Australian Wheat Board admits Saddam payments

FACING FLAK: Former AWB chairman Trevor Flugge.

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The Australian Wheat Board (AWB) has admitted for the first time that it knew it was providing hard currency to Saddam Hussein's regime via so-called "transport fees", the Federal Court heard this morning.

In his opening address on behalf of a shareholder class action against AWB, John Sheahan, SC, said he read the admission "with some surprise" when he received AWB's outline of submissions on Monday.

It contradicted AWB's "traditional position" in its public statements that it had been duped when it made the payments, Mr Sheahan said.

It was also in contrast to the company's denial of any liability to the aggrieved shareholders in the formal defence to the class action it filed with the court in November, he said.

AWB continues to deny the two central allegations made by the shareholders: that it breached its obligations of continuous disclosure to the stockmarket; and that it engaged in misleading conduct in contravention of the Trade Practices Act.

The shareholders claim that AWB caused them loss by concealing that it was sending money to the Iraqi government in breach of the United Nations Oil-for-Food program and Australian export rules.

The payments were investigated by a UN inquiry headed by Paul Volcker in 2005 and an Australian inquiry headed by Terence Cole, QC, in 2006.

AWB's outline of submissions says it admits it paid fees to a Jordanian trucking company, called Alia, and "that it knew the fees were to be remitted by Alia to the Iraqi State Company for Water Transport".

The outline continues: "However, it disputes the [shareholders]' allegations: that payment of the fees was contrary to the UN sanctions; that AWB knew, believed or was aware of this; that the UN and [Australia's Department of Foreign Affairs and Trade] did not know AWB was paying the fees and could not and/or would not have permitted it if they did know; and that any of this comprised material information which AWB was obliged to disclose to the Australian Stock Exchange or was the subject of any misleading or deceptive conduct by AWB."

"That admission would seem to involve an admission that AWB's traditional position was always false," Mr Sheahan said this morning.

"And, in particular, it seems to involve an admission that its response to the Volcker report was a series of falsehoods," he said.

He referred to AWB's stock exchange announcement when Mr Volcker's report was released in October 2005 which said: "AWB has consistently maintained its position that it did not know, and could not know, what Alia did with the money AWB paid to it by way of transport fees."

Justice Lindsay Foster said it was possible that "those in control now may have come to this realisation recently".

"That's true, so in describing it as false I was not saying necessarily that they were knowingly false when made but they were false," Mr Sheahan replied.

He said the admission reduced the issues in dispute in the class action, but "there's still a large issue apparently about the extent to which that knowledge was disseminated within the organisation".

Mr Sheahan's opening address continues this afternoon.

AWB's barrister, Charles Scerri, QC, is expected to begin his opening address on Monday.

- © Fairfax NZ News