Saturday, August 29, 2009

AWB Oil-for-Food scandal The timeline

From the mid 90’s to around 2006 Australia’s government, some statutory authorities and public service were implicated in attempts to subvert the UN Oil for Food program. Australia’s major involvement revolves around a former statutory body – The Australian Wheat Board and eventually the offspring AWB LTD. Here are some of the major issues as they unfolded:

August 1990 the UN Security Council adopted resolution 661, imposing comprehensive sanctions on Iraq following that country’s invasion of Kuwait.

April 1995 acting under Chapter VII of the United Nations Charter, the Security Council adopted resolution 986, establishing the "oil-for-food" Programme, providing Iraq with another opportunity to sell oil to finance the purchase of humanitarian goods, and various mandated United Nations activities concerning Iraq.

January 1996 BHP Billiton described a wheat deal as a "humanitarian gesture", which took place with the full knowledge of the Australian Government. Recovery of an Iraqi debt for this $US5million "humanitarian gesture" featured in a 2002 deal between BHP and AWB.
Documents recovered by in 2003 suggested the then BHP executive had met senior figures in Saddam Hussein's regime during the height of Western sanctions in Iraq.

May 1996 Foreign Affairs document shows both the Foreign Affairs Minister, Alexander Downer, and the department would not support a plan by BHP to get the Iraqis to agree to a "deferred payment" of five years.

1996 Foreign Affairs Minister Alexander Downer welcomed the UN oil-for-food strategy and flagged Australia's desire to provide most of Iraq's wheat requirements.

1997 BHP-Billiton executives proposed US$50 million -US$100 million loan to Saddam's regime to help gain access to oil fields.

1998 The Iraqi Grains Board first raised the idea of kickbacks from AWB.
AWB, Australian monopoly wheat exporter was under government control as The Australian Wheat Board,.

1999 Mark Emons traveled to Canberra to discuss transport fees with Department of Foreign Affairs and Trade (DFAT) officials.

July 1999 AWB corporatised and is no longer a statutory body answering directly to the Australian Agriculture Ministry.

July 1999 Saddam ordered his ministers to tell AWB to start inflating the price of its wheat contracts, so he could take a cut. AWB agreed to disguise these kickbacks as a "trucking charge"

October 1999 the Iraqi Grains Board demanded a non-negotiable $US12-per-tonne extra be added to the price of wheat from Australia.

October 1999 AWB employee Dominic Hogan said he had come up with a "brilliant idea" for how to pay the trucking fees.
He told former manager of sales and marketing Mark Emons that AWB could set up a "special" bank account with a "friendly" bank in Jordan, he suggested the ANZ, and that money could be transferred from there to Saddam's regime "as long as it was not apparent that the funds were going to Iraq".

The 'Alarm Bells' should have alerted governments and the UN to potential corruption, as early as:

September 1999 Emons wrote an email to Dominic Hogan, who also worked on the Middle East desk. "Speaking with slug (Graham Owen, who worked in the finance department), he suggests that the only way to make the payments is holding the money in an account in Australia until the sanctions are lifted or we can make the payment to a Jordanian account." Emons

December 1999 Canada raised concerns with the UN that the AWB was using Jordanian front companies to fund interests associated with the Iraqi regime.
The UN then questioned an Australian government representative in New York who, after consultation with the AWB said the matter was untrue.

1999 or 2000 DFAT’s Robert Bowker, Australia's current ambassador to Egypt, satisfied himself that no corruption was taking place by telephoning AWB employees who denied there was anything untoward about their billion-dollar deals with Saddam.

1999 Trevor Flugge's daughter, Felicity, was employed by Ronly Holdings when some of the Iraqi contracts were negotiated.

2000 A report written by Arthur Andersen said Ronly Holdings was secretly paying inland trucking fees to the Iraqis as a way of circumventing UN sanctions on Iraq. Ronly Holdings is a London trading house run by two Turkish businessmen, Nori Bali and Erol Yahya.

2000 The external auditors uncovered what could amount to "money laundering" and reported to the Australian Wheat Board (AWB).

