AWB Oil-for-Wheat Scandal
Encyclopedia
The AWB Oil-for-Wheat Scandal (also known just as the AWB Scandal) refers to the payment of kickbacks to the regime of Saddam Hussein in contravention of the United Nations Oil-for-Food Humanitarian Program. AWB Limited
is a major grain marketing organisation based in Australia
. For much of the twentieth and early 21st century, it was an Australian Government entity operating a single desk regime over Australian wheat, meaning it alone could export Australian wheat, which it paid a single price for. In the mid-2000s, it was found to have been, through middlemen, paying kickbacks to the regime of Saddam Hussein
, in exchange for lucrative wheat contracts. This was in direct contradiction of United Nations Sanctions, and of Australian law.
As a result of these bribes, AWB was able to secure 90% of the Iraqi wheat market, before being discovered in 2005. United Nations
investigator Paul Volcker
found that the Australian Wheat Board, and later AWB Limited, were not the only, but certainly the largest source of kickbacks to the Iraqi regime. The Australian Government also launched a Royal Commission, which recommended that criminal proceedings commence against 12 people.
Ultimately, criminal charges were dropped by the Australian Federal Police
. Several Australian civil cases were however successful.
Since the payments were discovered, AWB Limited has undergone a major restructuring, losing its monopoly supply of Australia wheat exports, and appointing an entirely new management. However, its profitability continues to suffer.
Although AWB and by extension the Australian Government were not the only entities to be implicated in the Oil-for-Food scandal, the event earned a place in Australian political consciousness.
The Australian Wheat Board was a statutory authority established in 1939. AWB Limited was the company that resulted from its privatisation in 1999. The kick-backs scandal engulfed both bodies.
The Australian Wheat Board and AWB Limited enjoyed a monopoly over the sale of Australian wheat exports. It achieved this through the use of a monopsony
(single buyer) regime within Australia, where wheat growers were only able to sell on their wheat to a single desk. This was intended to prevent farmers under-cutting each other on price, and thus assure the highest price for Australian wheat.
The AWB had sold wheat to Iraq since 1948, and was the single largest supplier of humanitarian goods to the nation during the Oil-for-Food Program.
Following the Iraqi invasion of Kuwait in 1990, the United Nations had imposed a financial and trade embargo on Iraq
. It was intended to weaken the Iraqi economy so that Saddam could not build up weapons for further wars. UN Security Council Resolution 661 prevented all states and their nationals form making funds available to Iraq. These sanctions were widely effective, leading to food shortages and international condemnation as the humanitarian crisis became clear.
In response to this, the Oil-for-Food program was begun. It allowed Iraq to sell oil to the rest of the world, provided the returns from this were kept in a UN bank account. This money could then be used by the regime, with UN oversight, to purchase a strict list of humanitarian supplies.
The Oil-for-Food Program however in itself faced criticism, with many alleging that it was too expensive to administer and liable to abuse. The program was discontinued on the lead-up to the invasion of Iraq.
However, transportation services were in fact provided by employees of the Iraqi Government, who also negotiated with the humanitarian supplier the size of the commission.
Prior to 1999, AWB had only been responsible for shipping wheat up to the port of entry in Iraq. However, in July 1999 it entered into this new contract with the Iraqi Government that had AWB assume responsibility, through Alia, of transporting wheat to points throughout Iraq. AWB told the UN Investigation that this was suggested by the Iraqi Government. Given that inland transportation was in fact provided by government employees, this was described in the UN report as "tantamount to payments to the Government of Iraq for...the provision of inland transportation services". AWB did not disclose to the UN its arrangements with the Iraqi government, instead saying it paid discharge costs to unnamed 'maritime agents' of up to $12 per metric tonne (pmt).
The initial cost of these transportation contracts in 1999 was $10 to $12 pmt. These rates rose by up to 50% the following year, then increased from 2001 until the just before the invasion to between $45 and $56 pmt. These increases were offered with no explanation, and were far beyond what could be considered a reasonable transportation fee in Iraq. When the UN Inquiry interviewed the former Iraqi Minister of Trade, he said that these fees were then added onto the original contract through after-sales service fees, making them revenue-neutral for AWB. Only a small part of the fees remained in the hands of the drivers and Alia, the majority being funnelled back to the Iraqi Government. Given these fees were added on top of the price of the wheat, this arrangement than had the effect of moving the proceeds from oil revenues from being used in humanitarian consumption to being placed in the form of currency in the hands of members of the Iraqi government. David Marr and Marion Wilkonson, both journalists with the Sydney Morning Herald, wrote that the "beauty of the rort from AWB's point of view was that Australia's wheat farmers didn't pay a cent. The money was all coming out of the UN's escrow account".
