evidence was tentative: it 'probably gave me the necessary comfort to proceed in the direction I was proceeding.'[519] I do not doubt Mr Long would have proceeded with the 500,000 tonne contract, and future contracts without the assurances in the letter or, indeed, from Mr Hogan.
31.407 Mr Long was so concerned about this 'quite extraordinary' calculation of a 'transport fee' that, after his return from Iraq he explained the method of calculation on a whiteboard to Mr Geary. He did so because it was such an unusual calculation that he wanted to make sure the '48.60 was a reasonable number to pay when benchmarked against other'[520] transport costs in Australia. He wanted to be able to 'justify' it.
31.408 Mr Geary thought the whole process of benchmarking the fee was 'ridiculous',[521] as it plainly was. No sensible businessman could contemplate calculating a 'transportation fee' by adding to a fixed price for transport an additional 10% of the contract price. I do not doubt that Mr Long knew the 10% was not a cost related to transport in Iraq. I reject Mr Long's evidence that:
I was alerting Mr Geary to the unusual calculation and letting him know my logic as to why I wasn't taking it any further, because it seemed a reasonable figure.[522]
In reality, Mr Long was letting his superior know that AWB was involved in paying amounts to Alia which had no relationship to trucking costs. Mr Long said:
I was aware that I'd inherited a system where there was a very unusual calculation for inland transport. I attempted to justify it to myself, I attempted to justify it to my senior manager, and it was included in the contract price. The full contract details pertaining to CIF free in truck all governorates of Iraq was not hidden to DFAT, was not hidden to the UN. When I put all those matters together, Mr Agius, that's what gave me the level of comfort to proceed on the basis that I did.[523]
The first part of the statement is true. Whilst attempting to justify the unusual payment, Mr Long knew it could not be justified as a transport cost or fee. The second part of the statement is not true for he knew of the terms of the contracts, and knew that the extraordinary fee that he was seeking to explain and justify, was not disclosed or apparent to a reader of the AWB contracts, and thus not apparent to DFAT or the United Nations.
31.409 On 16 August 2002, Mr Long was part of the AWB delegation, including Mr Flugge and Mr Lindberg, which visited Iraq to resolve the iron filings quality claim. Members of the delegation received a four page brief which contained the statement:
AWB also pays a fee, covered under sales contract, to the Ministry of Transport covering inland transport fees and discharge costs.[524]
Mr Long said he checked the brief for accuracy, later qualifying that evidence to say he checked it to ensure it 'accorded with the objectives of the trip and the background to the market'.[525] Thus Mr Long was told that the fee, the calculation of which was 'unusual', and which he had sought to justify to himself and to Mr Geary, was stated to be a fee payable to the Ministry of Transport in Iraq. If Mr Long did not already know that the fee paid to Alia was in truth a payment to Iraq, and I am satisfied that he did, he then knew that to be the case because the trip brief from AWB told him so.
It was agreed by the delegation that AWB would pay the IGB and thus Iraq US$6.00 per tonne as compensation for contaminated wheat. The total payment was apparently US$2 million.
31.410 On 16 September 2002, Mr Long sent a memorandum to the CRRC Committee Members, AWB Legal, AWB Government Relations and the Pool.[526] It addressed recovery of the Tigris debt as well as concerns regarding the debt of some US$500 million owed by Iraq to Australian wheat growers. Mr Long wrote, in terms:
UN Regulations prohibit direct payment of funds to Iraq whilst Iraq is under UN sanctions.[527]
Mr Long thus knew that the payments of 'inland transport fees' including the 10% surcharge, which had so troubled him in June and July, and which he had been told in August were payments to the Ministry of Transport in Iraq, were prohibited by United Nations sanctions. He did nothing to stop such payments being made. He also knew the US$2 million iron filings compensation could not be paid to Iraq.
31.411 In late October 2002, Messrs Hogan and Whitwell went to Baghdad to discuss the Tigris debt and the iron filings compensation payment. A note prior to the trip stated:
Due to the inability to make payments direct to IGB because of the longstanding UN sanctions, we will propose that these amounts [the US$2 million] will be paid to BHP to offset the Tigris debt owed by IGB to BHP dating back to January 1996.[528]
31.412 After the trip, Messrs Hogan and Whitwell reported to many including Mr Long that they had discussed the following proposals:
1. Offsetting vessel claims (iron filings) against Tigris (BHP) debt-approx USD2 million.
2. Balance of debt to be recovered against new business (load up contract)-approx USD7.5 million (if using compound)
3. No further vessel claims would be used as offset-but would need to be redirected through UN account.[529]
Later on 7 November 2002, Mr Whitwell emailed many, including Mr Long, to advise that the Minister in Iraq had asked for payment of the USD2 million compensation through the 'inland transport mechanism'.[530]
Mr Long knew that payments through the 'inland transport mechanism' were payments to Iraq and prohibited by UN sanctions.
31.413 Between 19 and 21 November 2002, Mr Long and Mr Whitwell travelled to Baghdad to discuss a further sale of wheat, the Tigris debt repayment, and the iron filings compensation payment. Mr Long asked the IGB whether, 'for corporate governance reasons', the iron filings compensation could be offset against the Tigris debt, or paid by AWB providing equipment to Iraq.[531] The 'corporate governance reasons' were that Mr Long and AWB knew that to pay money to Iraq was prohibited by United Nations sanctions. The request was rejected by the Iraqi Minister who insisted it be paid to Iraq through the 'inland transport mechanism.'
Further, during the visit Mr Long agreed that the debt to Tigris of US$8.375 million would be recovered by AWB for payment to Tigris by inflating the price of wheat under the next contract, although the contract was not concluded whilst in Iraq.
31.414 A contract for 1 million tonnes was concluded on 2 December 2002. Mr Long acknowledged that he knew the Tigris debt was to be added to the otherwise agreed contract price.[532] The price was inflated by US$8.375 per tonne to Mr Long's knowledge. Mr Long received the email of 12 December 2002 showing the price breakdown. To obtain approval for such contracts, necessarily neither DFAT nor the United Nations could be told that the wheat price included a factor for debt recovery. I reject Mr Long's evidence that he did not intend to deceive anybody in relation to the two contracts A1670 and A1680. Mr Long signed the long-form contracts.
31.415 The long-form contracts contained clause 9F which in terms required any quality claims to be repaid into the escrow account.[533] Nonetheless AWB, to Mr Long's knowledge, had agreed to pay to Iraq the US$2 million by adding to the 'inland transportation fee' the sum of approximately US$2 per tonne, and paying that sum to Alia knowing it was a payment to Iraq. That agreement was not reflected in the contracts Mr Long signed as he well knew.
