30.1 The Inquiry's terms of reference do not extend to investigating and reporting on whether the actions or conduct of the Commonwealth, or any of its officers, might have constituted a breach of a law of the Commonwealth, a State or Territory. It was made clear, however, that if during the conduct of the Inquiry it appeared there might have been a breach of any Commonwealth, State or Territory law by the Commonwealth or any officer of the Commonwealth related to the subject matter of the terms of reference, I would approach the Attorney-General, seeking a widening of the terms of reference. That situation did not arise.
30.2 It does not follow, however, that it is not relevant to examine what knowledge the Commonwealth, or certain of its officers, may have possessed at material times about the activities of AWB Limited, the terms on which AWB was shipping wheat to Iraq, and whether it was breaching or circumventing the sanctions in any way. Such knowledge may be material when considering any potential liability of AWB or its officers. It may provide a possible defence to certain actions potentially available against AWB or its officers. The consideration of the possible knowledge of the Commonwealth is limited to the circumstances relating to AWB's trade with Iraq. There is no suggestion in the evidence that the Commonwealth possessed any knowledge that the Rhine Ruhr or Alkaloids of Australia contracts included any arrangements relating to the payment of fees to Iraq.
30.3 A number of the offences that might potentially have been committed by AWB or its officers or employees have as one of their elements the deception of Commonwealth officers in the course of their duties, or the obtaining of a benefit, advantage or other gain from the Commonwealth as a result of the making of a false or misleading representation or the provision of misleading information or as a result of some other dishonest or fraudulent conduct towards the Commonwealth. Those offences include the offences created by ss. 29B and 29D of the Crimes Act 1914 (in relation to conduct occurring prior to 24 May 2001) and ss. 134.2, 135.1, 135.2, 135.4 and 136.1 of the Criminal Code. The elements of these and other offences are considered in Appendix 26.
30.4 For offences involving the obtaining of a benefit or advantage by reason of misleading representations or information or some other deceptive or dishonest conduct, the misleading information or deception must operate on the mind of the person to whom it was directed.[103] If that person was the Commonwealth, the misleading information or deception must have been a material cause of the decision by the Commonwealth to confer the benefit or advantage.
30.5 It follows that if, at the time that any misleading information was furnished to the Commonwealth and the benefit or advantage was conferred, the Commonwealth knew that the information was misleading, the person who provided the misleading information could not be convicted of an offence of obtaining the benefit or advantage by reason of the provision of the misleading information.[104] In certain circumstances, however, the person could be convicted of an attempt to commit such an offence.[105]
30.6 In the case of information provided by AWB to the Commonwealth about its wheat contracts with Iraq, if the Commonwealth or certain of its officers knew that the information provided by AWB was false or misleading, it could not be found that such benefit, advantage or gain that AWB obtained from the Commonwealth consequent upon the provision of that information was obtained as a result of the misleading representation or information. Knowledge on the part of the Commonwealth would also make it difficult to establish dishonesty or fraud on the part of AWB.
30.7 It is the actual knowledge of the Commonwealth that the information was false or misleading that is material in considering whether a benefit or advantage was conferred by the Commonwealth by reason of the provision of misleading information. It is immaterial that the Commonwealth may have had the means or ability to find out that the information was misleading[106], or that it ought reasonably to have known that the information was misleading.[107] It is also immaterial that the Commonwealth, at the time it conferred the benefit or advantage, suspected but did not know that the information was misleading.[108] The question is whether the alleged false or misleading statement operated on the mind of the person to whom it was directed-here, the Commonwealth. Accordingly, the question whether the Commonwealth may have had constructive knowledge (in the sense that it ought reasonably to have known the truth or that it had the means and ability to find out the truth) is immaterial. A false statement may still operate on the mind of a person who merely has constructive knowledge so as to result in the person being misled or deceived.
30.8 In considering the knowledge of the Commonwealth in this context, it is important to define the knowledge or information that is, or may be, material. This requires a consideration of the relevant information or statements AWB gave or made to the Commonwealth that might provide the basis for charges under the Crimes Act or the Criminal Code and how it might be said that this information or the relevant statements was or were false or misleading. In short, what are the particulars of any potential offences that might have been committed by AWB that rely on the allegation that AWB misled or deceived the Commonwealth?
30.9 The particulars of potential offences that AWB might have committed are considered in Appendix 26. The primary information that was provided by AWB to the Commonwealth in relation to each wheat contract comprised a UN 'Notification or request to ship goods to Iraq' form[109] and a copy of AWB's short-form contract with the Iraqi Grain Board. These documents were submitted to the Department of Foreign Affairs and Trade, ultimately for transmission to the United Nations.
30.10 The notification form included certain basic information about the contract, including the 'value per item' and the 'total value' of the goods proposed to be shipped. In the case of AWB's wheat contracts, the 'value per item' was the price per tonne of the wheat to be shipped and the 'total value' was the total contract price, being the price per tonne multiplied by the number of tonnes of wheat the subject of the contract. The information in the notification form also included shipping arrangements (border point or point of entry into Iraq) and the means of transport. In AWB's notification forms, the point of entry was invariably specified as Umm Qasr and the means of transport was specified as 'bulk carrier(s)'. Nothing was stated about the inland destinations in Iraq or the method of transportation thereto.
30.11 AWB's short-form contracts that were submitted to DFAT included, amongst other things, the quantity of wheat the subject of the contract, details of the shipment and discharge, and the price per tonne. In most cases the shipment details included that the cargo would be 'discharged Free in Truck to all silos within all Governates of Iraq' at a specified average rate, and the price per tonne was specified as being on terms 'C.I.F., Free in Truck'.
30.12 Full details of the notification forms and contracts AWB sent to DFAT for submission to the United Nations are given in Chapter 11 and Appendix 15. The arrangements between AWB and the IGB in relation to the payment of inland transportation fees and other amounts are discussed in detail in Chapters 13 to 26. The following general conclusions may be drawn about the notification forms and contracts AWB furnished to DFAT:
30.13 This information was information that was material to the decisions and actions taken by officers of DFAT in relation to AWB's contracts and applications to participate in the OFF Programme. The failure to refer to these matters in both the notification forms and the short-form contracts that were submitted to DFAT was capable of rendering the information that was provided misleading in a material respect. It was potentially misleading to specify the price per tonne for the supply of wheat whilst neglecting to inform DFAT that the price incorporated fees not genuinely ancillary to the supply of wheat on the terms disclosed in the contract.
30.14 It is also open to construe the submission of the notification forms and contracts in the circumstances as an implied statement or representation by AWB that the details in the notification form and the accompanying contracts contained the entirety of the terms on which AWB was supplying wheat to the IGB and there were no additional terms or collateral or side agreements relating to the supply. It was potentially misleading and deceptive to furnish the notification forms and contracts without also disclosing the additional terms or collateral arrangements involving the payment of inland transportation fees and other amounts directly or indirectly to the IGB or another Iraqi entity or its nominee.
30.15 It follows that the relevant inquiry in relation to the knowledge of the Commonwealth is whether the Commonwealth, or certain of its officers, had actual knowledge that:
30.16 The Commonwealth can acquire knowledge only by its officers. In this sense, the Commonwealth is in a position analogous to that of a company. In the case where it is alleged that a person obtained a benefit or advantage from a company by reason of the provision of misleading information, the company is not deceived by and the benefit or advantage is not conferred by reason of the misleading information if an employee with requisite status and authority in relation to the conferral of the benefit or advantage, or any employee whose state of mind represents the mind and will of the company, knew that the information was misleading.[111] The principles relating to imputing to a company the knowledge of its officers or employees apply equally to the imputation of knowledge to the Commonwealth.[112]
30.17 In the case of the information provided by AWB to the Commonwealth (the notification forms and its short from contracts), the relevant benefit or advantage conferred by the Commonwealth is one or both of the following:
30.18 The officers with requisite status and authority in relation to the conferral of these benefits or advantages were the officers of DFAT who were responsible for 'processing' AWB's notification forms and contracts for submission to the United Nations, the officers who were delegates of the Minister in relation to the granting of permissions to export to AWB, and the officers who were responsible for recommending and causing the permissions to export to be signed by the delegates. The DFAT officers who fell within this category were Messrs Bowker, Cuddihy and Grenenger and Ms Drake-Brockman, Ms Courtney, Ms Moules, Ms Brodtman and delegates, including Messrs Aitken, Quinn and Richardson and Ms Owens.[113] Since the Minister for Foreign Affairs is the ultimate repository of the power to grant permission under the Regulations, the knowledge of the Minister, Mr Downer, would also be material.
30.19 In addition to the Minister for Foreign Affairs and the specific DFAT officers with authority and responsibilities in relation to the Oil-for-Food Programme, there are other persons whose status and authority at the relevant time was otherwise such that their knowledge would be imputed to the Commonwealth. This would include the Prime Minister and the Minister for Trade.
30.20 The knowledge, or possible knowledge, of other officers of the Commonwealth who were not responsible for receiving or acting on the information furnished by AWB, or whose knowledge cannot relevantly be imputed to the Commonwealth, is not material to whether AWB may have committed the Crimes Act or Criminal Code offences relating to the obtaining of a benefit or advantage from the Commonwealth. It is immaterial that some other officer of the Commonwealth may have possessed some relevant knowledge if that knowledge was not conveyed to the Ministers or the responsible DFAT officers. For example, it would not be relevant that an officer of the Australian intelligence community may have possessed some intelligence about Iraq requiring suppliers of humanitarian goods under the Oil-for-Food Programme to make surcharge payments if that information was not conveyed to the relevant Ministers or DFAT officers. Knowledge by an officer of the intelligence community is not imputed to the Commonwealth in the relevant circumstances.