The UN investigation concluded that AWB paid over $221.7 million in 'inland transportation costs'. This totalled more than 14% of the illicit funds the Iraqi Government procured through kickback schemes over this time.
was far less charitable.
AWB told the UN investigation that it believed the fees it was paying to Alia were genuine transportation fees, and was not aware of its ownership and operations being so tied to the Iraqi Government, nor of the fact that it was paying kickbacks to the regime. It also produced correspondence between itself and the Australian Department of Foreign Affairs and Trade
in which the Department advised it could see "no reason from an international legal perspective" that AWB could not enter into a commercial agreement with a Jordanian-based company.
Alia's owner told the UN inquiry that he believed AWB knew his company did not actually provide transportation services, but he had not spoken to AWB about the matter. Alia's General Manager, Othman al-Absi, said that AWB had been very interested in the capacity of Alia to transport wheat, and had asked the Jordanian Government whether Alia was a genuine trucking company. He later told the Cole Inquiry, "I do not recollect ever being asked by anyone from AWB about who owned or controlled Alia, or whether it had connections with the Ministry of Transport. However, Alia's ownership was public knowledge and was not hidden." Both him and Alia's owner agree that they never disclosed Alia's part-ownership by the Iraqi Government to AWB. The Enquiry concluded that it could not for certain say that AWB was aware of the arrangement it had entered into with the Iraqi Government, however, much circumstantial evidence (suggestion of Alia by the Iraqi Government, sharp rise in its prices, knowledge that prices were determined by the Iraqi Government, lack of logistics detail offered by Alia, curious wording in faxes received by AWB) meant it had cause to be suspicious. AWB representatives admitted in a meeting with the UN investigators that it was 'debatable' whether senior management should have known of the kickbacks.
The Cole Inquiry delved in much greater detail into the breaches by AWB. Mark Emons, the manager of AWB's Middle East operations, told the inquiry that he, and Dominic Hogan from AWB's Cairo office, at the very first meeting at which the prospect of certain arrangements were broached in 1999 "knew what Iraq was asking was outside the sanctions". Furthermore, it found that AWB attempted to hide and distance itself from the payments to Alia, using counter-parties and intermediaries to get the money to Alia, who in turn passed it onto the regime. The final report states that there was "no sensible basis for making these payments...at a cost to AWB, except to disguise AWB's making of payments to Alia".
Under Australian legislation, all shipments to Iraq were banned unless the Foreign Minister (at the time, the Alexander Downer
) was "satisfied that permitting the exportation will not infringe the international obligations of Australia". The UN Enquiry did not comment on whether the Australian Government should have known about the actions of the AWB. Through the Department of Foreign Affairs and Trade, the Government knew that AWB had entered into an arrangement with Alia. The Cole Inquiry found in "secret evidence" that the ownership of Alia was known since 1998 in the departments of Foreign Affairs, Defence and Prime Minister and Cabinet, as indicated by an intelligence report from a "foreign agency".
In 2004, Iraqi daily Al Mada published a list of 270 persons and entities who were given oil vouchers for helping Saddam Hussein. The report alleged clear violation of the agreements of the Oil-for-Food program established fourteen years earlier and ending the year before.
In response to this, the UN launched an independent inquiry into the program, headed by former U.S. Federal Reserve Chairman Paul Volcker
. Its terms of enquiry were to "collect and examine information relating to the administration and management of the Oil-for-Food Program...including entities that have entered into contracts with the United Nations or with Iraq under the Programme."
The final report was released on the 27th of October, 2005. It accused almost half of the companies operating in Iraq during the time of the Oil-for-Food program to have paid either kickbacks or illegal surcharges to secure Iraqi business. In special reference to AWB, it stated that "little doubt remains that AWB made large numbers of payments to Alia, and these payments in turn were channelled to the Iraqi regime."
