Australia: AWB scandal and the Iraq war

Day of judgement: John Howard became the first prime minister in 23 years to give evidence to a major federal inquiry. Photo: Glen McCurtayne



Howard's day in the hot seat

By Dan Silkstone, Sydney
April 13, 2006



PRIME Minister John Howard called an independent inquiry last October to investigate whether AWB had breached Australian laws by paying kickbacks to Iraq. Yesterday, the inquiry called him.
At 10am today, in a crammed hearing room in central Sydney, Mr Howard will appear before the Cole inquiry. He will be the first Australian prime minister to front a top-level commission since Bob Hawke testified at the Hope royal commission on intelligence agencies in 1983.
Mr Howard has consistently said he is happy to appear if sought by the commission, stressing he has nothing to hide and knew nothing about the $290 million in kickbacks that the United Nations says AWB paid to Iraq.
In a brief statement issued yesterday, Mr Howard said: "The Cole commission of inquiry has requested that I appear at its hearings. As I have said previously, I am happy to do so."
When he appears today at the commission, Mr Howard will come face to face with an old acquaintance. He attended law school at Sydney University in the 1950s alongside commissioner Terence Cole.
Although the two men were not close, they were keen debaters. But while Mr Cole captained the debating team, sources say Mr Howard was in the second-string line-up.
The Prime Minister's oratory skills have improved since then, and he will need them when he is examined by counsel assisting the inquiry, John Agius SC.
Mr Agius has shown during examination of Deputy Prime Minister Mark Vaile and Foreign Minister Alexander Downer that he will not hesitate to ask probing questions of the nation's most powerful men
Terry Forrest, QC, appearing for a string of AWB executives, has also applied for permission to cross-examine Mr Howard.Unlike Mr Vaile and Mr Downer, who both had direct ministerial responsibility for overseeing AWB's dealings, Mr Howard is unlikely to be quizzed to the same degree about why he and his staff failed to identify kickback payments and stop them continuing.
But the Prime Minister will face awkward questions about whether he received several warnings about Iraq's rorting of sanctions and allegations that AWB might be involved, which were cabled to his office by diplomats or supplied by intelligence agencies.
Both Mr Downer and Mr Vaile struggled to explain to the inquiry this week why they had not seen the intelligence data or 21 crucial cables sent to their offices. Mr Vaile said he had no recollection of seeing the warnings and no idea why he had not seen them. Mr Downer gave a more considered defence, offering several reasons why he missed the warnings and saying his staff "did a good job".
Cables sent to Mr Howard's office include the January 2000 warning from a Foreign Affairs and Trade employee at the UN, Bronte Moules, that the UN had received allegations from Canada of AWB kickbacks and asking the Australian Government to investigate "at a high level".
Opposition Leader Kim Beazley repeated calls for Mr Howard to expand the inquiry's powers to allow findings against the Government, suggesting the Prime Minister might have seen some of the warnings that passed through his office.
"Cables that dealt with Iraqi sanctions are cables that should have ended up on the Prime Minister's desk," Mr Beazley said. "And I've got to tell you I think they did."
Mr Howard's office was also sent intelligence material in 2002 warning that Iraq was charging 10 per cent fees on all imports under the UN oil-for-food program and fees were paid through Jordanian bank accounts.
The Government department Mr Howard oversees was sent even more extensive intelligence. The Department of Prime Minister and Cabinet was told in 1998 that trucking company Alia was owned by the Iraqi Government and was involved in breaching UN sanctions. It received intelligence in 2000 that kickbacks were being disguised as "transport fees".
The UN's Volcker report last year revealed AWB as the largest supplier of kickbacks to Iraq — funnelling $290 million disguised as transport fees, through Alia, to Saddam Hussein.
The Prime Minister is also likely to be quizzed about the apparently cosy relationship between the Government and AWB.
The commission has heard that the Government repeatedly defended the wheat exporter against allegations of improper dealings and coached its executives on how to respond to the Volcker inquiry investigators.
According to notes tendered to the commission, former AWB managing director Andrew Lindberg stated last year that a foreign policy adviser to Mr Howard, Paul O'Sullivan, had advised him to keep AWB's answers to UN investigators "narrow" and "technical".