31.416 Between December 2002 and February 2003 Mr Long discussed with Mr Whitwell a memorandum he requested Mr Whitwell to prepare regarding the iron filings rebate payment and the Tigris Petroleum fee. The memorandum ultimately dated 7 February 2002, was 'recommended' by Mr Long, and 'approved' by Mr Geary before being forwarded to Mr Lindberg's office. It recorded the agreement AWB had reached, through Mr Long and Whitwell, with IGB to inflate contracts A1670 and A1680 to recover the Tigris debt of US$8.375 million. It recorded that AWB, again through Mr Long and Whitwell, had endeavoured to have IGB agree to offset the US$2 million iron filings compensation against that debt, but had been unsuccessful due to the Iraqi Minister insisting that the compensation be paid through the inland transport system, as the Minister believed was agreed with Mr Lindberg in August 2002. It records that these matters raise 'corporate governance' issues because 'direct payment to a company with links to the Iraqi regime may be construed to be in contravention of the UN Sanctions.'[534] The company with links to the Iraqi regime was Alia. It stated, after quoting UN resolution 661, that 'this means that the Government of the Commonwealth of Australia would be obliged to prevent AWB Limited from making any remittance of funds to the IGB',[535] referring to the proposal to pay US$2 million to IGB through the inland transport system. It recorded so called 'legal opinion' by which the payments of the US$2 million might be hidden from discovery.[536] It recorded the advice of DFAT that the US$2 million should be deducted from the price of future sales to Iraq or paid to the United Nations escrow account. It adverted to the fact the payments 'would not be well received by the UN OIP office and that there was reasonable chance of them finding out.'[537]
It acknowledges that failure to pay Iraq the US$2 million could have 'serious implications for the execution of the new contracts'[538] with Iraq, and accordingly Mr Long recommended proceeding with the payments to Iraq known to be in breach of sanctions but only on the Managing Director informing the Australian Government immediately prior to shipment.
31.417 Mr Long knew that none of the above agreements were known to the Australian Government, or the United Nations and that such arrangements were not disclosed in contracts A1670 and A1680, which Mr Long had signed. He did not advise DFAT or the United Nations of the inflation of contracts A1670 and A1680, or of the intention to repay the iron filings compensation through the inland transport mechanism.
31.418 Whilst General Manager, IS&M, Mr Long authorised payments to Alia.
31.419 On the evidence before me I am satisfied that from at least January 2002 Mr Long was aware of the true arrangements between AWB and IGB, was aware that payments to Alia were in fact payments to the IGB and Iraq, was aware that payments to Iraq were prohibited by United Nations sanctions, and was aware that the contracts executed by AWB with the IGB and submitted to DFAT for the obtaining of United Nations approval did not reflect the true arrangements between AWB and IGB.
31.420 If, as I have found:
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB referred to above
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme :
and
(1) Mr Long, as General Manager, International Sales and Marketing from November 2001 onwards authorising AWB's entry into the contracts knowing that the agreements with the IGB included the payment of the fees, that the written contracts did not reveal the agreement relating to the fees and that the payment of the fees was at all times to be concealed from DFAT and the UN
(2) signing the long-form Tigris contracts
(3) engaging in discussions and negotiations with IGB and the Iraqi Minister for Trade in relation to the trucking fees and the contracts and leading the contract negotiations in relation to contract A1141
(4) authorising payments to Alia
(5) being involved in negotiations in relation to Tigris contracts A1670 and A1680 and internal AWB discussions/correspondence authorising the inflation of the contracts and making an agreement to repay the iron filings compensation of US$2.016 million to Iraq through the inland transport payment mechanism
and
or
then, in my view, Mr Long might have aided, abetted, counselled or procured the offences that AWB might have committed against ss 135.1(7) and 136.1 of the Criminal Code and s. 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of s. 11.2 of the Criminal Code and ss 84 and 323 of the Crimes Act 1958 (Vic) respectively.
As I have already indicated, AWB's deception of DFAT and the United Nations, the payment of money to Iraq in known contravention of the United Nations sanctions and the concealment of those payments are serious matters. The aiding and abetting of this conduct by officers and employees of AWB is equally serious.
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under sections 135.1(7) and section 136.1 of the Criminal Code and s. 82 of the Crimes Act 1958 be instituted against Mr Long.
31.421 If, as I have found, Mr Long, in the period from about November 2001 to March 2003, used his position or exercised his powers as an officer or (in the case of s. 184(2) of the Corporations Act 2001) as an employee of AWB:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT, and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to Alia to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
- the concealment of the above facts from DFAT and the United Nations
and
- there was no contract between AWB and Alia in relation to the provision of any discharge and transportation services for which the fees were properly payable
- IGB had the obligation to discharge the wheat at Umm Qasr, and transport it to all governorates of Iraq
- Alia performed no discharge or transportation services for AWB in respect of wheat sold by AWB to IGB
- Alia was a mere conduit and the fees were paid on to Iraq or an Iraqi entity in contravention of the UN sanctions
- the above facts were concealed from DFAT or the United Nations
and
- that the price included the sum of US$8.375 per tonne not related to the price of wheat but being the amount of an alleged debt to Tigris that IGB had agreed with AWB would be recovered from the United Nations escrow account for payment by AWB to Tigris (the US$8.375 per tonne also included a sum of US$500,000 (equivalent to US$0.50 per tonne) to be retained by AWB as its commission for recovering the Tigris debt)
- the relevant written contracts between AWB and IGB that were submitted to DFAT and thus to the United Nations did not disclose that this sum was included in the price and this fact was otherwise concealed from DFAT and the United Nations
then, in my view:
31.422 In the case of section 180, even if Mr Long did not know all or any of the matters referred to above in relation to the payments to Alia that he authorised, in my view having regard to the size of the payments authorised by him and the fact that there was no written contract between AWB and Alia pursuant to which the payments were properly made, and if, as I have found, Mr Long nevertheless failed to satisfy himself that the payments were properly and lawfully payable to Alia, then in my view he therefore might have failed in any event to exercise his powers and discharge his duties with the required degree of care and diligence and therefore might have contravened s. 180 of the Corporations Act 2001.
31.423 It is a serious matter for an officer of a public corporation such as AWB to authorise the corporation to enter into agreements in breach of statutory duties that the officer owes to the corporation, particularly where the officer acts intentionally, dishonestly or recklessly in breach of those duties.
31.424 I recommend that this matter be referred to the Task Force for consideration of whether proceedings under s. 184 of the Corporations Act 2001 be instituted against Mr Long.
31.425 Sections 180, 181 and 182 of the Corporations Act 2001 are civil penalty provisions. ASIC is the responsible entity for seeking relief in respect of alleged contraventions of civil penalty provisions. I recommend that this matter be referred to ASIC for consideration, in consultation with the Task Force, of whether proceedings under ss 180, 181 and 182 of the Corporations Act 2001 be instituted against Mr Long.
31.426 It was submitted that Ms Lyons might have committed an offence of aiding or abetting AWB in breach of s. 195 of the Crimes Act 1958 (Vic), and might have committed an offence against s. 1307 of the Corporations Act 2001.
31.427 For reasons given elsewhere, I am not satisfied that AWB might have committed any offence against s. 195 of the Crimes Act 1958 (Vic). Accordingly, no question of aiding or abetting can arise. Also for reasons given elsewhere, I am not satisfied that Ms Lyons or anyone else at AWB committed an offence against s. 1307 of the Corporations Act 2001 in relation to the agreement with Tigris.
