Kevin Rudd (Griffith, Australian Labor Party, Shadow Minister for Foreign Affairs and Trade and International Security) Share this | Link to this | Hansard source

This wheat for weapons scandal demonstrates three things: that this government was guilty of gross negligence on an important matter of national security; that this government subsequently engaged in a gross attempt at cover-up once its negligence became known; and, on top of that, this scandal resulted in a great cost to the Australian community and, in particular, to our hardworking wheat farmers. The government’s defence in relation to this scandal is a defence which rests on, in turn, three propositions: we were ignorant, we were incompetent and we were negligent. They are the three elements of the government’s defence—a defence of ignorance, a defence of incompetence and a defence of negligence. The reason they chose that defence was that if you were to argue that the government knew what the AWB was doing then at that point, at the admission of that, they became complicit in one way or another in potential criminality on the part of AWB operations in relation to Saddam Hussein’s regime. So the government chose instead a defence resting on ignorance, incompetence and negligence.

How does this defence stack up against the record which has emerged, the factual material which was presented during the course of the Cole inquiry—noting that the commissioner was not asked to make determinations in any respect in relation to the incompetence or negligence of ministers in discharging their obligations under Australian administrative law, most particularly in respect of the foreign minister and his obligations under the Customs Regulations to give effect to Australia’s international obligations to enforce UN sanctions against Iraq? We have documented a total of 25 warnings prior to the Iraq war which this government received by one means or another. There were a further 10 warnings which the government received after the Iraq war and before this tawdry scandal, the largest corruption scandal in Australia’s history which saw $300 million filter through to the enemy, was finally brought to a halt.

Warning No. 1 was in 1998. The Australian intelligence community held intelligence indicating that Alia Corporation, based in Jordan, was part owned by the Iraqi government and was involved in circumventing UN sanctions on behalf of the Iraqi government. This intelligence was distributed to DFAT, DOD and PM&C.

Warning No. 2, in September 1999. Australia’s senior trade commissioner in Amman was advised by the Iraqi Ministry of Trade that AWB Ltd was an exception to the usual Iraqi practice of not buying exports from non-favoured nations.

Warning No. 3, in November 1999. The Australian Embassy in Amman learned that AWB had been sending laboratory equipment to Iraq without UN approval. A series of internal DFAT emails revealed that DFAT believed that AWB’s actions were in breach of sanctions. One email says, ‘I believe this action to be in breach of UN sanctions.’ Another says: ‘AWB may have been doing this for some time but there is no benefit in launching a witch-hunt at this stage.’

Warning No. 4, in December 1999. Shell approached Austrade in Amman and expressed interest in taking any oil paid to the AWB for wheat at a premium. Shell were interested in an arrangement by which Shell would pay for AWB wheat shipments to Iraq. DFAT notes: ‘What is being considered here might breach UN sanctions.’

Warning No. 5, December 1999. On 21 December 1999 the Canadian permanent mission to the UN asked the UN Office of the Iraq Program about a proposed contract between the Iraqi Grain Board and the Canadian Wheat Board. Iraq was asking the Canadian Wheat Board to deposit $700,000 into a Jordanian bank account to cover transportation costs in Iraq. The Canadians told the UN, in December 1999, they understood that the Australian Wheat Board had already entered into this kind of arrangement.

Warning No. 6, in the first quarter of 2000. For the first quarter of 2000 the Australian intelligence community had intelligence indicating that Alia received fees in Jordan for inland transport within Iraq of goods purchased under the oil for food program. It received these fees as an agent for the Iraqi government. The fees, less a small commission, were paid into accounts accessible by Iraq in violation of sanctions. The amounts involved were substantial. This intelligence was distributed to DFAT, the Department of Defence, the Office of the Inspector-General of Intelligence and Security and PM&C.

Warning No. 7, in 13 January 2000. The UN raised concerns with the Australian permanent mission to the UN in New York. On 13 January the mission reported the meeting by cable, explaining that another country had alleged that AWB had entered into an arrangement with Iraq where it would pay $14 per metric tonne to a Jordanian bank account to a company owned by a son of Saddam Hussein. The UN asked if Australia would make some discrete high-level inquiries to ensure that the AWB was not in breach of sanctions. UN official Felicity Johnston said that she told our mission that the payments were for inland transportation. DFAT Canberra responded saying, ‘We think it is unlikely that AWB would be involved in a breach of UN sanctions.’ The cable was sent without first contacting AWB.

Warning No. 8, on 10 March 2000. On 10 March 2000, our UN mission reports that, ‘Until we are able to provide a formal reassurance of this there will remain a question mark over the matter from the point of view of both the Office of the Iraq Program and the third country in question.’ We now know that third country to be Canada.

Warning No. 9, on 11 March 2000. Austrade’s representative in Washington reports that there are continuing concerns that the AWB had agreed to ‘irregular payment’ terms with the Iraqi Grains Board and that Austrade was ‘concerned that AWB do not understand the seriousness nor the urgency of the matter. It may be necessary to advise the minister of the situation’. This cable is copied to the Managing Director of Austrade and the Secretary of the Department of Foreign Affairs and Trade.

Warning No. 10, in March 2000. The Austrade representative in Washington met with AWB Chairman Trevor Flugge and AWB’s New York representative, Tim Snowball, to discuss the Canadian complaint. According to Snowball, Austrade indicated that there was ‘a big problem around the trucking fee and some exposure’.

Warning No. 11, on 22 March 2000. On 22 March 2000, DFAT Canberra reports by cable that AWB will provide the UN with a copy of its standard terms and conditions with Iraq. The cable, which mentions allegations of irregularities by AWB, is copied to the Prime Minister and the ministers for foreign affairs, defence and trade.

