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AWB's involvement in the Iraq oil-for-food scandal raises questions.



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This transcript has been prepared by a source external to the Department of the Parliamentary Library.

 

It may not have been checked against the broadcast or in any other way. Freedom from error, omissions or misunderstandings cannot be guaranteed.

 

For the purposes of quoting verbatim from a transcript, it is advisable to verify the transcript against the broadcast.

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PM

 

Friday 28 October 2005

AWB's involvement in the Iraq oil-for-food scandal raises questions

 

MARK COLVIN: "What did they know and when did they know it?" and "Follow the mon ey" are the great catchcries of investigators everywhere, and the United Nations report on the Iraqi oil-for-food scandal has done a meticulous job on both. 

 

One result is that Australia's monopoly wheat marketer and seller, AWB, finds itself right in the middle of the scandal. 

 

Oil-for-food was meant to make international sanctions on Iraq bite against the regime, while making sure the ordinary people didn't suffer from lack of food or medicines. 

 

Instead, in a grotesque turnaround, UN officials who administered the scheme perverted it, to ensure that Saddam Hussein and his cronies lined their pockets with a river of oil money, and Iraqi babies still starved. 

 

Some believe that in doing so, they actually extended the dictator's grip on power. 

 

It was all about kickbacks and the United Nations report, chaired by the former US Federal Reserve Chairman Paul Volcker, says the Australian Wheat Board paid the equivalent of more than $AU 290-million to the regime. 

 

Mr Volcker says that AWB staffers should have known what was happening. 

 

The company is vigorously defending itself. But many questions are being asked about whether further action should be taken. 

 

Karen Percy reports. 

 

KAREN PERCY: AWB is in serious damage control mode. 

 

ANDREW LINDBERG: We were an unwitting participant in an elaborate scheme of deception devised by the regime. 

 

KAREN PERCY: The former wheat board has found itself targeted in a damaging UN report in the oil-for-food program. 

 

The program was set up in 1996 as a way to get much needed food and medicines to the Iraqi people, who were being hurt by global sanctions. 

 

Under the program, Iraq could sell oil to approved traders, if the proceeds were used for humanitarian purposes. 

 

The idea was that Saddam Hussein wouldn't be able to get control of the money. 

 

But as it turns out, the Iraqi President was able to get his hands on almost $2.4-billion dollars. 

 

The report's author, Paul Volcker. 

 

PAUL VOLCKER: It was manipulated by Saddam Hussein and it also describes, necessarily, how thousands of contractors, wittingly or unwittingly facilitated the process. 

 

KAREN PERCY: Under the program, AWB shipped close to seven million tonnes of Australian wheat to Iraq from 1997 until 2003 in numerous contracts worth almost $3-billion. 

 

The company was one of the largest participants in the humanitarian program, and the report found it contributed 14 per cent of the total kickbacks, or $293-million. 

 

The company's managing director Andrew Lindberg says AWB was acting in good faith when in the second year of its UN contract it negotiated a transport deal with a Jordanian company, Alia Transportation, to truck the wheat from the port city of Um Qasr. 

 

ANDREW LINDBERG: At all times through the oil-for-food program we relied on the UN. 

 

They approved the contracts, contracts that included inland transport, and they were there to certify that the prices were reasonable and acceptable, and they did that on a contract by contract basis. 

 

And I think our reliance on the UN should not be understated. 

 

KAREN PERCY: It turns out the transport company was owned by the Iraqi Government. 

 

While the report notes there was no direct evidence to prove AWB was aware of this, it also found,: 

 

VOICEOVER: Numerous documentary and circumstantial warning signs placed at least some employees of AWB on notice that payments to Alia may have been illicitly funding the Iraqi regime. 

 

KAREN PERCY: The report refers to the fact that AWB was aware that the transport costs were being set by the Iraqi Government. 

 

As a result, the investigating committee believes that AWB should have realised the regime was benefiting. 

 

It's something the company's managing director, Andrew Lindberg, disputes. 

 

ANDREW LINDBERG: I think it's a debatable issue. I think we need to remember that what is known to the 2IC now, the independent committee, was not known to AWB at the time. 

 

They've had the benefit of hindsight, they've had the benefit of access to information and knowledge that we couldn't have had. 

 

KAREN PERCY: Questions are being asked about whether further action should be taken against the company. 

 

The UN's report clearly states that AWB could not pay the Government of Iraq or an Iraqi company for transportation costs without violating UN sanctions and the rules of the program. 

 

The UN's Investigative Committee is offering assistance to governments which want to prosecute companies which have abused the system. 

 

That doesn't look like an option for Australia. 

 

The Prime Minister John Howard says there's been no adverse finding against AWB. 

 

JOHN HOWARD: Let's all have a careful look at this report and once again, let's hear from AWB Ltd., because it is a company that runs its own affairs. 

 

KAREN PERCY: And Dr Simon Longstaff from Sydney's St James Ethics Centre says the company should be given the benefit of the doubt. 

 

SIMON LONGSTAFF: On balance in those circumstances, I'm sympathetic to the view that they were having to manage a highly volatile situation and may very well have thought that the movements in contract price, large as they were, were part of a volatile operating environment rather than immediate and evident connection with corruption. 

 

KAREN PERCY: But he says all companies should adhere to ethical standards. 

 

Dr Longstaff. 

 

SIMON LONGSTAFF: Unfortunately, in many areas when these things happen, people pretend to… actually, prefer to turn a bit of a blind eye rather than ask difficult questions which can jeopardise important commercial relationships. 

 

Now, doing anything like that, in other words turning a blind eye, is extremely problematic now in Australia, because the criminal law here has full extra territorial application when it comes to the bribery of foreign officials, so you know, it's a very, very serious matter. 

 

KAREN PERCY: AWB is among more than 2,200 companies around the world, which have been named in the humanitarian program kickbacks scandal. 

 

Corporate giants like Daimler Chrysler and Siemens are among them. 

 

And there are two other Australian firms named in the report - Melbourne-based Rhine Ruhr, which supplied distillation equipment is said to have paid almost $20,000 of its $260,000 contract in so-called after sales service fees. 

 

It did not respond to the UN investigative committee and did not return PM ’s calls today. 

 

Sydney based Alkaloids Australia, supplied close to $1-million worth of muscle relaxants, almost 100,000 of which is said to have gone in kickbacks. 

 

In the report the company denies that it made payments in violation of the UN's rules. 

 

Alkaloids Australia didn't return PM's calls either. 

 

While the UN report will provide valuable material for investigations already underway in the United States and Europe, there's some doubt about how much further the probes will go. 

 

PM understands that it was well known in diplomatic circles that some money was being siphoned-off by Iraq, but it was tolerated in order to allow food and emergency supplies to get to the children and families who needed it. 

 

MARK COLVIN: Karen Percy.