30.21 The relevant inquiry is whether the Commonwealth knew that the information conveyed to it by AWB was false or misleading at the time AWB conveyed that information to it, and at the time it conferred the relevant benefit or advantage on AWB. The relevant time is therefore the period during which AWB submitted to DFAT the notification forms and contracts that omitted to disclose the arrangements relating to the payment of inland transportation fees and other payments to Iraqi entities and the period during which permissions to export were signed consequent on UN approval of the contracts. That period was from late 1999 to early 2003.
30.22 It is immaterial if the Commonwealth came to possess information about AWB's arrangements relating to the inflation of contract prices and payment of inland transportation fees after early 2003, unless the actions of the Commonwealth on receipt of the information at that later time bear upon the question whether the Commonwealth knew the information during the relevant period. The question whether the Commonwealth's actions when it did receive allegations about these matters in mid to late 2003 could provide the basis for an inference that it knew the information during the relevant period is discussed in detail below.
30.23 There is no direct evidence that anyone at AWB ever told anyone at DFAT that AWB's wheat prices incorporated inland transportation fees or other payments to be made to Iraqi entities, or that its contracts with the IGB were subject to terms or collateral arrangements requiring it to make payments, directly or indirectly, to Iraqi entities or their nominees. Indeed, such evidence as there was on this issue was to the contrary.
30.24 It is unsurprising that the evidence supports a finding that DFAT was not told by AWB or its officers that AWB was paying inland transport fees and after-sales-service fees to Alia for forwarding to Iraq. In 1999 and 2000 AWB went to great lengths to disguise the fact of making such payments. Thereafter, and to the date of the Inquiry, AWB maintained that such payments to Alia were legitimate payments to a legitimate trucking company performing a legitimate service. It rejected all claims of improper payments. In the circumstances, it would be extremely improbable that AWB would have discussed Alia with DFAT or informed DFAT that it was indirectly making payments to Iraq. To have done so would have involved informing DFAT it (AWB) was acting contrary to UN sanctions.
30.25 No document obtained by the Inquiry-either from AWB, DFAT or any other person or entity-constituted or evidenced a communication of the relevant information by AWB to DFAT during the period late 1999 to early 2003.
30.26 DFAT was required by notice to produce to the Inquiry, amongst other things, any document that evidenced, recorded or concerned any communication, written or oral, passing between it and AWB relating to the sale of wheat, the use or engagement by AWB of trucking companies, including Alia, or the sanctions on Iraq.[114] Many thousands of documents were produced by DFAT and examined by the Inquiry. Those documents that constituted or recorded a communication between DFAT and AWB were identified and collated into seven lever-arch folders that were tendered as exhibit 542. No document within exhibit 542 constitutes, or is capable of constituting, an advice or acknowledgment by AWB that it was paying, or had or was being required to pay, inland transportation fees directly or indirectly to the IGB or any Iraqi entity or its nominee. No document refers to Alia or to the fact that AWB was making payments to Alia ostensibly in relation to inland transportation. No correspondence or communication from AWB refers to the fact that the price per tonne in AWB's contracts incorporated amounts referable to the payment of such fees or refers to the fact that AWB had any collateral agreement or arrangement not recorded in the contract in relation to the provision or payment for inland transportation services.
30.27 The only correspondence that referred in any material way to AWB's inland transportation arrangements in Iraq was correspondence between Mr Stott of AWB and Ms Drake-Brockman of DFAT in October and November 2000, in which AWB sought, and DFAT provided, advice about whether DFAT was 'comfortable' with AWB entering into discussions with Jordan-based trucking companies with a view to agreeing to a commercial arrangement relating to the discharge of wheat cargoes. This correspondence, and the evidence relating to whether there were any other communications between AWB and DFAT in relation to it, is discussed in detail below. Suffice it to say that nowhere in the letter Mr Stott sent to DFAT is it revealed that by October 2000 AWB had already entered into arrangements whereby it paid substantial sums per shipment (calculated on a per tonne basis) to Alia, a Jordanian company nominated by the IGB to receive the payments. Indeed, Mr Stott had amended a draft of the letter to specifically delete any reference to the fact that AWB's contracts had incorporated in them a 'predetermined and UN approved transport fee'.[115] Nowhere in this letter is it stated that AWB's contracts with the IGB were conditional on AWB agreeing to make these payments or that the payments were factored into the contract price.
30.28 There were also communications between AWB and officers of DFAT during the period commencing in about mid to late 2003 concerning allegations made by a United States agricultural lobby group, US Wheat Associates, that AWB's wheat prices had been inflated to include payments to the regime of Saddam Hussein. The US Wheat Associates allegations and DFAT's responses are discussed in Chapter 28. Whilst the US Wheat Associates allegations used pejorative terms and suggested that the 'excess' added to the price of the wheat contracts was paid to Saddam Hussein and his family, the basic thrust of the allegations-that AWB's contract prices had been inflated to incorporate amounts that were ultimately paid to the Iraqi regime-was in substance accurate.
30.29 The documentary evidence demonstrates that, far from conceding to DFAT that this may be the case, AWB stridently denied the US Wheat Associates allegations. On 6 June 2003 AWB issued a press release that forcefully denied the allegations, Mr Lindberg describing them as 'absurd, with no foundation and an insult to Australian farmers and damaging to our reputation'.[116] In a letter dated 12 June 2003 from Mr Lindberg to the US Wheat Associates President, Mr Tracey (a copy of which was provided to DFAT officers in the Iraq Task Force[117]), Mr Lindberg wrote that the allegations that '[AWB] contracts with prices inflated by millions of dollars per shipload has provided foundation to the rumours that some of the excess may have gone into the accounts of Saddam Hussein's family' were not true and were unsupported by any evidence.[118] Internal DFAT communications concerning the US Wheat Associates allegations repeatedly state, 'Government has been assured by AWB Ltd that no such kickbacks were paid'.[119]
30.30 The communications concerning the US Wheat Associates allegations occurred after the end of the Oil-for-Food Programme and therefore well after the time DFAT officers and the Minister or his delegate were considering granting permissions to export to AWB. They are, however, relevant insofar as they are inconsistent with any notion that AWB had advised DFAT during the currency of the Programme that its contracts incorporated inland transportation fees and surcharges that were paid indirectly to the IGB or other Iraqi entity via its nominee, Alia. Far from confirming to DFAT that there was some substance in the US Wheat Associates allegations, at least insofar as they alleged that AWB's prices had been inflated to incorporate payments made to the Iraqis by way of inland transportation fees and 10 per cent after-sales-service fees, AWB rejected them as 'baseless and outrageous'.[120] AWB maintained the same position in its communications with DFAT concerning its potential role in an investigation conducted by the United States Senate Committee on Foreign Relations into the Oil-for-Food Programme.[121]
30.31 The first documentary record of any advice by AWB to DFAT to the effect that it had made payments relating to inland transport to a company nominated by the Iraqis is in a letter dated 10 June 2004 from Mr Lindberg to the Minister for Foreign Affairs. In that letter, which was AWB's first formal response to the announcement by the United Nations of the establishment of the Independent Inquiry Committee, Mr Lindberg stated:
Wheat was delivered to Iraq by AWB for distribution to all governates of Iraq in accordance with the Distribution Plan for the relevant Phase of the OFF Programme as approved by the UN. This was reflected in the terms of each AWB wheat sale contract approved by the UN, which provided for the cargo to be discharged 'Free into Truck to all silos within all governates of Iraq'. The Iraq Grains Board (IGB) nominated the preferred trucking supplier and the rate to apply.[122]
Mr Lindberg reiterated to the Minister, however, that at all times AWB had acted with integrity in its dealings with Iraq.
30.32 The revelation-for the first time in explicit terms-that AWB's wheat contracts incorporated the payment of trucking fees to a trucking supplier nominated by the IGB and at rates specified by the IGB, was still at best a half truth. What Mr Lindberg omitted to inform the Minister was that the trucking supplier nominated by the IGB was not itself providing the transport services but was simply channelling the funds paid to it back to the Iraqis. Nor did Mr Lindberg nominate the name of the trucking supplier-Alia. Nor did he inform the Minister that included in the 'transportation fee' was a sum equivalent to 10 per cent of the contract price that AWB knew was not related to any transport cost. The question of whether Mr Lindberg knew at this time that Alia was not providing the trucking but was simply channelling the funds back to Iraq and knew of the 10 per cent after-sales-service fee is dealt with elsewhere. Whatever Mr Lindberg knew, it had been known at a senior level within AWB since November 1999, and the 10 per cent fee had been known to be unrelated to any trucking service since its inception.
30.33 The first correspondence from AWB that identified Alia as the Jordanian transport company to which AWB made payments was a briefing paper relating to the Independent Inquiry Committee investigation that was provided to DFAT in August 2004.[123] In this briefing paper AWB continued to assert that Alia was a legitimate trucking company that provided actual transportation services for AWB. It maintained this position even though it had no contract with Alia, yet had paid it US$223 million. In all its communications with DFAT concerning the IIC investigation, AWB maintained the position that, so far as it was aware, Alia provided transport services and AWB did not know that Alia merely channelled the payments to Iraq. Statements to this effect were made by officers of AWB in meetings with DFAT officers on 27 September 2005[124] and 13 October 2005[125] and with Mr Downer (and DFAT officers) on 4 October 2005.[126] The discussions that occurred at these meetings are addressed further below.