Warning No. 12, on 13 September 2000. On 15 September 2000, Mr Davidson Kelly from Tigris emails Charles Stott at the AWB saying:

For your information, Tigris is an Aussie registered company and enjoys the support of our friends at DFAT who, as I told you, are interested in the outcome of discussions to recover the Obligation. It was good to see you, Mark Vaile and Bob Bowker in Melbourne yesterday.

Mr Vaile has denied that he met Mr Davidson Kelly in Melbourne on 14 September 2000 as he was in Sydney. However, his spokesman later admitted that he was in Melbourne at a function for the launch of BHP’s sponsored report on trade and the Middle East on 13 September 2000 and may have met with Mr Davidson Kelly and Mr Stott.

Warning No. 13, in October-November 2000. On 20 October 2000, AWB Chairman Trevor Flugge wrote to trade minister Mark Vaile regarding AWB’s recent visit to Baghdad. AWB then had discussions with DFAT about its proposal to engage Jordanian trucking companies and then wrote to DFAT on 30 October 2000 seeking DFAT’s approval for this arrangement. On 2 November DFAT replies to AWB giving it the green light to proceed on this process, saying that it—that is, DFAT—‘can see no reason from an international legal perspective why you should not proceed. That is, this would not contravene the current sanctions regime on Iraq. International Legal Division has been consulted in the preparation of this response’.

Warning No. 14, in November 2000. By November 2000 the Australian intelligence community held intelligence indicating that Iraq’s transport charges for humanitarian goods under the oil for food program had been substantially increased. Alia was one of the means by which fees were paid to Iraq. The Australian intelligence community also had information that such fees would probably have been used for procurement purposes outside Iraq. This information was forwarded to DFAT and Defence. Some of this information was sent to IGIS and PM&C.

Warning No. 15, in March 2001. By March 2001 the Australian intelligence community held intelligence of endeavours by Iraq to breach sanctions by, amongst other methods, collecting commission on contracts for humanitarian goods imported into Iraq under the oil for food program. This included information that Iraq violated sanctions by charging a commission of at least 10 per cent on imported humanitarian goods under the oil for food program and that the 10 per cent was rigidly enforced. This information was sent to DFAT, Defence and IGIS. One report was forwarded to PM&C.

Warning No. 16, on 7 March 2001. The New York Times carried a front-page article which outlined in accurate detail Saddam Hussein’s misuse of the oil for food program. The article reported Saddam’s use of bogus additional charges like inland transportation on commodity contracts, including wheat. It also reported concerns that Saddam was using the money earned through the scheme to buy weapons. The sources for the article included diplomats and United Nations officials.

Warning No. 17, on 8 March 2001. The US Acting Permanent Representative, Ambassador Cunningham, told the UN Security Council:

We have evidence that kickbacks have been requested. We don’t have any good evidence that they’ve been paid but one assumes this is happening. It has been going on for some time. We don’t have any means of assessing as I said yesterday, what the degree is, because obviously the companies that are doing this and violating the law are not going to come forward and admit they are doing it.

Wasn’t he right?

Warning No. 18, on 9 March 2001. The Australian Permanent Mission to the UN in New York sent a cable to Canberra which reported that, according to UN officials, Iraq had begun demanding kickbacks and illegal commissions on contracts for humanitarian supplies. During a debate in the Security Council the UK had called on Iraq to ‘stop manipulating the program and stop blackmailing companies by demanding surcharges’. Norway had said that ‘everybody knows about the kickbacks’. The cable was sent to the Prime Minister, the foreign minister and the trade minister.

In a supplementary statement to the Cole inquiry, Mr Downer said that the cable had been opened by his chief of staff and forwarded to his Adelaide office but that he could not recall reading it. According to this cable access log, 71 DFAT employees read this cable, some of them on multiple occasions.

Warning No. 19, in April 2001. On 10 April, the Australian Permanent Mission to the UN in New York sent a cable to Canberra which refers to:

... anecdotal and in some cases hard evidence of Iraqi purchasers and agents demanding fees and commissions in association with the export of oil and the import of humanitarian supplies ...

The cable goes on to say that the mission had been approached by Iraqi officials in UN corridors who had complained that the sanctions committee could ‘complicate the matter’. The UN mission noted in its cable:

Iraq’s interest in keeping port fees outside the oil-for-food program appears self-evident from the Iraqi delegation to us ...

The cable was sent to offices of the Prime Minister, the foreign minister, the trade minister, the agriculture minister and a range of government departments including ONA, DIO, the Attorney-General’s Department and the Treasury.

Warning No. 20, in August 2001. Michael Wallbanks, from the British shipping giant P&O Nedlloyd, said that when his office was advised about the 10 per cent ‘after-sales tax’ levied by Iraq in 2001 he contacted the US and British navies, as well as the British embassy in Dubai. He said that the impost was common knowledge among anyone in the shipping industry who had dealings with Iraq.

Warning No. 21, in September 2001. The Australian intelligence community held intelligence indicating that inland transport fees for humanitarian goods, including fees paid through Alia, were proposed to be increased substantially by Iraq. This increase was on top of the 10 per cent commission already paid and the fees were payable in advance of delivery. The proposed increase in transport fees was to apply to all humanitarian goods delivered under the oil for food program through the port of Umm Qasr. This information was distributed to DFAT, the Department of Defence and IGIS.

Warning No. 22, in May 2002. The US General Accounting Office presented its report Weapons of Mass Destruction: UN Confronts Significant Challenges in Implementing Sanctions against Iraq to the Hon. Tom Harkin of the US Senate. The report sets out in detail Saddam’s misuse of the oil for food program, including the imposition of a 10 per cent levy on commodity contracts.

