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(generated from captions) This program is captioned live. Good morning. I'm Ali Moore. and our first program of 2006. Welcome to Business Sunday, the major business story And as we go to air, of our monopoly export wheat trader, is the scandal tearing the heart out the AWB, widespread damage with the potential to do even more to Australia's trading reputation. of the AWB, This morning we explain the structure kickbacks to a corrupt regime. and look at the culture which allowe which drove it all And we ask whether the single desk should be allowed to continue.

environment creates The culture that a monopoly and very much "we win at all costs" is very much an aggressive culture a look in No-one else could really get the business. on how they were actually operating on their own So they ran it, it would appear, above the law. and in part considered they were Michael D'Ascenzo. And meet the new Tax Commissioner, interview We have his first television since taking on the job last month.

in the individual market If there's no deterrence you have the person saying, why should I?" "well, no one else is paying tax, in the large market If you don't have the deterrence or in the business market, getting away with a better deal." people saying, "my competitor's because I can't be competitive I'm losing business the right thing. because I'm trying to do from the US Also Robert Penfold reports expansion. on Westfield's massive global business class airline, Ozjet, And Australia's take-off. still flying after a very difficult Plus of course, Terry McCrann. with Kellie Connolly. First though here's the latest news, the rapidly deteriorating health Confusion surrounds Ariel Sharon, this morning. of the Israeli Prime Minister, he'd be lucky to last the day Initially, doctors suggested they say he's in no immediate danger after an emergency operation but now before he suffered his stroke This was Ariel Sharon just hours on 4 January. his life was finally slipping away. And earlier today, it seemed that other family members at his bedside His son, Omri, joined and gave doctors permission part of Mr Sharon's intestine to carry out an operation to remove were threatening his life. in which blocked blood vessels the operation had been a success. The hospital said this afternoon that immediate danger to his life In the morning was really that it's critical, stable, but now I can say to the life of PM Sharon and there is no immediate danger Israel has had five weeks Since his collapse, of the Sharon political era to come to terms with the end long he can hold on to life. and the country now waits to see how Queensland Leader Peter Beattie in as many days has become the second premier to be caught out using foul language at the COAG meeting in Canberra, The Premier was recorded by the medi about his deputy, Anna Bligh. using a swear word while talking NSW Premier Morris Iemma at the same meeting has apologised for swearing of Sydney's Cross City Tunnel, when referring to the new head Graham Mulligan. again today Lifeguards will be on the lookout after a shark feeding frenzy from Gold Coast waters yesterday. prompted swimmers to evacuate feeding on bait fish close to shore. More than 100 sharks were counted, were told to leave the surf Swimmers at several beaches joined the feast. as more and more sharks diplomats out of Indonesia and Iran Denmark has pulled all of its printing of cartoons after receiving threats linked to the depicting the prophet Mohammed.

has been temporarily withdrawn The Danish ambassador in Tehran after angry mobs attacked the Embassy over the cartoon scandal.

Bird flu has spread to Italy the deadly H5N1 strain with tests confirming in the south of the country. killed several swans but Italy's health minister said No humans have been infected Calabria and Puglia. the virus was detected in Sicily, to Italy from the Balkans. The swans are believed to have flown has landed American adventurer Steve Fossett flight in aviation history. after completing the longest non-sto and then some in roughly 76 hours. He's flown around the globe anyone has ever flown in a plane It does represent the farthest or any other aircraft so it's a prime record I've wanted it for a long time earlier than expected The 61-year-old was forced to land in southern England on his aircraft after a generator failed to the planned destination of Kent. and it didn't quite make it Kevin Stadler held a two-shot lead, To sport and American ahead of today's final round golf tournament in Perth. of the $3 million Vines Green lead the local chase, Australians Nick O'Hern and Richard leader with South Korean KJ Choi. keeping the pressure on the overnight a 2-stroke lead, Attempting to build on the wrong way. Korean K.J. Choi went about it the opportunity to pounce, Kevin Stadler took doing so in fine style at the 5th. from the big man." COMMENTATOR: Oh! Wonderful shot at the next - But Choi was quick to bounce back back at 16 under and 1 clear. tearing up The Vines course - It wasn't just those two just part of a posse Fred Couples and Craig Parry putting Choi under siege. Choi's game going in reverse again.. And the pressure was felt - that is not good. A bogey of the double variety - at the 10th. ..finding even more trouble Stadler then took over, some home-grown talent - but breathing down his neck, has Nick O'Hern nicely placed. an eagle finish in a round of 8 under This will ease its way around. at present, Going through a purple patch grabbed a share of the lead late, Victorian Richard Green leaving it until the last hole. Stadler upstaged, But that's where first-round leader sneaking clear with an eagle. APPLAUSE With no Lleyton Hewitt, but bounced back in a big way. Peter Luczak started nervously, CHEERING Luczak beat Michael Lammer in four.. From a set down, And he does it with the forehand.