30.34 As late as October 2005, and in the face of findings made by the Independent Inquiry Committee, senior officers of AWB continued to maintain to DFAT and the Ministers that it did not know that Alia did not itself provide any transport services and channelled the inland transportation fees AWB paid to it back to Iraq. In letters to the Ministers for Foreign Affairs and Trade dated 26 October 2005[127] Mr Stewart and Mr Lindberg wrote:
… the Committee has concluded that AWB did not actually know of the matters alleged, namely that the transport company, Alia for Transportation & General Trade ('Alia'), was a 'front company' for the former government of Iraq and that it channelled transport fees to the regime. Nevertheless, the Committee will find that the $200m paid by AWB to Alia for transport fees was 'channelled through Alia to the government of Iraq'. The Committee has found there is insufficient evidence to support a 'knowing' finding and the test by which it assesses the weight of the evidence is one of 'reasonable sufficiency'. This is a lower threshold than tests applied by courts and so the Committee's finding is supportive of AWB's position that it did not know of the matters that have now been uncovered by the Committee's extensive investigations.
30.35 Like its responses to the US Wheat Associates allegations, AWB's communications with DFAT and the Ministers in 2004 and 2005 concerning the Independent Inquiry Committee investigation were inconsistent with AWB having previously advised DFAT during the operation of the Oil-for-Food Programme that it had made or was making payments indirectly to Iraq ostensibly in relation to inland transport. Even when AWB eventually advised DFAT in mid-2004 that its arrangements with the IGB included paying amounts relating to inland transport to a company nominated by the IGB, it continued to maintain that these payments related to transport services provided by that company and continued to deny that it knew that any payments were being made to Iraq.
30.36 With the possible exception of Mr Stott, no past or present officer or employee of AWB claimed to have ever advised anyone at DFAT that AWB's wheat contract prices incorporated inland transportation fees payable to Alia or otherwise indirectly to the IGB or Iraq or that there were arrangements with the IGB collateral to the written wheat contracts that involved paying inland transportation fees, or 10 per cent surcharges disguised within inland transportation fees, to Alia or otherwise indirectly to the IGB or any other Iraqi entity. None of the officers whose duties included communicating with DFAT in relation to substantive issues involved in the contract approval process, or who had some contact with DFAT in relation to AWB's wheat contracts with Iraq, or who otherwise knew what information was being provided to DFAT-such as Messrs Officer, Hogan, or Emons-suggested that they had ever told any officer of DFAT about these matters. Indeed, a number of them positively stated that they did not advise DFAT about the payment of inland transportation fees, including at meetings with DFAT where aspects of AWB's dealings with Iraq were discussed.
30.37 Mr Officer was the General Manager, Global Sales and Marketing, at AWB between late 1995 and early June 2000.[128] In this position he was responsible for AWB's international activities, including sales to Iraq. Mr Emons, the Regional Manager for the Middle East, Africa and Europe, reported to him. Mr Officer's involvement in and knowledge concerning AWB's payment of inland transportation fees is discussed elsewhere in the report. Suffice it to say that he knew that the IGB required AWB to pay inland transportation fees, that AWB's standard contract had to be changed to allow for payment of the fees by increasing the contract price, that the contract price (including the 'uplift' for transport fees) was paid from the UN-controlled escrow account, and that AWB would remit the transport fees to a party nominated by the IGB either directly or via an intermediary.[129]
30.38 Whilst Mr Officer rarely had discussions with DFAT[130], he was on good terms with Mr Bowker, the Director of the Middle East Section of DFAT, and met with him in December 1999 to discuss AWB's marketing strategy for Iraq and the commercial environment in which AWB was operating.[131] He never told anyone at DFAT, including Mr Bowker at the December 1999 meeting[132], about AWB's payment of trucking fees. Nor was he aware of anyone else at AWB advising DFAT about the true contractual relations between AWB and the IGB insofar as they involved the payment of transportation fees:
Q: Are you aware that, after October of 1999, no contract between the AWB and the IGB under the Oil-for-Food Program ever again identified a specific amount as payable on account of discharge costs or inland transport fee or trucking fee?
A: I'm aware as of the January 2000 contract that that was in fact the case. After that, I had left the AWB, I think, when the next contracts were negotiated, so to that extent, yes, that's correct.
Q: Did you, yourself, ever inform anybody at DFAT as to what the full terms and conditions of the arrangements between the IGB and the AWB were-
A: No.
Q: -insofar as they related to the payment of trucking fees-
A: No.
Q: -or inland transport fees?
A: No.
Q: Are you aware of any communication between AWB and any officer of DFAT in which DFAT was told the detail of the true contractual arrangement as between the IGB and the AWB, other than what appeared on the face of the written contracts that were submitted to DFAT?
A: No.[133]
30.39 As Regional Manager of the Middle East, Africa and Europe section of AWB during the period 1996 to June 2000, Mr Emons had regular meetings with DFAT concerning issues that arose in the markets for which he was responsible, including Iraq.[134] In particular, he was requested by the government relations officers of AWB once or twice a year to accompany them to Canberra to give an overview of the various AWB markets to DFAT and other Commonwealth departments.[135] Those meetings did not descend into the details of the contractual arrangements with the Iraqis.[136] He also attended the meeting between Mr Officer and Mr Bowker in December 1999, although Mr Emons was unable to recall that meeting.[137]
30.40 Mr Emons' knowledge of the payment of trucking fees indirectly to Iraq through Ronly Holdings Limited and Alia is discussed in detail elsewhere in the report. He knew AWB was not responsible for trucking within Iraq but was responsible only for payment of a fee to an account nominated by the IGB. Mr Emons did not recall informing DFAT of AWB's arrangements to pay trucking fees at any of the meetings that he attended:
Q: Did you ever, in any of those meetings, inform a DFAT officer of the arrangement that AWB had to pay trucking fees to the Iraqis?
A: I don't recall that happening. I'm not saying it wouldn't have occurred through the government relations officer, but I certainly, myself, don't recall doing it.
Q: Did you ever inform anybody at DFAT that AWB was making the payment via ship owners?
A: No.
Q: Are you aware of any conversation within AWB which indicated that DFAT had been told that the trucking fee was being paid to the Iraqis?
A: I'm sorry, I don't recall any.[138]
30.41 Mr Emons' non-disclosure of AWB's arrangements in relation to the trucking fee payments was deliberate. Mr Emons first learnt about the Canadian complaint from Mr Officer.[139] He was aware that Messrs Flugge, Snowball and McConville met with the Austrade Commissioner in Washington, Mr Nicholas, on 9 March 2000 and the Canadian complaint was discussed.[140] After the meeting, he received an email from Mr Snowball in which Mr Snowball stated, amongst other things, that 'if all the UN wants is some understanding on standard terms and conditions in AWB contracts then I think we have nothing to worry about'.[141] He understood from this that if there was mention of the trucking fee to the UN, there would be an issue and something to worry about[142] and that he was being told to keep this in mind if he was contacted by DFAT.[143]
30.42 Following his receipt of Mr Snowball's email about the Canadian complaint, Mr Emons took a step that was plainly intended to minimise the risk that the United Nations or DFAT would find out about the trucking fee from the IGB. He sent a fax to the Director General of the IGB, advising the IGB that AWB had been questioned by the United Nations about payments by AWB to the 'Jordanian trucking company' and that AWB was concerned that the Canadian Government had taken action within the United Nations to discover the 'manner of AWB payments'. He asked for the IGB's assistance in ensuring that 'no information of a confidential nature is released'.[144]
30.43 Like Mr Emons, from the time Mr Hogan was appointed Regional Manager of the Middle East Section in August 2000, he was involved in communications with DFAT in relation to AWB's wheat contracts with Iraq. He was aware of the procedures for obtaining UN approval of contracts under the Oil-for-Food Programme and the documentation that was submitted to DFAT in that regard.[145] He was involved in sending contracts to DFAT in the course of this process.[146]
30.44 In early August 2000 Mr Hogan wrote to DFAT, seeking its advice in relation to a proposed change in the terms of AWB's wheat contracts and a proposed change in the way contracts were submitted to the United Nations.[147] In each case the advice sought from DFAT was whether the proposed changes would be accepted by the United Nations. Mr Hogan subsequently received written advice from DFAT about these matters and was involved in a telephone hook-up with DFAT personnel to discuss the advice.[148] Mr Hogan did not seek DFAT's advice regarding the payment of trucking fees to Iraq via Alia.[149] There was no discussion about payment of trucking fees to Iraq or payments to Alia during this telephone hook-up.[150]
30.45 In mid-October 2000 Mr Hogan and Mr Stott travelled to Iraq via Jordan. Prior to entering Iraq, Mr Hogan and Mr Stott met with Mr Twisk, from the Australian Embassy in Amman. The discussions with Mr Twisk concerned the current state of affairs in Iraq.[151] Mr Hogan also met with the Trade Minister, Mr Vaile, in Egypt after the visit to Iraq.[152] On none of these occasions were there any discussions about the inland transportation fee or its method of payment.[153]
30.46 Mr Hogan was involved in the drafting of a letter to DFAT concerning AWB entering into discussions with Jordan-based trucking companies. The final version of this letter was signed by Mr Stott. This letter, DFAT's reply and the question of whether there were any discussions between Mr Stott and DFAT about the letter's terms is considered in Chapter 20. Mr Hogan's draft of the letter, dated 27 October 2000, included a reference to the fact that all Iraq contracts were concluded with a 'predetermined and UN approved transport fee'.[154] This reference was removed in the final version of the letter that was settled and signed by Mr Stott and dated 30 October.[155] Mr Hogan's evidence was that in any conversation he had with any DFAT officer between 27 and 30 October he would not have mentioned anything about payment of the inland trucking fee or whether or not it had been approved by the United Nations.[156]
30.47 If there was any intention on the part of officers or employees of AWB to tell DFAT about the payment of inland transport fees to Alia and indirectly to Iraq or to seek DFAT's advice about or attitude to the payment of such fees, an occasion when that would have been expected to have occurred was when AWB was asked by DFAT and Austrade to respond to the Canadian complaint. The facts relating to the Canadian complaint are discussed in detail in Chapter 16.