Warning No. 23, in August 2002. It was reported that at this time the agriculture minister, Mr Truss, was warned by prominent Victorian grain merchant Mr Ray Brooks that AWB was paying bribes to Saddam Hussein’s regime, at an occasion at the Mallee machinery field day in north-west Victoria. But according to this report he was told by Mr Truss to ‘stop peddling stories like that around’. According to Mr Brooks, Mr Truss said: ‘Ray, don’t give me that bull. The Wheat Board is run by farmers of great integrity and honesty. They wouldn’t do that sort of thing.’

Warning No. 24, on 21 August 2002. The Weekly Times reported that the dispute between the AWB and the Iraqi Grains Board was resolved through payments for inland transport. The article said:

An industry source said Iraqi negotiators extracted a $7 million saving out of AWB Ltd as part of the deal. The source said it involved the AWB subsidising transport of the grain from the Iraqi port of Umm Qasr to further inland and supplying grain testing equipment.

Warning No. 25, in December 2002. By December 2002 the Australian intelligence community held intelligence that Iraq was enforcing the 10 per cent commission on imports under the oil for food program. One means by which it was to be continued to be paid was by payment into accounts in Jordan. This intelligence was distributed to the office of the foreign minister, the office of the Minister for Trade and the Prime Minister’s office, apart from the usual AIC and DFAT regulations. It was also distributed to the Australian Federal Police.

These were the 25 warnings which the Australian government received prior to the Iraq war about what the AWB was up to in Iraq, yet this government’s defence was that it knew nothing. It was ignorant! It had no information at its disposal! It was therefore, on any reasonable man’s conclusion, incompetent and negligent.

We are left with this question, and it goes to the heart of public administration in this country: how is it that we spend hundreds of millions of dollars each year on our intelligence community and a diplomatic network to receive information of this calibre and quality into Canberra and nobody—I repeat: nobody—across the entire system of government here was capable of drawing upon these 25 warnings to at least proceed with a robust investigation of what was going on? That is the outstanding question here. It is a failure of public administration, at worst, of which this government is grossly culpable and negligent.

Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

Yesterday the government claimed vindication by Mr Terence Cole’s report on his inquiry into certain Australia companies in relation to the UN oil for food program. Let me quote that raving leftie the economics editor of the Financial Review Alan Mitchell, who said today:

Howard’s vindication is primarily Terence Cole’s judgement that the government had no “actual knowledge” that AWB was hiding payments to the Iraqi regime by providing misleading information about its business arrangements.

But that is just one part of the broader judgement that the public must make.

“It is immaterial that the commonwealth may have had the means or ability to find out that the information was misleading, or that it ought reasonably to have known that the information was misleading,” Cole explains.

Immaterial to Cole with his narrow terms of reference, but not immaterial to the public.

I commend Mr Cole for his dedication in unearthing the truth about the corrupt conduct of AWB officials. He has done the Australian people a great service, but he could have done Australia an even greater service if he had been allowed to examine and report on every aspect of the AWB scandal. This scandal does not begin and end with the conduct of the AWB and its officials. The AWB did not act in a vacuum; the AWB is not just another private company. As the holder of a legal monopoly on the overseas sales of Australian wheat, the AWB was, in effect, an arm of the Australian government, even after it was privatised.

The conduct of the AWB, which Mr Cole thoroughly investigated, was only half of the story. The other half of the story was the legal and political environment in which the AWB operated and that was the responsibility of this government. AWB officials bribed people in Iraq. There is a devastating indictment in Mr Mitchell’s column today of the number of times Mr Cole cites Australian intelligence advising DFAT officials, and that all of them end with DFAT officials saying that ‘they do not recall having read, recalled or sought access to this intelligence that was provided to them’—all the way through to 2005.

In the Australian, I notice Mr Paul Kelly says that Cole judges that DFAT officials did not deliberately turn a blind eye to this bribing of the regime in Iraq. I contrast their insouciance with Colonel Mike Kelly, the deputy head of the Coalition Provisional Authority and a leading legal officer in the Australian Army, who after being just a few weeks in Iraq was able to work out what the AWB was up to—that is, that it had bribed the regime and was continuing to make these illegal payments. It is an amazing contrast.

The Prime Minister makes much of the fact that he told Mr Cole that he could ask for the terms of reference to be extended if he wanted, but that is a red herring. What the Prime Minister said was that Mr Cole could make the request if he believed that ministers or officials were engaged in criminal conduct. Criminal conduct is a very high bar to set. I do not know whether ministers or officials have engaged in criminal conduct. Quite possibly they have not, but that is not the real question. The real question is whether ministers bear responsibility for the alleged criminal conduct of AWB officials named in Mr Cole’s report.

The real issue was responsibility—political and administrative responsibility. The real questions were: first, did the Prime Minister, the Deputy Prime Minister and the foreign minister, through their omission or negligence, create a climate in which Wheat Board officials came to believe that their criminal conduct had the approval of the government; and second, did those ministers do enough, or in fact do anything, to discover what the Wheat Board was up to and take steps to prevent it once they were warned about it? Those are the real questions, but Mr Cole was not able to give us a direct answer because the Prime Minister deliberately wrote the terms of reference in such a way as to prevent him from doing so.

The Prime Minister has once again been very clever, perhaps too clever for his own good. In order to cover up the negligence, incompetence and complacency of the foreign minister and Deputy Prime Minister, he has made himself an accomplice to their misdeeds. He stands politically convicted of this scandal, just as they do, because even though Mr Cole has been prevented from making a direct finding on the conduct of the ministers, his report has allowed the Australian people to draw their own conclusions and to make their own report on the government’s behaviour.