the perfect start. ..the win giving Australia up a brave fight in a tough 4-setter, But Chris Guccione, despite putting couldn't capitalise, with Stansilas Wawrinka levelling the tie for the locals.

Leith Mulligan, National Nine News. And Australia today took out the doubles rubber to take a grip of its Davis Cup tie with Switzerland. Wayne Arthurs and Paul Hanley defeated Stanislas Wawrinka and Yves Allegro in four sets to take a 2-1 lead for Australia.

The Waratahs Super 14 campaign is off to the best possible start. It was a fiery start to the match of the round between NSW and Queensland with two scuffles in the opening 10 minutes. The sides were locked up at 6-6 at half-time. But after falling behind, the Waratahs staged a late fightback with Rocky Elsom scoring the winning try 10 minutes from the end. COMMENTATOR: And that's it!

It's the first time since the start of the original competition in 1996 that NSW has won in Brisbane. Coach John Buchanan has warned Australia's cricketers they face the axe if they lose today's second finals clash against Sri Lanka. The world champions are under pressure to level the 3-match series in Sydney. They suffered a shock 22-run defeat in the first final on Friday when five run-outs cost them any chance of victory. Taking a look at the weather around the country: I'll be back at 8:30 with an update, but now it's back to Ali. When we come back, Michael D'Ascenzo, our new tax commissioner, talks to Ross Greenwood.

He's the tax man, and you've probably never heard of him.

But his will, and perhaps his whim, will affect each one of us. Michael D'Ascenzo is our new Tax Commissioner. He's risen through the ranks of the department, and depending on how you look at it, he's found the holy grail or grasped the poison chalice of one of Australia's most unpopular jobs, replacing Michael Carmody, who resigned last year. He's certainly taken on the role at a time when there's been unprecedented criticism of the complexity of our tax system and increasing demand for reforms such as a flat tax.

Michael D'Ascenzo, in his first television interview, talks to finance editor Ross Greenwood. Michael D'Ascenzo, congratulations on becomin Australia's new tax commissioner You've been here for quite a long time so just how does your role change with this new position

Well, thanks very much, Ross, for the congratulations. It's certainly a role that I'm pleased to take on. I think the challenge there is from being a contributing architect to one that makes those directions real both for our own people and for the community. As I say, you have been with thi organisation for a long time But a lot of people wouldn't know you or your background Give us the potted history Well, the potted history was when I looked for somewhere to go to work,

the Tax Office was the first one to respond. So fate brought me here. But throughout that period I've had a whole range of careers. I've done management work, I've done IT work, I've done marketing work, I've done product development work, I've done operational work, I've done technical work. The beauty about an organisation like the Tax Office is that you get so many skills and then you can apply those as well as whatever leadership capacities you have to make a difference in the tax field. Well, many of the projects you've worked on in your career here have been cutting edge

the bottom of the harbour tax scheme in the 1980s, the foreign tax havens, self-assessment Have these helped to you understand Have these helped to you understan not just the Tax Office but also the Australian taxpayer Well, I think I've been fortunate enough

to be given opportunities to work in areas that are fairly exciting areas that were cutting edge and to make a contribution there. And I think that does help you understand how it all fits in a big picture and how the Tax Office is part of a wider regulatory framework for the community. And in the time you've been here, the taxpayer themselves,

the individual taxpayer, do you think in essence that they've changed in any way I think right from the beginning the Australian taxpayer has been supported by the tax profession, particularly tax agents, and that's been a feature of our system which is different from a lot of other systems. You've also said you would like to help to improve the tax act What exactly do you mean by 'improved' What areas could be improved