PRIME Minister John Howard


Probe on wheat sales to Iraq
By Caroline Overington
New York Correspondent

April 29, 2004

The Australian Wheat Board's long and lucrative relationship with Saddam Hussein's regime in Iraq will be examined as part of a United Nations investigation into the discredited and defunct oil-for-food program.
The UN will consider whether any of the money Iraq paid Australia for wheat was "kicked back" illegally to Saddam's regime by third parties who helped facilitate the deals - in Australia's case, by a Jordanian trucking company.
An AWB spokesman in Melbourne, Peter McBride, said the Wheat Board was "completely unaware of any corruption. Our contracts were completely under the terms provided by the UN."
Mr McBride said the UN insisted the Wheat Board's contracts with Iraq include the use of a third party to provide "inland transport" - that is, trucks to get the wheat around Iraq.
Saddam's Iraqi Grains Board (now defunct) provided the AWB with the name of its "preferred company" and the AWB used that company - a Jordanian trucking company - for all its contracts.
Mr McBride said questions about the legitimacy of this company were "questions for the UN".
The UN Security Council last week named a three-person independent panel to investigate allegations that UN officials mishandled the oil-for-food program, allowing Saddam to pocket billions of dollars illegally.
The allegation is that Saddam's government used the program to extract billions of dollars from companies that wanted to do business with Iraq, leaving his people short of food and medicines, while blaming the UN sanctions for those shortages.
One of Saddam's schemes was to order vendors to inflate their prices by 10 per cent and "kick back" the excess to his government.
The Age this week obtained some of the contracts that the AWB signed with Iraq under the oil-for-food program, which began operating in December 1996 to enable Saddam to sell oil to buy food and humanitarian goods, such as medicine.
One of those contracts shows that, three months before the war, the AWB signed a deal to provide 525,000 tonnes of wheat to Iraq for €280 ($A455) a tonne.
US wheat industry sources who examined the contract said the price was about $US30 ($A41) a tonne higher than world wheat prices at the time.
Mr McBride said the price "might seem" high because it included the cost of paying a third party - the unnamed Jordanian trucking company - to transport the wheat to mills around Iraq.
Contracts that involve third parties are of particular interest to oil-for-food program investigators, since an Iraqi Oil Ministry official, Faleh Khawaji, has
told The New York Times that Iraq would make a deal with a supplier, then say: "Give us another 10 per cent."
"The Western companies would say: 'I can't do it. I've got a board, how do I get around the auditors?' " Mr Khawaji said. "And somebody would tell them there are companies in Jordan willing to do this for you."
Mr McBride said the AWB had never agreed to kick back money to Saddam's regime, directly or indirectly. "We used a Jordanian trucking company to do that (transport wheat) on our behalf." He said he was "unaware of any relationship between them and the Saddam regime. I actually do not know what their relationship was. All we did was pay them a reasonable fee to transport the grain in Iraq."
He said the trucking company had "the approval of the UN".
After Saddam was deposed, coalition forces examined outstanding oil-for-food contracts and asked many vendors to take 10 per cent off their prices.
Mr McBride said Australia had been asked to renegotiate some of its wheat contracts, "but they are commercial in confidence, so we don't discuss (what happened to the) price".
Congressman Chris Shays, who is leading a US House of Representatives investigation into the oil-for-food program, told reporters on his return from Iraq this week that Saddam skimmed $US10 billion from the program. Mr Shays said he had evidence that "everyone who participated in this program benefited. You were not a player unless you were giving something to Saddam."
A member of the Egyptian Parliament, Emad Geldah, also said businesses had "no choice" but to follow Iraq's instructions. "If you wanted to do business with Iraq, these were the conditions you had to abide by," he said.
In September 2002, the Coalition for International Justice in Washington named the Australian Wheat Board as "the main exporter to Iraq, with contracts worth more than twice those obtained by any other single company". The second largest supplier was the Vietnam Northern Food Corporation, which supplied rice to Iraq.
At least three other bodies are investigating alleged corruption and fraud in the oil-for-food program, including the US Senate Foreign Relations Committee, the House of Representatives Committee on International Relations and the Iraqi Governing Council in Baghdad.
The scandal over the program erupted in January when the Iraqi newspaper Al-Mada named 270 dignitaries, officials and journalists from 46 countries who allegedly received bribes under the program.
Program director Benon Sevan, who has been accused of being directly involved in the corruption, is due to retire from the UN, but Secretary-General Kofi Annan says he will co-operate with any investigation.



