8.1 The Inquiry's terms of reference were widened to permit and require the Inquiry to report on whether conduct of AWB in relation to or consequential upon any complaint, inquiry, investigation or allegation, or response thereto, concerning its dealings with Iraq might have constituted a breach of any law of the Commonwealth, a State or Territory.
8.2 It is to be expected that, when an inquiry or complaint is made regarding conduct that might be adverse to the reputation of a prominent public company, the board and management of that company would respond by requiring that the inquiry or complaint be properly investigated. Such a course is necessary to maintain the reputation of a company, its board, its management and employees. It enables the company to respond properly to the inquiry or complaint. It is also to be expected that, in endeavouring to ascertain the factual and legal circumstances material to the inquiry or complaint, a company would engage appropriate personnel and resources, including legal resources.
8.3 Having determined, as best it can, the factual and legal circumstances material to the inquiry or complaint, a company must then determine the approach it will adopt regarding disclosure of that which it has ascertained. The approach it adopts may be indicative of the attitude of its board or senior management and may be indicative of an open or closed culture within the company.
8.4 AWB professed an open, frank and cooperative culture. In the introduction to the company's Code of Conduct, Mr Andrew Lindberg, the then Managing Director, wrote:
It has become an essential element of good business practice for the Board and Executive of commercial organisations to provide a clear set of 'values' that emphasise a culture encompassing strong corporate governance, sound business practices and good ethical conduct.
…
At AWB we promote and demonstrate clearly that our business affairs and operations are at all times being conducted legally, ethically and in accordance with the highest standards of integrity and propriety. This is a fundamental principle of AWB's operations and business affairs.
…
Adherence at all times to these values and standards is essential. It will ensure that AWB maintains a reputation for high standards of business conduct, professionalism and integrity. We will ensure that AWB is proud of what it stands for as an organisation. No employee should ever feel that his or her conduct could not survive the test of public scrutiny.[360]
8.5 The conduct of AWB has been the subject of 'public scrutiny' or questioning on four significant occasions:
8.6 In January 2000 Canada informed the United Nations that the Canadian Wheat Board had been asked to pay a deposit of US$700,000 into a Jordanian bank account to cover 'transport costs' in Iraq for wheat. It was suggested by Canada that AWB had concluded contracts that included terms similar to those proposed to the Canadian Wheat Board. This led the United Nations to ask the Australian permanent mission to the United Nations to make inquiries of AWB regarding the matter. Ms Moules, First Secretary at the Australian mission, cabled the Department of Foreign Affairs and Trade in Canberra, asking that an inquiry be made of AWB. Mr Bowker (Department of Foreign Affairs and Trade) in prior general discussions with Mr Officer, AWB's General Manager, Global Sales and Marketing, had been informed that AWB was 'fully aware of, and respected, the obligations of the Australian Government and would continue to act appropriately'.[364] On 18 January 2000 Mr Bowker raised the detail of the Canadian query with Mr McConville, AWB's Government Relations officer. Without making any inquiry, Mr McConville responded, 'This is bullshit'.[365] He further rejected the allegations, saying, 'AWB would continue to uphold its responsibilities towards the Australian Government in Iraq'.[366]
8.7 There is no evidence that Mr McConville made any inquiry of anyone in AWB before responding to Mr Bowker; nor is there any evidence that Mr McConville made any inquiry of anyone in AWB following his conversation with Mr Bowker. Had he made any inquiry of those with responsibility for the Iraq contracts-Mr Emons, Mr Hogan, Mr Officer or Mr Watson-or had he looked at the contracts entered into after July 1999, or the conditions of tendering for such contracts, he would have observed that AWB had indeed entered into contracts containing clauses similar to those proposed to the Canadian Wheat Board. He also would have learnt that AWB had agreed to pay 'discharge', or inland transport, costs of US$12.00 or $14.00 per tonne.
8.8 The matter was again raised on 9 March 2000, at a meeting between Mr Nicholas (Austrade) and Mr Flugge (AWB's then Chairman), Mr McConville and Mr Snowball in Washington. Ms Johnston (United Nations) had earlier raised with Mr Nicholas the matter of 'irregularities' in AWB's contracts and the question whether there were contracts 'parallel' to those submitted to the United Nations. Mr Nicholas told the three AWB representatives that Ms Johnston had said a third country was concerned that AWB was making irregular payments required by the Iraqi Grain Board. AWB immediately assured Mr Nicholas that there were no irregularities in its dealings with Iraq. Although Mr Snowball was of the view that it was unnecessary to do so, Messrs Flugge and McConville agreed that the matter should be taken seriously and a full response be given to the United Nations.
8.9 In truth, the matter was of concern to AWB. Mr Snowball discussed it with Mr Emons, who on 15 March 2000 sent a facsimile to Mr Abdul Rahman (IGB):
We wish to advise that the office of AWB Limited in New York has been approached by the Customs office of the United Nations who are questioning the payments by AWB to the Jordanian trucking company.
We are very concerned to learn from the UN that the Canadian Government has taken action within the United Nations to discover the manner of AWB payments.
We ask your assistance in this matter and would ask that no information of a confidential nature is released.
We will be seeking your understanding on this matter when AWB visits Iraq in April.[367]
8.10 On the same day Mr Snowball emailed Mr Emons, advising him that when the matter was raised by Mr Nicholas 'we played down the issue'.[368] He also wrote:
Bronte [Moules] confirmed that the UN were asking for information on the contract clause … She has put this request through to DFAT in Canberra and DFAT will contact you. 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. We should ensure that we do provide something to DFAT when they contact you.[369]
8.11 The matter was resolved by Ms Moules providing to Ms Johnston a copy of the standard terms and conditions.[370] However, such terms and conditions were supplied only after that course had been agreed by Mr Emons and Mr McConville.[371]
8.12 AWB's attitude to this complaint was no doubt influenced by the knowledge that the complaint was made by the Canadian Wheat Board. Nonetheless, what should have been addressed was whether AWB, in agreeing to the payment of inland trucking fees through a Jordanian trucking company, was acting otherwise than in accordance with UN resolutions. Mr Emons was concerned that the method of payment of trucking fees would be discovered, and he sought the Iraqi Grain Board's cooperation in not making information available to the United Nations. Mr Snowball knew from his involvement in email correspondence in June 1999, and subsequently, that AWB was in fact paying a US dollar sum per tonne for trucking fees and that the fee was paid to the Iraqis via their maritime agents because all Iraqi accounts were frozen. Undoubtedly he knew that the Canadian complaint raised the propriety of making such payment. It was against that background knowledge that he wrote, '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'.[372]
8.13 It is apparent that Mr Nicholas must have raised the question of payment of trucking fees with Messrs Flugge, McConville and Snowball at a meeting on 9 March 2000 because after the meeting Mr Snowball both spoke to and emailed Mr Emons, expressing concern about the UN inquiries relating to the payment of trucking fees. This resulted in Mr Emons faxing the Iraqi Grain Board, requesting secrecy about trucking arrangements. Each must therefore have known that the United Nations regarded arrangements for payment of trucking fees as possibly breaching sanctions. Notwithstanding Messrs Flugge and McConville informing Mr Nicholas that the UN inquiries would be taken seriously, Messrs Flugge, McConville and Snowball did nothing to inquire into such transport arrangements or to determine whether such arrangements were in breach of UN sanctions.
8.14 On 3 June 2003 the President of US Wheat Associates, Mr Tracy, wrote to Mr Powell, the then US Secretary of State[373]:
The recent announcement on the renegotiating of contracts under the Iraq Oil-For-Food (OFF) program raises several important issues for the United States. We are particularly concerned as to whether old wheat contracts with the Australian Wheat Board (AWB) are or have been included in this exercise.
The U.S is providing most of the funding for the WFP [World Food Programme] feeding effort, so possible price gouging for Australian wheat-regardless of whether it's through OFF or WFP-is appalling. We certainly support all efforts to see that the Iraqis do not go hungry, but there is no reason for the U.S. to pony up funding if the Australians continue to overcharge for such a basic commodity. The U.S. must require open bidding and complete transparency in the process.
We urge that you direct your staff involved in WFP and OFF contract approvals to be alert to these issues and to inform themselves on the going prices for these commodities.
This US Wheat Associates letter and similar statements were published in the US and Australian press.[374]
8.15 Mr Lindberg responded to the allegations by letter dated 12 June 2003, addressed to Mr Tracy:
All contracts entered into between AWB and the Iraqi Grains Board were made and executed in accordance with the United Nations (UN) sanctioned Oil-For-Food Programme. Each and every contract for the supply of wheat by AWB under the Oil-For-Food Programme has been examined by the UN Office of the Iraq Programme to determine its conformity with the provisions of Security Council Resolution 1284 (1999) and all related procedures and guidelines. In particular, the price and value of the wheat shipped under each contract has been considered and found by the UN to be reasonable and acceptable.[375]
8.16 Following publication of the US Wheat Associates complaint, Mr Lindberg asked Mr Cooper (AWB's General Counsel) to investigate the matters alleged in the letter and to provide legal advice to the AWB Executive Leadership Group on the issues raised.[376] Initially, the investigation had no particular name, but in May 2004 it became known as 'Project Rose'.[377]
8.17 Mr Cooper was responsible for managing Project Rose from its commencement until late July 2004, when Mr Hargreaves, Stakeholder Relations Manager, was given management responsibility for it by Mr Lindberg.[378] Following the announcement of this Inquiry, the project was renamed 'Project Lilac', and Ms Gillingham was made responsible for it.[379]
8.18 Mr Cooper instructed Mr Quennell, from Blake Dawson Waldron, to conduct a factual review designed to gather together all AWB documents in order to establish the relevant facts.[380] After undertaking the factual review, Mr Quennell was to advise AWB on the legal consequences of the facts that had been found.[381]
8.19 Mr Quennell did not receive a written brief in June 2003. He was given 'an open ended instruction to … come into the company and undertake this review and report back on his findings from time to time'.[382] He was given a copy of the US Wheat Associates letter of 12 June 2003 and was directed to all the sources of information he would need. Those sources included electronic records of AWB and the names of persons he would need to interview. At that time Mr Quennell acquired all of the Iraq hard-copy files from AWB's International Sales and Marketing division.[383]
8.20 From June 2003, before the factual review had begun, Mr Cooper had an awareness of the type of legal issues that might arise from facts Mr Quennell might find. Mr Cooper's evidence was that:
… very early on in the piece in June, we identified the broad legal issues that could be raised by these facts, and so in June of 2003 we knew the overall legal headings, if you like that we needed to research, such as the UN sanctions and whether they had been complied with, the foreign corrupt practices provisions in the Commonwealth Criminal Code …[384]
8.21 In June 2003 Mr Quennell and his staff set about gathering documents and information in relation to all the AWB contracts dealing with the Oil-for-Food Programme and the inland trucking component of those contracts.[385] His initial review of AWB materials was substantial, covering the six months from June to December 2003.[386] He reviewed email records and paper files. In March and April 2004 AWB personnel were interviewed; they were questioned specifically on documents.[387]
8.22 From time to time Mr Cooper and Mr Quennell provided briefings to members of the Executive Leadership Group and the AWB and AWBI Boards regarding Project Rose.
8.23 The first of these briefings was on 12 June 2003, when Mr Quennell gave a presentation to the Executive Leadership Group. The presentation was in both hard-copy and oral form. It identified a number of factual and legal matters requiring investigation and legal analysis.[388] AWB claimed legal professional privilege over the presentation, which claim was ultimately rejected by the Federal Court of Australia.
8.24 It is now known that on 12 June 2003, the following matters were drawn to the attention of the Executive Leadership Group within AWB:
8.25 AWB never told the Australian Government, or the Independent Inquiry Committee, of this advice or of its reservations. No doubt that is one reason why it wished to keep hidden from this Inquiry the details of the presentation.
