government was warned - did not act!

The Australian government failed to investigate a warning from Canada five years ago that wheat exporter AWB was paying kickbacks to Iraqi dictator Saddam Hussein's government, an inquiry has been told.

The commission of inquiry investigating AWB's $300 million in illicit payments to the regime has also heard AWB and the Iraqi government covered up the affair and kept the payments secret from the Department of Foreign Affairs and Trade (DFAT) and the United Nations.

But DFAT accepted, without further action, an assurance from AWB that there was nothing irregular in its deals with Iraq under the UN oil-for-food program.

In January 2000, a UN customs expert warned Australia's UN mission in New York that the Iraqi government was demanding around $US700,000 ($A930,230) from the Canadian Wheat Board to cover suspect trucking fees in Iraq, and that AWB was already paying such fees.

Documents tendered to the inquiry on Friday show Australia's Austrade commissioner Alistair Nicholas asked AWB managers about contract documents which indicated the wheat exporter might have a separate arrangement in place with Iraq that could be outside UN processes.

"Alistair mentioned that someone at the UN was asking him quietly/informally about payments AWB was making to Iraq for discharge/trucking," AWB executive Tim Snowball said in a March 2000 email to AWB Middle East section chief Mark Emons.

"Alistair suggested to us that the request for information on the above contract clause was linked to this discharge/trucking payment issue.

"We played down the issue and said we would look at the UN request."

Mr Snowball said AWB wanted Mr Nicholas to steer clear of the matter.

"We do not want Alistair sticking his nose into our Iraq business and causing us problems," Mr Snowball wrote.

"If this was a big issue he should have picked up the phone straight after his visit to the UN to tell me rather than waste our chairman's time in Washington!"

Bronte Moules, from Australia's permanent UN mission, sent the UN's request for information on the contract clause to DFAT, but the department never took any further action.

Mr Snowball wrote back to Ms Moules on April 3, 2000, saying there was nothing to worry about and the contract simply contained "permanent clauses covering demurrage/despatch".

"Both parties have elected to maintain said agreement until there is a change in trading circumstances whence an update will take place," Mr Snowball wrote.

Mr Emons, a whistleblower who has exposed AWB's system of kickbacks at the inquiry and implicated its most senior staff, then sent a fax to Iraq's Grain Board urging a cover-up.

"We are very concerned to learn from the UN that the Canadian government has taken action within the UN," he wrote.

Mr Emons asked that "no information of a confidential nature" be released.

Iraq's Grain Board replied saying "the necessary actions already have been taken regarding the matter".

The inquiry continues.

Dave R.