30.48 The first officer of AWB to respond to the complaint was Mr McConville. His response, when Mr Bowker put the complaint to him in January 2000, was, 'This is bullshit'. He went on to emphatically deny the allegations and tell Mr Bowker that AWB would continue to uphold its responsibilities in relation to Iraq.[157] The second occasion that the complaint was raised directly with AWB was on 9 March 2000, when Messrs Flugge, Snowball and McConville met with Mr Nicholas, the Austrade Commissioner in Washington. On this occasion, Mr Nicholas was assured by the AWB representatives that there were no irregularities in their dealings with Iraq.[158]
30.49 At the meeting with Mr Nicholas, and following it, the question of the alleged irregular payments related to transport fees became subsumed in a request by DFAT that AWB provide to it (and the United Nations) copies of any 'parallel contracts' between AWB and the IGB. This latter issue was able to be resolved by AWB's provision to DFAT of a document setting out AWB's standard terms and conditions in April 2000[159]-a document that revealed nothing about the payment of inland transportation fees by AWB. Mr Bowker had a further conversation with Mr McConville in the context of AWB providing a copy of its standard terms and conditions. During that conversation Mr McConville suggested that AWB's competition were 'throwing mud' at it because 'that is how competition between wheat traders works'.[160]
30.50 AWB's response and what may be inferred from it in relation to the knowledge of the officers involved in response to the Canadian complaint, including Mr Emons, are discussed in Chapter 16. Suffice it to say that, in relation to Messrs Flugge, Snowball and Emons, it may be inferred that they knew the allegations concerning 'irregular payments' related to AWB's payment of inland transportation fees, that the failure to disclose this to DFAT during the March meeting was deliberate, and that Mr Snowball cooperated with DFAT's request for the standard terms and conditions as a way of playing down the issue. As for Mr McConville, there is no evidence that he was aware of the specifics of AWB's contracts, including that AWB was paying inland transportation fees to Alia. It is, however, surprising that he dismissed the allegations put to him by Mr Bowker in such emphatic terms, without raising the matter with those at AWB who were responsible for the Iraq contracts.[161]
30.51 The point of immediate relevance insofar as the knowledge of the Commonwealth is concerned, is that despite the fact that questions had been specifically directed to whether AWB was making 'irregular' payments outside the terms of the Oil-for-Food Programme, AWB did not tell DFAT (or Austrade) anything about the payment of inland transportation fees.
30.52 Another occasion when it might reasonably be expected that AWB would disclose to DFAT that it was making inland transportation payments to Alia and indirectly to Iraq, was in the context of correspondence on the subject of Jordanian trucking companies that occurred in October and November 2000.
30.53 The facts relating to this correspondence are addressed in detail in Chapter 20. The evidence, in summary, establishes the following:
30.54 Ms Drake-Brockman's evidence was that she did not draft the DFAT letter she signed.[170] A number of issues arise in relation to the drafting of the letter and whether, as the letter states, the 'International Legal Division' at DFAT was consulted about the terms of the letter.[171]
30.55 As noted, AWB's request for advice did not convey any information to DFAT about the fact that AWB had been paying, and intended to keep paying, inland transportation fees to Alia and indirectly to Iraq. It is open to infer from the fact that Mr Stott deleted the reference to the 'UN approved transport fee' from Mr Hogan's draft that Mr Stott consciously withheld this information from DFAT. Plainly, the letter of 30 October 2000 does not inform DFAT of the true arrangements between AWB and the IGB in relation to transportation or payment of fees to Alia.
30.56 So far as the knowledge of the Commonwealth is concerned, the more important question is whether there were any conversations between Mr Stott and any DFAT officer about the terms of the letters that revealed to DFAT that AWB was making payments to Alia. The evidence relating to this and the conclusions to be drawn from it are discussed in Chapter 20. The evidence can be summarised as follows:
30.57 A number of issues arise from the evidence relating to DFAT's receipt of Mr Stott's letter and the drafting of the reply ultimately signed by Ms Drake-Brockman. In particular, there are some inconsistencies and unexplained gaps in both the documentary evidence and the evidence of the DFAT officers who were in Ms Drake-Brockman's section at the time. They include the following.
30.58 First, it is apparent that both an unsigned version of Mr Stott's letter and a signed version (with minor differences) were faxed to DFAT. Ms Drake-Brockman's evidence was that she had a specific recollection of having been shown only the unsigned version. Only the unsigned version remained on DFAT's files. No satisfactory explanation for this was provided by any officer of DFAT. It is unusual that both an unsigned and a signed version of the letter was sent to DFAT. This would tend to support one portion of Mr Stott's evidence-that there may have been some discussion about the terms of the letter before it was signed-although it is contrary to a draft unsigned statement taken from Mr Stott by Minter Ellison in 2004, which records, 'I did not discuss the drafts of my letters with DFAT'.[185]
30.59 It is unusual that, on Ms Drake-Brockman's evidence, a reply was drafted in response to an unsigned letter, particularly if the signed version was available. It is unusual that the signed reply was not maintained on any file in the relevant section.
30.60 Second, Ms Drake-Brockman had a clear recollection of how the letter was presented to her by her staff. This included discussions about the terms of the draft reply with both Ms Courtney and Mr Cuddihy. Ms Drake-Brockman's evidence in this regard was not corroborated by either Ms Courtney or Mr Cuddihy. Neither recollected having any role in the preparation of the reply to Mr Stott's letter or having any discussions with Ms Drake-Brockman about it. No DFAT officer who gave evidence to the Inquiry recollected being involved in the drafting of the reply. DFAT's files contain no record of who drafted the reply.
30.61 Third, the reply signed by Ms Drake-Brockman concludes with the sentence, 'International Legal Division has been consulted in the preparation of this response'. Ms Drake-Brockman's recollection was that she was advised by her staff that the Assistant Secretary of the Legal Branch was comfortable with the reply and that, when she asked to see him, she was advised by her staff that he was out of the office and not contactable. DFAT's files contained no record of any consultation between an officer or officers in the Middle East Section and DFAT's International Organisations and Legal Division or Legal Branch in relation to Mr Stott's letter or the reply. The evidence of officers in the Legal Branch was that if the branch had been consulted, a note or written record of any advice provided by the branch would be retained on file. No officer of the Legal Branch who gave evidence or provided a statutory declaration to the Inquiry recalled providing any advice or input into the letter signed by Ms Drake-Brockman.
30.62 These matters reflect on the reliability of the documentary systems within DFAT. They raise a concern that Mr Stott's request for advice and the response may not have been dealt with in the ordinary course. They do not, however, reflect upon whether Mr Stott told DFAT that AWB was making trucking payments to Alia and had been for the past year, that AWB did not have a contract with Alia for provision of trucking, that AWB had no real obligation to arrange trucking services in Iraq, that Alia had been nominated by the IGB as the body to whom fees were to be paid, or that the contract price had been inflated to include the trucking fee.
30.63 Insofar as Mr Stott's alleged conversations with officers of DFAT arise as an aspect of the knowledge of the Commonwealth, my conclusions are as follows:
- There is an absence of any documentary record of such a conversation-an absence for which Mr Stott was unable to provide any rational or logical explanation.[186]
- If Alia was a topic for discussion with DFAT, there is no rational reason why Mr Stott would not have referred to it in his letter or would not have confirmed Ms Drake-Brockman's statements about Alia in a subsequent letter.
- There is no reason why Alia would have been raised in a conversation following the letter when the letter itself makes no reference to it. The letter referred to 'Jordanian trucking companies', not Alia.
- There is an absence of any other evidence capable of corroborating Mr Stott's evidence on this matter. Mr Stott claimed he told his manager, Mr Goodacre, about the conversation with Ms Drake-Brockman.[187] Mr Goodacre did not recall any such conversation[188], although he conceded that it was possible that Mr Stott did.[189]
30.64 Even if Mr Stott's evidence were to be accepted, it does not follow that it should be concluded that he told Ms Drake-Brockman that AWB's wheat prices were inflated to incorporate the payment of an inland transportation fee or that the fee was paid to Alia or that Alia passed on these fees to Iraq. Mr Stott did not claim that he told Ms Drake-Brockman any of those things.
30.65 The evidence does not support the conclusion that in October or November 2000, in the context of Mr Stott's letter and Ms Drake-Brockman's reply, Mr Stott, or anybody else at AWB, told Ms Drake-Brockman, or anybody else at DFAT, that AWB was paying inland transportation fees to Alia and that these fees were incorporated in its contract prices. I find that they did not do so.