31.428 I make no adverse findings against Ms Lyons.
31.429 It was submitted that Mr Officer might have accessorial liability and might have committed an offence against s. 184 of the Corporations Act 2001, and contravened ss 180, 181, 182 of the same Act.
31.430 Mr Officer was General Manager of the International Sales and Marketing Division until June 2000. In that capacity he was responsible for all AWB international activity including sales, marketing, market development, chartering, shipping and global trading. He was a member of the Executive team.
31.431 I am satisfied Mr Officer was fully aware of the true arrangements between IGB and AWB. Mr Officer in his submissions did not dispute the factual circumstances which I have recounted in the narrative chapters. His submissions acknowledge that Mr Officer:
Knew of the requirement that AWB pay the inland transport fees and that AWB's contract had to be amended to allow for payment of the fees by increasing the contract price. He also knew that the payment of the contract price was [out of] the escrow account controlled by the United Nations and that transport fees would be remitted to a party nominated by the IGB either directly or via an intermediary.[539]
31.432 Mr Officer's initial evidence to the Inquiry in confidential session was not truthful. Nonetheless I am satisfied that in later evidence he did give truthful evidence that accorded with the documentary material. His evidence has been the subject of attack by Counsel for various witnesses, particularly Mr Flugge, and I have had regard to those submissions.
31.433 Mr Officer submitted that he had no authority to accept or act on the Iraqi demands of June 1999, change the AWB contract to accommodate those demands, or cause AWB to contract on the required terms. He submitted, against his interest, that he sought and obtained authority to make contractual changes and did so with the 'express authority' of his superiors, including Mr Rogers.[540]
31.434 Mr Officer contended that he was not an active participant in the Iraq wheat trade, although he was responsible for those who were, his role being 'supervisory'.[541] He submitted that the 'effective source of the supervision and authorisation of the actions of Messrs Hogan, Emons, Watson and others was the Chairman of the Board of Directors, Mr Flugge.'[542] Notwithstanding this, Mr Officer accepted he played a role and knew of the discussions about effecting a means of payment. However, he sought to paint his role as that of a communicator of information or instructions between those at the operational level and the Chairman or Managing Director. I do not accept that characterisation. Mr Officer was the General Manager of International Sales and Marketing, fully aware of the true arrangements, with authority to reject the proposed contractual arrangements and with the knowledge of the consequences of so doing for the Iraqi trade. I do accept however the probability that he kept both the General Manager and Chairman informed of the Iraqi developments and had their encouragement and approval to proceed.
31.435 Regarding contracts A4653, A4654 and A4655, Mr Officer contended that because the contracts disclosed a 'discharge' cost of US$12 per tonne payable to an Iraqi entity neither the United Nations nor DFAT were misled. Each failed to notice the provisions. DFAT relied on UN examination as it exercised only a 'post box' function.
31.436 I have addressed the issues of the misleading of the United Nations and DFAT when addressing the submissions of AWB. Mr Officer knew that the contracts submitted to both DFAT and the United Nations did not reflect the true agreement made with IGB, or the responsibilities arising from the agreement. He authorised, in the sense of not stopping, Messrs Hogan, Emons and Borlase to enter into contracts, informed Mr Rogers and Mr Flugge of the arrangements, obtained their authority to agree to the payment of the fee to Iraq and amend AWB's standard contracts to accommodate that change, and approved of the payment of the fee through shipowners and Ronly to disguise its payment.
31.437 Regarding contract A4822, Mr Officer argued his absence of responsibility on the submission that, whatever his knowledge at the time, he played no part in any deception arising from the non-disclosure of the true arrangement. He acknowledged AWB's responsibility to advise DFAT and the United Nations,[543] but said he played no part in its failure to do so. I reject that contention. In his role as General Manager International Sales and Marketing Manager, it was his responsibility to ensure that contractual documents truly reflected the agreements reached both for AWB's own purposes and for the purpose of enabling AWB to obtain the United Nations' and DFAT's approval to export to Iraq and approval from the United Nations to be paid from the escrow account. The contracts, including A4822, did not reflect the true agreements reached as Mr Officer knew yet he allowed them to be forwarded to DFAT and the United Nations.
31.438 A similar submission was addressed regarding contracts A4970, A4971 and A4972. These contracts were agreed in January 2000 whilst Mr Officer was on leave. Thus he was not party to contracts on the given terms except in so far as his conduct in agreeing to the general arrangements made with Iraq in 1999 flowed through to this contract. For the reasons previously given, Mr Officer was a participant in establishing a contractual structure which he knew did not reflect the true arrangements with Iraq, and knew that the documents submitted to DFAT and the United Nations did not reflect the true arrangements reached. He knew that the general arrangements so made would apply to the future contracts although tonnages and prices would vary in the future. He knew that the obligation to pay a fee to Iraq, the absence of obligation on AWB to arrange discharge and inland transportation, and the fact the fee would be paid to the nominee of the IGB would continue for future contracts and would not be disclosed to DFAT or the United Nations either by the contract or otherwise. He omitted to correct contracts to reflect the true agreement reached, and did nothing to prevent the contracts not reflecting the true arrangements from being forwarded to DFAT or the United Nations. He knew and approved of arrangements to pay fees to the Iraqi nominated account through the intermediaries of shipowners and Ronly, and informed Mr Rogers of those arrangements. And he signed an application form for payment of monies to Alia. In my view he did participate and was knowingly involved in the deception of DFAT and the United Nations.
31.439 If, as I have found:
and
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB referred to above
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme
and
(1) expressly or impliedly authorising Messrs Hogan, Emons and Borlase to engage in the said conduct on behalf of AWB
(2) keeping Mr Rogers informed of AWB's relationship and arrangements with IGB from July 1999 (when the above fee was first imposed) and in obtaining the authority of Mr Rogers or Mr Flugge to the imposition of the above fee as a term of AWB's contract with IGB in July 1999
(3) in participating in discussions concerning and in approving the proposal for the payment of inland transportation fees through the conduit of shipowners
(4) informing Mr Rogers about the proposal to use Ronly as a conduit for payment of the above fee
(5) signing as the requesting party an application for the payment of US$453,600 to Alia on account of the inland transportation fee (which request was submitted to and authorised by Mr Laskie)
and
or
then, in my view, Mr Officer might have aided, abetted, counselled or procured the offences that AWB might have committed against sections 29D, 29A and 29B of the Crimes Act 1914 and section 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of section 5 of the Crimes Act 1914, and sections 323 and 84 of the Crimes Act 1958 (Vic) respectively.
In relation to the suggested contraventions of ss 180, 181 and 182 of the Corporations Act 2001, I note that any proceedings against Mr Officer based on any possible contravention of these sections would be time barred by s. 1317K of the Corporations Act 2001. That time bar does not, however, apply to the offences under s. 184.
