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Tuesday, 30 May 2006
Page: 84


Mr KELVIN THOMSON (8:04 PM) —I have to say I have never had much in common with the member for O’Connor but there is no doubt that he is very well versed in the ways of the wheat industry. I think that to listen to him on topics to do with AWB is something which will bring wisdom to those of us who have the opportunity. The Royal Commissions Amendment Bill 2006 is a response to problems that have arisen in the Cole commission on the oil for food program. It will, however, also affect future inquiries and royal commissions.

The bill will amend the Royal Commissions Act 1902 to ensure that claims for legal professional privilege over documents sought by a commission exercising royal commission type powers can be determined by a member of the commission, including the power to require production of the document in order for the claim of legal professional privilege to be determined. This follows a Federal Court case that put in doubt Commissioner Cole’s power to inspect documents in order to determine a claim of legal professional privilege.

I support the bill and the second reading amendment moved by the member for Gellibrand, which points out that Labor demanded action on this issue back in March and also that this bill will not solve the broader problem that Commissioner Cole’s terms of reference are too narrow. It notes that the current terms do not allow Commissioner Cole to make findings of whether or not ministers, their offices and departments have discharged their duties under Australian administrative law and under international law, in particular United Nations Security Council resolution 661. Of course, Commissioner Cole has provided formal written advice that a change to the current terms of reference, which would allow the commission to make such determinations, is outside his powers and can only be done by the executive. Furthermore, if the Howard government had nothing to hide in the $300 million ‘wheat for weapons’ scandal, it would expand Cole’s terms of reference to allow the commissioner to make such determinations.

Commissions exercising royal commission powers will have the power to determine claims of legal professional privilege, including the power to demand to inspect the relevant documents in order to determine the claim. Given the outcome of AWB Ltd v Cole it is now not clear that commissioners currently enjoy this power. This can frustrate commissions with delays and additional costs as legal professional privilege claims are tested in courts, which do have the power to see the documents and to determine legal professional privilege claims.

The bill does not remove or diminish the protection of legal professional privilege, which is an important principle of justice. It simply affects how the determination is made as to whether a claimed privilege actually exists. It would not take away the right of the claimant to seek judicial review of a commissioner’s decision to reject legal professional privilege. It is important to give commissioners exercising these powers the power to effectively determine legal professional privilege claims in order to keep commissions running with minimal cost and delay caused by litigation. Legal professional privilege should be preserved, but the onus should be on the claimant to pursue it, including commencing litigation if necessary. Such a change could be a deterrent to exaggerated claims of legal professional privilege being used to hide wrongdoings. I think the misuse of legal professional privilege has been seen in some high-profile cases in recent times, including this one—the AWB case—and the James Hardie case. The parliament should send a clear message that legal professional privilege is an important principle but that it should not be claimed without grounds in order to obstruct commissions.

In the course of the Cole inquiry, AWB claimed legal professional privilege over a draft statement of contrition which was produced in December 2005. The commissioner determined that legal professional privilege did not attach to the document and that there was no reasonable excuse for it to be withheld. AWB then applied to the Federal Court to order Commissioner Cole not to use the document on the grounds that it was protected by legal professional privilege. The Federal Court found that legal professional privilege did not attach to the document because it had not been produced and circulated for the dominant purpose of obtaining legal advice. In short, it was produced for the purposes of public relations, not legal advice.

Ultimately, the court did not make a binding determination on the issue of whether the commissioner has the power to demand to inspect a document in order to make a determination on a claim of legal professional privilege. It is clear from this case that commissions can decide whether to accept or reject a claim of legal professional privilege and this bill is providing a special process for determining whether legal professional privilege is a reasonable excuse for failing to produce a document. It provides that legal professional privilege remains a reasonable excuse if a court has decided that the document is subject to legal professional privilege or a member of the commission has accepted that the document is subject to legal professional privilege. A member of the commission would be empowered to demand the document for inspection by written notice. Inspection could be made either by the member or by a person authorised by the member, such as an adviser. If the claim is accepted, the commission would be required to disregard the document for the purposes of any report or decision the commission makes.

We have seen reports today concerning further developments on this issue. According to a report in the Australian today, the wheat exporter AWB was to be forced to agree to a timetable to produce potentially damning documents to the Cole inquiry. The report indicated that Commissioner Cole would hold a public hearing today to address the production of documents, some of which are likely to show that AWB knowingly breached UN sanctions and provided hundreds of millions of dollars to the regime of Saddam Hussein. As the Australian said:

AWB is known to have conducted a secret legal review of its trade with Iraq, known as Project Rose and later as Project Lilac. Mr Cole wants access to some of the 30,000 documents collated as part of Project Rose.