30.66 There was a very belated suggestion in the evidence of both Mr Lindberg and Mr Long that, on a visit to Iraq via Jordan in August 2002, they met with the Australian Ambassador to Jordan, Mr Tilemann, and that during that meeting AWB's use of Alia was mentioned. This evidence arose following the tender of a note made by Mr Cooper of meetings that occurred on 1 and 2 June 2005.[190] Mr Cooper's note recorded the words 'AL told Australian Ambassador in Iraq in 2002 of using Alia'. Mr Lindberg's evidence was that at the meeting that occurred on 2 June 2005 between himself, Mr Trewin and members of the Project Rose team he said 'something, by way of an aside, to the effect that I might have mentioned Alia to the Ambassador' during the Iraq trip in August 2002.[191] When examined, however, Mr Lindberg conceded that he said 'might' because he was not sure whether it was mentioned or not.[192] He had not recollected this supposed exchange when he provided his first statement to the Inquiry.[193]
30.67 In a statutory declaration, Mr Long stated that, having had his attention drawn to Mr Cooper's note, he recalled meeting the ambassador at the ambassador's house in Amman on the way into Iraq in August 2002.[194] Mr Long had no specific recollection of the substance of the conversation, but he believed that he and Mr Lindberg told the ambassador about 'the quality claim' and that Mr Cooper's note was 'likely to reflect some of what Andrew said in the course of the conversation'.[195] The basis for Mr Long's statement that this was 'likely' was that 'because meetings such as this inevitably turn to discussions of our [AWB's] business in Iraq'.[196]
30.68 Mr Long's supplementary statement also contains the following passage:
I have known Mr Tilleman in a professional capacity since 2002. It is difficult to have specific recollections of specific conversations but I believe it was well known to Mr Tileman that Alia supplied trucking services to the AWB. On an occasion that I am now unable to date I do recall Mr Tilleman saying to me words to the effect:
'We know Alia, we have entertained them, they are a trucking firm.'
My memory does not allow me to provide the context in which this was said.[197]
30.69 Mr Tilemann had no recollection of being told by Mr Lindberg or Mr Long about Alia-in 2002 or at any other time. He considered it unlikely that he was told anything about Alia because he would remember it if he had. The first he came to know about Alia was in September 2005:
Q: Do you have any recollection of being told in Jordan in 2002 that the AWB were using Alia for transport services from Umm Qasr?
A: No.
Q: No recollection at all?
A: No recollection.
Q: Do you say that it wasn't said to you?
A: I think it is unlikely that it was said to me. That somebody is using the name Alia would have a particular sort of impact, because the name is associated with some very specific moments in Jordanian history and to my knowledge it was not used and the first I ever heard of a trucking company by the name of Alia was in September 2005.[198]
30.70 The evidence of Mr Tilemann is preferred to the evidence of Mr Lindberg and Mr Long in relation to whether or not either of them ever discussed Alia with Mr Tilemann. In relation to the August 2002 meeting, Mr Lindberg's evidence is no higher than that he 'might' have said something about Alia and that he was unsure whether he did. Mr Long's evidence about the August 2002 meeting is at best speculation and based on the fact that conversations with Mr Tilemann usually turned to AWB's business in Iraq. The specific business discussed at this meeting was the quality claim. There is nothing to suggest that the discussion extended beyond that. Mr Long's recollection about the statement made by Mr Tilemann is vague and not specific as to time or context. It was a belated recollection apparently prompted by somebody else's note of a conversation to which Mr Long was not a party. It is not corroborated by any note or other evidence. There is no other evidence that Mr Tilemann, or anyone else at the embassy in Jordan, was aware of Alia or ever reported this fact to DFAT Canberra. In any event, there is no suggestion that Mr Lindberg told Mr Tilemann in August 2002 that AWB was paying monies to Alia as a conduit for paying money to Iraq. I find that neither Mr Lindberg nor Mr Long spoke to Mr Tilemann in 2002 about Alia.
30.71 Following the hostilities in Iraq in early 2003, the Coalition Provisional Authority obtained possession of documents held by various ministries and interviewed people who had occupied positions in the ministries. As a result of these investigations, the CPA made a number of assertions about the inflation of contract prices for humanitarian goods supplied under the Oil-for-Food Programme and the payment of 'kickbacks'. These allegations-including Captain Puckett's memorandum dated 10 June 2003-are addressed in Chapters 25 and 28. The CPA resolved to renegotiate all the outstanding contracts entered into under the Programme and reduce the price by 10 per cent.
30.72 By May 2003 Mr Long had been appointed to the CPA. As further details about the price in AWB's wheat contracts under the Programme emerged, specific allegations were made against AWB by US Wheat Associates. These allegations, and DFAT's written responses to them, are discussed in Chapter 28.
30.73 In this context, Mr Long and Mr Whitwell had a number of conversations with officers of DFAT's newly established Iraq Task Force-in particular, Ms Armstrong. Ms Armstrong's evidence was that, far from acknowledging that AWB's prices had been inflated by the requirement to pay inland transportation fees and that AWB had paid these fees to Alia and indirectly to Iraq, Mr Long and Mr Whitwell denied that AWB had inflated its prices or paid any kickbacks.
30.74 It was not until March or April 2004 that Mr Long and Mr Whitwell advised Ms Armstrong of the fact that AWB's contracts included inland transport, that AWB used a Jordanian trucking company, and that AWB made payments to Jordanian accounts in the name of Alia or Alia transport. Ms Armstrong's uncontradicted evidence was that on 18 March 2004 Mr Whitwell said to her:
AWB entered into a number of contracts with the Iraqi Grains Board. Because of the way in which the UN OFF program was set up, the Iraqis required the contracts to include inland transport and AWB was instructed to use a Jordanian trucking company. The prices were loaded up in the freight costs and insurance and risk premiums. The UN paid the contract.
The cost of freight and associated insurance charges and risk premiums were high and this is why the extra costs were high. Monopolies were charging what they liked-it was not exactly an open bidding system.
AWB paid the Jordanian trucking company. The Jordanian trucking company might have made payments to the Iraqis of their own volition.
AWB advised DFAT of the arrangement with the Jordanian trucking company in 2000.[199]
30.75 In April 2004 Mr Long told Ms Armstrong:
The trucking company would not do anything until it received payment. We had to pay before final UN authentication came in. The Letter of Credit could come through as late as 21 to 25 days after unloading.
We sent remittances to Alia Transport to a Jordanian Bank account. We knew the Jordanian company. It was a legitimate trucking company. The Iraqis handled the negotiations of the freight rates with Alia and advised AWB how much the fee was and the freight rate. It was that rate that went into the contract.[200]
30.76 These statements were made well after the end of the Oil-for-Food Programme and in the context of mounting allegations about inflated contract prices and kickbacks. Mr Long and Mr Whitwell were telling Ms Armstrong about incorporation of the inland transport fee in the contract price and the payments to Alia in this context because DFAT had never been told of this previously. They neglected to tell Ms Armstrong that Alia did not itself provide the transport, that the 'transport fee' included from November 2000 a 10 per cent surcharge unrelated to transport, and that Alia remitted the funds it received to Iraq.
30.77 Statutory declarations from some 112 past or present officers of DFAT were provided to the Inquiry. Some 24 statutory declarations were also provided from present or former officers of other Commonwealth departments. Some officers provided more than one statutory declaration. Of these statutory declarations, 92 were from officers who were on the distribution lists for various cables and addressed nothing more than whether the officer received, read or acted on any of the relevant cables. The significance of these cables is considered below. The balance of the statutory declarations were from officers who had some involvement in the Oil-for-Food Programme, either because they were posted for a period to the Middle East and Africa Branch or to the Australian mission to the United Nations or a relevant embassy. Appendix 27 lists the names of all Commonwealth officers who provided statutory declarations to the Inquiry. Those statutory declarations that deal solely with cables are listed separately in the appendix.
30.78 No DFAT officer stated that he or she was told at any time by anyone from AWB during the currency of the Oil-for-Food Programme that AWB's wheat prices had incorporated in them fees for inland transport payable to Iraq or a 10 per cent after-sales-service fee or that AWB had entered into collateral arrangements that involved it in paying inland transportation fees to Alia or otherwise indirectly to Iraq. Without exception, those officers who were involved in the Oil-for-Food Programme and dealt with AWB stated that they were unaware of these matters until well after the Programme ended.
30.79 It was not put to Ms Drake-Brockman that Mr Stott informed her of any of these matters. Consistent with Mr Stott's evidence, all that was put to Ms Drake-Brockman by Mr Stott's counsel was that after Ms Drake-Brockman sent the 2 November letter to AWB Mr Stott telephoned her and during that conversation she told Mr Stott that DFAT knew of Alia and that she was comfortable with Alia.[201] Ms Drake-Brockman denied that she made these statements to Mr Stott, and I accept her evidence in preference to the evidence of Mr Stott. Even if it were to be accepted that Ms Drake-Brockman did say these words to Mr Stott, it does not follow from this that Mr Stott had informed Ms Drake-Brockman about AWB's payment of inland transportation fees to Alia or that Alia was forwarding those payments on to Iraq.