8.26 On 15 August 2003 Mr Quennell provided to Mr Cooper a draft advice entitled 'Wheat exports to Iraq-trucking fees'.[400] AWB claimed legal professional privilege over the advice, which claim was also ultimately rejected by the Federal Court. Mr Cooper told Mr Lindberg of the advice, but the Board was not informed, and Mr Cooper was instructed to obtain Senior Counsel's advice on the same topic.[401]
8.27 The advice from Mr Quennell and Blake Dawson Waldron was:
In our view:
8.28 Apart from the conclusions just quoted, the advice contained at least two telling paragraphs:
What was AWB's intention in making payment of trucking charges to Alia? Was it to influence persons at GBI in order to obtain business? In a broad sense it was, since the truck transport component was necessary to effect delivery of wheat, and presumably, unless inland delivery could be accomplished, GBI may not have wished to buy Australian wheat. (This hypothesis assumes that the truck transport charge was a genuine component in the first place.)[403]
and
AWB has not remitted funds to persons or bodies within Iraq. It may have infringed the first part of paragraph 4 [of Resolution 661] if it has 'made available a financial or economic resource' to GBI by paying its agent to provide a service that GBI would otherwise have had to procure and meet the cost of itself. Further, AWB is likely to have contravened Resolution 661 if it remitted funds to Alia in the knowledge that such funds would ultimately be placed at the disposal of the Iraqi regime. On the basis of the documentary evidence which we have examined to date it can at least be said that it is arguable that AWB did not know how the funds remitted to Alia would be ultimately disbursed.[404]
8.29 These passages called into serious question whether the 'trucking transport charge' was a genuine trucking fee and whether AWB truly believed the payments to Alia were for the purpose of trucking by Alia or would be passed on to Iraq.
8.30 This advice-and the reservations it expressed-was never conveyed to the Australian Government or the Independent Inquiry Committee and is inconsistent with the position AWB has taken publicly. No doubt that is one reason why AWB sought to prevent public disclosure of the advice.
8.31 On 6 May 2004, after the United Nations had in April announced an inquiry into the Oil-for-Food Programme, Mr Lindberg wrote a memorandum to the AWB and AWBI (AWB (International) Limited) directors, notifying them of AWB's investigation of its Oil-for-Food contracts with Iraq:
Introduction
Media speculation regarding AWB's contracts with Iraq under the Oil for Food Program is increasing and is expected to intensify over the coming months.
Attached is a report from ABC national rural radio news today that KPMG has been appointed to investigate claims that AWB overpriced the wheat sold to the Iraqi Grains Board …
Action already undertaken
Last year we commenced a detailed review of the facts surrounding AWB's Oil For Food Contracts with Iraq. This has involved reviewing over 30,000 emails, many files and interviewing AWB management. The process has been led by Chris Quennell, Trade & Transport lawyer with Blake Dawson Waldron, Melbourne.
A report on the factual findings will be tabled with AWB management tomorrow and I will be in a position to brief you next week.
We anticipated this enquiry over 12 months ago and put in place this process to establish the facts and to manage AWB's risk. The enquiry has been rigorous and very detailed. Although substantially complete, the enquiry will take a further few weeks to fully complete.[405]
8.32 On 12 May 2004, on Mr Cooper's instructions, Mr Quennell briefed Mr Tracey QC on Project Rose. Mr Quennell provided to Mr Tracey QC a memorandum of instructions[406], together with an accompanying volume of documents.[407] Mr Tracey QC was asked to advise on:
… whether AWB may have
(i) contributed to a contravention by Australia of its obligations under UN Resolution 661 … and
(ii) contravened any Commonwealth and/or State legislation (including, in particular, the Criminal Code Act 1995).[408]
8.33 AWB claimed legal professional privilege over Mr Tracey's advice. On 7 April 2006 (day 62 of the Inquiry's hearings) AWB conceded, after submissions from Counsel Assisting, that privilege for Mr Tracey's advice had been waived in 2005 because of disclosure of that advice. The brief thus became available to the Inquiry. It showed that many of the material documents had been assembled by advisors to AWB in one folder in May 2004.
8.34 The memorandum of instructions set out the procedures for the provision of humanitarian supplies to Iraq and the UN contract approval procedure.[409] It noted that prior to July 1999 AWB's contracts with the Iraqi Grain Board were concluded on a CIF free out Umm Qasr basis.[410] It set out the inclusion in the tender dated June 1999 of the following clause:
10-PRICE
CIF free on truck to silo at all Governorate [sic]. Cost of discharge at Umm Qasr and land transport will be USD 12 per metric ton to be paid to the land transport co. For more details contact Iraqi Maritin [sic] in Basrah.[411]
The memorandum then summarised the history of the introduction of the trucking fee into the three contracts, A4653, A4654 and A4655, concluded on 14 July 1999, and contract A4822, concluded on 14 October 1999.[412]
8.35 It noted the inclusion in the short-form contract A4653 of the following clause:
SHIPMENT The cargo will be discharged Free in to Truck to all silos within all Governates of Iraq at the average rate of … The discharge cost will be a maximum of US$12.00 and shall be paid by sellers to the nominated Maritime Agents in Iraq. This clause is subject to UN approval of the Iraq distribution plan.
PRICE The CIF, Free in Truck price per tonne of 1,000 kilos is … UNITED [States] of America dollars is as follows [deleted for confidentiality].[413]
And it specifically noted, 'The 'discharge cost' of US$12 per m.t. was added to the sale price of the wheat. There is no specific reference to "land transport"'.[414]
8.36 The memorandum continued:
Subsequent contracts between AWB and IGB (eg A4970, A4971 and A4972 dated 20 January 2000) ... continued to include a provision to the effect that the discharge costs would be a maximum amount (eg US$15 per m.t.) and was to be paid by the sellers to the nominated maritime agents in Iraq, the clause being 'subject to UN approval of the Iraq distribution plan'. However, the signed contracts (eg A4970, A4971 and A4972) as submitted to the UN … did not include the above provision. Instead, the shipment clause made no reference to the 'discharge costs' and merely stated:
'The cargo will be discharged free into truck to all silos within all Governates of Iraq at he [sic] average rate of 3000 m.t. per day.'[415] [original emphasis]
It noted that all AWB contracts submitted to the UN from January 2000 made no reference to a payment of a discharge cost or a trucking fee and stated, 'The trucking fee was increased from time to time, eg contract A1441 dated 23 June 2002 was for a total of [deleted for confidentiality] CIF Free in Truck to all Governates Iraq with a trucking fee of US$47.45 per m.t'.[416]
8.37 In respect of the mechanism for payment of the trucking fee, the memorandum stated:
The trucking fee in respect of contracts A4653, A4654, A4655 and A4822 was paid directly by AWB to a Jordanian company, Alia for Transportation and Trade ('Alia').
In relation to subsequent contracts, payment of the trucking fee was for a time effected by whichever shipping company had undertaken to provide the ocean carriage of the particular shipment. However, as appears from an email from Charles Stott … on 25 July 2000 … the procedure was then changed so that AWB remitted the funds direct to Alia.[417]
It made no mention of the suspicions current in AWB at the time that Alia was part-owned by the Iraqi Ministry of Trade.
8.38 The memorandum then set out the substance of Mr Stott's letter of 30 October 2000 to Ms Courtney of the Department of Foreign Affairs and Trade[418] and of Ms Drake-Brockman's reply of 2 November 2000[419], noting, '… as at 30 October 2000 the arrangements for the payment of the trucking fee had already been in place for approximately 8 months'.[420]
8.39 Mr Tracey QC was then instructed:
The documents which instructing solicitors have examined do not indicate whether the trucking fees paid by AWB to Alia can be regarded as a genuine payment for the provision of inland freight services actually provided by Alia. We have not seen any contract between AWB and Alia. We have seen no evidence to indicate whether or not the trucks used to transport wheat after its discharge at Umm Qasr were provided by Alia. We have seen no explanation as to how the trucking fee was calculated or the basis upon which the trucking fee was subsequently increased. The trucking fee does not appear to have been calculated with regard to the differing distances between Umm Qasr and the various Governorates …[421]
He was then referred to some internal AWB emails in which the trucking fee was discussed.
8.40 The memorandum contained no reference to the after-sales-service fee of 10 per cent, the ownership of Alia, the negotiation of contracts A1670 and A1680 to include an 'uplift' in price to cover the Tigris debt, or the proposed payment via the trucking fee of the 'Iron Filings' compensation.
8.41 Mr Tracey QC gave oral advice in conference on 25 May 2004.[422] On the same day Mr Cooper and Mr Quennell gave a briefing to a joint information session attended by the directors of AWB and AWBI. The PowerPoint presentation given at the briefing noted Mr Tracey QC's oral advice, as follows:
Richard Tracey QC has been briefed and advised in conference today:
1. no evidence of breach of relevant UN Resolution on sanctions (661)
2. no evidence of breach of Australian domestic law
RT is maintaining a watching brief and can advise at short notice if the matter develops further (eg by commencement of some form of inquiry).[423]
8.42 The minutes of the AWB Board meeting held on 26 May 2004 summarised the Project Rose briefing:
Project Rose
The Board noted it had received a briefing on Project Rose (attended also by directors of AWB (International) Limited) on Tuesday 25 May 2004 and had also received a memorandum on this matter from the Managing Director on 6 May 2004. Project Rose is the code-name for the AWB Group's internal investigation of AWB's wheat exports to Iraq and AWB's involvement in the United Nations Oil for Food Program (OFF) in regard to which allegations of impropriety had been made in the public arena.
The briefing session was addressed by Mr Jim Cooper, General Counsel, and Mr Chris Quennell, trade and transport lawyer of Blake Dawson Waldron. (The Board noted that a copy of the briefing presentation would be filed with the Board papers).
The Board noted the following with regard to the Project Rose briefing:
(a) the allegations of impropriety had commenced with correspondence from the US Wheat Associates to the US Secretary of State, Mr Colin Powell, on 3 June 2003. There had been sporadic media commentary since that time, and a number of inquiries (all of which remain unconfirmed) had been reported as follows: UN independent inquiry into the OFF program; Interim Iraqi Governing Council Investigation (reportedly to be conducted by KPMG); US House of Representatives investigation; and a US Senate Committee on Foreign Relations investigation.
(b) The Project Rose investigation commenced in June 2003 and has involved a comprehensive review of all contract arrangements for the export of wheat by AWB to Iraq from mid 1999 to 2002, including the inland freight arrangements within Iraq.
(c) The findings to date of the Project Rose investigation are as follows:
1. all AWB contracts were approved by the Office of the Iraq Program at the United Nations;
2. no evidence has been identified of any AWB knowledge that money paid to the Jordanian transport firm, Alia, was onpaid to the Iraq regime;
3. no evidence has been identified of payment of funds by AWB to any other person in relation to the OFF shipments; and
4. no evidence has been identified of payment of funds to any AWB employee by any other person in relation to OFF shipments.
(d) That the Board would be kept informed of any additional findings that may emerge from the Project Rose investigations.[424]
8.43 Thus, between June 2003 and May 2004 AWB conducted a detailed review of its sales to Iraq under the Oil-for-Food Programme. The review examined most relevant emails, and statements were taken from relevant employees. The Executive Leadership Group received at least some reports on progress of the investigation, and in May 2004 the Board was briefed on the investigation and its outcomes to date.
8.44 Having conducted this investigation and obtained legal advice about whether AWB had participated in any breach of UN sanctions or breached any Commonwealth, State or Territory law by paying trucking fees to Alia-the advice being that it had not-AWB, apparently through resolutions of its board, determined that it would not provide the details of its internal examination to those who might be inquiring into the very matter it had investigated. Most of the relevant documents compiled as a result of Project Rose and included in the brief to counsel were not provided to the Independent Inquiry Committee; nor was the IIC provided with statements that had been taken from relevant witnesses. AWB negotiated with the IIC an arrangement whereby it was obliged to produce not 'all relevant documents' but only those documents the IIC requested. Of the 164 documents identified by its own lawyers as relevant, and briefed to counsel, AWB provided only 45 to the IIC.
8.45 Similarly, although AWB had collected in a volume most of the relevant documentary material for the purpose of briefing counsel, it did not provide that compilation to this Inquiry until obliged to do so following the concession on day 62 of hearings that legal professional privilege for Mr Tracey's advice could not be maintained because it had been waived. Similarly, legal professional privilege was initially claimed in relation to the slide presentations made to the board concerning Project Rose until this claim was also withdrawn on day 62 and the slides were made available.[425]
8.46 On 4 June 2004 Mr Tracey QC asked Mr Quennell:
(1) whether there was any commercial justification for the [10%] increase;
(2) why the IGB [or its successor] agreed to a reduction after the fall of the Iraqi regime and, in particular, whether there was any commercial justification for the reduction.[426]
Mr Tracey QC was instructed that there was no commercial justification for the 10 per cent increase and that the 10 per cent reduction in contracts A1670 and A1680 had been 'unilaterally imposed'.[427]
8.47 On 8 June 2004 Mr Tracey QC advised Mr Quennell:
In the absence of commercial justification for the introduction, increases and decreases in the trucking fee and the lack of specific approval for the fee and its quantum by the UN there is reason to suspect that the fee (or part of it) was used as a kick-back to the IGB or persons associated with it. Whether the money was so used can only be determined by an investigation of the finances of the Jordanian trucking company which was the recipient of the trucking fees.