We're very much at the operational end so that second category of the customer and the consumer - the user of the system - as I said, if we find that the law is operating in a way that just imposes compliance costs that just are over the bounds of what the benefits for policy is, we say to government, "Hey, this is costing taxpayers too much. "You might want to think of another option." But when you give that advice to improve the tax act,

is that about streamlining your ability to collect the tax from businesses and your consumer or is it really an ability to help or is it really an ability to hel them to comply with the tax act Ross, we have to be efficient. But the outlay is not done that mechanically. Interestingly, tax administration is all about having high levels of voluntary compliance. Because it is not the amount that you claw back through your enforcement action that is the real important part of tax administration.

The important part about tax administration is having a culture where people can comply, can easily comply and do comply voluntarily in relation to their obligations. Where do you priorities lie when it might come to, say, doing an audit process over one large company versus, say, for example, trying to get 10,000 individual PAYE earner to comply How do you actually allocate your resources or your priorities to make certain that all partie are not only payin a correct amount of tax but also that you're being efficient in the way in which you collect it Our business is really to get high levels of voluntary compliance. That really requires a whole-of-system perspective. In other words, you can't just ignore a whole range of segments. If there's no deterrence in the individual market, you have the person saying, "Well, look, no-one else is paying tax. Why should I?" If you don't have the deterrence in the large market or in the business market, people say, "My competitor is getting away with a better deal. "I'm losing business because I can't be competitive "because I'm trying to do the right thing." You've said since you've come in that those who don't pay tax, the Tax Office will make it harder on, that in the past it's bee a bit of a softie when it's come to tax collection Talk to anybody in business I don't think anybody would call the Tax Office a softie So exactly what do you mean My philosophy is, hey, if someone wants to do the right thing and pay their tax, then we should be trying to bend over backwards to make it easy for them to do so

and to take their circumstances into account. Ultimately if having done all that people still say, "Well, I'm still not going to pay you," then you've got to take firmer action. Well, I can't let you go without asking on behalf of ever business owner in the country

about BAS statements, which drive them crazy They're even sent up in comedy skits They're even sent up in comedy skit which says that it is somehow in the public psyche that that red tape is too many great for many business owners Yeah, now I think that is an area where we in the Tax Office can do something. I have a view that we could get people to use the accounts that they use themselves and then either, by working with software developers or by developing our own systems, just like E-tax, that's the fax, plug it in, press the button and it comes to the Tax Office. And if we don't need to do any more, that must save a lot of time. OK. Final question who does your tax Unfortunately, my wife forces me to do the tax. The shoebox method - you've got all the receipts in the shoebox or have you got some other system My wife actually keeps good accounts, so she loves doing that. But I am trying to persuade her to go to a tax agent next year. Michael D'Ascenzo. After the break - Westfield USA - the Australian shopping centre giant's latest phase in it's global expansion.

We're taking US ideas to Australi and Australianising the and bringing them back to the US So the real key to the global nature of the company is the sharing of information, the sharing of ideas

We're used to Westfield shopping centres sprouting up almost overnight like mushrooms, and it's a global phenomenon. Westfield's investments around the world now total $45 billion and rising, and all that from a single delicatessen started by Frank Lowy in Sydney's western suburbs in the 1950s. Nowhere has the Westfield international invasion been more apparent than in America's capital of glitz, Los Angeles, and this morning North American correspondent Robert Penfold looks at what happens when Bondi meets Tinselltown. Imagine it - fancy owning the shops where the millionaires of Beverley Hills go to spend. How much is this one This one for you - $2,650. The shops or, in this case, the mall, is just around the corner. And for any Australian, it's all so familiar. Wherever you look, there it is - Westfield. Managing director Peter Lowy. Hopefully you see it everywhere you go and the customers recognise it as well We do add our brand We do add our bran to the mall itself And with our bran comes all of the Westfiel customer service initiatives

