AWB considers life with a criminal recordMichael PascoeWhat...

AWB considers life with a criminal record

Michael Pascoe

What would happen to AWB if it should eventually be charged with and convicted of a criminal offence?



Date: 28 April 2006

The phrase “the late mail” is being redefined as the Cole inquiry keeps unearthing DFAT cables spelling out the dodgy nature of Iraq oil-for-food contracts. The tardiness of yesterday's addition to the bulging file – and most blatant warning yet – seems particularly fortunate for Lord Downer by the looks of David Marr's report:
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The three ministers escaped questions on its contents when they appeared before the inquiry two weeks ago, but each has given supplementary statements in the past few days claiming not to have read – or not to have recalled reading – the cable. In Mr Downer's case this was despite his then adviser Michael Smith opening the cable and emailing it to the minister's office. Mr Downer said: "Having regard to this information, it may be that a hard copy of the cable was printed and distributed to me." But he said he was unaware of the "issues raised".

Somehow I already knew that. Maybe DFAT has started using the same courier company Rio employs to renew mining leases.

Less predictable is the answer to a question raised by a New Yorker forensic accounting student keeping an eye on the Cole inquiry from afar /about what happens if AWB Ltd is indicted and convicted of criminal activity – a very real possibility.

“In the States, a criminal indictment of a corporation or business is the kiss of death (a la Arthur Andersen),” writes the Harvard MBA who's doing a bit of post-grad swotting. “What would the ASX do? Or whomever you have as an SEC? You do have securities law there don't you? Any chance that the UN and/or new Iraqi state could/should/might sue the AWB for recovery of all payments?” Cha-ching.

It is of course purely in the speculative realm of what might happen to AWB if it should eventually be charged with and convicted of a criminal offence, but yet another layer of legal pain would fall on the shareholders presently hanging tough, perhaps threatening the very existence of the company.

The actual penalties under the 1999 bribery and skulduggery act aren't much for a big company – just a miserable $65,000 fine. However, if a court looks at every shipment as an individual act and multiplies that by $65K, it begins to add up. Cha-ching, cha-ching.

But that of itself still wouldn't be the main problem. It turns out that the ASX doesn't have any listing rule about corporations being criminals – hey, one man's criminal is another's entrepreneurial hero – so there would be no automatic suspension or penalty.

However, there are listing rules about disclosure and an ASX with gonads could treat a criminally convicted company very harshly on that score, unless it was more interested in just collecting listing fees. In theory, a company committing crimes has a duty to disclose that to the ASX if it is material. Already waiting for AWB is a little disclosure about what it didn't tell the market around the time it claimed it was warning Lord Downer it was heading for trouble.

And what follows from a non-disclosure problem is the inevitable class-action by investors who trusted the company. Cha-ching, cha-ching, cha-ching.

It's worth remembering that HIH, for example, lost its ASX listing over non-disclosure, not for lying, cheating and ruining countless lives. If AWB is suspended, the cha-chings would just keep coming.

Then there's a matter of Federal Government contracts. Canberra won't do business with building companies that don't play by its IR rules, so how could the government possibly continue to grant wheat export monopoly powers to a criminal company? With John Howard already condemning AWB as a bunch of lairs, I don't like the chances. Exit half of AWB's reason for being.

What's left? Enough to pay more executives for “resigning” and the legal bills through all the mess? AWB's lawyers will hope so.

http://www.crikey.com.au/articles/2006/04/28-1409-6373.html