We can see that significant issues are at stake here. Indeed, I understand that today wheat exporter AWB said it would be asking the Federal Court to decide whether some 1,240 documents sought by the Cole inquiry are protected by legal professional privilege. Legal counsel for AWB said today, ‘The most expeditious and responsible course would be to let the Federal Court rule on whether the documents should be made available to the inquiry.’ He said, ‘We will be commencing proceedings today to have the Federal Court resolve the claims in respect of all documents.’ This sounds innocent but it is not. It is anything but. It is more of the culture of cover-up and obfuscation which has marked AWB’s conduct in this matter. Commissioner Cole said today that the extent of future hearings was dependent on the inquiry receiving all the documents to which it was entitled—that is, the inquiry will be delayed. AWB has claimed this privilege over 1,240 categories of documents and the claims could extend to some thousands of documents to come.

Mr Cole also said that it would greatly increase cost and delay if each of the claims were tested in the Federal Court as no decision could be made on what witnesses needed to be called or recalled until he had all the necessary documents before him. He said that only 45 of the 164 documents in the Tracey brief—that is the brief in dispute—had been given to the UN’s Volcker committee, which found of course that AWB had been paying $300 million in kickbacks to Saddam’s regime. This makes a joke of the claim that there has been cooperation with the Volcker committee. Only 45 of 164 documents were handed over to the Volcker committee. So we have AWB commencing proceedings to have the Federal Court rule on whether the Cole commission is entitled to view these documents. This is no doubt an attempt to seek advantage as they seek to exclude detail of their in-house legal review of the contract and the deals with Iraq and Alia, known to the Cole inquiry as Project Rose documents and Project Lilac documents. Project Rose alone is thought to contain up to 30,000 documents.

The other issue that I think is important for us to be aware of is the 1998 wheat deal involving the former Australian Wheat Board and India, which is more evidence of the need for the House to support the amendment moved by the member for Gellibrand concerning the powers of the Cole commission. Back in February 1998, India’s STC bought $310 million of wheat from AWB, which was then owned by the Australian government. Indian politicians protested that the tender was extraordinary and the Central Bureau of Investigation in India began investigating corruption allegations against three senior Indian government officials. They suspected kickbacks because there was a $7.50 per tonne increase in the price of wheat compared with the price of wheat that had been sold to Egypt. A request for help by Indian police investigating AWB’s possible involvement was never referred to the Australian Federal Police. The Times of India reported last week that the Indian investigation was stalled because the Australian government refused to hand over documents, claiming the Australian Wheat Board was an autonomous body it had no control over. India’s CBI was forced to close the investigation in January 2004, blaming noncooperation from Australian authorities.

Last week Senator Ellison told the Senate Legal and Constitutional Legislation Committee that, in 2001, after fielding a mutual assistance request from India’s Central Bureau of Investigation, the Australian government deemed there was no evidence to justify any inquiries by local authorities into possible breaches of Australian law, yet we now have exhibits before the Cole inquiry showing that in October 2001, when AWB was under pressure to cooperate with the CBI, the wheat seller had documents showing that it had paid $US2.5 million to a Cayman Islands bank account for a May 1998 wheat shipment. In May 2004, just as the Volcker inquiry began investigating AWB for breaching UN trade sanctions against Iraq, an officer in the Attorney-General’s Department knew some Federal Police officers were ‘keen to explore the possibility of an investigation by the AFP to see if AWB Ltd had broken any Australian laws in its Iraq dealings’.

Indeed, an email tendered to the Cole inquiry shows Jonathan Chew of the Attorney-General’s International Law and Transnational Crime Section told Department of Foreign Affairs and Trade officials that the AFP officers had expressed ‘some concern that, despite Australia having antibribery and corruption laws in place for a number of years, there had been few prosecutions’. So we have details emerging of something like a forerunner to the AWB kickback deals with Saddam. When the price being paid to AWB was found to be significantly over the market rate, the Indian Central Bureau of Investigation began asking questions. When these questions reached Australia, they were met by the same deaf ear that received dozens of accounts, allegations and warnings about the kickbacks being paid to Saddam. The questions here are: why was the matter not referred to the Federal Police? The AWB was still government owned at this time. What actions did the government take?

