Court shown emails sent in 1999 showing company executives discussing how to pay Iraq a ‘trucking fee’ in exchange for grain contracts under UN sanctions

This article is more than 4 years old

This article is more than 4 years old

AWB executives were worried payments they made to Iraq looked “too direct”, a court has heard.

Emails sent in 1999 when AWB first agreed to pay Iraq a so-called trucking fee for Australian grain show its executives discussing how to do so under UN sanctions.

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“He understands we can’t pay him direct,” an AWB executive said of an Iraqi official in an email.

“I know this is a little too direct but he assures me that it is a one-off,” an AWB executive said in another exchange read out in the Victorian supreme court.

Two former executives – then chairman Trevor James Flugge and group general manager trading Peter Anthony Geary – are facing a civil trial for allegedly breaching their duties.

AWB first paid $US453,600 into a Jordanian bank account in November 1999, and a total $US223m was paid in trucking and after-sales service fees up to 2003.

More emails show AWB executives discussing how to route the payments through third parties and encountering hurdles because of international bank rules curbing money laundering.

Australian Securities and Investments Commission counsel Norman O’Bryan also read emails from UN officials who, in 2000, were becoming concerned the UN’s Food For Oil program was being subverted.

A UN official warned against “any hard currency payment” being made to Iraq, as a review of AWB’s contract arrangements was ordered.

“We may have stumbled across a case of sanction evasion,” a UN official said in another email.

Canada had complained to the UN that its grain supply contract had been cut back after it declined an Iraqi request to pay a trucking fee.

“The money that was being paid was finding its way to the IGB (Iraqi Grain Board) and not to any trucking company of any sort,” O’Bryan told the court on Wednesday.

“All of this behaviour by AWB was happening while the UN was discussing this issue and trying to get to the bottom of it.”

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Emails at the time show AWB gave assurances it was fully aware of the Australian government’s obligations and the UN security council’s sensibilities.

In the years AWB paid the fees, Australia’s share of Iraq’s grain market rose to 90%. The US-led invasion brought an end to the fees.

Flugge has issued a statement denying any wrongdoing and the court has yet to hear from Flugge or Geary’s lawyers.

The prosecution opening continues on Thursday.