30.80 I find that during the Oil-for-Food Programme no officer of AWB ever told DFAT or its officers that AWB was paying fees to Alia, that Alia did not provide transport services for the cartage of AWB's wheat, that AWB had no contact with Alia, that Alia had been nominated by the IGB as the recipient of fees, that the contract price included the so-called transport fee, that from November 2000 there was included in the fee a sum equivalent to 10 per cent of the price that was unrelated to transportation, or that Alia was a conduit for the payment of such fees to Iraq. Indeed, the inference to be drawn from the evidence is that on those occasions when AWB's contracts and dealings with Iraq were the subject of discussion between officers of AWB and officers of DFAT, the AWB officers involved deliberately refrained from telling the DFAT officers anything that might have revealed these facts to them. The failure to notify DFAT was by no means accidental. This finding is consistent with the fact that no officer of AWB asserted that he did so inform DFAT and no officer of DFAT said he or she was so informed.
30.81 It follows that, if DFAT did come to possess the relevant information, it did so from sources other than AWB.
30.82 A related question is whether AWB ever told either the Prime Minister or the Ministers for Foreign Affairs and Trade about its arrangements in relation to the payment of inland transportation fees to Alia and indirectly to Iraq. The improbability of it having done so, in circumstances where it had refrained from telling DFAT, is obvious.
30.83 There were a number of occasions during the operation of the Oil-for-Food Programme when AWB had the opportunity to directly advise the Prime Minister or the Ministers for Foreign Affairs and Trade of its arrangements relating to inland transportation fees. First, AWB wrote to the Prime Minister and the Ministers on a number of occasions. Second, senior AWB officers met with the Minister for Foreign Affairs and the Minister for Trade on a number of occasions during the currency of the Oil-for-Food Programme and shortly after it ended. There were also some meetings involving the Prime Minister. AWB did not disclose the relevant information either to the Prime Minister or the Ministers either in its correspondence or during any of the meetings. AWB did not claim to have done so.
30.84 As well as serving notices to produce on DFAT and the Department of the Prime Minister and Cabinet, the Inquiry asked that the offices of the Prime Minister, the Minister for Foreign Affairs and the Minister for Trade produce any documents that evidenced or constituted communications to or from AWB . None of the documents produced pursuant to this request revealed that AWB ever advised the Prime Minister or the Ministers that AWB was inflating the prices in its Iraq wheat contracts by incorporating fees payable to the Iraqis or that AWB was paying inland transportation or any other fees to Alia or otherwise directly or indirectly to Iraq.
30.85 A number of the letters AWB sent to the Ministers are considered in the foregoing paragraphs in the context of the knowledge of DFAT. None of the letters to the Ministers disclosed the existence of the relevant information.
30.86 Letters from AWB to the Ministers during the currency of the Oil-for-Food Programme did not descend at all into any details of AWB's contractual arrangements with Iraq or make any reference to the payment of inland transport fees or any other fees or payments directly or indirectly to Iraq. The letters that followed the end of the Programme-including those that related to allegations made by US Wheat Associates and those that dealt with the IIC investigation and possible findings against AWB-denied the allegations that AWB's wheat prices were inflated or that AWB paid 'kickbacks' to Iraq.[202] The letters in 2004 and 2005 that disclosed that AWB's contracts had incorporated payments referable to trucking and that the IGB had nominated Alia as the trucking company are inconsistent with AWB having previously advised DFAT or the Ministers during the operation of the Oil-for-Food Programme that it had made or was making payments indirectly to Iraq ostensibly in relation to inland transport. Even these letters maintain that Alia provided a transport service to AWB and do not suggest that it simply channelled the fees paid to it back to Iraq.
30.87 There is no evidence that anyone from AWB ever informed the Prime Minister, the Minister for Foreign Affairs, the Minister for Trade or any other Minister of the relevant dealings between AWB, Alia and the Iraqis. No past or present AWB officer claimed in evidence that they informed the Prime Minister or the Ministers about AWB's payment of inland transportation fees or after-sales-service fees and their incorporation in the contract price.
30.88 Senior officers of AWB did meet with the Ministers and the Prime Minister during the Programme and during the period 2003 to 2005, when allegations were being made about AWB's contracts under the Programme. There is no evidence to suggest that officers of AWB disclosed the relevant information to the Ministers or the Prime Minister during any of these meetings. In those instances where formal records were made of the conversations that occurred at the meetings, the records do not reveal that the AWB participants conveyed the relevant information at the meeting.[203]
30.89 Even in mid to late 2005, when it was apparent that the IIC was alleging that Alia was a front company, senior officers of AWB continued to tell the Minister for Foreign Affairs that AWB's payments to Alia were in respect of genuine trucking services provided to it by Alia and that it did not know Alia was making any payments to Iraq. This was the effect of what Mr Stewart and Mr Lindberg told the Minister at meetings on 1 June 2005[204] and 4 October 2005.[205] The record of conversation prepared in relation to the 4 October 2005 meeting includes the following:
2. Mr Downer said the IIC allegations were worse than he had thought. There was evidence presented by the IIC in the most recent letter. Mr Downer noted the letter claimed that Alia was a front company. He enquired what was the role of the Iraqi State Company for Water Transport (ISCWT). Mr Lindberg replied it was the port authority, which had responsibility for discharging goods from ships. Alia was not a front company and had provided transportation services. The AWB had been unaware of any wrongdoing and had used its services in good faith. Mr Downer said AWB needed to provide evidence. Mr Lindberg said AWB had been seeking additional information from the IIC about the claims, before providing a written response to the 26 September letter. The so-called evidence did not support the facts. AWB had provided explanations to the IIC which had been ignored. AWB could demonstrate that it had paid no kickbacks. Nor had AWB breached the sanctions regime. This had been confirmed by independent legal advice both in Australia and overseas (Richard Tracy in Australia and a Cornell University Professor who had previously participated in drafting the sanctions regime).[206]
30.90 AWB's continuing protestations at this late stage-that AWB was merely paying Alia for transport services provided by it and that it knew nothing of Alia paying the fees it received from AWB to Iraq-is inconsistent with any suggestion that AWB had told the Minister the true position in relation to the inland transportation fees at any time.
30.91 The Prime Minister and the Ministers for Foreign Affairs and Trade each provided statutory declarations to the Inquiry and gave oral evidence.[207] The content of their statutory declarations is inconsistent with any notion that they were ever told at any time by anyone from AWB during the currency of the Oil-for-Food Programme that AWB's wheat prices had incorporated in them fees for inland transport or after-sales-service fees of 10 per cent payable to Iraq or that AWB was paying inland transportation fees to Alia or otherwise indirectly to Iraq. Each of them stated that they were unaware of these matters until well after the Programme ended.
30.92 It follows that, if the Prime Minister or the Ministers did come to possess the relevant information, they did so from sources other than AWB.
30.93 In considering the question whether DFAT obtained from sources other than AWB knowledge of AWB's payment of inland transportation fees to Alia, and indirectly to Iraq, and its incorporation of these fees into its contract prices, it is important to emphasise again that it is only the actual knowledge of DFAT that is relevant in assessing any potential defence available to AWB. It is immaterial whether DFAT was in a position to find out, or could have, or should have, discovered the information from some other source.
30.94 DFAT received or had available, or potentially available, to it information concerning Iraq and AWB's wheat sales to Iraq from a number of sources, among them:
30.95 Two questions arise in relation to DFAT's acquisition of knowledge from any of these sources. The first is whether there is direct evidence of the communication to DFAT of the relevant information from any of these sources. The second is, if there is no direct evidence of the communication of the information from these sources, whether knowledge may be inferred from a combination of the information that was known to DFAT and a failure on the part of DFAT to make any inquiry or take any action in relation to that information. In certain circumstances 'a combination of suspicious circumstances and failure to make inquiry may sustain an inference of knowledge of the actual or likely existence of the relevant matter…a failure to make inquiry may sometimes, as a matter of lawyers shorthand, be referred to as wilful blindness'.[208]
30.96 Throughout the operation of the Oil-for-Food Programme DFAT liaised with the UN Office of the Iraq Programme and the 661 Committee via Australia's mission to the United Nations. On at least two occasions DFAT obtained from the United Nations information that was potentially relevant to AWB's actions in paying inland transportation fees.
30.97 The first such occasion was the Canadian complaint. The facts relating to the Canadian complaint, and in particular the information that was communicated to DFAT by the United Nations in relation to it, are discussed in Chapter 16. The information that was conveyed to Ms Moules at the mission by Ms Johnston, the Chief Customs Expert attached to the Office of the Iraq Programme, in January 2000 can be summarised as follows:
30.98 Ms Johnston also conveyed some information about the Canadian complaint to Mr Nicholas, the Australian Trade Commissioner in Washington, in March 2000. That information was essentially the same as the information Ms Johnston had conveyed to Ms Moules, although the account of the complaint that Ms Johnston gave to Mr Nicholas was less detailed than the account she gave Ms Moules.[209] Ms Johnston also raised with Mr Nicholas, as an additional issue, the fact that AWB's short-form contract contained a term that referred to AWB's standard terms and conditions and that this 'implied that additional conditions were attached to the contract, but not included in the paper submitted to the UN'.[210] This was the main focus of the conversation between Ms Johnston and Mr Nicholas.[211]
30.99 There is an issue as to whether Ms Johnston told Ms Moules and Mr Nicholas that irregular payments ostensibly related to transport costs. It is clear from contemporaneous documentation that the information conveyed to Ms Johnston by Lt Colonel Saunders of the Canadian mission included that the additional payments related to transport costs.[212] Ms Johnston did not, however, make notes of her conversations with Ms Moules and Mr Nicholas. Ms Johnston maintained that she conveyed all the information she received from Lt Colonel Saunders to Ms Moules, including the reference to transportation costs[213], and that she conveyed the same information to Mr Nicholas, again including the reference to transportation costs.[214] Ms Moules' evidence, on the other hand, was that nobody from the United Nations in any of their communications with her referred to trucking fees. The only reference was to irregular payment methods.[215] Ms Moules' cable to DFAT in Canberra, recounting her conversation with Ms Johnston, made no reference to transport costs or trucking fees.