In response to the UN Report, the Government sanctioned a royal-commission into the allegations, headed by Honourable Terence Cole
QC
, a former Judge of Appeal of the New South Wales Supreme Court. The Commission called to the stand many prominent members of the Government, including the then Prime Minister of Australia
John Howard
, the first Australian Prime Minister to face a judicial inquiry in more than twenty years. The Cole Inquiry
into the company's role in the scandal was completed and tabled by Attorney-General
Philip Ruddock
on 27 November 2006. The inquiry found that, at the insistence of the Iraq government of dictator Saddam Hussein, the AWB agreed to pay 'transportation fees' of around A$
290 million. Cole's findings agreed with the UN Report in finding this money was paid, often indirectly, to a Jordanian transportation company, Alia, who a small percentage of the fees, and paid the remainder onto Saddam's government. This breached the sanctions placed on the Iraqi regime. The Cole Inquiry concluded that from mid-1999, AWB had knowingly entered into an arrangement that involved paying kickbacks to the Iraqi government, in order to retain its business. It cleared Government bureaucrats and ministers from wrongdoing, however, it recommended criminal prosecutions be begun against former AWB executives.
The kickbacks also breached the OECD Anti-Bribery Convention
.
, Victoria Police
, and the Australian Securities and Investment Commission".
The UN Report recommended a structuring of the way the UN administers many programs.
On 11 July 2006, North American farmers claimed $1 billion in damages from AWB at Washington DC, alleging the Australian wheat exporter used bribery and other corrupt activities to corner grain markets. The growers claimed that AWB used the same techniques to secure grain sales in other markets in Asia and other countries in the Middle East. The lawsuit was dismissed in March 2007.
In August 2009, the Australian Federal Police dropped their investigation into any criminal actions undertaken by AWB and others in this matter. This decision came after Paul Hastings QC declared the prospect of convictions was limited and "not in the public interest".
A civil case was bought by shareholders of AWB, and was settled out of court for $39.5 million in February 2010.
The Australian Securities and Investments Commission
proceeded with several civil cases against six former directors and officers of AWB. Two have been against Andrew Lindberg, AWB's former head. Both are is still in progress.
in Iraq, where it had helped depose the government of Saddam Hussein
. The scandal caused significant concern. The Australian Government attempted to distance itself from the AWB, who from 1999 had been restructured into a private company.
The AWB share-price continues to suffer.
journalist Caroline Overington
.
AWB Limited
AWB Limited is a major grain marketing organisation based in Australia. It was a government body known as the Australian Wheat Board until 1 July 1999, when the AWB was transformed into a private company, owned by wheat growers...
is a major grain marketing organisation based in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
. For much of the twentieth and early 21st century, it was an Australian Government entity operating a single desk regime over Australian wheat, meaning it alone could export Australian wheat, which it paid a single price for. In the mid-2000s, it was found to have been, through middlemen, paying kickbacks to the regime of Saddam Hussein
Saddam Hussein
Saddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...
, in exchange for lucrative wheat contracts. This was in direct contradiction of United Nations Sanctions, and of Australian law.
As a result of these bribes, AWB was able to secure 90% of the Iraqi wheat market, before being discovered in 2005. United Nations
United Nations
The United Nations is an international organization whose stated aims are facilitating cooperation in international law, international security, economic development, social progress, human rights, and achievement of world peace...
investigator Paul Volcker
Paul Volcker
Paul Adolph Volcker, Jr. is an American economist. He was the Chairman of the Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States in the 1970s and...
found that the Australian Wheat Board, and later AWB Limited, were not the only, but certainly the largest source of kickbacks to the Iraqi regime. The Australian Government also launched a Royal Commission, which recommended that criminal proceedings commence against 12 people.
Ultimately, criminal charges were dropped by the Australian Federal Police
Australian Federal Police
The Australian Federal Police is the federal police agency of the Commonwealth of Australia. Although the AFP was created by the amalgamation in 1979 of three Commonwealth law enforcement agencies, it traces its history from Commonwealth law enforcement agencies dating back to the federation of...
. Several Australian civil cases were however successful.