Although Mr Cole was not allowed to make direct findings about the conduct of ministers, it is not hard to read between the lines of some of his comments. Of DFAT, for instance, he says:

The critical fact that emerges is that DFAT—

the minister’s department—

did very little in relation to the allegations or other information it received that either specifically related to AWB, or related generally to Iraq’s manipulation of the Programme—

that is, the oil for food program. There are two issues here. The first is the level of ministerial oversight of what DFAT was or was not doing in relation to monitoring AWB’s behaviour. The Minister for Foreign Affairs and the then Minister for Trade, the Deputy Prime Minister, were jointly responsible for that. Despite the fact that they received more than 30 warnings, as outlined by the member for Griffith, that Saddam Hussein was corrupting this program and specifically that he was demanding bribes from wheat exporters, we are expected to believe that they never saw any of these warnings, that no-one in their staff did and that it never occurred to them to ask or to find out whether the AWB, which after all was one of the largest wheat-marketing companies in the world, was in some way involved.

It is hard to tell whether these two ministers have been knaves or fools, but perhaps we will find out when, as threatened, Mr Flugge calls the Minister for Foreign Affairs as a defence witness if he is charged with a criminal offence. In a criminal trial, under the scrutiny no doubt of the best QC money can buy, the minister will not be able to do his Arthur Daley impersonation, ducking and diving, as the government’s automatic majority allows him to do in the House.

But that is not all. In this case there was a particular agenda at work with relation to the AWB. For decades the old Australian Wheat Board acted in effect as the marketing arm of the Country Party. Even after it was privatised it was stuffed with National Party mates with backgrounds in the wheat industry: ‘The National Party on tour’, as the opposition leader called it yesterday. The prize exhibit here is Mr Flugge, who in 1987 stood for the National Party for the seat of O’Connor. The member for O’Connor is thus something of an expert on Mr Flugge. Let me quote him yesterday:

The dogs have been barking about corruption for years. A number of people—who were not Liberals—were constantly out in the market place saying it was the way you did business in the Middle East. If our side of politics is guilty of anything, it’s of trusting a mob of agri-politicians—all of which have close connections to the National Party.

I do not often agree with the honourable member for O’Connor, but here he clearly knows what he is talking about. The key to this scandal is the long-established cosy relationship between National Party ministers and the leadership of the wheat industry who have been protected ever since World War I by the so-called single desk, a monopoly arrangement that like all monopolies is a breeding ground for corruption. I refer Liberal members opposite to every conservative economist from Adam Smith to Milton Friedman, who talk about the evils of monopoly, if they do not believe me. The spectacle of a Thatcherite government propping up a corrupt marketing monopoly is truly amazing. What has happened to economic rationalism?

The AWB scandal will damage Australia’s economic interests for years to come, particularly now that protectionist inclined Democrats are back in control of the US congress. I expect a devastating problem for Australia from Senator Harkin, who now controls the new Democrat dominated agriculture committee in the US Senate. As the Australian argued yesterday:

For a small country such as Australia with a heavy reliance on commodity exports, the benefits of honest world trade are self-evident. If Australia’s pleas are now met with increased scepticism on Capitol Hill, it will be because AWB was happy to pay bribes to Saddam and the Government did nothing to stop it.

The belief that bribery and corruption are acceptable ways of doing business, at least in the Middle East, is not confined to the National Party, however. This belief has been given a veneer of respectability by statements of certain academics and former diplomats, the people who form a too influential Arabist lobby within the Australian academic and diplomatic network. One of these is Dr Andrew Vincent, Director of the Centre for Middle East and North African Studies at Macquarie University, who on ABC radio in February opposed even having an inquiry into the AWB at all on the grounds that it would damage our wheat trade. Dr Vincent said:

... the bottom line is that in some parts of the world international trade is done with kickbacks, with considerations, with bribes, with whatever you want to call them. And if you don’t pay those kinds of considerations you won’t have a market.

Then we have Mr Bruce Haigh, the former Australian ambassador to Saudi Arabia, who wrote on his website—and he has been constantly writing in the Financial Reviewthat the Cole commission:

... has given trade competitors a blunt instrument with which to hit Australia over the head as well as injuring the AWB, which in the past secured wheat deals of $4 billion annually.

With views like this prevalent amongst Australian diplomats and in universities where Australian diplomats and DFAT officials learn about the Middle East, it is no wonder the current Minister for Trade, Mr Truss—perhaps not the brightest bulb in the government’s chandelier—thinks that the AWB payments to the Saddam Hussein regime were no worse than some sort of commission payment that you make to a real estate agent when you buy a house.

It is no wonder that Commissioner Cole singled out a leading Middle East DFAT official, Bob Bowker, referring to his failure to investigate intelligence relating to general rorts of the oil for food program. It will be very illuminating, as the member for Griffith recounted, if the recalcitrant Mr Davidson-Kelly is extradited to Australia and charged. He will have some very interesting things to say about the meeting that took place at the Point Restaurant in Albert Park between himself, the trade minister and Mr Bowker. I am sure the government does not want what went on at that meeting, in my electorate, to come out at that trial.

I think honourable members recognise that I know something about the Middle East, even if they do not always agree with me about it. One of the things that has angered me most about this whole affair is the complete indifference that seems to have been displayed by the AWB, by DFAT and by this government about the political context of AWB’s behaviour in relation to Iraq and particularly about the ultimate use to which Saddam Hussein put the $224 million he got from the AWB.

Saddam in the 1990s was a desperate man. Having lost both the Iran-Iraq War and the Gulf War, his regime was on the ropes, cut off by UN sanctions from oil revenues and arms imports. This was the precise juncture at which the AWB came to his rescue. As one of the leading participants in the rorting of the UN oil for food program, the AWB’s $224 million was one factor—and, in my opinion, a major factor—that allowed Saddam to recoup some of his losses and re-equip his forces. Saddam may not have had nuclear weapons, but the French and Russians will sell you a lot of conventional military hardware for $224 million. It was that re-equipping that emboldened Saddam to defy the UN over inspections of his suspected weapons stocks and programs, and of course it was Saddam’s defiance that led to the US led invasion in 2003 and to the current imbroglio in Iraq.