30.100 Mr Nicholas' evidence was that Ms Johnston did not say anything to him about the detail of the irregular payments.[216] Mr Nicholas' cable that included detail of his discussions with Ms Johnston and was prepared within a week of those discussions also made no reference to transport costs or trucking fees.[217]
30.101 For the reasons that follow, it is not strictly necessary to make a finding about whether Ms Johnston told Ms Moules and Mr Nicholas that the irregular payments related to trucking or transport. If it was necessary to make a finding on this, there are sound reasons for preferring the evidence of Ms Moules and Mr Nicholas. The most significant factor is that Ms Moules' cable constitutes a detailed contemporaneous record of her conversations with Ms Johnston. Ms Johnston accepted that, but for the absence of any reference to transport costs, Ms Moules' cable was an accurate rendition of what she said to Ms Moules.[218] Ms Johnston's evidence, on the other hand, was based entirely on her recollection of a conversation that occurred over six years ago.[219] Mr Nicholas' cable also contains a fairly contemporaneous record of his conversation with Ms Johnston. Again, it does not refer to transportation costs or trucking fees. It is unlikely that Ms Moules and Mr Nicholas both forgot or neglected by oversight to refer to the fact that Ms Johnston had told them the irregular payments related to transport costs. There was no reason why both Ms Moules and Mr Nicholas would intentionally exclude any reference to transport costs in their cable reports if Ms Johnston had included such details in her conversation. On balance, the likelihood is that Ms Johnston's recollection about a conversation that occurred six years ago was faulty and that for some reason she neglected to tell both Ms Moules and Mr Nicholas that the alleged irregular payments related to transport costs.
30.102 Whether or not the information conveyed to Ms Moules and Mr Nicholas included a reference to transport costs, it was very close to an accurate account of the arrangements that were in place between AWB and the IGB. Most importantly, it included information to the effect that AWB's wheat contract prices were inflated by US$14 per tonne and that this additional component of the price was paid by AWB into a bank account outside Iraq. All that was missing was a specific reference to Alia and, if it is accepted that it was unlikely that Ms Johnston told Ms Moules and Mr Nicholas that the irregular payments related to transport costs, specific reference to the fact that the payments were for inland transportation fees.
30.103 The significant point, however, is that the information that was conveyed to DFAT by the United Nations was put as being no more than an allegation and an allegation in respect of which the United Nations had no way of 'judging the accuracy or otherwise'.
30.104 It was also an allegation that DFAT took up with AWB and that was emphatically denied. The actions taken by DFAT in response to the Canadian complaint are detailed in Chapter 16. In short, the only step taken by DFAT was a step taken by Mr Bowker on his receipt of Ms Moules' 13 January 2000 cable reporting on Ms Johnston's contact with her. The step taken by Mr Bowker was to telephone Mr McConville, AWB's Manager of Government Relations, who emphatically denied the allegations. Mr Bowker did not take the matter up with any other senior officers of AWB or seek a more detailed or considered or written response from AWB. He did not, for example request any information from AWB about the structure of AWB's contract prices and how they were arrived at or whether it made any payments to a Jordanian account. Mr Bowker's belief was that DFAT had neither the power nor the capacity to investigate AWB's commercial arrangements, other than by inquiry of AWB.
30.105 As a result of AWB's denials and the absence of any information gained from any other inquiries, DFAT was in possession of no information to substantiate the allegation or any part of it. It follows that, as far as DFAT was concerned, the allegation was unfounded, and AWB was neither inflating its contract prices nor making irregular payments to an account outside Iraq. It accordingly had no actual knowledge of these matters from that source.
30.106 Any issues regarding the steps taken by DFAT in relation to the Canadian complaint and the adequacy of the inquiries it did make are immaterial unless they support an inference that DFAT actually knew the claims to be true and did not follow up the allegations adequately or at all because it was deliberately turning a 'blind eye'. This is considered further below.
30.107 The United Nations-or at least the United Nations missions of various of its member states, including the United States, the United Kingdom and Norway (in its capacity as chair of the 661 Committee-conveyed some general information to DFAT in relation to attempts by Iraq to manipulate the Oil-for Food Programme and circumvent the sanctions.
30.108 On 9 March 2001 Ms Moules sent to DFAT a cable[220] that referred to and discussed a report by the United Nations Secretary-General on the Oil-for-Food Programme. It also contained Ms Moules' report on information she obtained from consultations with members of the Security Council about the Security Council's discussion concerning the report, which occurred in closed session on 8 March 2001.[221] Ms Moules' report on the Security Council's discussions included the following:
The UK and U.S. laid the blame for the shortcomings in the operation of the program on the Iraqi regime. The U.S. said it was obvious the Government of Iraq did not support the Oil-for-Food Program and wanted it to fail. The UK said Iraq needed to order more supplies, pump more oil, stop manipulating the Program, and stop blackmailing companies by demanding surcharges.
- Concerning the issues of surcharges, in addition to Iraq's attempt to add surcharges to oil prices (O.UN10270) Iraq has, according to UN officials, begun demanding kickbacks and illegal commission on contracts for humanitarian supplies. We asked the Norwegian Mission (whose PR chairs the Sanctions Committee) if and how the committee intended to address this issue. Norway said that although 'everybody knows about the kickbacks', given the lack of hard evidence (clearly surcharges are not reflected in any of the documentation processed by the UN) it was difficult to address the issue directly. However Norway was considering having a committee letter circulated containing a general reminder to all member states of the illegality of companies paying surcharges to Iraqi purchasers.
30.109 Three points may be made about this information. First, it did not relate directly to AWB and its contracts under the Oil-for-Food Programme, although it does refer generally to contracts for humanitarian supplies. Second, the information about Iraq demanding kickbacks and illegal commissions is again in the nature of an allegation, in the sense that, as the Norwegian mission pointed out, there was a lack of 'hard evidence' to support the claims. Third, the United Nations, in performing its export examination of contracts submitted to it for approval, had not detected any excessive pricing showing that prices included surcharges.
30.110 It is apparent, however, that Ms Moules appreciated the risk that AWB might be the subject of Iraq's attempts to circumvent the sanctions. Less than two weeks after the 9 March 2001 cable, Ms Moules was contacted by Mr Snowball and asked to provide some advice in relation to the payment of port fees in Iraq. The terms of Mr Snowball's request for advice and Ms Moules' response are addressed in Chapter 12. One of Ms Moules' cables to DFAT in Canberra, reporting on her efforts to clarify the issue of port fees, includes the following passage:
The current environment of increased scrutiny of the operation of the Oil-for-Food program and heightened awareness of attempts by Iraq and by some suppliers to circumvent the sanctions regime underlines the importance of AWB adhering closely to the current regulations concerning the payment of port fees. It is not yet clear whether AWB will be placed under further pressure by Iraqi agents to pay port fees in a manner inconsistent with sanctions, and AWB New York has said it will stay in touch with us if needed regarding forthcoming shipments. Iraq's interest in keeping port fees outside the Oil-for-Food Program appears self-evident from the Iraqi delegation's approach to us, though we would note that there was no suggestion in the casual nature of Iraq's approach that the issue of port fees is being linked to AWB's securing of future wheat contracts.[222]
30.111 It is self-evident that general information that Iraq was alleged to be involved in manipulation of the Oil-for-Food Programme and that AWB may be put under pressure by Iraqi agents to pay port fees in a manner inconsistent with the sanctions is not the same as specific information that AWB had inflated its contract prices to facilitate payment of inland transportation fees to Alia and, indirectly, Iraq.
30.112 During the period 1998 to 2004 agencies within the Australian intelligence community produced a number of intelligence reports that, in general terms, concerned issues or events relating to the Oil-for-Food Programme. Pursuant to notices to produce served on agencies within the Australian intelligence community, a number of reports were produced to the Inquiry and inspected by counsel and solicitors assisting. Of the reports inspected, 15 documents were found to be of relevance. Public interest immunity was claimed by the Commonwealth on behalf of the Australian intelligence community in respect of the 15 for the reasons set out in confidential statutory declarations provided by the heads of the agencies that produced the relevant reports.[223] The claim for public interest immunity was upheld[224], and the reports were tendered as a secret exhibit (secret exhibit 4). However, I prepared a document that distilled the content of the relevant reports and their distribution, without disclosing the source of the information within them or any other matters adverse to the public interest. The distillation was in the following terms:
1. In 1998 the AIC held unassessed intelligence indicating that Alia Corporation (Alia), based in Jordan, was part owned by the Iraqi Government and that it was involved in circumventing United Nations sanctions (sanctions) on behalf of the Iraqi Government.