One of those initiatives was spending A$186 million renovating Westfield Century City. That involved creating extra stores, a new food court, relocating the cinema complex... CHEERING AND APPLAUSE from all over Los Angeles ..then inviting VIPs in just the start of it. to hear that this was we'll be investing over $1.5 billio Over the next four or five years, in the city of Los Angeles of our own capital That was $1.5 billion. of 130 shopping centres Westfield Century City is just one owns around the world. the Westfield group in the crown And for the moment this is the jewel of their American portfolio. here? What's the idea with the food hall

on what used to be here. It certainly looks a big improvement it's been done in the US, Well, it's the first time we did in Bondi Junction in Sydney and it was really based on what feel as if they're in a restaurant We're trying to get the customer to and knives and forks So instead of having plastic plates and plastic trays, we actually have china and cutlery and the design, as you can see, and we've also upped the foo and we've also upped the food

of all the store fronts Besides Rupert Murdoch, talk of Australians business success story and there's no greater international than Frank Lowy and Westfield. Lowy spent just six years at school, Czechoslovakia in the early '50s. migrated to Australia from and then started a delicatessen He worked on a building site in the Sydney suburb of Blacktown. of shops, He went on to to build small groups in Sydney's west bought local farmland housing subdivisions and turned that into his first shopping centre in 1959. and eventually built big problems facing Westfield, Globally, what are some of the do you think? that we probably face Well, the biggest issue of the department store industry, is the consolidation redevelopments.. and we do have to do Is that worldwide? It's particularly in the US Right. There were probably 8 or 10 department store There were probabl that we used to deal wit that we can deal with and now there's probably five or six And getting smaller again? And getting smaller at the moment Yeah. And so for us and for the consumer of its business the US mall industry has lost part the US mall industry has lost parts

lifestyle centres, to other forms of retail power centres, strip centres over the last 10 or 15 years those customers and we need to win bac and we need to win back

retailers that they're looking for so we need to give them the the word was out - After stage one of the renovation, were more comfortable the food was better, the movie seats improvement in business. and store owners saw an immediate I like these. sunglasses, Solstice, selling high-end just before Christmas opened its 51st American store here in Century City. right next to the food court, And with a prime spot from manager Anthony Trujillo. no complaints there good Actually, Westfield's been pretty We have a lot of stores in Westfiel are very successful in their malls and all of our storie because they do such things as they have out here as the dining terrace get into the market to change and really and really go after the customer to come to the mall and have them feel more welcome in Bondi Junction, As you've see from what we've done

in Century City, as you see what we do here in San Francisco, what we're going to do in the UK, in London, what we're going to do in White Cit what we're going to do in White City

what we are really doing concepts that we see is we are taking these global and Australianising them We are takes US ideas to Australia to the US and then bringing them bac them again and then, you know, reworking on and then taking them back agai and then taking them back again

backwards and forwards and taking them to the UK of the company So the real key to the global nature and the sharing of ideas is the sharing of information and growing by the day. Westfield appears to be growing Here on the outskirts of Los Angeles, the Westfield make-over. the suburb of Tapanga is now getting Back in the early '90s, of about $3 billion. the company had assets worldwide and that figure is now $45 billion. Fast forward to today, 13 years on, there's much more to come. And, as can you see, both financially and physically It's a massive development largest single investment in the US. and it's turning into the company's It's worth $580 million. shopping malls in Tapanga, Westfield bought two rather tired a well-heeled semirural area. now Westfield has bought that too. They were separated by one block, an pulling it all together. Stephen Fluhr is Westfield's man So by the time all is said and done, of real estate we finish up with a solid mile the stretch fully developed up and down driving in from the top here, So what you're getting is someone for 1.5km or more they get in here and they can drive and all they see is Westfield? as you come down the stretch Exactly, exactly, these mall And really what we do when we buy these malls

and redevelop them and expand them the product that was there before is we actually totally reinvent

for our retailers so that we can create greater sale And at the end of the day, can do greater sales, if the retailers in our mall if the retailers in our malls

rents we can then charge them higher

profits Therefore, we can make greater Peter Lowy.