Saddam also had a program of making payments to the families of Palestinian suicide bombers, paid out of the same Rafidain Bank in Jordan into which the AWB made its payments to the bogus trucking company Alia, which was in fact controlled, owned and operated by the Ba’athist regime then in control of Iraq. I cannot prove that AWB money went to the families of the suicide bombers who have killed hundreds of innocent people since 2000, but neither can anyone prove that it did not. It was in the same bank, and it was probably transferred from one account to the other. This is where the geniuses, the 12 evil men from the AWB, had their worst effect—not that they would care. The AWB has a lot to answer for, and so do those ministers whose incompetence and complacency let the AWB get away with its corrupt actions for so long.

The Financial Review has an editorial on Mr Howard’s double standards in today’s paper. It begins by quoting that immortal television series Yes, Minister:

‘Decent chaps don’t check up on decent chaps to see that they’re behaving like decent chaps.’ That Prime Minister John Howard and Foreign Minister Alexander Downer have managed, in their defence of the government’s conduct in the AWB oil-for-food scandal, to make this quotation from Yes Minister seem relevant in 2006 is a tribute to their creative powers of spin.

I conclude by saying that this is a saga that is not over yet. The government think they have got off. They think, with this five-volume, narrowly focused report, that charges against these people will be delayed beyond the next election. This is not over though for the foreign minister, the Prime Minister or the former Minister for Trade. An aggrieved Mr Flugge is yet to sing but, when he does at his prospective trial, I am sure a lot more will come out on the incompetence and involvement of this government in this incredible scandal where an Australian monopoly benefited one of the most evil regimes in the world and stole the public money of the people of Iraq, put in a UN account. This was all done, as the member for Griffith has repeatedly pointed out, despite 35 warnings to this government. It is a record of shame which this government think they will survive because of the narrow terms of reference of this report. However, it is a record of shame that they will not survive because, in the long term, the Australian people will make a judgement about this. As I pointed out, this is not over yet. The criminal trials of these people will see much more evidence adduced.

Maria Vamvakinou (Calwell, Australian Labor Party) Share this | Link to this | Hansard source

The findings of the Inquiry into certain Australian companies in relation to the UN Oil-For-Food Programme, chaired by the Hon. Terence Cole and otherwise known as the Cole inquiry, were finally tabled in parliament this week. This report has been much anticipated, certainly by this side of the House, and has certainly been the subject of intense media and public interest and speculation.

The Cole inquiry’s mandate was to investigate allegations first made in the Volcker report that the Australian Wheat Board had knowingly breached United Nations sanctions against Iraq under the United Nations oil for food program by paying financial kickbacks to Saddam Hussein’s regime over the course of five years. The report now confirms that allegations of deliberate violations of the UN oil for food program are true and that the AWB is guilty of the most serious forms of corruption. As such, Australia now stands out as the biggest single contributor to kickbacks paid to Saddam’s regime. This is a reputation that has damaged our country’s reputation and standing in the eyes of the international community.

In 1995 the United Nations Security Council adopted resolution 986, which established Iraq’s oil for food program. Under the provisions set out in the oil for food program Iraq was allowed to trade its oil for basic humanitarian goods, such as food, in order, as we all know, to alleviate the widespread suffering that years of UN sanctions against Iraq had created for the country’s civilian population. We all remember the many images of children dying in hospitals because there was no money for medication—children dying in poverty. The people of Iraq have suffered horrendously over a long period of time and, unfortunately, continue to suffer.

From 1996 onwards, AWB began selling Australian wheat to the Iraqi Grains Board under the oil for food program. As the Cole report notes, by 1999 approximately 10 per cent of Australia’s annual wheat exports were being sold to Iraq—obviously this is significant for the Australian wheat industry. In June 1999 the Iraqi Grains Board introduced a new condition of tender in its contracts with the AWB, which required, as we have now learned, AWB to pay an additional fee of some $US12 for every metric tonne of Australian wheat delivered to Iraq. This additional fee was described as a ‘discharge and land transport fee’, although AWB was never under any obligation to arrange for the discharge and transport of Australian wheat exported to Iraq. In essence, this fee was the kickback that AWB was expected to pay to the Iraqi government if it wanted to continue exporting wheat to Iraq.

We now know that executives of AWB were well aware that this additional fee was paid as a kickback to Saddam’s regime and that it therefore breached UN resolution 661, which prohibited any funds being made available to the government of Iraq. In short, AWB entered into a series of short-term and long-term contracts with the Iraqi Grains Board in late 1999, the terms and conditions of which included this new $US12 discharge and transport fee. It drew the necessary funds for that additional fee from a United Nations escrow fund by concealing their true purpose and it then paid these funds to the government of Iraq via the Jordanian company Alia, which received these kickbacks on behalf of the Iraqi state company for water transport. Throughout all of this the AWB made no arrangements for either the discharge or transport of Australian wheat in Iraq once it arrived in the port of Umm Qasr.

Over the course of 2,000-plus pages, the Cole inquiry report goes into extensive detail over AWB’s duplicity in breaching UN sanctions against Saddam Hussein’s regime. However, as detailed as it is, the report handed down by the Cole inquiry provides us with only half the picture. The fault lies not with the inquiry itself but with the inquiry’s limited terms of reference, which purposely restricted the scope and reach of the inquiry and its investigations.

It is important to note that the Cole inquiry’s terms of reference were set by the Prime Minister and, as such, it was the Prime Minister himself who exercised full control of the parameters of this investigation. The terms of reference were conveniently limited to investigating criminal breaches of the law only. What the Cole inquiry was not empowered to do was to investigate either government negligence or ministerial responsibility regarding the AWB scandal.

