Class action proceedings by farmer shareholders are already afoot. Read on!
-------------------------------------------------------------- Little crop of horrors 01/25/2006
When Australia sold wheat to Saddam Hussein, big money changed hands. Now an inquiry wants to know whether Australians knowingly danced with the devil. Tony Wright reports on the Cole commission.
Around 7000 years ago, the people who inhabited the land known as Mesopotamia between the Tigris and Euphrates rivers learnt the art of irrigation. They domesticated wild grains and eventually grew so much wheat they became the first in the world to export the grain. Wheat, thus, became the staff of the first civilisation. Such irony. All these centuries later, the old Mesopotamia – now known as Iraq – has become one of the world’s big wheat importers. Salinisation of the land, massive population growth, a rural rush to cities, war and corruption have turned Iraqis into supplicants for the grain that has been their daily bread since the time pottery was invented. Since 1948, the farmers of one of the world’s newest agricultural nations, Australia, have made billions of dollars from the hunger of Iraqis for bread.
Officials of the Australian Wheat Board (now AWB Ltd) learnt to speak Arabic like natives and grew wise – though perhaps not wise enough – in the ways of doing business in the streets and sly alleyways of Baghdad. The Australians built their own dockside unloading facilities at Iraq’s only port, Umm Qasr, to ensure the wheat kept flowing, trained local staff and worked closely with Iraqi millers and bakers. Less than a decade ago, Australia was supplying two-thirds of the 3 million tonnes of wheat Iraq was importing annually from the international community. When western intelligence agencies like the CIA, Britain’s MI6 and Australia’s Secret Intelligence Service wanted to know how things operated in Iraq, they listened closely when the men of the AWB were speaking.
But Iraqis are old in the ways of commerce. If they were to spend billions purchasing wheat from the new world, they were no strangers to the concept of the nod and the wink, of one hand greasing the other. Winston Churchill was one of the luminaries of the modern era to recognise how frustrating things can be to an outsider – in the early 1920s, as Britain tried vainly to subjugate and colonise the land of the Tigris and Euphrates in quest of its oil and wheat, he admitted things were never as they seemed. It was, he said, his “Mesopotamian entanglement”.
The AWB’s success in building its wheat trade with Iraq was not quite what it seemed, either. Now it is being revealed as Australia’s own 21st-century entanglement – a mess so convoluted and damaging to Australia’s reputation that the federal government has been forced to convene a royal commission of inquiry in an effort to get to the bottom of it. Saddam Hussein and his cronies managed to skim several hundred million dollars from the wheat trade with Australia before the Coalition of the Willing put them out of business in 2003. Because AWB is the nation’s monopoly trader, that means those hundreds of millions of dollars came out of the pockets of Australian wheat growers who had no choice in the matter. To add insult to injury, many wheat growers are also shareholders in AWB and have been forced to watch as the scandal has sent their shares and the credibility of their international business way south. Class actions are being threatened.
A former Judge of Appeal of the NSW Supreme Court, Terence Cole, QC, has until the end of March to disentangle the major threads of the story and to decide whether anyone did anything illegal.
The big question that the Cole commission must answer is this: who in Australia knew what was going on? Were the board and senior officials of AWB duped unwittingly or were some of them so immersed in the Iraqi way of doing things that they succumbed to the nod and the wink and the greased palm? Were they so determined to keep selling Australian wheat to Saddam’s Iraq that they were willing to dance with the devil, with whatever dance steps required?
A subsidiary question, yet unexplored, could have explosive political implications: though AWB has been corporatised since the late 1990s, how could the enormous kickbacks have occurred without the knowledge of the Australian government and at least some of its ministers? The Department of Foreign Affairs and Trade and AusAid had clear interests in Australia’s involvement in the food-for-aid program but as yet, no “smoking gun” cables have turned up.
Australia’s military partnership in the Coalition of the Willing’s attack on Saddam’s Iraq and its blighted aftermath gives these questions a context beyond even the huge monetary scale of the scandal.