Back soon with a news update, finally started to come good? and has loss making airline Ozjet from coming last Stoddart knows how to turn a dollar I will be around for a long time before. because I've been down this road

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Still to come - the AWB bribery scandal, but here with a news update is Kellie Connolly. Doctors treating comatose Israeli Prime Minister Ariel Sharon say there's no immediate danger to his life after emergency surgery to remove part of his intestines. Peter Beattie has become the second Premier in as many days

to be caught on tape swearing at the COAG meeting in Canberra. Following on from Morris Iemma's gaffe, the Queensland Premier swore while referring to his deputy Anna Bligh. And in Super 14, NSW has scored an historic 16-12 victory over Queensland. More news in the Sunday program at 9:00am.. The critics said Paul Stoddart's all business class airline, Ozjet, would never get off the ground he would never get an air operator's certificate with his ageing fleet of 737s. But they were wrong.

Three months after launching Ozjet into the Sydney-Melbourne route, one of the most competitive in the world, the airline is still flying. But it's also bleeding millions of dollars a month, and one of its rivals is running a book on just how long it can survive For his part Stoddart has a message for the doubters - Ozjet will fly as long as Australians want a business class airline at economy class prices. He spoke to Business Sunday's Adam Shand. Would you like a grass and water, madam Are times on Ozjet so tough that Paul Stoddart is now carting livestock? No. In fact, it is the entrepreneur's latest print and television campaign in production. What on earth am I doing here? I know you want to get bums on seats, but this is a new extreme. Absolutely How did you come up with this anyway Well, the whole idea - the original idea was cattle class You know, everybody refer to economy as cattle class And we were getting how this really happened, we were getting customer feedback saying, "I'm sick of being treate cattle class.

All the cattle clas was coming in the feedback "Herded like sheep onto the aircraft "It's nice and refreshing to fly "It's nice and refreshing to fl with Ozjet and get nice meals. Like most things in the Stoddart story, we aren't quite sure how this one ends.

No, no, no

It's make it up as we go along Launching a new airline in Australia is an expensive business so the extras are all Ozjet staff.

General manager Hans Van Pelt gets close and personal with the sheep whilst Stoddart plays director and animal wrangler. In its third month of operation,

Ozjet, the all business class airline, is finally doing some business.

Load factors have now hit 50%, a far cry from December, when some flights carried just three souls between Sydney and Melbourne. What it did do is it let people speak out and say that they didn't at that time of the year want the mid-morning and mid-afternoon flights, so we adjusted the schedule. What we've ended up with now is less flights but obviously far better load factors on those flights. And I think it is fair to say that it is now meeting our expectations. The bookings over the last couple of weeks have really, really picked up and it's looking good. Industry talk suggests that Stoddart is losing $2 million a month supporting Ozjet. He won't talk dollar figures on the losses but claims the financial performance of Ozjet is on target. It helps that Stoddart's European aviation business has chipped in the aircraft from excess capacity. is we own the planes The bottom line, I suppose, them and the infrastructure to support so in a kind of a way can we support it it's not driven by how long it is physically possible. in terms of whether the motivation is. It's more driven as to where is a piece of string, I suppose you could say how long but what is a fair amount of time about Ozjet, to try the product? for the Aussie public to get to know has been Because what our biggest problem the product. is getting people to try the business day to day. Hans Van Pelt has had to run on time all day, He says the airline is now running but the losses still hurt. the cheques here at Ozjet It's been Paul Stoddart signing if you like. over this loss making period, Yep through this period? How calm has he remained Look, it's been tough It's one thing budgeting for a loss actually experiencing it It's quite something else results We've pretty much had the financial to have that we thought we were goin that we thought we were going

into your pocket But the reality of having to di to have to do it obviously is tough even when you knew you were goin We are starting to see the ga and what we earn closing fast between what we spend in the air Ozjet now has three aircraft in March. and will begin flights to Perth a loyalty program within a year. There are also plans to begin of the decision But some analysts have been critical one way between Sydney and Melbourne to launch a two-for-one offer at $24 is under pressure. They say it shows management in late November, Before they launched weren't going to lower their fares they were pretty adamant that the they were pretty adamant that they

below $325 within six weeks of that However, now we've see However, now we've seen

they initiated a two-for-one deal going to have cheap ticket And then they said they were onl And then they said they were only

until late January, those cheap tickets into February and now we're seeing them sell are changing their strategy So it is pretty apparent that the Ozjet's toughest criticism aviation writer Scott Rochford. has come from 'Sydney Morning Herald make money with its older 737 fleet. He's sceptical of Ozjet's ability to It's really a questio to put into Ozjet of how much money he's willin I mean, there's no clear indicatio have of how much money he actually doe his Minardi formula one racing tea However, he did - he recently sol his Minardi formula one racing team

from his European aviation business, and he has made a considerable su which is based in England So, you know, there are suggestion it goin that, you know, he could keep it going

months for at least another three to four Minardi formula one team But having owned the struggling for five years, from coming last. Stoddart knows how to turn a dollar