2000 Prime Minister Howard, and deputy Vaile, who was trade minister and Foreign Minister Alexander Downer received a copy of a cable from the Australian mission to the United Nations, in January of 2000, which contained a formal warning to the Australian government from the United Nations about what the wheat board was up to.

March 2000 Austrade commissioner Alistair Nicholas called Flugge and other AWB executives to a "briefing" in Washington DC. Mr Nicholas asked whether there was any truth to rumours circulating at the UN that Australia was paying kickbacks to Saddam's regime, in exchange for wheat contracts.

October 2000 AWB said engaging the services of Alia would "eloquently solve our problems" in Iraq, but wanted to "ensure DFAT is comfortable with AWB proceeding". AWB wrote to seek DFAT's Ms Drake-Brockman permission to pay "trucking fees" to the Jordanian trucking company Alia. The deal was approved.

October 2000 AWB's Hogan sent a fax to foreign affairs official Jill Coutney, telling her AWB was "extremely keen" to solve discharge problems in Iraq and was about to enter discussions with a "transport company in Jordan with an aim of introducing a performance incentive scheme".

October 2000 AWB's Hogan had an informal meeting with Trade Minister Mark Vaile in Cairo on October 20.

2000 Trade Minister Mark Vaile told the then AWB chairman, Trevor Flugge, he had told officials from the department:
"…existing UN-controlled restraints on trade with Iraq" had to be respected, adding Iraq needed "to comply with the relevant UN Security Council resolutions.”…I have asked relevant Department of Foreign Affairs and Trade officials to maintain a close dialogue with the AWB interlocutors on this issue, and keep me apprised of developments."
The letter was written at the time AWB hugely increased its kickbacks to the Iraqi regime from $12 per tonne of wheat to $44.50.

Late 2000 the AWB wrote to inform DFAT that it had contracted with a Jordanian company to truck wheat within Iraq. DFAT responded with approval.

2001 AWB dumped Ronly and tried to end some deals with the company. The following year, the head of Ronly, Mr Bali, telephoned Flugge to discuss a dispute over money and raised the secret dealings in Iraq.

June 2002 Michael Long was personally told by Iraqi trade minister Mohammed Medi-Saleh that 10per cent would be added to the price of contracts between AWB and the Iraq Grains Board.

July 2002 Trade Minister Mark Vaile issued a press release stating he recognised the need to provide wheat to the Iraqi people, notwithstanding issues with the Iraqi government.

July 2002 Prime Minister Howard had written to AWB's chief executive, Andrew Lindberg "In view of the importance of the matter, I suggest the government and AWB Ltd remain in close contact in order that we can jointly attempt to achieve a satisfactory outcome in the longer term."

July 2002 Long went to Baghdad after Australia’s wheat sales were threatened. “Through our extensive efforts, in Baghdad, we convinced them that it’s the farmers that are suffering and not the government. Then the [Iraqi trade] minister [Mohammed Mahdi Saleh] decided to reinstate the 2 million ton trade ‘out of respect for the Australian farmers and the Australian people'.” Long.

August 2002 Three ships containing Australian wheat have been stopped from unloading in the port of Umm Qasr in Iraq, because authorities are alleging the grain is contaminated with iron powder.
A team of executives - including Lindberg, the former chairman Trevor Flugge and international sales manager Michael Long - flew immediately to Iraq to meet the trade minister. Saleh said he expected the Australians to pay a $US2 million fee to "clean" the contaminated wheat.

August 2002 Between trips to Libya and Iran by Minister Vaile and AWB chairman Brendan Stewart went to Baghdad over Iraqi claims that Australian wheat shipments had been contaminated.

August 2002 Brendan Stewart was reported as saying he had spoken with Minister Vaile, Foreign Minister Alexander Downer and then deputy Prime Minister Anderson about the tone of the Government's public rhetoric about Iraq and its effect on AWB's Iraqi sales.