A further reason for suspecting the efficacy of the fee is Hogan's assertion that UN approval for its payment had been obtained. If this was not the case then a question arises as to why the assertion was made. Was it a deliberate attempt to mislead AWB management or did he make an honest mistake?
None of this establishes that the AWB or any of its employees is guilty of any offence or of breaching UN resolutions. What it does suggest is the need for further enquiries (if this is possible) to determine all the facts surrounding the payment of the trucking fee and, in particular, whether any part of it found its way to the IGB or any Iraqi officials.[428]
8.48 By October 2004 AWB was concerned about the legality of the Tigris transaction and whether it could pay the money collected from the escrow account to Tigris. On 13 October 2004 Dr Donaghue of counsel advised in a draft memorandum of advice:
(1) Neither AWB nor any of its employees participated in or contributed to a breach by Australia of Security Council Resolution 661 as a result of their participation in the Tigris transaction;
(2) It is possible that both AWB and some of its employees (including but not necessarily limited to Long, Whitwell and Hogan) have breached:
(a) Section 70.2 of the Criminal Code Act 1995 (Cth); and
(b) Section 81(1) of the Crimes Act 1958 (Vic).
(3) In these circumstances, AWB should not pay the US$8 million that it received in the course of the transaction to Tigris, as to do so may involve the commission of a further offence against S.88 of the Crimes Act 1958 (Vic).[429]
8.49 Immediately AWB sought the advice of two senior counsel.[430] Mr Tracey QC was asked to advise on a statement of facts later verified by Messrs Stott, Long and Whitwell whether the Tigris transaction had resulted in AWB and/or any of its employees participating in and/or contributing to a breach by Australia of its obligations under Resolution 661. He advised on 26 October 2004, as had Dr. Donaghue, that it had not.[431]
8.50 Mr Richter QC, with Dr Donaghue, was asked to advise on the assumed facts arising from the Tigris matter whether:
They advised that no offence had been committed and thus the money could be paid to Tigris. The advice stated:
… while we consider it possible that the AWB employees who structured the Tigris transaction might be found to have engaged in misleading conduct for certain purposes, this is not sufficient to establish the offence. There must be a causal link between the obtaining of the property and the deception-it must be obtained by deception. It does not follow from the fact that a deception might have been carried out that that deception caused the obtaining of property in the required sense.[432]
8.51 In March 2005 Mr Tracey QC was asked to consider further documents relating to port fees.[433] Having done so, he advised:
Some of the documents also contain evidence of attempts by Iraqi Government agencies to obtain direct payment for port fees and payments through Alia for inland transportation (for example, faxes under tabs 8, 9 and 14). The terms of these communications add to the concern which I expressed in my email of 8 June 2004. However, I note my instructions that there is no evidence of any payments of the kind contemplated in the documents briefed having been made. There is also some comfort for AWB in the repeated refusals of its officers to agree to the paying of US50˘ per metric ton port fees as demanded by Iraqi authorities (for example, documents collected under tabs 8 and 8A) but AWB's position was subsequently undermined by its agreement to incorporate the port fees into the inland transport fee which it paid to Alia (see under tab 11A).[434]
8.52 In July 2005 Mr Tracey QC was asked to confirm his opinion in writing. His advice, dated 12 August 2005, expressed severe doubts and reservations about factual matters on which he was asked to advise:
19. The passages in the various documents to which reference has just been made are suggestive of the possibility that the trucking fee was, in fact, a payment by the AWB to the IGB in contravention of Resolution 661. The correspondence suggests that the payments started being made, not because of any commercial concern of the AWB about demurrage costs, but rather because of a demand made by President Hussein. Thereafter steps were taken to disguise the true nature of the payments by directing them through Alia. When the Canadian authorities raised the issue at the United Nations the AWB reaction was that payments should cease. Not only that, the IGB was asked not to supply details of the payments to the UN. All this is suggestive of attempts by the AWB to meet the Iraqi demand for payment but to do so in a way in which it was 'not apparent that the funds were going into Iraq'. It is notable that none of this history was recounted to the Department of Foreign Affairs and Trade later in 2000 when its advice was sought as to the efficacy of the trucking fee. The Department was told that the fee was necessary in order to secure quick clearance of Australian wheat from the wharves at Umm Qasr. No doubt, as a result of the comfort provided by the response, payments continued to be made to Alia at least until mid 2002.
…
22. It is also to be observed that the documents fail to provide evidence about a number of matters which it would be necessary to establish in order to prove a breach or breaches of Resolution 661. Some of the omissions might also add to the suspicion that breaches may have occurred. I am instructed that the documents examined by my instructing solicitor do not indicate whether the trucking fees paid by AWB to Alia can be regarded as a genuine payment for the provision of inland freight serves actually provided by Alia. No contract between AWB and Alia appears in the papers. There is no documentary evidence to indicate whether or not the trucks used to transport wheat from Umm Qasr to the various inland destinations within Iraq were provided by Alia. No documentary explanation appears as to the basis for the calculation of the trucking fee which was originally charged or subsequent increases to it. The information which does not [sic] emerge from the document is, in a number of instances, equivocal insofar as it may have a bearing on the present enquiries. The absence of any documentation evidencing the commercial basis for the fixing of the trucking fee at various rates and the absence of any contract with Alia may be taken as suggesting the existence of a bogus arrangement under which money was paid through Alia to Iraqi authorities for a purpose other than payment for the provision of trucking services. On the other hand, it may be that the payments were in the nature of an incentive to make it worth the while of Alia to provide more trucks to clear the wheat. I recall it being said at a conference about this matter last year that, after trucking fees were paid, the time taken to clear wheat from the Port of Umm Qasr improved considerably. This could have occurred as a result of the payments. That said, the absence of a contract between AWB and Alia is surprising. However, the evidence does not go so far as to suggest that none was ever entered into.
23. It is also of concern that the Department of Foreign Affairs and Trade was not told, when its advice was sought in late 2000, about these pre-existing events. The AWB gave the Department the impression that the demurrage problem had only recently arisen and that the trucking fee solution was about to become the subject of negotiations with Alia. This is not, however, necessarily indicative of misconduct. By the time the Department's advice was sought, the trucking fee had been paid for almost a year. It had been referred to in some of the contracts which had been forwarded to the United Nations through the Australian Diplomatic Mission. It is therefore conceivable that the author of the 30 October 2000 letter was able to assume a certain level of background knowledge on the part of the Department which didn't require rehearsal. It is possible that the $US12.00 payments which had been made were not producing the desired result of quick clearance from the port because they appeared in the contract and, as a result, limited the scope for the negotiation of incentives for the provision of more trucks by Alia.[435]
Mr Tracey QC concluded:
24. Ultimately, however, the question that I was asked to advise on was whether there was evidence that AWB may have contributed to a contravention by Australia of its obligations under Resolution 661. A breach of that resolution would only have occurred if the trucking fees had been paid to the IGB or the Iraqi Government and then only if it was not paid for a legitimate commercial purpose. Whilst some of the material with which I have been briefed raises suspicions that there may have been a perception within AWB that any payment of the trucking fee may have contravened Resolution 661 and that it was necessary to make the payment to Alia in order to avoid any suggestion that the payments, if made directly to the IGB, would have been in breach of the Resolution, there is absolutely no evidence in the material provided to me that any of the money paid by the AWB to Alia was ever forwarded to the IGB or any other arm of the Iraqi government. It was for this reason, that, despite some misgivings I answered the question posed for advice in the negative.[436]
8.53 Regarding Australian domestic law, Mr Tracey QC concluded:
25. I considered the possibility that some of the conduct appearing in the documents, although it occurred outside Australia, may have been suggestive of criminal conduct in breach of the Commonwealth Crimes Act. I was unable to identify any offence arising from the conduct of any individual AWB officer or the AWB itself disclosed by the documentary material.
26. I have not conducted an exhaustive search of Commonwealth legislation with a view to negativing the possibility of other breaches of Australian law. I will, of course, be pleased to examine the possibility of a breach of any specific Australian law to which my attention is directed.[437]
8.54 In September 2005 Mr Tracey QC was asked to give further advice but on different assumptions and in respect of different questions. The questions were:
(1) Did UN Resolution 661 and/or Resolution 986 prohibit the AWB from paying, out of funds obtained from the escrow account, established by clause 7 of Resolution 986, fees charged by Alia for Transportation and General Trade ("Alia") for the inland transport of wheat sold by the AWB under UN approved contracts?
…
(2) Does payment, out of funds obtained from the escrow account, of fees charged by Alia for the inland transport of wheat sold by the AWB under UN approved contracts contravene any Australian law?[438]
The advice then sought was on the premise that the fees charged by Alia were in fact for the transport of wheat in Iraq and in the absence of any evidence that 'payments made to Alia were, or might have been, remitted to the Saddam regime or individuals of the regime'.[439] Mr Tracey QC was instructed, 'The AWB engaged Alia, a company registered and based in Jordan, to provide the necessary trucking services'.[440] On the basis of those assumptions, Mr Tracey QC answered each question in the negative:
14. On the facts and assumptions on which I have been asked to advise no breach of the prohibition on the making available of funds to Iraq has occurred. All payments were made to Alia in Jordan. AWB has no reason to believe that any of those funds might have been remitted to the Iraqi regime or any individuals within it.[441]
…
18. I am not aware of any Australian law which would have been contravened by the AWB or any individual by reason of the payments made to Alia for the provision of trucking services. On the facts and assumptions on which I have been asked to advise, the payments were made pursuant to bona fide commercial arrangements.[442]
8.55 AWB also sought, from a Professor Wippman in the United States, advice about whether payment of inland trucking fees was permissible under the Oil-for-Food Programme. As is apparent, Professor Wippman's advice was given on the false basis that AWB had a contract with Alia for the provision of trucking service. The overview advice was:
The UN resolutions establishing and maintaining a sanctions regime on Iraq do not, on their face, provide a clear answer to the question whether in-land trucking fees may be paid in hard currency to a Jordanian company. Paragraph 4 of Resolution 661 prohibits payments to the Iraqi government or any commercial undertaking in Iraq, but contains a humanitarian exception. Read in light of subsequent practice and the escrow account system created by resolution 687, it appears that the sanctions regime was designed to preclude suppliers from making hard currency payments to the Government of Iraq (GOI) or other entities in Iraq, either directly or through third parties, even for trucking services that were essential to providing foodstuffs to the locations where they were needed in Iraq, and even if the costs charged for trucking were reasonable and customary. However, the imprecise nature of the resolutions prompted various inquiries to the Office of Iraq Programme (OIP) and the 661 Committee. Decisions of the committee, though not equivalent in authority to decisions of the Security Council, carry great weight, and decisions of the OIP are also significant as aids to interpretation. Since both the OIP and the 661 committee considered the acceptability of contracts containing in-land trucking provisions, and did not place holds on such contracts or otherwise block them, and since AWB's contracts on their face included payments to a third party nominated by the GOI for in-land transportation and were approved by OIP, AWB could reasonably interpret the sanctions regime to permit payment of reasonable and customary in-land transportation fees.[443]
8.56 Importantly, Professor Wippman wrote:
According to the Secretary-General's November 25, 1996 interim report, the distribution of humanitarian supplies is to be done by the GOI through 'a decentralized network of food warehouses and distribution centres that supply rations to private retail stores, which in turn distribute rations to households within their areas.' Further, 'transportation of these rations from warehouses to the retail stores is provided by the private sector and paid for by the Government.' The distribution plan submitted by Iraq and approved by the Secretary-General is contained in Annex I to the Interim Report. A small amount of money is set aside for logistics, but it is not clear how that is to be used. However, the distribution plan states that 'all items purchased under the Plan will be transported to and stored in specifically designated silos and warehouses,' including wheat. Further, 'retail ration agents shall receive the monthly food quota for the population residing within their designated areas upon presentation of ration coupons … against payment of a standard nominal fee as a contribution towards internal transportation, handling, and distribution.' Thus, it appears that Iraq agreed to handle internal transportation costs and planned to charge recipients internally a 'standard nominal fee' for such costs, presumably in local currency.