31.440 If, as I have found, Mr Officer, in the period from about June 1999 to 9 June 2000, used his position or exercised his powers as an officer or (in the case of s 184(2) of the Corporations Act 2001) as an employee of AWB:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT, and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to Alia (or to Alia via other third parties) to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
- the concealment of the above facts from DFAT and the United Nations
- there was no contract between AWB and Alia in relation to the provision of any discharge and transportation services for which the fees were properly payable
- IGB had the obligation to discharge the wheat at Umm Qasr, and transport it to all governorates of Iraq
- Alia performed no discharge or transportation services for AWB in respect of wheat sold by AWB to IGB
- Alia was a mere conduit and the fees were paid on to Iraq or an Iraqi entity in contravention of the UN sanctions
- the above facts were concealed from DFAT or the United Nations
then, in my view:
31.441 It is a serious matter for an officer of a public corporation such as AWB to authorise the corporation to enter into agreements in breach of statutory duties that the officer owes to the corporation, particularly where the officer acts intentionally, dishonestly or recklessly in breach of those duties.
31.442 I recommend that this matter be referred to the Task Force for consideration of whether proceedings under section 184 of the Corporations Act 2001 be instituted against Mr Officer.
31.443 Counsel Assisting submitted that Ms Peavey might have committed an offence against s. 1307 of the Corporations Act 2001 in that she participated in the creation of the Tigris agreement said to be a 'book' within s. 1307.
31.444 For the reasons given elsewhere, s. 1307 of the Corporations Act 2001 has no application to the Tigris agreement.
31.445 I make no adverse findings against Ms Peavey.
31.446 Counsel Assisting submitted that Mr Quennell might have committed an offence against s. 1307 of the Corporations Act 2001 in that he participated in the creation of the Tigris agreement said to be a 'book' within s. 1307.
31.447 For reasons given elsewhere, s. 1307 of the Corporations Act 2001 has no application to the Tigris agreement.
31.448 I make no adverse findings against Mr Quennell.
31.449 It was submitted that Mr Rogers might have accessorial liability, and might have breached s. 184 of the Corporations Act 2001, and contravened ss 180, 181 and 182 of the same Act.
31.450 Mr Rogers was Chief Executive Officer at the time AWB agreed to pay inland transportation fees to Iraq, at the time AWB agreed to pay fees to Alia as a means of disguising the fees so paid, and at the time arrangements were made to use shipowners and Ronly to further disguise such payments.
31.451 It is undoubted that Messrs Emons, Hogan, Watson and Officer knew of the agreement and arrangements put in place to make the payments indirectly to Iraq. Mr Officer reported to the Managing Director, Mr Rogers.
31.452 Mr Rogers had no recollection:
(a) of being involved in any discussion regarding any land freight or transportation issues[544]
(b) of any specific meetings with Mr Officer or Mr Emons about land transport fees in Iraq[545]
(c) of discussion between Mr Hogan and Mr Daoud in Baghdad in October 1999 about how the US$12 per tonne fee could be paid[546]
(d) any distinction between a contract disclosing a US dollar payment, and the mechanism for such payment, being drawn to his attention.[547]
31.453 In addition, Mr Rogers gave evidence that:
(a) he gave no consideration to any distinction between a contract which disclosed a liability to pay a US dollar sum and the mechanism for such payment[548]
(b) he was aware that a transport fee or discharge cost was included in the contract[549]
(c) he was not aware any such fee was going to Iraq[550]
(d) he was not aware the fee was to be paid to a transport company registered in Jordan[551]
(e) he was not aware, whilst he was Managing Director, that such payments were made to a Jordanian company[552]
(f) he was not aware that Ronly was used as a conduit for payment to the Jordan company.[553]
31.454 There is, however, evidence which points in a different direction:
(a) Mr Rogers gave evidence:
I would have thought I would have had discussions with Mr Officer and Mr Emons, if there was a change, but I can't remember the context of those discussions We had discussions on Middle East business on a regular basis, on all aspects.[554]
There is no apparent reason why Messrs Officer and Emons would have kept from Mr Rogers the difficulties emerging from the contractual changes and the methods of overcoming those difficulties.
(b) Mr Rogers was the Managing Director. Mr Officer reported to him. What was imposed by Iraq in June 1999 was a requirement rendering the contractual arrangements in Iraq unique for AWB for they purported to oblige AWB to accept responsibility for discharge and transportation beyond the discharge port. Mr Officer gave evidence that he did not have authority to agree to that contractual change without the approval of Mr Rogers as Managing Director or the Chairman. He also gave evidence that he believed he told Mr Rogers of the general proposal to use intermediaries to pay the transport fee costs demanded by Iraq,[555] and Mr Rogers raised no objection. He said he kept Mr Rogers informed in a general way about the relationship with IGB and how the Middle East desk was dealing with IGB's requests. He said:
Although I cannot recall any specific conversation, I have no doubt that Murray was aware of the IGB requirement to pay transport fees, that AWB's standard contract had to be changed to allow for payment of these fees by increasing the contract price, that the contract price (including the uplift for transport fees) be paid by the UN (from the escrow account) to AWB and that AWB would then remit those fees to a party nominated by the IGB either directly or via an intermediary. This was because we all within AWB, that is the middle East Desk and those Executive Team members with whom I spoke, including Murray Rogers, Paul Ingelby and others who attended the regular Executive Team meetings, were aware that the payment of those fees was the price of doing business in Iraq.[556]
(c) Mr Officer gave evidence that:
In contrast, I had more general discussions with Murray Rogers. However, without their support and authority, the contractual changes could not occur. In a matter of this significance, I did not have the authority to act on my own initiative, to either respond to or accept the IGB request or to put in train any necessary changes to the contract terms and conditions. For me and the Middle East Desk to act on this request, we required the authority from both Trevor Flugge and Murray Rogers. Without their authority, the contract changes could not occur. Although I cannot recall the precise discussions, both Mark (as he told me) and I told Trevor and Murray that the fee had been imposed by the IGB and that we had no choice as if we did not pay, wheat sales would be lost to our competitors. The consequence of rejecting the IGB proposal was that AWB would potentially not be asked to tender for IGB contracts, that substantial tonnages of Australian wheat would either be sold at substantially lower prices or would remain unsold, the Australian farmers would suffer significant financial hardship and AWB's competitors would move in to markets traditionally developed by AWB for its farmers. At no stage did either Trevor or Murray disagree with the contractual changes or the payment of the trucking fees that had been proposed and they understood these reasons.[557]
It is inherently probable that such a major contractual change would be discussed with and authorised by the Managing Director.
(d) Mr Emons gave evidence that:
39. The IGB's position raised a number of concerns for all of us. One concern was where these payments we were required to make under the contracts, would end up. Another was that AWB Limited would be paying American dollars to a representative of the Iraq Government and this might result in the US Treasury freezing the funds. Yet another was that AWB Limited had no control over the movements of the trucks and weighing at the end point of a trip.
40. I spoke to each of Messrs Officer, Rogers and Flugge about the contract.[558]
This is consistent with the evidence of Mr Officer, as one would reasonably expect. There is no evidence to the contrary from Mr Rogers, merely an absence of recollection.