August 2002 Vaile congratulated a successful AWB delegation to Baghdad, which secured even further wheat exports to Iraq, even as we were counting down to war.
These oil-for-food contracts, with suddenly inflated prices, were signed by AWB executives and stamped by Australian government officials before going to the UN.

2002 US wheat farmers wrote to then US secretary of state Colin Powell, saying Australia seemed to be having incredible luck picking up business with Iraq, and asking him to investigate AWB, to see if it had been paying kickbacks. All this was openly debated in the US Senate.

2002 Oil debt deal. An agreement was reached in 2002 between AWB and the Iraqi Grain Board that the price for a million tons of wheat "would be artificially inflated to include the amount due to Tigris." (Andrew Lindberg) The debt was originally owed to Australia's then major oil firm BHP for the supply of wheat by the AWB in 1995 in exchange for oil exploration rights. The debt was later assigned to Tigris Petroleum, a firm set up by former BHP executives. The money was to be paid "through the mechanism of a trucking fee," said the statement to the Australian government inquiry.

The Alarm Bells start ringing again

2003 US Defence Department report accused AWB of overpricing 500,000 tonnes of wheat "to the tune of $14.8 million".

March 2003 Prime Minister John Howard said: “The oil-for-food program has been immorally and shamefully rorted by Saddam Hussein, who has used the proceeds of it to acquire his weapons capacity and support it."

April 2003 Trevor Flugge was chosen by the Foreign Minister, Alexander Downer to lead a team of Australian experts to reform Iraq's Agriculture Ministry shortly after coalition forces moved into Baghdad.

June 2003 Michael Long ‘passed information about the kickbacks to DFAT” - 10 weeks after the war started. Long said, he received a report, while in Baghdad, from the ruling Coalition Provisional Authority, made up of Americans and Britons, that clearly stated Saddam had been stealing from the UN's oil-for-food program, by adding a "kickback or surcharge, often 10per cent" to the price of contracts.
"We need to know what percentage kickback or 'after sale service fee' was involved," the report said, adding that Long should work with the Iraq ministry to identify the fees. AWB employee, Chris Whitwell, also emailed the report to a senior DFAT official, Zena Armstrong, who was then a member of DFAT's Iraq taskforce. The taskforce was established in September 2002 to bring together a range of departments and agencies, including Prime Minister and Cabinet, Defence, AusAID and Austrade, and the Attorney-General's Department.

June 2003 the MPs Craig Emerson and Senator Kerry O'Brien issued a press statement calling for the Government to investigate allegations that Australia's wheat sales helped support Saddam Hussein's regime. The Government ignored them.

TRADE Minister Mark Vaile denies any knowledge of kickbacks made to Saddam Hussein's government but cannot explain comments he made in 2003 suggesting he knew Australia's monopoly wheat exporter was making some kind of investment in the dictator's regime. "The wheat sales conducted during the past decade were under the UN's oil-for-food program under sanctions that we all supported. I have asked my department to contact the US embassy and convey a message to Colin Powell that Australia regards these comments as quite disturbing." Vaile said in June 2003

October 2003 the Australian Government established a $350 million trade facility to support Australian exporters operating in Iraq.

November 2003 Oil for Food Program terminated.

November 2003 US Wheat Associates (USWA), representing American growers lobbied then Sec Powell, claiming Australian exporters overcharged for sales to Iraq.

2004 stories about AWB's dealings in Iraq - including the fact that contract prices were inflated and that Iraq had forced AWB to make payments to a Jordanian trucking company - were also starting to appear in Australian newspapers. They were picked up by US senators, who wanted to investigate AWB.

October 2004 Australia's former US ambassador, Michael Thawley, allegedly misled a powerful Republican senator in the US in that the Government had no knowledge of the kickbacks scheme.

November 2004 Iraq's former trade minister, Mohammed Medhi Saleh was interrogated by a panel of UN investigators, when he told them: AWB had for years been making payments to a Jordanian trucking company known as Alia, which kicked the money straight back to Saddam's regime.

February 2006 Andrew Lindberg resigned as CEO of AWB.

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