This seems to have been the procedure actually followed. According to the Secretary General's June 2, 1997 report, 'in Trebil and Umm Qasr, government offices ("reception centres") are responsible for dispatching trucks using a computerized system aligned to the Ministry of Trade's allocation plan.' The Ministry 'uses 45,693 food and flour retail agents from the private sector to distribute commodities to beneficiaries.' In turn, 'a nominal fee of 105 Iraqi dinars is paid by each food beneficiary towards transport and administrative cost.' Moreover, the system seemed to work adequately. According to the Secretary-General's report, 'with minor exceptions … the commodities have been transported efficiently throughout the country …' (para. 44). (See also S/1997/685, Sept. 8, 1997 ('once food arrives at any of the three entry points, dispatch and distribution is efficient'). In fact, the system seemed to improve as time went on. (See S/1998/477, June 5, 1998, para. 48 (time for delivery of wheat from points of entry to governorate warehouses reduced to 3-4 days)). It does not follow that a different arrangement would violate the Security Council resolutions, but hard currency payments to private contractors would have departed from the approved distribution plan at this point in time.[444]
And later he wrote:
However, a major goal of the sanctions regime was to prevent hard currency from flowing to the GOI outside of the escrow account. Hard currency payments to a GOI-nominated company outside of the escrow account run counter to this goal if the payments are high relative to the actual cost of the service at issue. Even if the payments are not high enough to permit a kickback, the structure of the program seems to require payment from the escrow account, at least for services rendered in Iraq. Thus, AWB's contracts with Alia probably should have been structured as separate contracts between Alia and the GOI, subject to 661 committee approval and payment from the escrow account. This seems to have been the gist of the advice given by Jon Almstrom to the CWB in December 1999 (IIC vol. 3, p. 73-74).[445]
As will become apparent, AWB did not have a contract with Alia for the trucking of wheat throughout the Oil-for-Food Programme.
8.57 In the days before the release of the Independent Inquiry Committee' final report, on 27 October 2005, AWB sought and obtained an expert opinion of Sir Anthony Mason. Sir Anthony expressly declined to express a view on whether AWB's payments to Alia contravened UN sanctions since he did not have available to him the material collected by the IIC.[446] The material before him did not 'establish or suggest that AWB or its officers, more particularly its senior executives, knew that the fees [paid to Alia] were unreasonable or that the fees were being illicitly channelled to the Iraqi Government or were not being applied to the provision of inland transportation'.[447]
8.58 Against that background, Sir Anthony Mason advised:
(i) Did the inclusion, on the insistence of the Iraqi Grain Board (IGB), of an inland delivery payment term in its wheat contracts with AWB violate the UN sanctions against Iraq that started with Resolution 661 in 1990 and continued until the Oil-for-Food Program ended in 2003?
Answer : No, so long as the price stipulated was reasonable.
(ii) Did the UN Sanctions Resolution prohibit AWB from paying fees for the inland delivery of wheat to a transport company?
Answer : So long as the fees were reasonable AWB could reasonably conclude that the payment of such fees was consistent with the Sanctions Resolutions.
(iii) Whether the payment of inland transport fees by AWB could fall within cl. 4 of Resolution 661.
Answer : The payment of unreasonable fees could fall within the prohibition contained in cl. 4 of Resolution 661.
(iv) Do the materials presented to me support a finding that AWB knew or ought to have known that the payments of inland transportation fees which it made were illicit payments to, or for the benefit of, the Iraqi Government?
Answer : As to actual knowledge, no. As to 'ought to have known', the position is not as clear. Although the evidence of steep increases in transportation fees invites suspicion, there are strong arguments that it should not be inferred that AWB ought to have known that the payments were being channelled to the Iraqi Government.[448]
8.59 Although no inference is available from the claiming of legal professional privilege, the concept that 'no employee should ever feel that his or her conduct could not survive the test of public scrutiny' was not adhered to by AWB or its Board. AWB chose, as it was entitled to do, to seek to prevent public scrutiny of its dealings with Iraq under the Oil-for-Food Programme. Even though it had investigated its dealings with Iraq under the Programme and been advised, at least on some occasions on the material briefed to counsel, that it had not acted in breach of sanctions or illegally, the Board determined to try to keep confidential the inquiries and their outcome. This is not indicative of a culture 'encompassing strong corporate governance, sound business practices and good ethical conduct'.
8.60 AWB's approach to disclosure to the Independent Inquiry Committee is a further indication of a closed, obstructive culture and approach.
8.61 On 21 April 2004 UN Secretary-General Kofi Annan announced the formation of an independent panel to conduct an inquiry into allegations of impropriety in the administration and management of the Oil-for-Food Programme.
8.62 On 6 May 2004 Mr Lindberg wrote a memorandum to the AWB and AWBI directors, notifying them of AWB's investigation of its Oil-for-Food contracts with Iraq.[449]
8.63 By the end of May 2004 AWB had substantially completed a major review of documentary evidence held by it in relation to dealings with Iraq under the Oil-for-Food Programme and had taken statements from relevant witnesses. The documents had been assembled in a brief for counsel, and legal advice had been obtained from Mr Tracey QC regarding:
… whether AWB may have:
(i) contributed to a contravention by Australia of its obligations under UN Resolution 661 … and
(ii) contravened any Commonwealth and/or State legislation (including, in particular, the Criminal Code Act 1995).[450]
8.64 On 26 July 2004 Mr Thomas emailed Mr Hargreaves and Mr Trewin, with a copy to Mr Cooper and Mr McKinlay, about Project Rose:
Jim gave a good overview to the ELG [Executive Leadership Group] on where things are up to regarding Rose. Discussion took place. AL and Jim will present to the Board on Wed.
In summary, the view is that we should take a 'passive cooperative approach'-i.e. assist where asked and provide appropriate responses-but not much upside in being actively co-operative.[451]
8.65 Thus, the senior executives of AWB agreed to respond to queries put to the company, but no more. As will appear when discussing the basis on which they would 'cooperate' with the Independent Inquiry Committee, AWB sought to narrow and restrict that which it was prepared to provide by way of information and witnesses.
8.66 On 22 December 2004 an IIC investigator wrote to Mr Hargreaves, seeking access to documentation and interviews with relevant AWB staff.[452] The investigator initially sought the following information from AWB:
a) Copies of all documents relating to contracts awarded under the UN's Oil-for-Food Programme to the Australian Wheat Board/AWB Limited, including letters of credit and bank transfers.
b) Details of any handling agents or transportation companies used by the Australian Wheat Board/AWB Limited in connection with the delivery of wheat to Iraq. This has been discussed in the press by the AWB (the Jordanian trucking company) and we request full details:
c) Interviews with AWB staff who were involved in discussions with Iraqi authorities including Andrew Lindberg, Michael Long, Trevor Flugge and Dominic Hogan.
d) Any documents from the Australian Wheat Board/AWB Limited Audit Committee relating to the audit or general oversight of contracts with Iraq.
e) All documents relating to any internal or external investigation conducted in relation to contracts under the Oil-For-Food Programme.
f) Assistance in arranging interviews with any other personnel from AWB Limited and personnel from the former Australian Wheat Board, including members of the Audit Committee of both organizations who may have information of assistance to the inquiry.[453]
Point (e) relates directly to the Project Rose investigation and the documents and statements obtained in that investigation.
8.67 Mr Hargreaves responded to the IIC investigator's email on 20 January 2005.[454] That email did not provide an answer to the investigator's request but stated that AWB was continuing to 'explore what would be the most appropriate way to assist the inquiry'.[455] Mr Hargreaves wrote that he understood that the IIC investigator intended to travel to Australia in 'early February' 2005; he offered to meet with the IIC investigator along with Mr Cooper.
8.68 On 27 January 2005 the IIC investigator again wrote to Mr Hargreaves[456], noting that he planned to be 'in Australia during the week commencing 7 February'.[457] In the light of this planned trip, the investigator asked whether access to the material requested in his email of 22 December 2004 would be granted. He also asked whether details he had asked for would be provided.
8.69 On 31 January 2005 Mr Hargreaves responded to the investigator's email of 27 January:
We struggle to see how there would be any benefit in duplicating the chain of documentation regarding our trade with Iraq under the OFF program given you are already accessing this information through the United Nations, but would be prepared to discuss this with you.
Further, given the effluxion of time and company policy it would not be our intention to offer AWB representatives for interview but would consider a process for answering questions on notice.[458]
8.70 On 1 February 2005 the IIC investigator responded to Mr Hargreaves' email of 31 January 2005: 'In consideration of the expense and time required to travel to Australia, the limitations placed on access to AWB information do not justify the journey at this point in time'.[459]
8.71 On 9 February 2005 Mr Hargreaves wrote to the IIC investigator, informing him of his and Mr Cooper's plans to be in the United States during February.[460] Mr Hargreaves sought a meeting with the investigator to explore 'a mutually acceptable process by which AWB could assist the IIC in its inquiries'.[461]
8.72 On 9 February 2005 the Minister for Trade, the Hon. Mark Vaile MP, telephoned the AWB Chairman, Mr Stewart.[462] He informed Mr Stewart that Mr Volcker had expressed concern about AWB's lack of cooperation with the IIC. Mr Vaile said it was the Government's view that the company ought to fully and expeditiously assist in the investigations.[463] This was reinforced by a letter from Mr Vaile to Mr Stewart dated 10 February 2005:
It is the Government's strong view that censure of AWB Limited by the Volcker panel would be seriously damaging to the reputation and standing of the company. For this reason, I urge you in the strongest possible terms to fully and expeditiously assist the IIC in its investigations.