Since the payments were discovered, AWB Limited has undergone a major restructuring, losing its monopoly supply of Australia wheat exports, and appointing an entirely new management. However, its profitability continues to suffer.
Although AWB and by extension the Australian Government were not the only entities to be implicated in the Oil-for-Food scandal, the event earned a place in Australian political consciousness.
AWB Limited
- For main article see AWB LimitedAWB LimitedAWB Limited is a major grain marketing organisation based in Australia. It was a government body known as the Australian Wheat Board until 1 July 1999, when the AWB was transformed into a private company, owned by wheat growers...
The Australian Wheat Board was a statutory authority established in 1939. AWB Limited was the company that resulted from its privatisation in 1999. The kick-backs scandal engulfed both bodies.
The Australian Wheat Board and AWB Limited enjoyed a monopoly over the sale of Australian wheat exports. It achieved this through the use of a monopsony
Monopsony
In economics, a monopsony is a market form in which only one buyer faces many sellers. It is an example of imperfect competition, similar to a monopoly, in which only one seller faces many buyers...
(single buyer) regime within Australia, where wheat growers were only able to sell on their wheat to a single desk. This was intended to prevent farmers under-cutting each other on price, and thus assure the highest price for Australian wheat.
The AWB had sold wheat to Iraq since 1948, and was the single largest supplier of humanitarian goods to the nation during the Oil-for-Food Program.
Oil-for-Food Program
- For main article see Oil-for-Food Program
Following the Iraqi invasion of Kuwait in 1990, the United Nations had imposed a financial and trade embargo on Iraq
Iraq sanctions
The Iraq sanctions were a near-total financial and trade embargo imposed by the United Nations Security Council on the nation of Iraq. They began August 6, 1990, four days after Iraq's invasion of Kuwait, stayed largely in force until May 2003 , and certain portions including reparations to Kuwait...
. It was intended to weaken the Iraqi economy so that Saddam could not build up weapons for further wars. UN Security Council Resolution 661 prevented all states and their nationals form making funds available to Iraq. These sanctions were widely effective, leading to food shortages and international condemnation as the humanitarian crisis became clear.
In response to this, the Oil-for-Food program was begun. It allowed Iraq to sell oil to the rest of the world, provided the returns from this were kept in a UN bank account. This money could then be used by the regime, with UN oversight, to purchase a strict list of humanitarian supplies.
The Oil-for-Food Program however in itself faced criticism, with many alleging that it was too expensive to administer and liable to abuse. The program was discontinued on the lead-up to the invasion of Iraq.
Transportation Schemes
Alia was established in 1994 as a Jordanian-registered transportation company, intended to refurbish Iraqi vessels stranded off the coast of Jordan for commercial use. 51% ownership was held by a Jordanian national, who held them on behalf of a close Iraqi associate, and the remaining two shares were held by assigned Iraqi Ministry of Transportation employees. In 1999, it was arranged by the Ministry of Transportation for Alia to commence inland transportation of goods arriving at the Umm Qasr, Iraq's only port. Alia was to receive a commission on the cost of these goods, paid for initially by the company bringing goods into Iraq, and then tacked onto the total bill of the Iraqi Government. They advertised this new arrangement through their usual tender process. Under the sanctions regime, third parties were prohibited from engaging with the Government of Iraq unless they had Security Council approval. By having the party exporting goods (i.e. the humanitarian supplier) be the one to pay Alia, the Iraqi Government was able to disguise this.However, transportation services were in fact provided by employees of the Iraqi Government, who also negotiated with the humanitarian supplier the size of the commission.
Prior to 1999, AWB had only been responsible for shipping wheat up to the port of entry in Iraq. However, in July 1999 it entered into this new contract with the Iraqi Government that had AWB assume responsibility, through Alia, of transporting wheat to points throughout Iraq. AWB told the UN Investigation that this was suggested by the Iraqi Government. Given that inland transportation was in fact provided by government employees, this was described in the UN report as "tantamount to payments to the Government of Iraq for...the provision of inland transportation services". AWB did not disclose to the UN its arrangements with the Iraqi government, instead saying it paid discharge costs to unnamed 'maritime agents' of up to $12 per metric tonne (pmt).