Minardi cars Stoddart ran the struggling on a quarter of his rival's budgets for $35 million, and sold out last year return. pocketing a handsome, if unlikely, all the odds, I did, and that was against

around long", so when people say, "Ozjet won't be barring one thing - as I said before, demand - if there is a lack of customer it will be a long time but, barring that, because I've been down this road times before. and I've been written off many, man and I've been written off many, many

people do that at their peril. And all I would say is, you know, planned to review his investment Before the launch of Ozjet, Stoddart after six months

of the airline but now he says the future of the travelling public. is entirely in the hands If it's a service they want to have, to other capital cities then it will expand and grow and stronger. and it will get stronger and, you know, 'if' is a great word, If, on the other hand - it is F1, it's 'F1' spelt backwards - we used to always joke and say demand, that's a different issue. if on the other hand there was no a dead horse. No-one is going to flog then it would not last. If there's no demand, there seems to be demand But clearly at the moment that's what we're looking to do. and we're actually growing, and

When we come back - at business and the economy. Terry McCrann with his unique look with his thoughts Here's Terry McCrann the share market this year on what will influence and interest rates. to shape the year ahead The parameters that are going for the economy more broadly for investors, for business, are now slotting into place. is going to continue to be The boom in commodity prices on our share market. the single biggest influence

from these record levels, Even if prices were to start falling up is yet to fully flow through. the momentum that has already built in Rio Tinto's profit We saw that in that huge increase

and next week we'll see it again profit from BHP Billiton. in the biggest ever local half-year from the old BHP steel, But we also got to see the dark side now called Bluescope. in selling its coal and iron ore The record prices BHP gets at which Bluescope has to buy are also the thumping high prices by the China success story while also getting squeezed which is driving commodity prices. were left unchanged last week Interest rates in Australia the next few months. and are now on hold for at least further across the Pacific. But they will probably still rise will bump around its record levels Put this together and our market will keep going sideways, while Wall Street for the last five years. as it's been doing to watch is jobs. The single most important statistic They've been flat for six months. for any change in interest rates They are now the early warning signal the broader share market. and, indirectly, And in the Sunday program into the Cronulla riots. a special investigation Aussie, Aussie, Aussie...oi, oi, oi Today on Sunday - an inside look at just what happened at Cronulla and its bloody fallout and, for the first time,

dramatic police radio recordings as the revenge attacks unfolded. And after the break - Business Sunday's cover story -

the AWB and the oil-for-food bribery scandal. I think there's a cerain number of farmers out there who still don't believe they've done anything wrong and they say briber or paying whatever it takes to get business done is OK SMOOTH, JAZZY MUSIC Fortunately, there are easier ways to clean your insides and let 100% natural fibre help do the cleaning for you. PHONE RINGS, HEAVY METAL MUSIC (Laughs) MAN: We've engineered one of Germany's best six-speed automatic transmissions into Australia's Ford Falcon. Nothing drives like the new Falcon. The resignation this week of the head The resignation this week of the hea of the AWB surprised few. Andrew Lindberg was the most obvious and just the first scalp after weeks of headlines about our wheat exporter bribing Iraqi officials. But the managing director's departure is far from the end of the story. The AWB is at the centre of our biggest ever scandal involving international trade, a scandal which has ensnared another of our global giants, BHP Billiton.

With AWB's shareprice down some 30%, the board has promised corporate reviews and internal audits, but there are many who want far bigger reforms. In this, our first major report for 2006, we explore the structure of the business charged with selling all Australia's bulk wheat and ask what went wrong and what happens now.