The IIC has proposed an MOU with the Australian Government which contains appropriate protections against improper use or release of confidential information passed by the Government to the IIC. In the Department of Foreign Affairs and Trade's previous correspondence with AWB Limited it indicated that AWB Limited should seek its own legal counsel. This remains the Government's view, including in relation to any interest AWB Limited may have in seeking appropriate assurances from the IIC regarding the improper use of AWB Limited information. That said, given the seriousness of the concerns raised by the IIC Chair, I am strongly of the view that it is in your interests to cooperate fully and supply the requested documentation.[464]
8.73 On 10 February 2005 the IIC investigator responded to Mr Hargreaves' email of 9 February:
In terms of 'a mutually acceptable process by which AWB could assist the IIC in its inquiries', the AWB was a leading contractor under the United Nations Oil-For-Food Programme (OFFP). The IIC has been tasked with conducting an investigation of the OFFP. As part of that investigation the IIC will be investigating the very public allegations made against AWB. In order to conduct a proper investigation it is necessary for the IIC to have access to all relevant documentation and to conduct interviews with AWB staff who have relevant information. The documentation that we request access to and the substance of the interviews relate directly to AWB contracts under the United Nations Oil-For-Food Programme.[465]
8.74 The IIC investigator then set out the information sought. In substance, it was the same as that originally asked for in the investigator's email of 22 December 2004. The material differences were that, in addition to the information originally sought, the IIC investigator also requested:
- the Department of Foreign Affairs and Trade
- the Australian mission to the United Nations
- the United Nations.[469]
The IIC investigator concluded his email thus: 'It would be helpful if you would indicate in advance the extent of cooperation AWB will consider and any specific matters that you wish to discuss'.[470]
8.75 On 16 February 2005 Mr Lindberg rang Mr Volcker.[471] On 17 February he wrote to Mr Volcker 'in response to matters discussed during our telephone conference on 16 February 2005 regarding the Independent Inquiry Committee's (IIC's) work and your request for assistance from AWB Limited (AWB)'.[472] The letter assured Mr Volcker that 'AWB will cooperate' with his inquiry.[473] It stated:
I believe that this discussion was very helpful in clarifying both the IIC's and AWB's position and correcting the misunderstanding that had developed between our two organisations on the question of cooperation. I hope that you have been assured that AWB will cooperate with your inquiry and naturally seeks a framework in which this cooperation can occur.[474]
The letter summarised the main points of discussion, and agreement, between Mr Lindberg and Mr Volcker. Among the main points were the following:
1. AWB will review the requests for information forwarded to us via the Australian Department of Foreign Affairs and Trade (DFAT) and those forwarded by your Senior Investigator …;
2. AWB will, to the best of its ability, meet your requests for access to documents, information and relevant persons;
3. AWB will establish a data room in Melbourne and provide access to your Senior Investigator … to review documents[475]…
8.76 Mr Lindberg also set out the arrangement for interviews with AWB representatives. He confirmed, amongst other things, that:
8.77 On 17 February 2005 Mr Lindberg also wrote to Mr Blazey, head of DFAT's Iraq Task Force.[480] Copies of the letter were sent to Ministers Downer and Vaile.[481] In his letter Mr Lindberg referred to his discussion with Mr Volcker and said he had 'reassured him that AWB Limited will be cooperating with the IIC'[482] and proposed that:
DFAT and AWB immediately establish a framework for cooperation on this project whereby:
1. as an ongoing process both parties consult on the most appropriate manner in which to fulfil requests from the IIC; and
2. in general terms, no AWB related documents are released without having first been inspected by AWB representatives.[483]
Mr Lindberg also requested 'details of any documents that are copied by IIC'.[484]
8.78 On 17 February 2005 Mr Taylor of the Wheat Export Authority wrote to Ms Scales (AWBI) seeking 'AWB(I)'s written consent to provide any relevant material held by the WEA' to DFAT, which Mr Taylor expected would, in turn, be passed on to the IIC.[485]
8.79 On 18 February 2005 Ms Scales replied to Mr Taylor's letter of 17 February.[486] Her reply proposed that the Wheat Export Authority and AWB establish a 'co‑ordinated approach' to the provision of information to the IIC, through DFAT, in the same terms as those proposed in Mr Lindberg's 17 February 2005 letter to DFAT.[487]
8.80 On 18 February 2005 AWB forwarded a draft 'confidentiality agreement' to the IIC.[488]
8.81 On 18 February 2005 Ms Ringler, counsel to the IIC, wrote to Mr Lindberg[489], informing him that the IIC was unable to accept AWB's proposed confidentiality agreement. Ms Ringler attached a draft memorandum of understanding that embodied the 'protections' the IIC was 'willing to extend to AWB'.[490]
8.82 On 22 February 2005 Mr Lindberg wrote to Mr Volcker, noting Ms Ringler's letter of 18 February.[491] Mr Lindberg proposed that the 'respective legal advisors settle ... [the] framework [for cooperation]'.[492] He stated, 'Clearly there needs to be an acceptable balance between your requirement for a full, fair and transparent investigation and AWB's concerns and responsibilities for due process, confidentiality and media comment'.[493]
8.83 On 22 February 2005 Mr Cooper wrote to Ms Ringler and attached a revised confidentiality agreement.[494]
8.84 On 23 February 2005 Ms Ringler replied to Mr Cooper's 22 February email that had attached to it AWB's revised confidentiality agreement. She stated:
Based upon my reading of this agreement, it appears to be for the most part the original confidentiality agreement you forwarded to us several days ago. This is somewhat disappointing in light of our numerous discussions regarding the problems with such an agreement. If what you have proposed is not open for discussion or negotiation, please advise.[495]
8.85 On 23 February 2005 Ms Ringler emailed Mr Cooper, attaching her own 22 February letter in which she acknowledged that she had received 'AWB's proposed agreement'.[496] Ms Ringler attached a memorandum of understanding, which, 'consistent with the IIC's practices … would be the format of any agreement or understanding reached between the Committee and AWB'.[497] The attached memorandum 'attempted to address the major areas of concern for AWB'.[498] She stated, however, that:
… there are a number of matters that the IIC cannot negotiate:
…
2. The AWB will not have the authority to veto the IIC's decision to include the name of a current or former AWB staff person in its report; and
3. If cooperation is terminated by AWB at some point prior to the completion of the investigation, the IIC will not be required to return to AWB all AWB documents or materials, witness interviews, and notes. In other words, the IIC can use, in accordance with the MOU provisions, what has already been provided by the AWB. At the completion of the investigation, the AWB documents and information will be returned or destroyed in accordance with the MOU.[499]
8.86 On 23 February 2005 Mr Lindberg wrote to Mr Blazey to inform him that AWB was 'still negotiating with the IIC regarding the framework of cooperation between the AWB and the IIC, including the confidentiality agreement'.[500] The letter also stated:
Unfortunately until this is finalised, AWB is not in a position to consent to the release of any AWB documents outside those documents specified in my letter to you dated 17 February 2005. I understand that DFAT has requested that the Wheat Export Authority ('WEA') provide to DFAT copies of relevant documentation. Given the current situation, AWB is not yet in a position to consent to the release by DFAT of any AWB documents provided by the WEA to DFAT.[501]
8.87 On 23 February 2005 Mr Cooper forwarded to Ms Ringler, by email, a 'red-lined version of the MOU'.[502]
8.88 Significantly, the 'Document production and confidentiality' clause had been amended to provide that AWB would give the IIC access only to 'scheduled documents'[503], rather than 'all relevant documents'.[504] This had the effect of narrowing the ambit of the documents available to the IIC for review as part of its investigation. It obviated the need for AWB to provide to the IIC the documents that had been assembled by Project Rose and were regarded by AWB's lawyers as sufficiently material to be briefed to counsel. The other significant amendment was to the 'termination of cooperation' clause, whereby any breach by the IIC of its obligations under the agreement would result in it being denied the right to use any of the documents or evidence it had gathered from AWB in any report.
8.89 On 24 February 2005 Ms Ringler emailed Mr Cooper, attaching a letter dated 23 February 2005 in relation to the proposed memorandum of understanding between AWB and the IIC.[505] In the letter Ms Ringler stated:
Your proposed changes at paragraph #2, 'Document Production and Confidentiality,' raise some fundamental questions that I would like us to resolve before proceeding with our MOU discussions. I am unclear what is meant by 'scheduled documents.' More broadly, your proposed language at paragraph #2 suggests that AWB already may have decided to withhold certain categories of documents from the IIC. If this is the case, it is something that needs to be fully discussed.[506]
8.90 On 24 February 2005 Mr Cooper replied to Ms Ringler's email of 24 February 2005:
In relation to clause 2 of the MOU, the 'schedule of documents' we refer to is a schedule of specific documents we intend to provide to the IIC representatives when they are in Melbourne based on the specific information requests the IIC has already sent through to us.[507]
8.91 On 25 February 2005 Ms Ringler emailed Mr Cooper, attaching a revised memorandum of understanding.[508] She subsequently forwarded to Mr Cooper, by email, a 'redlined' version of this revised memorandum of understanding, which reflected changes the IIC proposed to make to the version forwarded by Mr Cooper on 23 February 2005.[509]
Ms Ringler had made a number of amendments to Mr Cooper's version of the memorandum of understanding, among them striking out the reference to 'scheduled documents' and replacing it with 'AWB documents, relevant to the Programme which the IIC has requested'.[510]
8.92 On 25 February 2005 Mr Cooper emailed Ms Ringler, attaching documents entitled 'MOU between the IIC and AWB Limited on cooperation and confidentiality', 'Schedule of AWB documents' and 'Dataroom protocol'.[511] The attached memorandum of understanding reinserted the reference to 'scheduled documents'.[512]
8.93 The attached schedule listed 12 categories of documents, access to which or details of which would be provided by AWB to the IIC:
1. Access to documents relating to contracts awarded under the UN's Oil-For-food Programme to Australian Wheat Board/AWB Limited including letters of credit and bank transfers.
2. Details of each shipment of grain by Australian Wheat Board/AWB Limited to Iraq under the United Nations Oil-For-Food Programme.
3. Details of any handling agents or transportation companies used by the Australian Wheat Board/AWB Limited in connection with the delivery of wheat to Iraq.
4. Access to all communication with local Iraq transportation companies and agents.
5. Details of all payments to local (Iraq) transportation companies and agents.
6. Access to all contracts with local (Iraq) transportation companies and agents.
7. Access to documents relating to financial arrangements with local (Iraq) transportation companies and agents.
8. Details of funds transfers to local (Iraq) transportation companies and agents including:
- dates,
- amounts,
- bank reference details
- account numbers
- access to all related documents.
9. Access to all correspondence between the Department of Foreign Affairs and Trade and the Australian Wheat Board/AWB Limited related to the United Nations Oil-For-Food Programme.
10. Access to all correspondence between the Australian Mission to the United Nations and the Australian Wheat Board/AWB Limited related to the United Nations Oil-For-Food Programme.
11. Access to all correspondence between the United Nations and the Australian Wheat Board/AWB Limited related to the United Nations Oil-For-Food Programme.
12. Access to any documents from the Australian Wheat Board/AWB Limited Audit Committee relating to the audit or general oversight of contracts with Iraq.[513]
8.94 By agreeing to provide to the IIC only the documents listed in the schedule, AWB limited the ambit of documents available for the IIC's inspection. Many relevant documents AWB held as a result of the Project Rose investigation, and knew it held, were not included in the 'scheduled documents'.
8.95 On 25 February 2005 Ms Ringler forwarded to Mr Cooper, by email, an amended copy of the 'data room protocol'.[514] The protocol set out the rules and procedures under which the IIC and its authorised representatives would be given access to the AWB data room.[515] It provided that IIC representatives could ask that documents be copied. All requests for documents to be copied would be referred to Mr Hargreaves, who would 'consider each request and either give his written consent to or reject the request'.[516]
8.96 On 25 February 2005 Ms Ringler emailed Mr Cooper in relation to the data room protocol. The email stated:
Under the terms of the protocol you require that any AWB document that the IIC wants copied will need to be individually vetted and either approved or disapproved for copying. The reasons that you gave for this process, was AWB's concerns about having AWB documents on US soil rather than any claims of privilege, commercial sensitivity, etc. The IIC expects that under the provisions of paragraph two of the MOU, if the IIC requests copies of documents reviewed they will be provided to us, unless AWB is claiming a legal reason for not providing copies … If it is the position of AWB that no AWB documents may be copied and provided to the IIC for its use outside of Australia, then the IIC will need to consider whether and how it will want to proceed with the MOU.[517]
8.97 On 25 February 2005 Mr Cooper responded to Ms Ringler's email of that day in relation to the copying of documents in the AWB data room. The email stated:
What we are concerned about is confidentiality of the documents. We are concerned that a blanket agreement by AWB that the IIC may copy and take all documents in the dataroom back to the US could result in thousands of AWB documents being out of AWB's control in the US. Many of these documents will be commercially sensitive and could cause significant commercial damage to our business if disclosed to third parties.
As you know we have had questions about the IIC's status and the immunity it may enjoy. Our advice is that the IIC's immunity is not guaranteed and thus you cannot guarantee confidentiality of AWB's documents if they are held by the IIC in the US. As you know, we have asked 3 times for written confirmation from you on the IIC's immunity and you have not responded. This does not fill AWB with confidence that the IIC could resist a subpoena from another inquiry for AWB's documents.[518]
8.98 On 26 February 2005 Ms Ringler responded to Mr Cooper's email of 25 February.[519] Specifically, she responded to the question of privileges and immunities enjoyed by the IIC, reiterating the position, communicated in other emails on this topic, that the IIC enjoyed the same privileges and immunities as the United Nations.[520]
8.99 On 26 February 2005 Ms Ringler also forwarded to Mr Cooper, by email, a revised memorandum of understanding.[521] Her email stated:
In order to proceed with a cooperation MOU, the IIC will require a commitment from AWB that copies of any documents responsive to IIC's requests and made available for IIC review, will be copied for IIC use if requested by the IIC. The MOU at paragraph two amply protects copies of AWB documents provided to the IIC …[522]
To this end, clause 2 of the revised memorandum of understanding attached to Ms Ringler's email included the sentence: 'At the IIC's request AWB will furnish the IIC with copies of any documents that the IIC reviews in the AWB Data Room and determines are necessary for purposes of its inquiry'.[523]
8.100 Again on 26 February 2005 Ms Ringler emailed Mr Cooper in relation to 'AWB's position on the MOU language relating to the copying of AWB documents for the IIC'.[524] The email stated:
Both Justice Goldstone and Mark Pieth insist that copies of AWB documents requested by the IIC be provided, unless there are exceptional reasons for not providing a copy of a document to the IIC …
I am forwarding to you the MOU that has been approved by Justice Goldstone and Mark Pieth. They have advised me to convey to you that these are the circumstances under which the Committee will enter into a cooperation MOU with AWB. The Data Room Protocol will need to be conformed to the MOU language.[525]
Clause 2 of the memorandum of understanding attached to Ms Ringler's email of 26 February 2005 included the sentence:
At the IIC's request, except in exceptional circumstances (addressed in paragraph 7), AWB will furnish the IIC with copies of documents that the IIC reviews in the AWB Data Room and determines are necessary for purposes of its inquiry.[526]
8.101 On 26 February 2005 Ms Ringler forwarded to Mr Cooper, by email, signed copies of the memorandum of understanding and data room protocol negotiated between AWB and the IIC.[527]
8.102 On 26 February 2005 Mr Cooper faxed Ms Ringler a copy of the memorandum of understanding, which he had signed on AWB's behalf.[528] The memorandum of understanding contained the following key provisions:
2. Document Production and Confidentiality-AWB will provide the IIC with access to scheduled AWB documents (see attached). The IIC may request, in writing, further documents that it considers relevant. In responding to the IIC's document requests, AWB has advised that it may take into account that certain documents may be commercially sensitive, subject to legal professional privilege, or expose AWB or its employees, officers or representatives (past or present) to breaches of Australian law. In the event that AWB decides to withhold documents for any of the aforementioned reasons, it will so advise the IIC in writing, and the parties may agree to additional terms for production. The IIC's review of all documents provided by AWB will be governed by the AWB Data Room Protocol, a copy of which is attached to this memorandum. At the IIC's request, except in exceptional circumstances (addressed further in paragraph 7), AWB will furnish the IIC with copies of documents that the IIC reviews in the AWB Data Room and determines are necessary for purposes of its inquiry. The IIC will maintain in strict confidence the documents provided by AWB, and it will not provide copies of documents to third parties. However, AWB agrees that the IIC may use documents provided by AWB for the purposes of its investigation and for any report. Documents provided by AWB will be maintained securely by the IIC and will be accessed only by IIC staff, all of whom have signed confidentiality agreements as a condition of their employment. At the conclusion of its investigation, and at AWB's choosing, the IIC either will return to AWB or destroy all documents that AWB provided the IIC. Any IIC work product relating to AWB will be maintained securely at all times, during and after termination of the IIC's investigation, and will be destroyed as soon as practicable after the inquiry concludes.