Distribution
The intelligence reports comprising this information were distributed on or about the date of their creation to other AIC members. Each was also distributed on or about that date to the Department of Foreign Affairs and Trade (DFAT), various areas of the Department of Defence including the International Policy Division and the Office of the Deputy Secretary Intelligence and Security (Defence), the Office of the Inspector-General of Intelligence and Security (IGIS) and to the Department of the Prime Minister and Cabinet (PMC)
2. By the first quarter of 2000 the AIC held unassessed intelligence indicating that Alia received fees in Jordan for the discharge and inland transport within Iraq of goods purchased by Iraq under the Oil for Food Program (OFFP). It received these fees as agent for the Iraqi Government. The fees, less a small commission, were paid into accounts accessible by Iraq in violation of sanctions. The amounts involved were very substantial.
Distribution
The intelligence report comprising this information was distributed on or about the date of its creation to other AIC members. It was also distributed on or about that date to DFAT, Defence, IGIS and PMC.
3. By November 2000 the AIC held unassessed intelligence indicating that Iraq's transport charges for humanitarian goods under the OFFP had been very substantially increased. Alia was one means by which these transport fees were paid to Iraq. The AIC also held unassessed information that such fees would probably be used for procurement purposes outside Iraq.
Distribution
The intelligence reports comprising this information were distributed on or about the date of their creation to other AIC members. Each was also distributed on or about that date to DFAT and Defence. Only 3 of the 4 were sent to IGIS and PMC; the reports sent to IGIS and PMC did not contain the intelligence on the increased transport charges or the probable use of fees for procurement outside Iraq.
4. By March 2001 the AIC held unassessed intelligence of endeavours by Iraq to breach sanctions by, amongst other methods, collecting commission on contracts for humanitarian goods imported into Iraq under the OFFP. It included unassessed information that Iraq violated sanctions by charging a 'commission' of at least 10% on imported humanitarian goods under the OFFP and that the 10% commission was rigidly enforced.
Distribution
The intelligence reports comprising this information were distributed on or about the date of their creation to other AIC members. Each was also distributed on or about that date to DFAT, Defence and IGIS. One report was distributed to PMC; this report did not contain the intelligence that the 10% commission was being rigidly enforced.
5. By September 2001 the AIC held unassessed intelligence indicating that inland transport fees for humanitarian goods, including fees paid through Alia, were proposed to be increased very substantially by Iraq. This increase was on top of the 10% commission already paid and the fees were payable in advance of delivery. The proposed increase in transport fees was to apply to all humanitarian goods delivered under the OFFP through the port of Umm Qasr.
Distribution
The intelligence report comprising this information was distributed on or about the date of its creation to other AIC members. It was also distributed on or about that date to DFAT, Defence and IGIS.
6. By December 2002 the AIC held unassessed intelligence that Iraq was enforcing the 10% commission on imports under the OFFP and that one means by which it continued to be paid was by payment into accounts in Jordan.
Distribution
The intelligence report comprising this information was distributed on or about the date of its creation to other AIC members. It was also distributed on or about that date to DFAT, Defence, Customs, the Australian Federal Police, the Office of the Foreign Minister, the Office of the Minister for Trade, the Prime Minister's Office, the Australian embassy in Washington and the High Commission London.
7. Between June 2003 and January 2004 the AIC held unassessed intelligence that the former Saddam regime had forced suppliers under the OFFP to pay Iraq the 10% commission.
Distribution
The three intelligence reports comprising this information were distributed on or about the date of their creation to other AIC members. Each was also distributed on or about that date to DFAT. Two of the reports were distributed to Defence, the Australian Embassy Washington and the High Commission London. One was distributed to the Australian Representative Office Baghdad, one to Treasury and one to the Department of Industry, Tourism and Resources.
8. The intelligence held by the AIC between 1998 and 2004 did not mention any Australian company by name. Unassessed intelligence held in November 2003 included that not all large companies had agreed to pay the Iraqi imposed surcharges, and cited as an example wheat imports from Australia.
Distribution
The intelligence report comprising the information held in November 2003 was distributed on or about the date of its creation to other AIC members. It was also distributed on or about that date to DFAT, Defence, the Australian Embassy Washington, the High Commission London and the Australian Representative Office Baghdad.
9. None of the detai ls or particulars of information contained in secret exhibit 4 is inconsistent with the distillation above save that the details above do not include details of the distribution of the certain documents within secret exhibit 4 after the commencement of this Inquiry.[225]
30.113 Senior officers of the Office of National Assessments[226] and DFAT[227] provided the following additional evidence in relation to the documents in secret exhibit 4 or the context in which these reports were prepared and distributed:
30.114 As set out in the distillation, exhibit 641, each of the reports in secret exhibit 4 was distributed to DFAT. Intelligence reports distributed to DFAT during the relevant period were received and disseminated in the following way:
30.115 In relation to the reports in secret exhibit 4 before late 2002, only very limited records of the names of individual DFAT officers who were on the internal DFAT distribution list or who may have accessed one of the reports electronically had been retained by DFAT or the intelligence agencies concerned. The only written receipts held by DFAT related to two reports; one of those receipts specified that the report was to be distributed to two individual officers.[255] Those officers were the then director of the Middle East Section and a director of another geographic section in another division of DFAT.[256] The intelligence agencies themselves also had very limited records of the internal DFAT distribution list. The agency that had provided most of the reports in secret exhibit 4 to DFAT in an electronic format had no record of the distribution list.[257] The second agency that provided reports to DFAT electronically had retained some limited records of who opened documents after the middle of the second half of 2002.[258] Those records that did remain did not establish that any of the delegates or relevant officers from the Middle East Section of DFAT opened electronically any of the reports in secret exhibit 4.
30.116 None of the delegates of the Minister for Foreign Affairs who signed permissions to export in relation to relevant AWB shipments, including Ms Drake-Brockman and Mr Bowker, recalled seeing or being provided with any of the reports in secret exhibit 4.[259] Nor did any of the officers of the Middle East and Africa Branch during the relevant period who received and sent to the United Nations copies of AWB's contracts and notification forms, including Ms Courtney, Mr Cuddihy and Mr Grenenger.[260] Nor were any of the delegates or relevant officers of the Middle East Section aware during the relevant period of the substance of the contents of the reports in secret exhibit 4, other than in respect of some immaterial matters or matters that were the subject of public knowledge or discourse.[261]
30.117 Even if the relevant delegates or officers did receive and read any of the reports in secret exhibit 4 or otherwise became aware of the substance of the content of these reports, it would not follow that they came to possess information or knowledge that AWB was inflating the prices in its Iraq wheat contracts by incorporating an inland transportation fee or that AWB was paying inland transportation fees to Alia, or otherwise indirectly to Iraq. It is apparent from the distillation that none of the reports contained that information. None of the reports referred to AWB. None of the reports referred specifically to the inflation in the price in wheat contracts under the Programme, although one report that referred to wheat cited wheat imports from Australia as being an example of some large companies not agreeing to pay Iraqi-imposed surcharges.[262]
30.118 The intelligence reports do, however, refer to Alia and its involvement with Iraq in the circumvention of sanctions and the exploitation of the Oil-for-Food Programme. They also refer to the imposition by Iraq of fees relating to inland transportation of humanitarian goods imported to Iraq under the Programme and note that Alia was one means by which these transport fees were to be paid to Iraq. The question whether the existence and potential availability of this information to DFAT, taken together with other surrounding information, facts and circumstances could support an inference that DFAT was turning a blind eye to AWB's potential involvement in the sort of activities referred to in the report is dealt with below.
30.119 In addition to DFAT, notices to produce documents were served on a large number of other Commonwealth departments, agencies or authorities, among them the Department of Agriculture, Fisheries and Forestry; the Department of Defence; Treasury; the Attorney-General's Department; the Department of the Prime Minister and Cabinet; the Wheat Export Authority; AusAID; Austrade; and the Australian Customs Service. These notices broadly required the production of any documents constituting or relating to communications between the department or agency and AWB or other departments or agencies or their Ministers concerning wheat sales by AWB to Iraq, Alia, the payment of inland transportation or other fees to Alia or indirectly to Iraq, and the possible breach of sanctions by AWB. The offices of the various Ministers responsible for these departments, authorities and agencies were also asked to produce any documents within the terms of the notices to produce.
30.120 A large number of documents were produced by the departments, agencies or authorities and the offices of their Ministers. None of the documents produced to the Inquiry revealed that any of the departments, agencies or authorities or their responsible Ministers possessed information to the effect that AWB was inflating the prices in its Iraq wheat contracts by incorporating fees payable to the Iraqis or that AWB was paying inland transportation or any other fees to Alia or otherwise directly or indirectly to Iraq. There is no suggestion that any such information was communicated by any of these departments, agencies or authorities or their Ministers to DFAT or the Ministers for Foreign Affairs and Trade or the Prime Minister.
30.121 The functions or responsibilities of some authorities or agencies did bring them into contact, or potential contact, with AWB or AWB (International) in relation to its wheat sales to Iraq or payments relating to such sales. The agencies or authorities with the most direct contact with AWB were the Wheat Export Authority and Austrade.
30.122 The functions and powers of the Wheat Export Authority and its involvement with AWB and AWB (International) are discussed in Chapter 29. Suffice it to say that the authority's functions included control of the export of wheat from Australia and monitoring the performance of AWB (International). Its powers included the power to compel AWB (International) to provide information or documents relating to certain matters.
30.123 During the relevant period the Wheat Export Authority, in the performance of its functions and the exercise of its powers, obtained information and documents from AWB (International) that included inform
