By Leonie Wood
AWB senior managers knew that inland transport fees levied by the Iraqi Grains Board between 1999 and 2003 had nothing to do with trucking wheat inside Iraq, that they were contrary to UN sanctions, and that by paying the fees the wheat exporter was ''simply paying a bribe'', a court has heard.
Lawyers for the Australian Securities and Investments Commission told the Victorian Supreme Court yesterday that AWB's managers also knew that Alia, a Jordanian company nominated by the Iraqis to truck the wheat from port to silos, was merely a front company commissioned to deposit the sums in bank accounts.
''Their [Alia's] job was to convey cash into nominated accounts, not to distribute anything at all,'' ASIC counsel Norman O'Bryan, QC, told the court.
He showed the court documents, written in Arabic, which indicated Iraq's State Company for Water Transport in 1999 contracted Alia to deposit all trucking fees received from companies, including AWB, into its bank account in Amman within five days of receipt. If Alia failed to deposit the sum within that time, it risked losing its 1 per cent commission.
The court has heard the trucking fees, or kickbacks, amounted to hundreds of thousands of dollars for each shipload of wheat, and while Iraq initially charged $US12 a tonne the fee eventually rose beyond $US55 a tonne. The UN's independent inquiry into the corruption of the UN oil-for-food program found AWB secretly paid about $US225 million to Iraq in breach of sanctions.
Speaking during the second day of ASIC's civil penalty case against AWB's former chief executive, Andrew Lindberg, Mr O'Bryan said internal AWB documents indicated the company had a strong focus on keeping costs low, with its managers measuring costs in other areas of its business to the second decimal point, or how much it meant in cents per tonne.
But he said the focus on efficiency did not apply to the Iraq trucking fees because AWB knew it was not carrying the cost.
The corporate regulator has alleged Mr Lindberg breached his fiduciary duties because he knew about AWB's illicit payments to Iraq and failed to halt them, ultimately bringing the former monopolist wheat exporter into disrepute and causing it commercial damage.
ASIC has asked Justice Ross Robson to consider that if Mr Lindberg successfully argues that he did not know about the payments, then the court should find that he nevertheless breached his duties because he had the means to investigate references to the kickbacks and should have done so.
Mr O'Bryan told the court AWB managers in 1999 and 2000 deleted from documents submitted to the UN oil-for-food program a particular clause in wheat contracts that might have drawn the bogus trucking fees to the attention of UN officials.
He also showed the court emails and reports by AWB managers which appeared to indicate that Iraq might adjust the fee ''if they feel they need to give something back to AWB''.
Mr O'Bryan said that indicated there was no economic basis for the transport fee, that Iraqi officials determined the price based on a company's ''ability or willingness to pay''.
A former AWB manager, Mark Emons, who visited Baghdad in June 2000, reported to his AWB colleagues at the time that ''there was some confusion in the Iraq Grains Board as to the amount of trucking due'', with explanations that the rate on the AWB contracts was different to that charged to other firms.
Mr Emons was told by one of his Iraqi contacts that the trucking fee might be reduced by the Iraqi minister, but ''there could be a considerable increase in the costs of the 'after-sales service' required''.
The hearing continues.