(e) Mr Rogers was present at the meeting in Baghdad between Mr Hogan and Mr Daoud, as was Mr Flugge, at which the payment of US$12 per tonne fee was discussed. Mr Daoud told those present that the fee had been imposed by the President of Iraq, and ships would not be unloaded unless the fee was paid in advance. Each of Mr Rogers or Mr Flugge said they paid no attention to the conversation between Mr Daoud and Mr Hogan. It would be open to a tribunal of fact to reject that evidence. One would have thought it likely that the Chairman and Managing Director would listen to a discussion between an AWB executive and IGB about new contractual terms, particularly if the tribunal of fact accepted the evidence that they had previously been consulted about the contractual changes and the reason for them.
(f) Mr Officer believed he told Mr Rogers about the proposal to use Ronly to pay the transport fee and Mr Rogers raised no objection.[559] Mr Rogers had no recollection of that, but if, as Mr Rogers accepted, there were regular discussions regarding Middle East business it would be open for a tribunal of fact to accept that such discussions took place. If they did, one would have expected there to have been discussion as to why using an intermediary was necessary.
(g) Mr Rogers knew, at least from July 1999 that it was contrary to United Nations sanctions for AWB to pay money directly or indirectly to any Iraqi instrumentality or corporation. That being so, if the evidence of Messrs Officer and Emons is accepted, Mr Rogers must have known of the impermissibility of the payments being required to be made under the contracts with the IGB. Particularly is that so, if the evidence is accepted that he was told of the use of Ronly to hide such payments.
31.455 A strong attack was mounted on the credit of Mr Officer and Mr Emons. I have had regard to that attack and the matters said to support it.
31.456 On the material before me I find that Mr Rogers was aware that from July 1999 that AWB had agreed to include in the price for wheat a fee to be recovered from the United Nations escrow account and paid to an account nominated by Iraq. Mr Rogers agreed to and approved of the change in contractual terms to facilitate such payments. As Managing Director, he would not have done so without understanding both the reasons for such changes and the consequences of them. He was present when the payment of the US dollar fee was discussed as being a requirement imposed by the President of Iraq as a precondition to unloading vessels. He must have appreciated AWB's trade with Iraq hinged on agreeing to pay the fee as required by Iraq. He knew that payment of fees directly or indirectly to Iraq was contrary to United Nations sanction and must have known that if the fee was required to be paid by the President of Iraq, it was a fee going to Iraq. He later was told of and approved the use of Ronly. He must have known that was an attempt to disguise the payment of the fee. The only reason to disguise the fee was because it was known to be contrary to sanctions. It necessarily follows that Mr Rogers knew that the United Nations and DFAT were not being informed of the true arrangements for the making of a payment back to Iraq. Mr Rogers engaged in that conduct because he knew that not to do so would result in AWB losing its Iraq market.
31.457 Whilst I find that Mr Rogers had that knowledge in 1999 and 2000 whilst he was at AWB, I am satisfied that his memory has now failed him in relation to those events. He did not intentionally set out to mislead this Inquiry, nor was he intentionally untruthful.
31.458 If, as I have found:
(1) AWB submitted to DFAT and thus to the United Nations the above contracts for approval for payment from the escrow account, which contracts did not truly reflect the agreements reached between AWB and IGB in some or all of the ways referred to in my findings concerning AWB
and
(2) At all relevant times AWB concealed from DFAT and the UN that the contracts did not truly reflect the agreements reached between AWB and IGB with the intention of deceiving DFAT and the UN and thereby dishonestly influencing the actions of DFAT and the UN or otherwise obtaining a benefit relating to or arising from participation in the Oil-for-Food Programme
and
(3) DFAT, unaware of the matters referred to above, forwarded to the UN the relevant contracts and associated documents for approval for payment from the escrow account, and subsequently granted permissions to export the wheat sold under the contracts under the Customs (Prohibited Exports) Regulations 1958
and
(4) The UN, unaware of the matters referred to above, approved the contracts for payment from the escrow account under the Oil-for-Food Programme
and
(1) Expressly or impliedly authorising, as CEO, AWB to enter into the contracts involving the payment of a fee to Iraq
(2) Permitting AWB to enter into these contracts in circumstances where he had authority to stop it doing so
(3) Expressly or impliedly authorising AWB to enter into arrangements with Ronly to make the payments
and
or
then, in my view, Mr Rogers might have aided, abetted, counselled or procured the offences that AWB might have committed against sections 29D, 29A and 29B of the Crimes Act 1914 and section 82 of the Crimes Act 1958 (Vic) and therefore might have committed offences against these sections by reason of section 5 of the Crimes Act 1914, and sections 323 and 84 of the Crimes Act 1958 (Vic) respectively.
In relation to the submissions that Mr Rogers might have committed offences or contravened sections 180, 181, 182 and 184 of the Corporations Act 2001, any proceedings relating to contravention of the civil penalty provisions in sections 180, 181 and 182 would be effectively time barred by s 1317K of the Corporations Act. This time bar does not, however, apply to offences under s 184 of the Act.
If, as I have found, Mr Rogers, in the period from about June 1999 to April 2000, used his position or exercised his powers as an officer of AWB:
- AWB's agreement to include in the wheat price a fee so that the fee was paid from the escrow account to AWB
- AWB's agreement to pay such fee to Iraq or an Iraqi entity
- the submission of written contracts to DFAT, and thus to the United Nations, for approval for payment from the escrow account under the Oil-for-Food Programme, which did not fully and accurately disclose, or disclose at all, AWB's agreement to pay the fee to Iraq or an Iraqi entity or the inclusion of the fee in the wheat price
- that the fee would be initially paid to Alia (or to Alia via other third parties) to disguise the fact that the fee was ultimately paid to Iraq or an Iraqi entity in contravention of the UN sanctions
- the concealment of the above facts from DFAT and the United Nations
then, in my view:
I recommend that this matter be referred to the Task Force for consideration of whether proceedings under section 184 of the Corporations Act 2001 be instituted against Mr Rogers.
31.459 It was submitted Ms Scales might have accessorial liability and might have breached ss 180, 181, 182, 1307 and 1309 of the Corporations Act 2001 and s 149 of the Criminal Code.
31.460 Ms Scales was Pricing Manager from March 1999 to June 2000, Pool Manager from June 2000 to March 2001 and General Manager of AWBI from April 2001.
31.461 I found Ms Scales to be a frank and truthful witness.
31.462 Ms Scales knew of United Nations sanctions from at least 1999 and knew that sanctions restricted payments of monies to Iraq without United Nations approval. She knew that AWB contracts required United Nations approval to ship wheat to Iraq, and knew that AWB was paid from the escrow account. She played no part in AWB reaching agreement with the IGB on wheat contracts, and was not involved in or concerned with the drafting or execution of the contracts, or their submission to the United Nations through DFAT for approval. She was not involved in any way in dealing with DFAT. Her belief was that all AWB contracts were approved by the United Nations.