3. Witness Interviews and Confidentiality-The IIC will maintain in strict confidence the information gathered in the course of these interviews, and it will not provide any records of this information to third parties. However, AWB agrees that the IIC may use information that it gathers in the course of AWB interviews as well as the fact of these interviews for the purposes of its investigation and for any report. The IIC will provide AWB with reasonable notice of its request to interview any current AWB employee, officer, or representative as well as reasonable notice of any former AWB employee, officer, or representative for whom the IIC desires AWB's assistance in locating and interview. With respect to the IIC's interview of a person who worked for AWB in connection with the Programme, the parties understand that each interview will be on the record and for attribution. In advance of the interview, the IIC will submit a list of subject areas to be addressed with the witness. At each interview, two representatives of the IIC will be present. A witness may have-at the witness's choosing-a person of legal counsel. In addition, if the witness agrees, up to two representatives of AWB may be present at each interview. A witness will advise the IIC prior to the interview who will be present on his behalf.
…
5. Naming of Past or Current Employees in any Report-Where the IIC determines that identification of an AWB officer, employee, or representative (past or present) is necessary to make clear that there has been a full, fair, and transparent investigation into the Programme, such an individual's name may be included in an IIC report. However, the IIC will balance its obligations with AWB's preference that its officers, employees, and representatives not be identified by name.
6. Adverse Findings-Consistent with the IIC's Investigations Guidelines, a copy of which is attached to this Memorandum, if the IIC proposed to make an adverse finding against AWB or one of its employees, officers, representatives (past or present), and that individual and/or AWB has cooperated with the investigation by providing documents or information, the subject of the adverse finding shall be informed of the proposed finding and the information upon which it is based and may make representations thereon personally, or with a legal representative, to place before the Committee relevant additional information or written submissions with regard to the proposed adverse finding. With the consent of the person or company against whom an adverse finding will be made, the person's or company's written submissions will be appended to the IIC's report or, if lengthy, posted on the IIC's website. The obligations pursuant to this paragraph shall survive termination under paragraph 8 if prior to AWB's termination of its cooperation AWB has provided the scheduled documents for the IIC's review and copying or the IIC has interviewed the AWB witnesses.[529]
8.103 On 28 February 2005 Mr Cooper emailed an IIC investigator, noting matters that had arisen in relation to the IIC investigator's use of the data room. In part, the email stated:
… all documents you wish to be copied and to take with you are to be tagged, and AWB will consider them all in one bundle … prior to your departure …
…
Copy typing documents
I note our conversation this afternoon about copy typing information from documents you and [another IIC investigator] onto your laptop computers. You noted today that you have copy typed certain paragraphs from AWB's documents. It was not AWB's understanding in entering the MOU that you would be doing this, only that you would use your laptop computers for taking notes and paraphrasing. As I explained to you today, AWB has an issue with you copy typing complete sections of AWB documents. This is an issue which will be considered by AWB in reviewing the documents to be released.[530]
8.104 On 1 March 2005 Mr Cooper emailed Ms Ringler to finalise arrangements for copying and the provision of documents to the IIC. The email confirmed the following:
8.105 On 2 March 2005 Ms Ringler replied to Mr Cooper's email of 1 March 2005. She clarified that the IIC had 'requested payment records that AWB had refused to release'.[532]
8.106 On 11 March 2005 Ms Ringler wrote to Mr Cooper, enclosing summaries of interviews conducted by IIC investigators with Mr Lindberg, Mr Long and Mr Flugge.[533]
8.107 On 1 April 2005 Mr Cooper responded to Ms Ringler's letter of 11 March 2005, expressing AWB's concern 'about the way the interviews will be conveyed to the IIC should these summaries stand, unchallenged in their present form'.[534] He said AWB intended to make a submission to the IIC about its concerns.
8.108 On 6 April 2005 Ms Ringler responded to Mr Cooper's letter of 1 April 2005, refuting each of his criticisms.[535] She also requested further information, the particulars of which she set out, as well as AWB's assistance in making arrangements for Mr Whitwell, Mr Watson, Mr Emons, Mr Stott and Mr Edmonds-Wilson to be interviewed by the IIC.
8.109 On 12 April 2005 Mr Cooper replied to Ms Ringler's letter of 6 April 2005. In response to her notification that the IIC planned to interview Messrs Whitwell, Watson, Emons, Stott and Edmonds-Wilson, Mr Cooper stated:
In considering your request it would be helpful to understand their relevance to your inquiries. Therefore in accordance with the agreed protocols for the previous examinations, can you please provide me with a list of topics for each of the proposed interviews of all those persons named. Would you also provide me with copies of any documents that the investigators intend to put to each of those persons.[536]
8.110 On 22 April 2005 Mr Lindberg wrote to Mr Volcker, attaching a 'detailed submission', as foreshadowed in Mr Cooper's letter of 1 April 2005, in relation to the IIC investigators' summaries of interviews, which Ms Ringler had forwarded to AWB on 11 March 2005.[537]
8.111 On 29 June 2005 Mr Cooper responded to Ms Ringler's request for further information, as had been set out in her letter dated 6 April 2005.[538]
8.112 It is to be observed that, by the time of the negotiations with the IIC, AWB had collected many relevant documents as a result of Project Rose. It did not simply make those documents available to the IIC. By negotiation, it managed to diminish the list of documents it provided and the witnesses it made available. Most of the documents that had been assembled by Mr Quennell as being relevant documents with which to brief counsel for the obtaining of advice were not made available to the IIC. Plainly, AWB knew that such documents were relevant.
8.113 Further, in resisting the request to interview Messrs Whitwell, Watson, Emons, Stott and Edmonds-Wilson, AWB, in professing a desire to know of 'their relevance to your inquiries', was, at best, being disingenuous. Their relevance was obvious. Mr Quennell had taken statements from Messrs Whitwell, Stott and Edmonds-Wilson in about September 2004.[539]
8.114 In truth, there was no full cooperation with the IIC. AWB engaged in a strategy of 'passive cooperation', providing only what was specifically asked for and, by using the memorandum of understanding with the United Nations, negotiating to restrict the documents sought. Had AWB been frank with the IIC, it would have provided to the IIC at least the material it had provided to its own counsel as being the relevant documents. It did not do so.
8.115 AWB's response to the Canadian complaint, the United States Wheat Associates complaint and the IIC inquiry was one of restricted disclosure and absence of true cooperation. It was indicative of a closed corporate culture that did not accord with the statements in AWB's Code of Conduct. However, such a response was not a breach of any Commonwealth, State or Territory law.
8.116 I record AWB's response to this Inquiry not for the purpose of determining whether the response was a breach of any Commonwealth, State or Territory law-for in my view consideration of this response for the purpose of determining whether it constitutes a breach of the law is not within the terms of reference of this Inquiry-but so that there may be a full understanding of the difficulties I and those assisting me encountered in the conduct of the Inquiry. The AWB response is also indicative of the culture within AWB from board level down.
8.117 AWB presented a façade of cooperation with the Inquiry. In truth, it did not cooperate at all.
8.118 AWB had collected what it had regarded as the relevant documents in the brief to counsel in May 2004. It did not make those documents available to this Inquiry until obliged to do so after 63 days of hearings. Instead, it provided to the Inquiry the initial 79 volumes of documents it had provided to the United Nations. Thereafter, pursuant to mandatory notices, it produced a great number of documents that this Inquiry had to search and assemble in some sensible order.
8.119 After the announcement of this Inquiry, AWB renamed Project Rose as Project Lilac. Project Lilac was to be managed by Mr Lindberg, Ms Gillingham and Mr Cooper. On 21 November 2005 Mr Lindberg, Ms Gillingham, Mr Cooper, Mr Zwier and Ms Thompson (the last two from Arnold Bloch Leibler) briefed the boards of AWB and AWBI about the Inquiry.[540] Legal professional privilege was claimed in respect of that briefing.[541] In the Federal Court, the Commonwealth did not oppose this claim for privilege.
8.120 On 13 December 2005 Mr Lindberg gave to the joint boards a verbal update on Project Lilac. The minutes to do not disclose what was said.[542] There was a further briefing of the joint boards on 12 January 2006 by Mr Lindberg, Ms Gillingham, Mr Cooper, Mr Judd QC, Mr Zwier and Ms Thompson, as well as by Mr Ian Smith of Gavin Anderson & Company.[543]
8.121 Prior to Christmas 2005 the solicitors for AWB, Arnold Bloch Leibler, provided to the Inquiry statements from 15 prospective witnesses, all being AWB executives. The statements were in general form and did not address a four-page list of matters the Inquiry sought to have addressed, the list having been provided to Arnold Bloch Leibler on 9 December 2005. The statements provided were of no use to the Inquiry, as AWB and its legal advisors must have known would be the case. It was then not known that in September 2004 lawyers for AWB had taken statements from many witnesses addressing the precise issues the subject of this Inquiry. AWB's lawyers were thus in a position to provide useful statements had they wished to do so. AWB chose not to. When proceedings commenced, Senior Counsel sought leave to appear for AWB and AWBI but not for any of the witnesses in respect of whom his instructing solicitors had provided statements. Those witnesses were thus initially unrepresented. I raised this matter. Subsequently the witnesses were represented by other solicitors and counsel.
8.122 On 25 January 2006 I raised the question of cooperation by AWB. Mr Judd QC responded to my remarks on 30 January 2006. I gave reasons in relation to this topic on 2 February 2006. The portions of my reasons relevant to cooperation are as follows:
1. On 25 January I stated:
Mr Judd, there is one matter I want to raise with you, and that relates to the cooperation that this inquiry is receiving from AWB. There have been a great number of statements made either by the chairman or on behalf of the chairman of the board that AWB would cooperate fully with this inquiry. Indeed, I think such a statement appears in the annual report which was recently released. The question that's concerning me is whether in fact the Inquiry is receiving that absolute cooperation. I would have expected that AWB would have had an analysis done of all of the documents which are in their possession. I would have expected that AWB would have consulted with all of the witnesses who are likely to be called in this Inquiry, and I would have expected that the statements that would be given to this Inquiry would address both the matters which are the subject of this Inquiry and the documents that relate to it.
What in fact has happened is that the Inquiry was initially given I think the 79 volumes that were given to the United Nations and subsequently, as a result of notices which were served on AWB, and no doubt as a result of discussions between the various solicitors, we received some 80 or more additional volumes.