The Australian Wheat Board scandal and the Iraq war
By Mike Head
28 February 2006



After seven weeks of damning evidence from the Howard government’s Cole inquiry, the real issue in the scandal over the Australian Wheat Board’s payment of $300 million worth of bribes to Saddam Hussein’s regime is not whether Prime Minister John Howard and his ministers knew about the kickbacks. That has certainly proved to be the case.
Testimony and documents presented to the inquiry have revealed nearly 20 occasions on which Australian Wheat Board (AWB) executives and various officials told senior government ministers or their advisors of the payments. Last week came the most incriminating document so far—a now-declassified secret cable sent from a Department of Foreign Affairs and Trade (DFAT) officer attached to the UN in New York warning that AWB had been asked by Iraq to pay “port fees” of 50 US cents a tonne and that such fees would breach UN sanctions.
Sent in April 2001, the cable was addressed to Prime Minister John Howard, Foreign Minister Alexander Downer, Trade Minister Mark Vaile and a raft of senior public servants from the Defence Intelligence Organisation and several government departments, including Defence and DFAT. The briefing, which the government deliberately hid from the public for five years, made clear that the illegal “port fees” was “linked to wider concerns about circumvention of the sanctions regime”.
Yet Howard, after initially saying last week he did not recall seeing the cable, then declared there was nothing in it that should have raised alarm bells in his office. He also insisted that the cable did not actually prove that the government knew illicit payments were being made. The truth is that Howard and his ministers had no intention of doing anything that would jeopardise lucrative Australian wheat sales to Iraq.
Howard’s response is in line with his government’s standard modus operandi—leave the implementation of the government’s dirty work in the hands of senior officials (in this case AWB executives) and make sure that no paper trail is left of its involvement. Responsibility can then be denied on the basis that government ministers knew nothing.
Whatever evidence ultimately emerges, the real issue in the AWB case—on which the mass media is totally silent—is what it further demonstrates about the utter hypocrisy behind the official fabrications brought forward to justify the invasion and occupation of Iraq. All the time that Canberra was falsely accusing Saddam Hussein of breaching UN resolutions, it was systematically violating the UN oil-for-food program to maintain its long and profitable relations with the Baghdad government.
For the Howard government (like the Hawke Labor government in the first Gulf War of 1990-91), the paramount consideration in joining the Iraq war was securing the strategic, diplomatic and commercial interests of the Australian corporate elite. That meant, first and foremost, lining up closely with the United States, the military and economic power on which Australian ruling circles have relied for protection since World War II. But it also meant grabbing every possible slice of the lucrative Iraqi cake—oil rights, construction contracts and agricultural markets—sometimes in fierce competition with US rivals.
As the World Socialist Web Site reported in May 2003, as soon as US-led troops took control of Baghdad the Howard government moved to claim the rewards of its participation in the illegal invasion. In late May 2003, Trade Minister Vaile led a delegation of executives from 10 major Australian construction, engineering, and oil and gas companies to the US for talks with American officials and corporate executives.
The delegation, which included senior figures from BHP, Santos, Multiplex, Clough Engineering, Australian Power and Water, and Woodside Petroleum, held discussions with American firms awarded reconstruction contracts from USAID (Agency for International Development). Vaile was quite unabashed about the money-making prospects. “Ultimately there’s going to be billions of dollars spent in the whole rehabilitation and reconstruction process,” he noted.
When it came to wheat, the government was under strong pressure from Australian farming groups to ensure that the valuable Iraqi market was not lost to the US. Before the first Gulf War, the US exported almost one million tonnes of wheat annually to Iraq, but these shipments were cut off under the sanctions imposed on Baghdad. Australian growers then took advantage of the 1996 oil-for-food program to recapture two-thirds of the Iraqi market, worth $A839 million to Australia in 2002.
For all the cynical rhetoric about rebuilding Iraq and establishing democracy, the US-installed Coalition Provisional Authority (CPA) was largely concerned with carving up the spoils of war, while it suppressed resistance to the occupation. When the Bush administration appointed Dan Amstutz, a former senior executive of Cargill Corporation, the largest grain exporter in the world, and former president of the North American Grain Export Association, to lead the CPA’s agricultural section, the Howard government countered by nominating two senior AWB executives.