The initial cost of these transportation contracts in 1999 was $10 to $12 pmt. These rates rose by up to 50% the following year, then increased from 2001 until the just before the invasion to between $45 and $56 pmt. These increases were offered with no explanation, and were far beyond what could be considered a reasonable transportation fee in Iraq. When the UN Inquiry interviewed the former Iraqi Minister of Trade, he said that these fees were then added onto the original contract through after-sales service fees, making them revenue-neutral for AWB. Only a small part of the fees remained in the hands of the drivers and Alia, the majority being funnelled back to the Iraqi Government. Given these fees were added on top of the price of the wheat, this arrangement than had the effect of moving the proceeds from oil revenues from being used in humanitarian consumption to being placed in the form of currency in the hands of members of the Iraqi government. David Marr and Marion Wilkonson, both journalists with the Sydney Morning Herald, wrote that the "beauty of the rort from AWB's point of view was that Australia's wheat farmers didn't pay a cent. The money was all coming out of the UN's escrow account".
The UN investigation concluded that AWB paid over $221.7 million in 'inland transportation costs'. This totalled more than 14% of the illicit funds the Iraqi Government procured through kickback schemes over this time.
Level of knowledge
The initial UN investigation was only partly interested in AWB, and was unable to decisively conclude whether it knew that it was breaching sanctions. The later Australian Cole InquiryCole Inquiry
The Cole Inquiry, formally the Inquiry into certain Australian companies in relation to the UN Oil-For-Food Programme was a Royal Commission set up by the Government of Australia in November 2005...
was far less charitable.
AWB told the UN investigation that it believed the fees it was paying to Alia were genuine transportation fees, and was not aware of its ownership and operations being so tied to the Iraqi Government, nor of the fact that it was paying kickbacks to the regime. It also produced correspondence between itself and the Australian Department of Foreign Affairs and Trade
Department of Foreign Affairs and Trade (Australia)
The Department of Foreign Affairs and Trade is a department of the government of Australia charged with advancing the interests of Australia and its citizens internationally...
in which the Department advised it could see "no reason from an international legal perspective" that AWB could not enter into a commercial agreement with a Jordanian-based company.
Alia's owner told the UN inquiry that he believed AWB knew his company did not actually provide transportation services, but he had not spoken to AWB about the matter. Alia's General Manager, Othman al-Absi, said that AWB had been very interested in the capacity of Alia to transport wheat, and had asked the Jordanian Government whether Alia was a genuine trucking company. He later told the Cole Inquiry, "I do not recollect ever being asked by anyone from AWB about who owned or controlled Alia, or whether it had connections with the Ministry of Transport. However, Alia's ownership was public knowledge and was not hidden." Both him and Alia's owner agree that they never disclosed Alia's part-ownership by the Iraqi Government to AWB. The Enquiry concluded that it could not for certain say that AWB was aware of the arrangement it had entered into with the Iraqi Government, however, much circumstantial evidence (suggestion of Alia by the Iraqi Government, sharp rise in its prices, knowledge that prices were determined by the Iraqi Government, lack of logistics detail offered by Alia, curious wording in faxes received by AWB) meant it had cause to be suspicious. AWB representatives admitted in a meeting with the UN investigators that it was 'debatable' whether senior management should have known of the kickbacks.
The Cole Inquiry delved in much greater detail into the breaches by AWB. Mark Emons, the manager of AWB's Middle East operations, told the inquiry that he, and Dominic Hogan from AWB's Cairo office, at the very first meeting at which the prospect of certain arrangements were broached in 1999 "knew what Iraq was asking was outside the sanctions". Furthermore, it found that AWB attempted to hide and distance itself from the payments to Alia, using counter-parties and intermediaries to get the money to Alia, who in turn passed it onto the regime. The final report states that there was "no sensible basis for making these payments...at a cost to AWB, except to disguise AWB's making of payments to Alia".
Under Australian legislation, all shipments to Iraq were banned unless the Foreign Minister (at the time, the Alexander Downer
Alexander Downer
Alexander John Gosse Downer is a former Australian Liberal Party politician who was Foreign Minister of Australia from March 1996 to December 2007, the longest-serving in Australian history...