The Inquiry has also received some-I don't know-15 or 20 statements from witnesses proposed to be called, all of which statements have been prepared with the assistance of your instructing solicitors. I do not think it's unfair to say that those statements tell this inquiry nothing. They don't address the issues with which I'm concerned. They are, as this witness said, high-level statements. They don't address any of the documents which have been laboriously tendered throughout this Inquiry and which I would have expected would have been the subject matter of evidence provided in statement form to the Inquiry. There is no point in giving this Inquiry statements which simply don't address the issues I must consider.
The result of that is at least twofold. One is that we have to go through this laborious process of calling witnesses and putting to them all this material which, in my view, ought to have been the subject of their statements. That process is long and tedious and expensive. This will continue as long as is necessary for me to understand fully the factual issues.
The second consequence is that, as it seems to me, the process is doing AWB immeasurable harm from a reputational point of view and a measurable harm from an economic point of view.
The reason I raise it is because this morning this witness said his understanding was that this was just to be a high-level statement, and the reason I raise it now is because we're about to adjourn until next Monday, so far as AWB is concerned, at the conclusion of today, which gives your clients a chance to review the approach they wish to take, and, no doubt, will give the witnesses a chance to review the statements that they have to date provided to the Commission.
On any view of the material, that which has been tendered to date requires significant response, and it simply must be addressed. At present, it hasn't been. Unless it is addressed in such statements, this process that we're now going through will just have to continue.
I raise those matters for your consideration and the consideration of Mr Forrest because, as I said, I do not think that we are receiving the full cooperation that the board has indicated we would receive. Rather it seems to me we are receiving some façade of cooperation. I don't mean in any way to reflect on your performance in this inquiry. You have been cooperative. I'm more concerned with the substantive circumstance that we are simply not receiving statements from people addressing the issues I must inquire into. [544]
2. On 30 January 2006 Senior Counsel for AWB addressed the Inquiry. Although the purpose of that address was said to be to respond to my remarks, it went far beyond that. In substance Senior Counsel for AWB addressed three matters. The first was a response to my remarks regarding lack of full cooperation. The second was submissions regarding legal professional privilege. The third was submissions regarding an asserted lack of fairness in the way in which the Inquiry was being conducted.
…
Façade of cooperation
6. Mr Judd QC contended that my expectation that there would have been an analysis of relevant documents, that there would have been consultation with all relevant witnesses, and that accordingly the statements would have addressed the matters the subject of this Inquiry and documents relevant to those matters, was unreasonable. Further, he contended that I had intimated that damage occurring to AWB, reputationally and financially, was due to the failure to produce detailed statements. He said that his instructing solicitors, Messrs Arnold Bloch Leibler, had stated in correspondence to the solicitor for the Inquiry that the statements were 'a general overview of the person's role and responsibility and involvement with the Iraq market'.[545] It was submitted that the Inquiry had not been provided with 'what was intended to be a substitute for the whole of the evidence to be given by the individual'.[546] It was explained that the decision to provide statements in this form was due to a number of factors. The first was the limited time available. The second was the restricted availability of the documents, and the third was that it would have been 'irresponsible' to descend to detail, or to have witnesses swear 'outside of the protection of the Commission, detailed responses to documents about which it is inevitable that [the] witness is going to be examined and examined on contentious issues. It seemed to us that the only prudent course was to allow that examination to occur before this Commission, and the Commission staff were so informed'.[547]
7. It is thus apparent that a conscious decision was taken, presumably for the reasons given, not to provide witnesses' statements which would be of any material assistance to this Inquiry. This was so notwithstanding that by letter dated 9 December 2005 the solicitor assisting the Inquiry had written to AWB's solicitors setting out, over four pages, the topics which it was sought to have the witnesses address. Mr Judd's response to this letter was that it did not address matters which had become important to the Inquiry, namely, the Tigris issue, the iron filings issue, or the Arthur Andersen report.
8. Senior Counsel assisting the Inquiry, in response, indicated that the reason why the list of 9 December did not address those three matters, but did nonetheless address other matters of interest to the Inquiry, was that:
(1) the Tigris issue was not brought to the Inquiry's attention, and documents relating to it were not provided to the Inquiry, until 12 December 2005;
(2) no documents had been provided to the Inquiry in relation to the iron filings claim by 9 December 2005; and
(3) the Arthur Andersen report had not been provided to the Inquiry by 9 December 2005.
9. Mr Agius SC also responded that not one of the 15 statements provided by the solicitors for AWB from prospective witnesses who are current employees of AWB addressed the issues in the letter of 9 December.
10. AWB is not obliged to cooperate with this Inquiry. I have no power to make it do so. However, if the company and its board maintain in public statements that it is 'fully cooperating' with this Inquiry, I would have expected to receive more than statements from witnesses giving a 'general overview of that person's role, responsibility and involvement in the Iraqi market'. Such statements are of minimal assistance to the Inquiry. The reasons why the statements were in such a restricted and unhelpful form have been explained. Accepting the explanations given necessarily means that, for the reasons advanced by Mr Judd QC, AWB was not in a position to provide statements from witnesses which were likely to be of material assistance to this Inquiry.
11. I appreciate the volume of documents which had to be examined and analysed by AWB and provided to this Inquiry. I also appreciate the ongoing nature of that task and that obligation. Nonetheless, I would have expected that, at least since early 2005, if not earlier, AWB would have marshalled all relevant documents in order that it could satisfy the requirements of the United Nations Volcker Inquiry, and to satisfy itself that statements made by AWB were accurate. I infer from Mr Judd's remarks that that did not occur and that his instructing solicitors, although involved in preparing the response to the Volcker Inquiry and report, were not involved in that task of assembling and analysing those documents. This, no doubt, is another reason why the analysis of documents and provision of statements addressing those documents from relevant witnesses which would have been of material assistance to this Inquiry has not been forthcoming.
12. For the reasons I have given, I do not think that the AWB has 'fully cooperated' with this Inquiry. It may have cooperated to the extent that it is able, but it has been restricted in providing useful cooperation for the reasons given by Mr Judd.[548]
8.123 As is apparent, I then accepted that amongst the reasons advanced for not providing statements addressing the matters of relevance to this Inquiry was, first, the limited time available and, second, the 'restricted availability of the documents'. At that time I did not know that in fact AWB had collected most of the relevant documents in a volume to brief counsel in May 2004. Nor did I know that during 2004 AWB's lawyers had taken statements from many material witnesses on topics of relevance. Had there been cooperation, statements addressing the documentary material tendered on the first day of hearings could have been provided. The issues were well understood because Senior Counsel had been asked to advise on the very terms of reference into which I was to inquire as early as May 2004. The reasons advanced by Mr Judd QC for the absence of cooperation were not factually accurate.
8.124 At no time did AWB make a statement of its position before this Inquiry, otherwise than in relation to its claim for legal professional privilege. That meant that all factual and legal issues had to be addressed by evidence. AWB had the right to adopt that position. However, it is not consistent with cooperation when it is now apparent that AWB had collated much of the relevant material more than 18 months before the Inquiry began, yet chose not to produce it to the Inquiry until compelled to do so, and then not in its assembled form.
8.125 I address AWB's claims for legal professional privilege in Chapter 7. The AWB Chairman and Board, so I was told[549], decided to claim legal professional privilege for its internal investigation of AWB's trading with Iraq during the Oil-for-Food Programme.
8.126 In their written submissions AWB and its directors sought to explain their decision to maintain legal professional privilege. They acknowledged that by the commencement of the Inquiry AWB's lawyers had conducted the lengthy 'legal review' known as Project Rose, had conducted interviews with 16 AWB executives and taken statements from seven, had conducted the investigation known as Project Water into the Tigris matter, and had obtained legal advice from solicitors from senior and junior counsel, and that the Board had been briefed on these matters on several occasions. They submitted that because of the 'interests of the company as a whole', as distinct from the directors' 'own self interest', they resolved to claim privilege over that material. The 'interests of the company as a whole' were said to include:
… protecting the company's interests in the event of civil or criminal proceedings, protecting the legitimate interests of employees in the event of civil or criminal proceedings, and maintaining an environment where employees will not be dissuaded from seeking internal or external legal advice in relation to the company's business because of concern that the Board would act in its own self interest deciding whether or not to maintain any privilege attaching to such communications.[550]
8.127 Further, they submitted that, once there was pressure from both the Inquiry and the media and public to waive the privilege, it became not possible to waive privilege because it would 'attach criticism as one made for self interest and in breach of duty'.[551]
8.128 I am not able to accept these extraordinary submissions. They are built on the premise that the Board of AWB considered the results of two-and-a-half years of investigations, recognised that disclosure of the facts, material and advice obtained during that process would be deleterious to AWB and it employees, and then resolved that it was in the 'best interests of the company as a whole' to try to keep secret that damaging material-even from a lawfully constituted Inquiry established by the Commonwealth of Australia to inquire into the very matter investigated. Reduced to simple terms, the directors decided to try and prevent disclosure of damaging documents. Of course, if the material was not damaging there could be no reason to try to prevent its disclosure. Furthermore, at the same time AWB and its directors stated repeatedly that they were cooperating with the Inquiry, knowing they were not, and maintained the public position of absence of any wrongdoing.
8.129 Unashamedly, AWB and its directors then submitted that, because they chose to seek to keep hidden the damaging documents, and because I would not accept their claims for privilege without their putting on evidence and my hearing argument, AWB was then obliged to resort to the Federal Court to have privilege decided. There, so it was argued, the matter was more expeditiously resolved than before me. Thus, the submissions concluded, it could 'not be reasonably contended the refusal by AWB to waive privilege caused any significant delay'.[552]
8.130 I do not doubt that the decision to seek to keep secret the damaging material was taken by AWB and its directors because of the awkwardness of AWB's position. If support for that view is needed it is found in the judgment of Justice Young in the Federal Court, who, having looked at certain documents for which privilege was claimed, wrote:
I am satisfied that these 10 documents are not privileged. The documents were, prima facie, brought into existence in furtherance of an improper and dishonest purpose, viz. inflating the prices of contracts A1670 and A1680 so as to extract payments out of the United Nations' escrow account that would then be utilised, in part, to satisfy a compensation claim by GBI [the Iraqi Grain Board]. Prima facie, the evidence establishes the transaction was deliberately and dishonestly structured by AWB so as to misrepresent the true nature and purpose of the trucking fees and to work a trickery on the United Nations.[553]
8.131 AWB's submission in relation to legal professional privilege has no substance whatsoever. It ignores the facts of what happened. Those facts are set out in Chapter 7, under the heading 'Legal professional privilege'.
8.132 AWB maintained in its public statements three basic propositions:
Disclosure of AWB's internal review of factual circumstances, including the documents reviewed and statements taken from witnesses, would at the very least cast serious doubt on the first two propositions. Disclosure of the legal advice received would make public the advice received contrary to the third proposition and make apparent the many reservations and qualifications AWB's legal advisors had raised, and disclose the narrow basis upon which the advice was given-in the case of Mr Tracey QC because, 'on the assumptions on which I have been asked to advise, the payments were made pursuant to bona fide commercial arrangements'[554] and in the case of Mr Richter QC, regarding Tigris, because although 'we consider it possible that AWB employees who structured the Tigris transaction might be found to have engaged in misleading conduct for certain purposes, that is not sufficient to establish the offence because of the absence of a causal link'.[555]
8.133 Thus AWB, its Chairman, Deputy Chairman and its Board decided to try to maintain the logically absurd public position that AWB had not breached any sanctions or laws and had strong legal advice to establish that position but would not disclose that advice or the factual basis established by AWB on which it was based. The strategy was, from the outset, bound to fail once its claim for privilege was challenged because of the doctrine of waiver, as the Federal Court found.
8.134 AWB's response to this Inquiry was one of non-cooperation, lack of frankness, and resort to litigation to endeavour to keep from disclosure documents and material relevant to this Inquiry. The decision to adopt that approach was made by the Chairman and Board of AWB. It has caused inestimable reputational harm to AWB.
8.135 Although AWB's approach to the investigations and inquiries with which it was confronted might be indicative of a closed corporate culture and was plainly contrary to the spirit, if not the letter, of its own Code of Conduct, such approach and conduct did not constitute a breach of any Commonwealth, State or Territory law. Rather, it was reflective of an attitude, established at the highest level in the company, that bodies with a legitimate interest in whether AWB's activities accorded with proper standards of commercial conduct should be resisted in their endeavours to inquire into that issue. Whilst AWB was entitled to take such steps as it regarded appropriate to protect its legitimate commercial interest, in determining what were proper steps to be taken in that regard AWB appears to have overlooked the reputational consequences of its approach.