How many of the bullets fired by Saddam’s troops and supporters at Australian soldiers were bought with AWB kickbacks? Prime Minister John Howard needs hardly to be reminded of the opprobrium that hung around the neck of one of his political heroes, Robert Menzies, after he approved the sale of pig-iron to the Japanese. That iron came back to Australian troops in World War II in the form of Japanese warships and fighter planes, and Menzies became known forever as “Pig-Iron Bob”.
The Cole inquiry, established by federal Attorney-General Philip Ruddock, has in its first week of hearings produced some spectacular exchanges between the counsel assisting, John Agius, and the AWB’s managing director, Andrew Lindbergh. As evidence piled up suggesting AWB was involved in a pattern of secrecy, backdoor behaviour and looking the other way, Lindbergh repeated endlessly that he couldn’t recall this or that detail of his organisation’s knowledge of, or role in, the tangled web of its dealings with the Iraqis, Agius has barely concealed his disbelief. “Are you a complete fool?” he demanded of Lindbergh at one stage late last week.
While the skewering of Lindbergh – who, as one newspaper tartly noted is paid $1.8m a year to run the company – is almost too excruciating to watch, it seems less likely the inquiry will explore at any depth the knowledge or otherwise of government ministers or public servants. The inquiry’s terms of reference do not extend beyond the behaviour of Australian companies and their employees or agents. However, commissions of inquiry have a history of taking excursions that ensnare governments in unforeseen strife, and Howard has an observer at each day’s proceedings.
Meanwhile, Lindbergh and the AWB are taking a severe battering. In particular, Lindbergh has not explained how an independent report to the AWB by auditors Arthur Anderson, which laid out serious risks in continuing to pay “inland transport fees” to the Iraqis, did not stop the payments.
Despite Lindbergh’s memory difficulties, Cole’s job has been simplified by a voluminous report of an earlier inquiry into the food-for-oil fandango. The startling facts were laid out clearly in a 623-page report last year compiled for the United Nations by Paul Volcker, a former chairman of the US Federal Reserve. Volcker’s report into how Saddam scammed the oil-for-food program mentioned thousands of international companies, but gave the AWB star billing – its contribution to Saddam’s manipulations of the oil-for-food program amounted to 14% of all international kickbacks.
Under the oil-for-food program, revenue from Iraq’s oil sales was held in trust by the UN, which paid international suppliers to deliver humanitarian goods, including wheat. The idea was to ensure Iraqis could eat and receive other critical supplies while the international community prevented Saddam from using oil cash to purchase weapons after his regime invaded Kuwait in the early 1990s. AWB was the single largest provider of humanitarian goods to Iraq under the program and participated in all phases of the program from 1997 to 2003 – selling a total of 6.8 million tonnes of wheat to Iraq and receiving a total of more than $2.3bn in payments from the UN escrow account.
But Volcker discovered that AWB was paying exorbitant amounts to a Jordanian-registered transport company to truck Australian wheat around Iraq. There were no “inland transport costs” until 1999, when Saddam’s regime suddenly began demanding such payments. They rose from about $12 a metric tonne to $56 a tonne over the next few years. On top of that emerged a “service fee” of 10% of the contract price of shipments of humanitarian aid, apparently for non-existent services. These payments were not revealed to the UN as a separate item in the accounting of the contract prices for wheat AWB provided. In fact, Iraqi Grain Board trucks were doing the transporting, just as they always had, and the money going to the Jordanian-registered company was being siphoned straight into the pockets of Saddam’s regime. Volcker found that $298m of AWB’s money had been skimmed by Saddam.
Howard last week gave a hint of his thinking about the free-ranging ways of AWB and its single-desk monopoly over Australia’s wheat sales. Asked at a press conference whether he was confident in allowing AWB to continue as the monopoly wheat exporter, Howard chose his words with the care that a man might take in tiptoeing over oyster shells. “Well, that is something that should be looked at. The question of having a single desk is something that in a way is unrelated to the position of AWB Ltd.
“Up until now, the government has had a policy of having a single desk for exports, that’s a policy that can always be reviewed and there are a range of views within the Australian community. If we were to change that policy, then we would need to take account of matters of policy and impact on the industry, separate and apart from the matters that are being dealt with before the royal commission.”
There are days when Howard must wish he had never heard the word Iraq.