I think the motivation is really just the embedded culture that has been there, the almost he-man culture that we're going to get things done regardless. It's a law unto itself and it's certainly proven to be a law unto itself in its dealings with Iraq They were doing what they felt had to be done Their reputation is shot. The biggest loser is grain growers. It's been a torrid few weeks for everyone involved. None more so, perhaps, than Andrew Lindberg, the man who took the AWB public five years ago well aware his company was a strange beast - publicly owned but with a legislated monopoly. It is something that doesn't have any parallels elsewhere in the world We think it's the best system We think it's the best syste in the world, quite frankly With hindsight, Lindberg's confidence was misplaced. Even as he was speaking, his manager were slinging Saddam Hussein's regime millions of dollars in kickbacks in blatant breach of UN sanctions. The former chairman Trevor Flugge several months ago called me in the office and was screaming down the phone and described this as a storm and described this as a stor It's clearly not a storm in a teacup Meet the journalist Australian officials reportedly tagged a rogue, claiming her story of kickbacks to Iraq was a beat-up from the very beginning. Caroline Overington first saw the Iraqi wheat contracts when she was based in New York. As soon as you raise the question is it possible that an Australian is it possible that an Australia compan would be providing upwards of $30 million to Saddam Hussein's regime troops in the months before Australian troop were due to go to war there? people were outraged by the very suggestion

It seemed like such an incredible occurrence, such an incredible idea

This is where it's all coming out - the Cole inquiry into the UN oil for food program. In this room, there have been almost daily revelations of bribery and truckloads of gold. and corruption, bags of money would be astounded Even the most gungo-ho trader at the scale of the deception.

is the first scalp to go. Now the Wheat Board's Andrew Lindber just how much was he responsible for But as managing director, was the managing director's job. Certainly corporate culture a corporate structure But Lindberg was handed the most competent of managers. that would have challenged even environment creates The culture that a monopoly is very much an aggressive culture and "We win at all costs" doesn't happen." and "We can control what happens and is exactly what the AWB has. A monopoly environment It's in fact not one company but two is AWB Limited, The publicly listed entity of AWB International, which in turn is the sole owner the actual holder of the monopoly exports - the so-called single desk. to market Australia's bulk wheat AWB International's national pool. All the grain goes into by AWB Limited, But that pool is managed which provides all the services. AWB International pays the bill.

for those service contracts. And there's no competition shareholders The combination of having who want a shareholder return their return and growers who want to maximise of interest amongst AWB. inevitably causes a conflict There's the rub. Shareholders in the listed company in the earnings of AWB Limited, have a direct interest around a quarter of which come for AWB International. from managing the pool direct interest in the pool itself. Growers, on the other hand, have a charge whatever it likes unconteste You have a private company that ca to run AWB International to vessel In terms of what it charge and a whole range of services, in the Australian community there is no-one else can offer those services earner for AWB Limited So basically it is a major cas They don't have to show us growers to run the pool. what cost they've had to charge us We've got no benchmark to be able and reasonable to see if that price is fair too much. or they've actually been charging us biggest private wheat grower Ron Greentree is Australia's the Cole inquiry. in Sydney this week to watch key performance indicators, or KPIs, He goes a step further, saying the are a strong motivator. used to determine executive pay the KPIs of the executive We have the situation where on the profits, will be set on shareholder return, would make sure which would then make that they a price to the pool they would charge at times which maybe someone else may be able to do it at a lower price. It was directly in the interest of AWB management to maximise the price of service agreements Exactly. So what's the link between the AWB's structure and its monopoly and what happened in Iraq?

If you're a single desk operator, frankly, you don't want as much transparency as growers would like. Because there is that veil of lack of transparency, it gives people almost the sense that we can do anything around here

and as long as no-one finds out, we're OK. No-one else could really get a look-i the business on how they're actually operatin the busines so they ran it, it would appear, on their ow and in part considered they were above the law Peter Howard has done battle with the AWB for years trying to get his own export permits He sees the Cole inquiry as the final nail in the coffin for the single desk system. But I believe that it would hardl be a blip in the marketing of wheat if there was no AWB tomorrow I really believe that But anyway, there's no reaso why they couldn't continue

And if they were a good company and offered good services, farmers would support them And's not the only one. The answer, in my view, is a free market. We should let anyone who wants to export bulk wheat the right to do that, which would create competition for the wheat that growers are selling.