I agree with the member for Gellibrand’s amendment and its point that Commissioner Cole’s terms of reference ought to allow him to make findings concerning the conduct of ministers. During the Cole inquiry I saw at least 10 reasons why the Cole commission should be empowered to make findings concerning the Minister for Foreign Affairs. First, ministerial ignorance is not bliss. We live in a constitutional system of ministerial responsibility. The idea that nobody is responsible for such a monumental disaster so damaging to our international reputation is unacceptable. On an issue of such profound significance, ignorance is no excuse. Second, Minister Downer had a legal obligation to ensure that Australian companies complied with UN sanctions against Iraq. He failed to discharge this obligation, yet he still claims he did nothing wrong. He continues to try to buck-pass—blame the UN, blame AWB and blame Australia’s wheat competitors.

Third, he gave conflicting answers to the parliament and the Cole commission. He was asked in parliament about a January 2000 cable from his departmental staff in New York. He said, ‘Of course I would have read them,’ but when he was questioned by the Cole commission he said he had no specific recollection of the cable. Did he read it or didn’t he? Fourth, he has not been able to cope with the demands of the job. He told the Cole commission he does not have time to read diplomatic cables and only reads them when he is stuck on a plane and has nothing better to read. He told the Cole commission that was one reason he failed to pick up on a series of warnings from diplomatic and intelligence officers about problems with AWB.

Fifth, he has been too gullible. He simply accepted AWB’s denials that it was not paying bribes and made no further inquiries. He did not apply the same standard to Saddam Hussein’s denials concerning weapons of mass destruction. He got that one wrong as well. Given the stream of warning bells, he should have made further inquiries. His claim to the Cole commission that the only other option he had was to call in the Federal Police is disingenuous in the extreme. For example, he could have personally demanded to be taken through the structure of the contracts. They would have been pretty brave to have lied to his face. The former Labor government scrutinised contracts with Iraq thoroughly.

Sixth, he has been too lazy to follow up serious issues. In March 2004 he wrote ‘This worries me’ on a departmental report about the Volcker inquiry and asked about AWB’s pricing arrangements, but he failed to follow the issue through. He got an AWB letter in June 2004 which was unenlightening, but he failed to chase up this matter. Despite this, he was party to Australia’s Ambassador Thawley misleading United States senators later on in 2004, which has damaged Australia’s standing in the US congress. He presides over a department so administratively sloppy that, even when he says he is worried, nobody does anything to pursue the issues he raises, including him.

Seventh, he has not run his portfolio in a professional way. For example, he met with AWB’s former CEO Andrew Lindberg in June 2004 to discuss the UN’s Volcker inquiry, but no-one took any notes, even though he had two staff there. Perhaps they thought there was no point taking notes because he never reads them. This is disgracefully unprofessional. The Public Service used to record everything in triplicate and was a reliable historical record. Now it has become plain sneaky. And the absence of a record of this meeting is no mere academic point. A major dispute has emerged at the Cole commission between Mr Lindberg and Mr Downer as to whether Mr Lindberg informed him that Alia, which AWB was paying fees to, was half-owned by the Iraqi government. Mr Lindberg says he did; Mr Downer says he did not.

Eighth, his department has degenerated into little more than a postbox, on its own admission. His department rubber-stamped AWB’s corrupt wheat deals with the Iraqi Grains Board. What on earth was it being paid to do? Minister Downer was totally unable to explain to the Cole commission why his department did not drill down into the detail of the inflated prices in AWB wheat contracts, and his excuse that finding out corruption in contracts was the UN’s task is just not good enough. For example, he had Australian taxpayers, through AusAID, take over liability for one of the most corrupt contracts three days after war broke out—but, although taxpayers became liable for the contract, the bribes inside the contract went undetected.

Ninth, he has failed to distinguish between AWB’s interest and the public interest. In June 2005, despite the myriad warnings he had heard by then, he indicated his ‘strong support’ for the company and said he ‘saw it as his responsibility to defend AWB’. He embarked on a strategy of trying to tough it out and of cover-up, which has maximised the embarrassment for Australia, instead of trying to get to the bottom of the matter and make a clean breast of it.

Finally, he still does not get it. The Cole commission challenged him over the failure of his staff on numerous occasions, yet he expressed full confidence in his staff. He said they had ‘done a good job’ and ‘faithfully implemented government policy’ et cetera. If ministerial responsibility and public accountability are to mean anything in this country, this system must be cracked open. If the Cole commission’s terms of reference allowed it to make findings and to report on the conduct of ministers, it would assist a public which is now heartily fed up with having to tolerate such miserably low standards of ministerial performance.