31.463 She did not recall when she first learnt of Alia. She said that from mid to late 2000 when she was Pool Manager, she knew that it was 'a trucking company that we needed to use as part of the contracts with the IGB. Alia Transport was the transport counterparty responsible for trucking into Iraq. In view of the significant demurrage issue we needed to improve the discharge rates of vessels at Umm Qasr. Trucks aided discharge of vessels so it seemed logical to me to use Alia if Alia could assist with the demurrage issue.'[560]
Her understanding was that:
the IGB determined the trucking company as the IGB knew the destination for delivery and volume of internal wheat movements. The IGB instructed AWB to use the trucking company and this was done. AWB paid the trucking company for their services.[561]
Ms Scales said she became aware of the 10% after-sales-service fee in either 1999 or 2000. She did not understand what it was for but understood it was approved by the United Nations.[562] She had no knowledge of the use of Ronly 'as a 3 rd party in the payment of trucking fees' whilst it was being so used but learnt of it after the practice ceased.[563]
31.464 Ms Scales' main interest through the whole period was the interest of the pool and its wheat growers, and in particular in ensuring the maximisation of their returns.
31.465 Ms Scales acknowledges that she received emails which indicated, if read, that money being paid on account of inland transport was actually being paid to IGB.[564] Mr Hogan's emails of 24 and 25 June 1999 were both addressed to Ms Scales and many others. She acknowledged it was likely she read it and paragraph 10 carried an implication monies on account of trucking were to go back to Iraq. However, as Pricing Manager, that matter was not the focus of her interest and she could not recall reacting to that information. It did not occur to her to ask why the monies were being sought to be paid indirectly.[565]
A similar position applied to the email of 25 June 1999. The content did not attract her attention although she acknowledged that she likely read the email.[566] I accept that evidence.
31.466 On 10 July 2000, Mr Jones emailed Mr Geary and Ms Scales attaching an 'Iraq brief June 2000'.[567] That brief outlined the United Nations sanctions and Oil-for-Food programme, and highlighted issues AWB had with its trade with Iraq. Issues highlighted were time delays in UN payments, tonnage shortfall at disport, and 'demurrage and discharge'.[568] It noted that contracts with IGB did not have a demurrage/dispatch clause. In the summary of issues it noted that the 'current mechanism of payment [of the trucking fee] is via transport company/s in Jordan.'[569] Ms Scales had no recall of receiving Mr Jones' email which raised issues which she thought should have been addressed by International Sales and Marketing, rather than the Pool. She said she would possible have read the brief. The point of relevance for this Inquiry is the last dot point of a summary on the sixth and final page of the document which read:
Mechanism for payment for trucking fee. In existing contracts the fee is $15.00 per tonne. IGB have indicated the fee will be reduced to $14.00 for future business. Current mechanism of payment is via transport company/s in Jordan.[570]
Ms Scales accepted that 'on the face of it' the quoted passage inferred that transport fees were actually being paid to IGB.[571] It does not appear that inference was drawn by Ms Scales at the time if she read the dot point.
31.467 Ms Scales received the email from Mr Hogan dated 2 November 2000 advising of the sale of 300,000 tonnes with the notation, in addition to the stated trucking fee of US$25:
** 10% will be added to px and included into trucking fee-i.e. IGB will confirm USD__ and T/Fee will be USD44.50 … this has been approved by UN (as per IGB-I will get this in writing).[572]
On the evidence, at that time Ms Scales believed the trucking fee had been approved by the United Nations and this reinforced her view.[573] She approved payments to Alia on that basis.
31.468 Ms Scales also authorised payments under contracts A0552, A0553, A0784, A0785 but there is no evidence to suggest that Ms Scales received any information to change her view that payments of trucking fees were approved by the United Nations.
31.469 During the currency of contract A1111 and A1112, Ms Scales received two emails which Mr Hogan sent to Messrs Ingleby and Goodacre.[574] It was copied by Mr Hogan to Ms Scales and others. It addressed the holding back of inland transport payments until the IGB put in place a letter of credit. It spoke of withholding of the 'second payments from the IGB.'[575] This made clear that there was knowledge within AWB that payments for trucking fees were payments to Iraq. However, Ms Scales said that implication did not register with her: rather she addressed the issue of AWB applying commercial 'leverage' to IGB to put in place the letter of credit.[576] I accept that explanation of Ms Scales' perception. The emails thus did not attach to her knowledge that payments to Alia were payments to IGB, nor did it change her view that trucking payments were approved by the United Nations.
31.470 Ms Scales was on leave from 10 to 20 September 2002. During that time Mr Long's memorandum of 16 September 2002 was forwarded to her. After her return she wrote on a copy of it 'file Iraq box'.[577] The memorandum sought legal review in relation to both the Tigris debt recovery and the iron filings compensation payments. The matter was to be addressed at a CRRC meeting on 19 September 2002 which Ms Scales did not attend. Ms Scales had no recollection of receiving, reading or discussing the document with anyone although she accepted she must have received it because of the note she made on it.
31.471 There is no evidence that Ms Scales played any part in giving approval to proceed with either loading up contracts A1670 and A1680 to recover the Tigris debt or to agreeing to payment of the iron filings compensation to IGB via the inland transport mechanism. She played no part in negotiating those contracts nor did she see the written contracts submitted to DFAT.
31.472 Ms Scales accepted that she was forwarded, as part of the executive, Mr Whitwell's email dated 6 November 2002 reporting on his discussion with the Iraqis in October regarding proposals to recover the Tigris debt, possibly offset the iron filings compensation and the Minister's desire to keep the two matters separate. Although she had no recollection of reading it she accepted she may have 'skimmed it'.[578] Her evidence was that she was not interested in mechanisms for payment, or any suggestion of loading up contracts, her focus being on the interests of the pool and its returns.[579] She regarded the mechanics of contracts being a matter for the experts in the International Sales and Marketing division.[580]
31.473 Ms Scales also received Mr Whitwell's email of 7 November 2002 reporting on the same trip to Iraq which noted that the Iraqi Minister had asked for payment of the iron filings compensation payment through the inland transport mechanism, and that the Tigris debt had been approved for repayment with the amount of the debt and the mechanism for repayments to be agreed later that month. She had no recollection of reading it but said that if she had it would not have 'rung any warning bells' because she assumed all contracts would be UN approved.[581]
31.474 I am satisfied that Ms Scales 'skimmed' or read those two emails. However, if approached from the background belief that whatever was ultimately agreed would require UN approval, and absent knowledge of the fact that in the past the true arrangements between AWB and IGB had not been disclosed to the UN such that Ms Scales believed that whatever arrangements were finally reached by the personnel in IS&M with the IGB would be disclosed to the United Nations when approval was sought, the emails do not attach to Ms Scales knowledge that AWB had or intended to act contrary to United Nations sanctions. Nor are they evidence that she intended that AWB would deceive DFAT or the United Nations. That she held the beliefs she said she held is established by her conduct when, much later in July 2004, she learnt that the details of the Tigris transactions had not been disclosed to the United Nations. Immediately she thought AWB may have been acting contrary to United Nations resolutions and in breach of the Oil-for-Food programme and required that AWB obtain legal advice before any steps were taken to pay the monies collected to Tigris.
31.475 Ms Scales was married on 30 November 2002 and thereafter was absent on her honeymoon for some period. She played no part in the agreements that became A1670 and A1680, or the submission of those contracts to DFAT and the United Nations in December 2002.