Both the Australian appointees—former AWB chairman Trevor Flugge and AWB executive Michael Long—had been in leading positions in the AWB when it paid bribes to the Saddam Hussein regime. Their top priority in occupied Iraq was to make sure that outstanding contracts worth more than $US250 million signed by the AWB before the invasion were honoured and that the AWB retained its place in the Iraqi market.
Their activities extended to Long using his posting at the Iraqi Ministry of Trade to save the position of Yusef Adbul Rahman, the former head of the Iraq Grains Board with whom the AWB had arranged its previous kickbacks. With the help of the Australians, Rahman survived the initial “de-Baathification” drive by the US to purge the Iraqi administration of all Baath Party officials.
Howard was fully aware of the purpose of the tasks undertaken by his representatives. He admitted in parliament last week that Flugge was sent to Iraq “because our principal concern at that time was to stop American wheatgrowers from getting our markets”.
It is little wonder that the Howard government, through its aid agency AusAID, paid Flugge almost $1 million for his eight-month stay in Iraq. The stakes were high, with nearly $US10 billion in contracts, including the wheat deals, up for renegotiation by the CPA.
AWB contracts worth about $US270 million were directly threatened by a June 2003 memorandum that went around all Iraqi ministries asking them to “identify which [food-for-oil] contracts have a kickback or surcharge (often 10 percent)”. Documents unearthed in the Iraqi ministries after the invasion had confirmed in detail the kickbacks paid to the old regime disguised as “trucking fees”, “port charges”, “after sales service fees” and “surcharges”.
The last two contracts that AWB signed before the war contained the biggest kickbacks of all, worth a total of about $US73 million: $US45.50 per metric tonne for “trucking fees” and another 10 percent “surcharge” of the whole value of the contract. In part, these contracts were designed to siphon a further $US8 million out of the UN-held funds and deliver it to Tigris Petroleum, a company linked to BHP, one of Australia’s largest transnationals, which had sent wheat shipments to Iraq in breach of UN sanctions in 1995, seeking to secure oil drilling concessions.
One exchange of correspondence about these contracts illustrates the intimate relationship between the AWB and the government. For the record, DFAT, which reports to Foreign Minister Downer, wrote to the AWB in mid-2003 asking politely for comment on the Baghdad documents showing the extent of the AWB and other bribes. AWB executive Chris Whitwell replied by asking for the department’s assistance to get the contracts honoured as a payoff for joining the “Coalition of the Willing”. He asked: “Not too much to ask for a Coalition member?”
But in September 2003, a report by the US Defence Contract Audit Agency cited evidence that “illicit surcharges/kickbacks were standard practice for oil-for-food contracts”. The report named Australia and estimated “overpricing” in one AWB contract at nearly $US15 million. The US wheat lobby then launched a letter-writing campaign to President Bush and other politicians, charging that “AWB reaped an additional $US56 million gold mine at the expense of the Iraqi people, on top of their already excessive prices”.
Nevertheless, with the help of the Howard government and its representatives in Baghdad, the AWB managed to salvage its contracts. UN World Food Program authorities inflicted a 10 percent cut of $US27 million but allowed the $US45 million worth of “trucking fees” to survive. When AWB managing director Andrew Lindberg announced in September 2003 that the million-tonne shipments were finally going ahead, he gave “great credit to the unfailing support and assistance from ministers Vaile and Downer, officials from the Department of Foreign Affairs and Trade, and international government representatives”.
The wheat, paid for by the World Food Program, was shipped to Iraq throughout the following year, while AWB executives put aside a share of the proceeds for Tigris. Thus, with the government’s “unfailing support and assistance”, AWB not only salvaged its own contracts but also recovered the cash that BHP spent in its 1995 bid to evade the UN sanctions.
This sordid episode sums up the essential character of the AWB’s dealings in Iraq. It was an operation backed at the highest levels of the Howard government to ensure that AWB and other major Australian companies profited, at the expense of the misery inflicted on the people of Iraq by two US-led wars.
Throughout the 1990s, Australian naval ships, aircraft and troops helped enforce the sanctions that caused widespread starvation in Iraq, leading to an estimated two million deaths. After 1996, once these sanctions were modified to permit profitable “oil-for-food” deals, the Howard government was among the first in line to collaborate with the Baghdad regime, via the AWB, even as it prepared to go to war against Iraq. Having joined the invasion, Howard and co did not skip a beat—their immediate concern was to secure the contracts that AWB had signed with the ousted regime.