) was "satisfied that permitting the exportation will not infringe the international obligations of Australia". The UN Enquiry did not comment on whether the Australian Government should have known about the actions of the AWB. Through the Department of Foreign Affairs and Trade, the Government knew that AWB had entered into an arrangement with Alia. The Cole Inquiry found in "secret evidence" that the ownership of Alia was known since 1998 in the departments of Foreign Affairs, Defence and Prime Minister and Cabinet, as indicated by an intelligence report from a "foreign agency".
Discovery of Breaches of UN and Australian Law
The invasion took place on March 20. By May 1, the government of Saddam Hussein was defeated, although resistance and insurgency against the military occupation still continued.In 2004, Iraqi daily Al Mada published a list of 270 persons and entities who were given oil vouchers for helping Saddam Hussein. The report alleged clear violation of the agreements of the Oil-for-Food program established fourteen years earlier and ending the year before.
Paul Volcker
Paul Adolph Volcker, Jr. is an American economist. He was the Chairman of the Federal Reserve under United States Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States in the 1970s and...
. Its terms of enquiry were to "collect and examine information relating to the administration and management of the Oil-for-Food Program...including entities that have entered into contracts with the United Nations or with Iraq under the Programme."
The final report was released on the 27th of October, 2005. It accused almost half of the companies operating in Iraq during the time of the Oil-for-Food program to have paid either kickbacks or illegal surcharges to secure Iraqi business. In special reference to AWB, it stated that "little doubt remains that AWB made large numbers of payments to Alia, and these payments in turn were channelled to the Iraqi regime."
In response to the UN Report, the Government sanctioned a royal-commission into the allegations, headed by Honourable Terence Cole
Terence Cole
Terence Rhoderick Hudson Cole, AO, RFD, QC , is an Australian jurist, known best for presiding over two Royal Commissions. Cole was born in Longreach, Queensland, and was educated at Fort Street High School in Sydney and the University of Sydney. He was admitted to the bar in 1962, and appointed a...
QC
Queen's Counsel
Queen's Counsel , known as King's Counsel during the reign of a male sovereign, are lawyers appointed by letters patent to be one of Her [or His] Majesty's Counsel learned in the law...
, a former Judge of Appeal of the New South Wales Supreme Court. The Commission called to the stand many prominent members of the Government, including the then Prime Minister of Australia
Prime Minister of Australia
The Prime Minister of the Commonwealth of Australia is the highest minister of the Crown, leader of the Cabinet and Head of Her Majesty's Australian Government, holding office on commission from the Governor-General of Australia. The office of Prime Minister is, in practice, the most powerful...
John Howard
John Howard
John Winston Howard AC, SSI, was the 25th Prime Minister of Australia, from 11 March 1996 to 3 December 2007. He was the second-longest serving Australian Prime Minister after Sir Robert Menzies....
, the first Australian Prime Minister to face a judicial inquiry in more than twenty years. The Cole Inquiry
Cole Inquiry
The Cole Inquiry, formally the Inquiry into certain Australian companies in relation to the UN Oil-For-Food Programme was a Royal Commission set up by the Government of Australia in November 2005...
into the company's role in the scandal was completed and tabled by Attorney-General
Attorney-General of Australia
The Attorney-General of Australia is the first law officer of the Crown, chief law officer of the Commonwealth of Australia and a minister of the Crown. The Attorney-General is usually a member of the Federal Cabinet, but there is no constitutional requirement that this be the case since the...
Philip Ruddock
Philip Ruddock
Philip Maxwell Ruddock is an Australian politician who is currently a member of the House of Representatives representing the Division of Berowra, New South Wales, for the Liberal Party of Australia...
on 27 November 2006. The inquiry found that, at the insistence of the Iraq government of dictator Saddam Hussein, the AWB agreed to pay 'transportation fees' of around A$
Australian dollar
The Australian dollar is the currency of the Commonwealth of Australia, including Christmas Island, Cocos Islands, and Norfolk Island, as well as the independent Pacific Island states of Kiribati, Nauru and Tuvalu...
290 million. Cole's findings agreed with the UN Report in finding this money was paid, often indirectly, to a Jordanian transportation company, Alia, who a small percentage of the fees, and paid the remainder onto Saddam's government. This breached the sanctions placed on the Iraqi regime. The Cole Inquiry concluded that from mid-1999, AWB had knowingly entered into an arrangement that involved paying kickbacks to the Iraqi government, in order to retain its business. It cleared Government bureaucrats and ministers from wrongdoing, however, it recommended criminal prosecutions be begun against former AWB executives.