31.476 On 12 December 2002, Mr Edmonds-Wilson emailed Ms Scales and others with details of contracts A1670 and A1680. It was noted as being sent to a 'reduced list due to the nature of the Tigris Petroleum issue.'[582] It disclosed the break-up of the price and showed the 'Inland Transport' fee as US$51.15. It noted:
* Tigris debt.
As part of the contract agreement, AWB will recover the Tigris debt (outstanding since 1996) on behalf of Tigris Petroleum (USD8,375,000/1million mt. For the service, AWB are deducting USD500,000 (i.e. AWB will pay Tigris Petroleum USD7,875,000 on a pro rata basis as vessels are being shipped).[583]
Ms Scales had no recollection of reading an email bearing the 'reduced list' notation which made her think she had not read this email. She acknowledged it likely she had read an email about the 1 million tonnes sale. If she had, she said her interest would have been in the 'net FOB' value as that was the critical figure for the pool.[584]
31.477 At some time after her return from leave on 14 February 2003, Ms Scales received the 7 February 2003 memorandum from Mr Whitwell which had been 'recommended' by Mr Long and 'approved' by Mr Geary, and she read it. Although the memorandum noted the recovery of the Tigris debt by inflating the contracts, the endeavours to offset the iron filings compensation, and the US$500,000 fee, the real subject of the memorandum was the proposal to proceed as required by the Iraqi Minister to pay the iron filings compensation back through the inland transport mechanism, legal advice obtained regarding that course, and risks associated with it.
31.478 Ms Scales' evidence was that she assumed the contract including the US$8.375 million in the price would be information of which 'the UN would have been informed and we would have got approval from the United Nations',[585] although she did not turn her mind to the mechanics of how that would appear in the contract, she never having seen contracts which were submitted to the United Nations.
31.479 Regarding the repayment of the iron filings compensation, her position was: 'The international sales and marketing group were putting up a proposal. I understood it was supported by legal advice and its actions and recommendations, sir, that they were recommending. It didn't strike me as something I was concerned about',[586] and that such proposals needed to be approved by management.[587]
31.480 I accept Ms Scales' evidence. The manner of payment of the iron filings compensation was a matter for International Sales and Marketing and AWB management. That matter was not relevant to her belief that, so far as the inflation of the contracts A1670 and A1680 was concerned, the contracts would be submitted to the United Nations for approval and the increased price component would, in some way, be disclosed.
31.481 In July 2004, Ms Scales learnt for the first time that contracts A1670 and A1680 submitted to the United Nations were 'silent on Tigris'.[588] She learnt this from Mr Johnson when asking about execution of those contracts. On learning the contracts did not 'itemize the Tigris component of the contracts' she was concerned and surprised.[589] Her evidence in this respect was reinforced by later discovered notes she had taken of what she was told by Mr Johnson. Her notes record:
IGB instructed to inflate sales [contracts] 1670, 1680 by US$7 to repay cargo to Tigris[590]
and later:
The issue is can this be seen as AWB taking money or facilitating ($$) from IGB outside OFF?[591]
and later:
AWBI has received $$IGB/UN OFF programme it inflated by US$7.00/mt
Now AWBI needs to pay Tigris $7/mt → agreement.[592]
She suggested a meeting with Mr Lindberg, Mr Long, Mr Geary, Mr Johnson and Mr Cooper.[593]
She required that senior legal advice be obtained before any monies were paid out to Tigris, and only authorised such payment on the basis of that advice.
31.482 Ms Scales has no accessorial liability for any offence which AWB might have committed in relation to deceiving DFAT or the United Nations. Further, at all times Ms Scales believed that payments to Alia were payments made pursuant to contracts which were approved by the United Nations.
31.483 Section 1307 has no application to matters concerning Ms Scales. She has not offended against ss 180, 181, 182 or 1309 of the Corporations Act 2001, nor has she been guilty of any obstruction contrary to s 149 of the Criminal Code.
31.484 I make no adverse findings against Ms Scales.
31.485 It was submitted that Mr Snowball might have accessorial liability.
31.486 From September 1998 until September 2001, Mr Snowball was the manager of AWB's United States office situated in New York until August 2000 and thereafter in Portland, Oregon. From October 2001 he was appointed Manager Trading (non-Australian grains) based in Melbourne.
31.487 Any possible accessorial liability of Mr Snowball depends upon two contentions advanced by Counsel Assisting:
(a) that Mr Snowball was aware from June 1999 of the true contractual arrangements made between AWB and IGB flowing from his involvement in email correspondence, in particular Mr Hogan's email of 24 and 25 June 1999, and knowledge that those two arrangements were not disclosed to DFAT or the United Nations in the contracts submitted to them
(b) Mr Snowball participated in the meeting of 9 March 2000 with Mr Nicholas, Mr Flugge and Mr McConville. He was aware of the nature of the Canadian complaint, namely, that enquiries were being made whether AWB was making trucking fee payments to Iraq outside the Oil-for-Food Programme in breach of sanctions, yet, being aware of the true arrangements, he assisted AWB in concealment of the true arrangements by not disclosing them to DFAT or the United Nations.
31.488 The allegations relate only to contracts A4653, A4654 and A4655 dated 14 July 1999 lodged with DFAT on 3 August 1999, A4821, and A4822 dated 14 October 1999 lodged on 29 October 1999, and A0430 dated 2 November 2000 lodged on the same date.
31.489 I am not satisfied that the evidence before me establishes either contention; or that Mr Snowball engaged in any deception in which AWB might have engaged.
31.490 Undoubtedly Mr Snowball received Mr Hogan's emails of 24 and 25 June 1999, and knew that AWB was seeking to find a method of accommodating IGB's requirements which involved making a payment to Iraq. He also must have known, because he was aware that contracts with Iraq were lodged with DFAT for submission to the United Nations for approval, that a method of accommodating those requirements had been found. However there is no material before me which established that Mr Snowball knew what that method was at the time contracts A4653, A4654 and A4655 were lodged on 14 July 1999, or contract A4821 and A4822 were lodged on 29 October 1999. There is no material which established that he knew that the contracts then lodged did not reflect the true arrangements reached with the IGB. Mr Snowball took no active part in approving of, or lodging, those contracts.
31.491 I am satisfied that by 9 March 2000, Mr Snowball knew, probably through Mr Emons, that the matter which Mr Nicholas raised at the meeting of 9 March 2000, related to the questioning of payments for 'trucking/discharge' costs by AWB to Iraq. He referred to that matter in his email of 15 March 2000 to Mr Emons. He also knew that if that issue was investigated, AWB might encounter difficulties with the United Nations, and in its trade with Iraq. However, knowledge alone is not sufficient to attract accessorial liability.
31.492 Regarding contract A0430 whilst Mr Snowball knew that there was added into the contract price a 'service fee' of 10%, he had also been informed that the fee had been approved by the United Nations. It had not, and Mr Snowball took no steps to check whether what he was told by Mr Hogan was correct regarding United Nations approval. However, apart from obtaining the knowledge referred to he took no part in relation to the agreement with IGB regarding A0430, its terms, or its lodgement with DFAT and the United Nations. I am satisfied that Mr Snowball did not participate in relation to any deception in which AWB might have participated regarding A0430.