Notes
[360] Ex 22, AWB0131.0023 at 0024.
[361] For a full discussion of the Canadian complaint, see Chapter 16.
[362] See Chapter 28.
[363] See Chapter 28.
[364] T 4581.42-4.
[365] Ex 565, DFT.0013.0057 at 0058, para. 7.
[366] Ex 565, DFT.0013.0057 at 0058, para. 7.
[367] Ex 122, AWB.0136.0524.
[368] Ex 121, MAE.0002.0091.
[369] Ex 121, MAE.0002.0091.
[370] Ex 489, DFT.0001.0437.
[371] Ex 123, AWB.5117.0226.
[372] Ex 121, MAE.0002.0091.
[373] Ex 1021, BJS.0003.0052.
[374] Ex 88, AWB.0214.0001.
[375] Ex 88, AWB.0214.0001 at 0002.
[376] Ex 408, WST.0001.0350 at 0354, para. 22.
[377] Ex 681, JMC.0002.0001 at 0002, para. 4.
[378] Ex 681, JMC.0002.0001 at 0002, para. 5.
[379] Ex 681, JMC.0002.0001 at 0002, paras 4-5.
[380] T 3297.7-21; T3297.41 - T 3298.3.
[381] T 3297.7-21.
[382] T 3259.31-4.
[383] T 3291.19-23.
[384] T 3297.27-33.
[385] T 3259.4-11.
[386] Ex 681, JMC.0002.0001 at 0004, para. 12.
[387] T 3297.45 - T 3298.3.
[388] Ex 681, JMC.0002.0001 at 0003, para. 9.
[389] Ex 1276, AWB.9000.0043 at 0046.
[390] Ex 1276, AWB.9000.0043 at 0046.
[391] Ex 1276, AWB.9000.0043 at 0047.
[392] Ex 1276, AWB.9000.0043 at 0047.
[393] Ex 1276, AWB.9000.0043 at 0048.
[394] Ex 1276, AWB.9000.0043 at 0049.
[395] Ex 1276, AWB.9000.0043 at 0049.
[396] Ex 1276, AWB.9000.0043 at 0051.
[397] Ex 1276, AWB.9000.0043 at 0051.
[398] Ex 1276, AWB.9000.0043 at 0053.
[399] Ex 1276, AWB.9000.0043 at 0053.
[400] Ex 409, WJT.0010.0076 at 0077, para. 8.
[401] T 3250.31-5.
[402] Ex 1276, AWB.9000.0095.
[403] Ex 1276, AWB.9000.0095 at 0101.
[404] Ex 1276, AWB.9000.0103.
[405] Ex 498, AWB.0338.0050.
[406] Ex 995, AWB.0420.0003_R.
[407] Ex 995, AWB.0420.0003_R at 0013_R-0390_R.
[408] Ex 995, AWB.0420.0003_R.
[409] Ex 995, AWB.0420.0003_R at 0003_R-0005_R.
[410] Ex 995, AWB.0420.0003_R at 0005_R.
[411] Ex 995, AWB.0420.0003_R at 0005_R.
[412] Ex 995, AWB.0420.0003_R at 0005_R-0006_R.
[413] Ex 995, AWB.0420.0003_R at 0006_R.
[414] Ex 995, AWB.0420.0003_R at 0006_R.
[415] Ex 995, AWB.0420.0003_R at 0006_R.
[416] Ex 995, AWB.0420.0003_R at 0006_R.
[417] Ex 995, AWB.0420.0003_R at 0006_R.
[418] Ex 581, AWB.0106.0111.
[419] Ex 582, DFT.0001.0011 at 0013.
[420] Ex 995, AWB.0420.0003_R at 0007_R.
[421] Ex 995, AWB.0420.0003_R at 0008_R.
[422] Ex 749, AWB.0416.0011_R.
[423] Ex 768, AWB.0413.0177 at 0182.
[424] Ex 337, AWB.0157.0417 at 0422-3. See also minutes of AWBI board meeting of 25 May 2004, which record a similar note (Ex 1421, JMC.0002.0076-0081).
[425] T 6243.3-29.
[426] Ex 1276, AWB.0416.0015_R at 0016_R.
[427] Ex 1276, AWB.0416.0015_R.
[428] Ex 1276, AWB.0416.0015_R.
[429] Ex 1276, AWB.9001.0311 at 0312-0313.
[430] Ex 1276, AWB.9002.0084; Ex 1276, AWB.9001.0337.
[431] Ex 1276, AWB.9001.0362.
[432] Ex 1351, AWB.0470.0089 at 0090.
[433] Ex 1276, AWB.0416.0047_R.
[434] Ex 1276, AWB.0416.0018_R at 0019_R.
[435] Ex 751, AWB.0416.0020 at 0027-0030.
[436] Ex 751, AWB.0416.0020 at 0030.
[437] Ex 751, AWB.0416.0020 at 0030-0031.
[438] Ex 1276, AWB.9002.0395 at 0415.
[439] Ex 1370, AWB.9002.0426 at 0431.
[440] Ex 1370, AWB.9002.0426 at 0434.
[441] Ex 1370, AWB.9002.0426 at 0435-0436.
[442] Ex 1370, AWB.9002.0426 at 0437.
[443] Ex 1276, AWB.9003.0005.
[444] Ex 1276, AWB.9003.0005 at 0010-0011.
[445] Ex 1276, AWB.9003.0005 at 0013.
[446] Ex 1276, AWB.0338.0150_R at 0170_R, para. 54.
[447] Ex 1276, AWB.0338.0150_R at 0171_R, para. 58.
[448] Ex 1276, AWB.0338.0150_R at 0173_R - 0174_R.
[449] Ex 498, AWB.0338.0050.
[450] Ex 995, AWB.0420.0003_R.
[451] Ex 971, AWB.0413.0057 at 0058.
[452] Ex 956, AWB.0085.0016_R.
[453] Ex 956, AWB.0085.0016_R at 0016_R-0017_R.
[454] Ex 956, AWB.0085.0016_R.
[455] Ex 956, AWB.0085.0016_R.
[456] Ex 956, AWB.0085.0022_R.
[457] Ex 956, AWB.0085.0022_R.
[458] Ex 956, AWB.0085.0026_R.
[459] Ex 956, AWB.0085.0030_R.
[460] Ex 956, AWB.0085.0043_R.
[461] Ex 956, AWB.0085.0043_R.
[462] Ex 497, WST.0019.0046_R at 0075_R, para. 130.
[463] Ex 497, WST.0019.0046_R at 0075_R, para. 130.
[464] Ex 845, DFT.0026.0158 at 0159.
[465] Ex 956, AWB.0085.0042_R.
[466] Ex 956, AWB.0085.0042_R.
[467] Ex 956, AWB.0085.0042_R.
[468] Ex 956, AWB.0085.0042_R.
[469] Ex 956, AWB.0085.0042_R.
[470] Ex 956, AWB.0085.0042_R.
[471] Ex 956, AWB.0085.0063_R.
[472] Ex 956, AWB.0085.0063_R.
[473] Ex 956, AWB.0085.0063_R.
[474] Ex 956, AWB.0085.0063_R.
[475] Ex 956, AWB.0085.0063_R.
[476] Ex 956, AWB.0085.0063_R at 0064_R.
[477] Ex 956, AWB.0085.0063_R at 0064_R.
[478] Ex 956, AWB.0085.0063_R at 0064_R.
[479] Ex 956, AWB.0085.0063_R at 0064_R.
[480] Ex 956, DFT.0022.0025_R.
[481] Ex 956, DFT.0022.0025_R at 0026_R.
[482] Ex 956, DFT.0022.0025_R.
[483] Ex 956, DFT.0022.0025_R.
[484] Ex 956, DFT.0022.0025_R.
[485] Ex 956, AWB.0295.0103_R.
[486] Ex 956, AWB.0295.0101_R.
[487] Ex 956, AWB.0295.0101_R.
[488] Ex 956, AWB.0394.0237; see Ex 956, AWB. 0085.0067_R.
[489] Ex 956, AWB.0085.0067_R.
[490] Ex 956, AWB.0085.0067_R.
[491] Ex 956, AWB.0085.0097_R.
[492] Ex 956, AWB.0085.0097_R.
[493] Ex 956, AWB.0085.0097_R.
[494] Ex 956, AWB.0085.0098_R; Ex 956, AWB.0280.0205_R.
[495] Ex 956, AWB.0085.0098_R.
[496] Ex 1507, AWB.0085.0120_R; Ex 956, AWB.0085.0126_R.
[497] Ex 956, AWB.0085.0126_R.
[498] Ex 956, AWB.0085.0126_R.
[499] Ex 956, AWB.0085.0126_R-0127_R.
[500] Ex 956, DFT.0008.0010_R.
[501] Ex 956, DFT.0008.0010_R.
[502] Ex 956, AWB.0085.0128_R; Ex 956, AWB.0085.0146_R.
[503] Ex 956, AWB.0085.0146_R.
[504] Ex 956, AWB.0085.0121_R.
[505] Ex 956, AWB.0085.0129_R.
[506] Ex 956, AWB.0085.0130_R.
[507] Ex 956, AWB.0085.0131_R.
[508] Ex 956, AWB.0085.0140_R
[509] Ex 956, AWB.0085.0144_R.
[510] Ex 956, AWB.0085.0146_R.
[511] Ex 956, AWB.0085.0150_R.
[512] Ex 956, AWB.0085.0152_R.
[513] Ex 956, AWB.0085.0155_R-0156_R.
[514] Ex 956, AWB.0085.0161_R.
[515] Ex 956, AWB.0085.0161_R at 0164_R.
[516] Ex 956, AWB.0085.0161_R at 0165_R.
[517] Ex 956, AWB.0085.0167_R.
[518] Ex 956, AWB.0085.0173_R.
[519] Ex 956, AWB.0085.0177_R.
[520] Ex 956, AWB.0085.0177_R.
[521] Ex 956, AWB.0085.0181_R.
[522] Ex 956, AWB.0085.0181_R.
[523] Ex 956, AWB.0085.0186_R.
[524] Ex 956, AWB.0085.0190_R.
[525] Ex 956, AWB.0085.0190_R.
[526] Ex 956, AWB.0085.0195_R.
[527] Ex 956, AWB.0085.0202_R.
[528] Ex 956, AWB.0085.0213_R.
[529] Ex 956, AWB.0085.0214-0216.
[530] Ex 956, AWB.0085.0226_R.
[531] Ex 956, AWB.0085.0229_R at 0230_R.
[532] Ex 956, AWB.0085.0229_R.
[533] Ex 956, AWB.0086.0010_R.
[534] Ex 956, AWB.0086.0033_R.
[535] Ex 956, AWB.0294.0002_R.
[536] Ex 956, AWB.0086.0040_R.
[537] Ex 956, AWB.0294.0007; Ex 956, AWB.0002.0174_R.
[538] Ex 956, UNO.0003.0194_R.
[539] Ex 1338, AWB.9001.0203; Ex 1337, AWB.9001.0212; Ex 1340, AWB.9003.0092, respectively.
[540] Ex 1377, AWB.0371.002 at 004.
[541] Ex 1377, AWB.0371.002 at 004.
[542] Ex 1377, AWB.0371.035 at 036; Ex 1377, AWB.0371.041 at 042.
[543] Ex 1377, AWB.0417.0013 at 0014.
[544] T 1301.3 - T 1302.33.
[545] T 1540.28-30.
[546] T 1540.47 - T 1541.2.
[547] T 1541.45 - T 1542.4.
[548] TRH Cole AO RFD QC, Reasons, <http://www.oilforfoodinquiry.gov.au/agd/www/UNoilforfoodinquiry.nsf/Page/Statements>, 2 February 2006.
[549] T 724; T 1317.
[550] Submissions of AWB, para. 12.
[551] Submissions of AWB, para. 14.
[552] Submissions of AWB, para. 17.
[553] AWB Limited v Honourable Terence Rhoderic Hudson Cole (No. 5) [2006] FCA 1234, [229] (Young J).
[554] Ex 1276, AWB.9002.0395 at 0407, para. 18.
[555] AWB.9002.0018 at 0133.