Over the course of five years, AWB signed 41 contracts with Iraq that contained kickback payments to Saddam Hussein’s regime in breach of UN sanctions and each one was approved by the Minister for Foreign Affairs, Mr Downer. Let me make this clear: the foreign minister of Australia approved the 41 contracts AWB made with Iraq that stand at the very heart of this scandal. What is more, it was the foreign minister who was also charged with the ministerial responsibility to ensure that no Australian company breached the UN sanctions against Iraq pursuant to the Customs prohibited exports regulations.

Let me reiterate the point that the responsibility for ensuring that no Australian company breach UN sanctions against Iraq fell squarely on the shoulders of the Minister for Foreign Affairs. At the same time, it was the same minister who approved AWB’s kickback contract with Iraq. To all of us—except, it seems, the members of the government—the circumstances surrounding the AWB scandal signal a clear breach of ministerial responsibility on the part of Mr Downer and are a resounding example of sheer incompetence and negligence on the part of his department.

The foreign minister’s response, however, to allegations that he failed in his ministerial duties under both Australian and international law has been nothing short of absurd. In a nutshell, the minister’s only line of defence has been a pathetic attempt to portray himself as an innocent victim of deceit on the part of the AWB and its executives. His excuses continue to both insult the intelligence of the men and women of Australia and show complete contempt for the notion of ministerial responsibility, which I might say remains seminal to our Westminster system of government and Australia’s democratic rule of law.

I do not need to remind the government that it is currently pursuing the option of introducing a formal citizenship test into Australian law that will require new migrants to pledge their respect for democracy and the rule of law in Australia, which the Parliamentary Secretary to the Minister for Immigration and Multicultural Affairs lists as one of the defining values of Australians. What hypocrisy it therefore is when this government asks new migrants to respect Australian democracy when members of its own senior cabinet are unwilling to do the same but instead continue to show complete contempt when it comes to upholding the integrity of Australia’s democratic institutions and the foundations of transparency and accountability that they are built on. The foreign minister would resoundingly fail the very citizenship test being proposed by the Parliamentary Secretary to the Minister for Immigration and Multicultural Affairs.

Notwithstanding the Cole inquiry’s limited terms of reference, we still, however, get glimpses of DFAT’s gross negligence throughout the report. In volume 4 of the report we read:

The critical fact that emerges is that DFAT did very little in relation to the allegations or other information it received that either specifically related to AWB, or related generally to Iraq’s manipulation of the Programme.

The truth is that, at different times over the five years that AWB was paying kickbacks to Saddam Hussein’s regime, the Prime Minister, the foreign minister and the then Minister for Trade and Deputy Prime Minister between them received some 35 warnings that raised serious concerns over the conduct of AWB. The truth is that neither the Prime Minister nor the foreign minister nor the then Minister for Trade and Deputy Prime Minister made the slightest attempt to act on these warnings or to investigate the allegations being made about AWB and Iraq’s manipulation of the oil for food program.

What we have here is nothing less than an example of gross negligence right across three government departments and an unflagging case of a clear breach of ministerial responsibility on the part of the foreign minister, who took absolutely no action to investigate allegations of impropriety on the part of AWB—yet he was charged with ensuring that no Australian company breached the UN sanctions against Iraq. We also know that two officials from the government’s own trade body, Austrade, met with the 51 per cent owners of Alia, the al-Khawam family, and we know that just before the outbreak of the Iraq war AusAID took over an AWB wheat contract that included some 50,000 tonnes of wheat shipped to Iraq on board the Pearl of Fujairah. The Minister for Trade at the time, Mr Vaile, had a hand in convincing AusAID to take over the AWB wheat contract.

The government’s protestations of innocence in the face of AWB’s web of deceit is not the only excuse we have heard. We have also heard the excuse that the foreign minister does not read his memos, which begs the question of just exactly what the foreign minister does. Then, how can we forget the chorus of: ‘I don’t know; I can’t recall; I can’t remember’—that chorus that we heard from the trade minister when he was called to give testimony before the Cole commission. What all this spells is a web of negligence, incompetence and deceit on the part of the government that easily matches AWB’s own web of deception. What we have before us is a scandal that the Howard government is doing its very best to sweep under the carpet, but it is a scandal that will not go away.

The AWB’s wheat for weapons scandal has done enormous damage to Australia’s international reputation. It is one more example of the enormous damage that the Howard government has done to Australia’s international reputation over its 10 years in office. The Howard government’s appalling treatment of refugees, whom it used as a political football, singled out Australia as a looming international pariah on human rights. The Howard government’s refusal to sign the Kyoto protocol has isolated Australia on the international stage when it comes to climate change and the environment. The Prime Minister’s support for the war in Iraq—an illegal war based on deceit and one for which the people of Iraq continue to pay the highest price—has singled out Australia as an aggressor nation with scant regard for the international norms and laws pertaining to war. And now we have the AWB scandal, one which has damaged Australia’s international trade reputation and undermines the broad perception of Australia as a country free of corruption. The AWB scandal completely undermines Australia’s moral authority and credibility when it comes to our country’s role in helping our Pacific neighbours with the vexed issues of corruption in our region and corruption in their own levels of government.

It has cost Australian wheat farmers somewhere in the vicinity of $500 million in lost contracts so far, and for AWB shareholders it has seen the price of AWB shares cut in half. The government’s continued attempt to duck and weave its way out of acknowledging its own negligence and its own share of responsibility for the AWB scandal has only deepened the cynicism ordinary Australians feel about those who are elected to represent them in this place.