31.493 I make no adverse findings against Mr Snowball.
31.494 It was submitted that Mr Stott might have accessorial liability, and might have committed an offence against s. 184 of the Corporations Act 2001, and contravened ss 180, 181 and 182 of the same Act.
31.495 Mr Stott was employed by the Australian Wheat Board from 1983 to 1996. From 1998 to 1996 he was in charge of the Middle East, Europe and Africa desk. In 1996 he left the Australian Wheat Board and became Manager International Business Development with BHP Petroleum Limited. In July 2000 he became the General Manager International Sales Marketing at AWB.
31.496 Mr Stott's first submission was that I should disqualify myself from making any 'findings or recommendations in respect of Mr Charles Stott'.[594] The basis for the submission was that there was an apprehension of bias against Mr Stott. It was said to be grounded upon a series of matters:
(a) allowing 'Stott to be portrayed as uncooperative and as a liar'[595]
(b) 'allowing Counsel Assisting to ridicule Stott' and failing to restrain laughter in the gallery related to his evidence[596]
(c) allowing Counsel Assisting to 'proceed with lines of questioning that have been formulated on inaccurate and/or incomplete factual bases'[597]
(d) questioning Mr Stott's characterisation of the 1996 grain shipment as a 'donation' (Mr Stott having partaken in endeavours to recover the cost of the 'donation' with interest)[598]
(e) attitude towards which facsimile Mr Stott settled[599]
(f) attitude towards whether a signed or unsigned facsimile was sent to DFAT[600]
(g) attitude towards Mr Stott's evidence of a conversation with Mr Drake-Brockman[601]
(h) differential treatment towards Mr Hogan compared to Mr Stott, it being asserted Mr Hogan was a liar[602]
(i) differential treatment towards Mr Watson compared to Mr Stott, it being asserted Mr Watson was a liar[603]
(j) general approach to Mr Stott.[604]
31.497 I have read the references said to support the submissions. They do not do so. I reject the application. In my view, no reasonable bystander could form the view that I would not bring an impartial and unprejudiced mind to the matters upon which I am called to report. The submission quite misunderstands the nature of the inquiry undertaken by a Royal Commission. But putting that to one side, a reading of the material on which the application is based, when read in context and with knowledge of the issues as they progressively emerged, could not, in my view, give rise reasonably to any disquiet.
31.498 The matters referred to in the application are all matters which it is legitimate for Counsel for Mr Stott to raise in relation to substantive findings Mr Stott may wish to resist or may wish me to make. However they do not sustain a finding of apprehended bias.
31.499 In paragraph 1.6 of the submissions, Mr Stott's Counsel appears to go further. It was put:
The Commissioner's bias has been demonstrated by his conduct towards Stott.[605]
That appears to be an allegation of actual bias, as distinct from apprehended bias. If that was the intended submission, I reject it. There is no basis for such a submission.
31.500 It is telling that between April and September 2006 when the Inquiry was not sitting but Counsel for Mr Stott were, so they told me, 'working almost exclusively on this case',[606] no application was made to the Federal Court for an order that I be disqualified, or in some fashion prohibited from making any findings or recommendations regarding Mr Stott. That is what should have occurred if Mr Stott wished to assert either actual or apprehended bias.
31.501 Mr Stott's second submission was that the Letters Patent do not permit me to make findings regarding Mr Stott because:
… Stott's employment at AWB between 1983 and approximately 1996 does not fall within the terms of reference. In particular, the terms of reference do not extend to any decision, action, conduct, payment or writing of Stott during his employment at AWB in this initial period in relation to the shipment of wheat to the Grain Board of Iraq in 1995/1996. This shipment occurred prior to the adoption and implementation of the Oil-for-Food Programme.[607]
I reject that submission.
31.502 Next, it was submitted that:
Stott's employment at BHP likewise does not fall within the terms of reference. By the time Stott commenced employment with BHP:
(a) the payment mechanism had been negotiated, agreed and approved by DFAT; and
(b) the wheat had already been shipped.[608]
I reject that submission.
31.503 At all material times Mr Stott was a person associated with either AWB or BHPP. I do not interpret the terms of reference as being restrictive of the time during which the activities of a person who is associated with either AWB or BHPP may be investigated and reported upon.
31.504 Mr Stott submitted that the evidence established, and it should be found that whilst he was General Manager International Sales and Marketing, he believed the trucking fees were 'in truth for the purposes of moving the wheat to all governorates of Iraq and that such trucking fees were UN approved.'[609]
The submissions did not address whether Mr Stott knew:
(a) that the fees were being paid to Alia, although the references to Ronly paying monies to Alia make plain that he did have that knowledge
(b) that the monies in truth were being paid back to Iraq, although his 'tests' were aimed at determining whether they were
(c) that sanctions prohibited such payment to Iraq, although it was submitted that no one explained to Mr Stott the resolutions or their effect.
31.505 Mr Stott submitted that he had been told by 'staff including Lister, Hogan, Hughes and Watson, that the trucking fees had been approved by the UN.'[610] He accepted that Watson gave evidence to the effect that he told Mr Stott in July 2000 of the 'mechanisms in place that AWB had come up with to make the trucking payments' but said Mr Watson should not be believed.[611]
31.506 He contended that support for the view that he believed the trucking fees had been approved by the United Nations was found in the following circumstances:
(a) he ceased the use of Ronly: he would not have done so if he had believed fees had to be paid through a circuitous route to avoid detection[612]
(b) he called in Arthur Andersen to examine the workings of the International Sales and Marketing desk: he would not have had trucking fees investigated, with other matters, if he 'knew the payment of the trucking fee was not UN approved'[613]
(c) that he carried out at least four tests to determine if the trucking payments were indeed being used for trucking, namely:
(i) advising the Iraqis he was going to write to DFAT about Alia:[614] (as they did not object he presumed the fees were UN approved)
(ii) paying monies direct to Alia and relying on Australian and international intelligence agencies whom he assumed would track such payments to advise AWB if the payments were going to Iraq[615] (as intelligence agencies did not inform AWB that the monies were going to Iraq, Mr Stott assumed the monies must have been used for trucking)
(iii) proposing to the Iraqi Minister that a method of resolving an impasse with Russian traders regarding price would be for Iraq to forego the trucking fees[616] (if Iraq did not agree Mr Stott assumed that was because the fees were truly required for trucking costs)
(iv) attempting to speak to Mr Daoud about trucking fees[617](but, unfortunately, Mr Daoud died before he could do so).
(d) the correspondence of October/November 2000 with DFAT. This correspondence addressed 'incentivising the trucking companies to get more trucks to Umm Qasr' and nothing more.[618]
31.507 Regarding the February 2001 trip report of Mr Borlase and Mr Hogan which was circulated within AWB including to Mr Stott and which reported the view of Mr Hogan and Mr Borlase that the increased trucking fee and the 10% surcharge was a way of Iraq extracting US dollars from the escrow account, Mr Stott accepted h