The kickbacks also breached the OECD Anti-Bribery Convention
OECD Anti-Bribery Convention
The OECD Anti-Bribery Convention is a convention of the OECD aimed at reducing corruption in developing countries by encouraging sanctions against bribery in international business transactions carried out by companies based in the Convention member countries...
.
Recommendations
The Cole Inquiry recommended that 12 people be investigated for possible criminal and corporations offences over the scandal. It wanted this to occur through a "joint task force comprising the Australian Federal PoliceAustralian Federal Police
The Australian Federal Police is the federal police agency of the Commonwealth of Australia. Although the AFP was created by the amalgamation in 1979 of three Commonwealth law enforcement agencies, it traces its history from Commonwealth law enforcement agencies dating back to the federation of...
, Victoria Police
Victoria Police
Victoria Police is the primary law enforcement agency of Victoria, Australia. , the Victoria Police has over 12,190 sworn members, along with over 400 recruits, reservists and Protective Service Officers, and over 2,900 civilian staff across 393 police stations.-Early history:The Victoria Police...
, and the Australian Securities and Investment Commission".
The UN Report recommended a structuring of the way the UN administers many programs.
Litigation
The scandal resulted in international condemnation and litigation. Although the United States successfully pursued criminal charges against several citizens and others in its borders, the Australian criminal investigation into AWB was eventually dropped. Civil charges have however been successful.On 11 July 2006, North American farmers claimed $1 billion in damages from AWB at Washington DC, alleging the Australian wheat exporter used bribery and other corrupt activities to corner grain markets. The growers claimed that AWB used the same techniques to secure grain sales in other markets in Asia and other countries in the Middle East. The lawsuit was dismissed in March 2007.
In August 2009, the Australian Federal Police dropped their investigation into any criminal actions undertaken by AWB and others in this matter. This decision came after Paul Hastings QC declared the prospect of convictions was limited and "not in the public interest".
A civil case was bought by shareholders of AWB, and was settled out of court for $39.5 million in February 2010.
The Australian Securities and Investments Commission
Australian Securities and Investments Commission
The Australian Securities & Investments Commission is an independent Australian government body that acts as Australia's corporate regulator...
proceeded with several civil cases against six former directors and officers of AWB. Two have been against Andrew Lindberg, AWB's former head. Both are is still in progress.
Effect on Foreign Relations
When the scandal was uncovered, Australia was part of the Coalition of the WillingCoalition of the willing
The term coalition of the willing is a post-1990 political phrase used to collectively describe participants in military or military-humanitarian interventions for which the United Nations Security Council cannot agree to mount a full UN peacekeeping operation...
in Iraq, where it had helped depose the government of Saddam Hussein
Saddam Hussein
Saddam Hussein Abd al-Majid al-Tikriti was the fifth President of Iraq, serving in this capacity from 16 July 1979 until 9 April 2003...
. The scandal caused significant concern. The Australian Government attempted to distance itself from the AWB, who from 1999 had been restructured into a private company.
AWB Today
The crisis bought about a significant loss of support for the AWB's monopoly power over the sale of Australian wheat. As early as February 2006, the Government expressed displeasure with its monopoly, saying it could be used as a bargaining chip in international trade negotiations.The AWB share-price continues to suffer.
Significance in Australian Political Landscape
Two books have so far been published on the scandal. The first was by Stephen Bartos, entitled Against the grain : the AWB scandal and why it happened. The second was Kickback: Inside the Australian Wheat Board Scandal by The AustralianThe Australian
The Australian is a broadsheet newspaper published in Australia from Monday to Saturday each week since 14 July 1964. The editor in chief is Chris Mitchell, the editor is Clive Mathieson and the 'editor-at-large' is Paul Kelly....
journalist Caroline Overington
Caroline Overington
Caroline Overington is an Australian journalist and author.Born in May 1970, Overington grew up in Melton, Victoria where she attended Melton South Primary School and Melton High School. Post secondary school she began her journalism cadetship with The Age Suburban Newspapers. She later took up a...
.