We have to make sure that we don't throw the baby out with the bathwater. But do you keep a single desk Well, I think that that's probably getting towards the end, particularly the way it is now. But we don't want to be irrational and throw it out overnight. The AWB declined to be interviewed by Business Sunday but their web site includes copious documents aimed at proving the single desk does work to the benefit of growers. And there is clear support, especially among smaller farmers, who form the vast majority of wheat growers and have a big say at the ballot box The world grains market is unbelievably corrupted by subsidies from Europe and northern America

It's dominated by three or four very large trading companies We are minnows really in the worl of grai and we believe that by havin a single desk, a single seller, we're better able to counter the forces that are set against us Angus McNeil is a senior vice-president of the grower lobby group the Grains Council, which is making no official statement about the Cole inquiry. Speaking as a grower, McNeil, who's just returned to Melbourne from a council meeting in Adelaide, is fiercely protective of the AWB's structure. He says if the single desk is open to competition and the big growers pull out, the system will collapse. It begins to pull the whole thin down, doesn't it Once you let some people break away, it starts pull a card or two out of the card house and the danger is the whole lot can come tumbling down And there are others who say the single desk shouldn't be questioned. The single desk wasn't responsible or the operation of the single desk itself wasn't responsible for what happened in Iraq. What happened in Iraq was solely due to the culture of whatever it takes, which was embedded in the AWB and perhaps the personalities of some of the people who were involved. That's not to condemn them out of hand.

That's just to say they didn't know

at what point they should draw the line. Bruce Haigh is a retired diplomat. For 22 years, he worked in the Middle East and Asia. All the postings I had oversea were in hardship post and in all of those posts the only way that you could get things done was to grease palms I think there are a certain number of farmers out there who still don't believe they've done anything wrong They say bribery, paying, whatever it takes to get business done is OK But I think there's a fundamental difference between breaching a UN sanction between breaching a UN sanctio which was put in place for a goo reason

to what we would have done so I think it's beyond just bribery Perhaps the bigger question is if AWB employees didn't know when to draw the line in Iraq, why weren't they told? The body tasked with supervising the wheat marketer is the Wheat Export Authority, or WEA. Where have they been? What are they doing on behalf of all wheat growers in Australia? But that criticism is not entirely fair. The people who run the wheat export authority have got their own problems. Professor Gordon McAulay was a founding member of the authority's board. He says from the outset what they could do was limited. Essentially only request information Essentially only request informatio from the AWB And we relied on them giving us what we requested They could refuse and there was nothing we could do So you couldn't be an effective monitor. Couldn't be an effective monitor The AWB is promising an audit of internal controls

and a review of governance procedures. Its managing director is gone, all well before any findings from the Cole inquiry. Indeed, the commission is still to turn its full attention to the allegations involving BHP. Then there's the potential political fallout. Will anyone find a smoking gun? As well, there's the prospect of criminal charges. The independent inquiry committee into the UN oil for food program... While the wheels of inquiry are spinning, growers have been busy delivering up to 25 million tonnes of grain to the silos of the AWB. Now they're worried the AWB is going down and it's taking their livelihoods with it. Oh, I think their reputation is shot. Yes, they will continue to be in business. But it's going to be a hard slog for them. And, as I said, it's not only their reputation shot but indirectly they've shot every Australian grower's reputatio at the same time. Next week, bird flu, and the devastation a global outbrea could have on business. We found even for a mild pandemic, which we measure is approximatel 1.4 million people killed globally, roughly 1% of GDP is wiped out, which is about US$350 billion Right now the World Health Organisation rates the chance of a pandemic as 1 in 10. HSBC says if it's a pandemic, up to half its staff could be absent

I guess the case we look at is about one-third of our staff not being available for work. Some economies, especially in the developing world, would shrink by over 50%. I think the SARS outbreak in 2003 was a serious wake-up call that even though only 1,000 people died, the economic costs of that was US$40 billion. Bird flu's economic impact next week on Business Sunday. And that's our program for today. Transcripts of this week's stories can be found on our website: Sunday is next with Laurie Oakes interviewing the Prime Minister, John Howard. I'm Ali Moore. See you next week. Supertext Captions by the Australian Caption Centre


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