The government now claims that the report handed down by the Cole inquiry somehow exonerates it from any responsibility for the wheat for weapons scandal, but it does nothing of the sort. Rather, the Cole inquiry shields the government from any criticism, and the Australian public, I am absolutely certain, will see through this shield. The question of what the government knew about the AWB scandal remains unanswered. We on this side of the House will continue to pursue the Howard government for honest answers rather than glib PR and spin, and I can assure you that we look forward to Mr Flugge’s testimony because I am certain, as my colleague the member for Melbourne Ports indicated before me, that Mr Flugge’s testimony will open up a whole new world into the practices, attitudes and perceptions of the Howard government.

Annette Ellis (Canberra, Australian Labor Party) Share this | Link to this | Hansard source

I rise this morning to speak on the motion to take note of the report of the Cole inquiry into the UN oil for food scandal, which has occurred as a result of the current government’s negligence. I would first like to quote from the censure motion moved by the Leader of the Opposition yesterday, which basically outlines Labor’s concerns about this issue:

That this House censure the Prime Minister, the Deputy Prime Minister and the Minister for Foreign Affairs for:

(1)

its negligence in failing to act on the 35 warnings it received over a five year period thereby allowing this $300 million wheat for weapons scandal to occur;

(2)

for its attempted cover-up of this scandal through its attempts to shut down a US Senate inquiry into AWB in 2004; its reluctance to cooperate with the Volcker Inquiry; and its failure to provide the Cole Inquiry with powers to determine whether or not Ministers did their job in enforcing UN sanctions against Iraq;

(3)

for the cost that has been borne by Australia’s hardworking wheat farmers because of this Government’s negligence—farmers who have now seen half a billion dollars of their Iraqi wheat market lost;

(4)

for allowing $300 million to be funnelled from AWB to Saddam Hussein’s regime which the Iraqi dictator used to buy guns, bombs and bullets for later use against Australian and coalition troops; and

(5)

for the damage inflicted on Australia’s international reputation because this Government’s negligence turned Australia into the world’s single biggest violator of UN sanctions against Iraq.

This is a scandal of enormous proportion and has led to the current government seriously damaging Australia’s reputation internationally. It is fair to say that much has been said and will be said about this shameful period of Australian history—a period which I fear will be looked back on in years and decades to come with shock and disbelief.

Due to the complexity of this issue I would like to briefly summarise the events. In 1990, following Iraq’s invasion of Kuwait, the United Nations imposed sanctions on Iraq. This meant that no funds were to be provided to the government of Iraq or to persons within Iraq. It also prevented nations from trading with Iraq, except for the provision of medical or humanitarian supplies. To prevent civilians from suffering hardship or starvation, the UN Security Council established the oil for food program, which allowed Iraq to sell oil under UN approved contracts. The proceeds from these sales were to go into a UN controlled account, and Iraq was permitted to buy humanitarian goods and foodstuffs. Through this program Iraq began to buy significant quantities of wheat from the Australian Wheat Board, the AWB, in 1996. By 1999 AWB was selling to Iraq about 10 per cent of Australia’s annual wheat exports.

The problem is that the AWB began paying kickbacks or additional moneys directly to a third party, which was providing funds to the Iraq government—that is, to the Saddam Hussein regime. This was illegal, and the AWB knew it. The AWB continued paying these fees and hiding these payments from about 1999. So under this government $300 million was funnelled from AWB to Saddam Hussein, who used those funds to buy those guns and those bombs and those bullets which were later used against Australian and coalition troops. This is also being done, I might add, through a period of time when there was the debate in this country as to whether or not we should enter what was the so-called coalition of the willing and go into combat in Iraq.

It disturbs me very deeply to think that while we were having that debate in this country, a very divided debate where there were very strong opinions against our entry into this war, and while the government was making its decision—I believe much earlier than it announced—to go to Iraq, this very action is occurring. As has been said in many debates in the parliament—and now, thankfully, many commentators in this country are also talking about this whole event in very open ways—while this was all happening warnings were being given around the world. At the UN, all over the place, people were talking about the potential problem we had on our hands with the AWB paying this money to a trucking company that owned no trucks. The whole thing is so ridiculous, just so out of reality, that if it was not so serious it could be the plot for a Monty Python movie. Yet it seems to me, to the commentators and to everybody who looks at this—even to Cole to some extent—that there were warnings abounding around the place. The deeply disturbing thing for me is that no-one in the government—the Prime Minister, the Minister for Trade, the Minister for Foreign Affairs, their departments, their officers—seemed to think that it was an important enough thing to do something about. This is extraordinary.

At the same time that this is all happening, at the same time that $300 million is flowing into that ghastly regime, I as a member of this parliament, sitting in the parliament as a very proud member of this parliament, copped abuse being hurled at me constantly from the other side of the parliament. Whenever we got up and said, ‘We disagree with our engagement in the war in Iraq,’ I and my colleagues on this side of parliament were all accused of being fans of Saddam Hussein. I remember those interjections very well. I remember every one of them. I took offence at them then and I take extraordinary offence at them now—now that we know what was going on while members of this government were hurling that sort of abuse across the chamber. Whenever we got up and said, ‘We disagree with the engagement in Iraq,’ at the same time $300 million was flowing through to that very regime—and I was being accused, because of my objection, of being a ‘fan’ of Saddam Hussein; that we did not want to see him removed. The immorality of this is gobsmacking—that is the only word I can apply to it. It disturbs me greatly. Now what we have got is a government holding up this five-volume defence—and I am not in any way accusing Commissioner Cole of anything here—that they made certain they would get by the terms of reference presented to Commissioner Cole, as their means of escaping their responsibility.

As far as Westminster systems go, as far as honesty in government goes, as far as the responsibility of individual ministers goes, I despair as to where we now sit in this country in terms of responsible government—a government with morals and a morality we should be proud of, that we used to be proud of. This country had an amazingly fantastic international reputation once; I am not sure about it now. It is all thanks to the people ruling this country at the moment who seem to think they can just do what they want.

The government is really quick to say that it knew nothing about the kickbacks. That is very hard to believe. In fact, I think it is impossible to believe. But if you do believe it then you can only conclude that the government is extremely incompetent. The government received 35 warnings about these kickbacks and it chose to ignore all of them—35 warnings. I cannot believe that people in this government knew nothing of this occurrence.

The Cole inquiry report is 2,065 pages long—as I said, it is five volumes. The government says it did not do anything wrong and the Cole inquiry supports that, according to the terms of reference it had. But clearly that means that the government did not in fact do anything right. It was warned 35 times that the AWB was paying kickbacks, but it did nothing. It did not look into the matter at all. I do not think it is possible for any government to be more arrogant, incompetent or lazy in relation to such an important matter.

Our Australian troops, for whom we hold extraordinary pride, are over there representing us as best they can with the training they have had. We wish them well, every single one of them. Simon Crean, the Leader of the Opposition at the time, had the strength to stand up and say, when he was farewelling those troops with our Prime Minister in that first dispatch of troops to Iraq: ‘We wish every single one of you well. We truly, though, don’t believe you should be going’—and we still believe that.

It has saddened me even more this week when I heard, following the tabling of the report in the parliament, that there were a few celebratory little parties emerging around the corridors of this parliament. I could give the benefit of the doubt and imagine that it may be because we are heading into the Christmas period, but it is a little hard for me to convince myself that there was not a little bit of relief partying going on as well—‘Thank goodness we have got out of the Cole question; we’ve got that behind us. That is a thing we can move off our agenda.’ I find that pretty sad.

I know that a number of constituents in my electorate find this whole thing really quite deplorable and they have told me that. The Australian people deserve nothing more than for the Prime Minister of this country to come clean on exactly what has really been going on here. I talk about people having the knowledge. We have heard previous speakers refer to the fact that maybe there was an attitude around. Some people have supposedly reported conversations they have overheard where a suggestion might have been given that the AWB could have been doing something incorrectly and the response was: ‘Oh no, hang on, the AWB are a pretty responsible mob, they are a pretty good bunch of blokes, they wouldn’t do that.’

The whole philosophy of this government begs many questions, and the question for me is: if it is good enough for this government to make a decision that the AWB are good blokes, that they would never do anything wrong, why, at the same time, do we have people on welfare or with disability who have to prove that they are innocent to this government when they attempt to receive assistance payments? There is definitely an imbalance here. If this government thinks you are a pretty good bloke, a decent sort of fellow, you can do anything. But if you happen to be a welfare recipient in this country then you have a whole different set of tests to go through—and that philosophy and morality of the government we have running this country at the moment worries me.

I feel incredibly strongly that I need to put on record my total and absolutely heartfelt objection to this whole dirty episode. It is not good enough to hold up five volumes of a book as a firewall between you, the government, and the people. What is good enough is honesty and morality. But I am afraid it may be some time—in fact, it will be until there is a change of government—before we see any of those decencies come back into the Australian democratic system.

Brendan O'Connor (Gorton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to contribute to the debate on this particular report and associate myself with the member for Canberra and other members on this side who have raised serious concerns about the way in which the government has chosen to respond to what is of course a very serious assault upon the Australian Wheat Board, its actions and behaviour. Indeed, that is clearly outlined in five volumes of reports by Commissioner Cole. What we do know, however, is that since the report has been tabled the government have chosen to pretend that somehow they have no role to play and have had no role to play in regulating the way in which AWB operates and have sought to suggest that they should be accused of no wrongdoing because there has been no wrongdoing on the part of the government or a particular minister.

The Labor Party fundamentally disagrees with that proposition. There is no doubt in the mind of, firstly, Commissioner Cole—who is of course limited by the terms of reference but who even with respect to those terms of reference concluded—that there was gross misconduct on behalf of people representing the Australian Wheat Board. Indeed, there was a failure—a fundamental, systemic failure of government—to consider the complaints that were being made by all sorts of people and parties with respect to the behaviour of the AWB. There is no doubt that the Minister for Foreign Affairs and the Minister for Trade at the time failed to have regard to the multitude of complaints that were made over a long period of time about the unlawful behaviour of the AWB.

I guess it should not surprise us on this side and indeed this nation. If a government is willing to engage in an unlawful war, why should I be surprised that it does not concern itself about the unlawful behaviour of the Australian Wheat Board? The fact is that this government chose, through its own negligence, to fund two sides of an unlawful war. I think it should therefore be condemned by the parliament and condemned by this nation that the government would allow the AWB to continue its actions in a manner that has brought this country into disrepute.

Labor warned the government that it was not in the interests of this nation or indeed in the interests of the world that we follow the Bush administration into Iraq. We said it was not going to assist Iraqis; it was not going to assist the citizens—the men, women and children—of Iraq; it was not going to in any way do anything other than place our troops in harm’s way. It was not an assault upon terrorism. In fact, it was going to increase the likelihood of terrorism both in that region and at home. I think those things have been shown to be true.

As the supporters of the war start to drift away and start to join those that were originally in opposition to the war, we have to therefore take note, and soberly take note, of the conclusions of the Cole report. In that report, Commissioner Cole clearly points out the list of complaints that were made, which makes a mockery of the answers of the government that they could not and did not know that there were serious bribes going on to fund the Saddam regime. I know my colleague the shadow minister for foreign affairs, the member for Griffith, did attempt in his contribution to articulate the multitude of warnings, but because there were so many he was only able to reach 25 warnings that the Minister for Foreign Affairs was notified of. I would like to continue where the shadow foreign affairs minister left off by adding a further 10 warnings that were made to the government or should have been known by the government.

On 19 May 2003, the foreign minister met with senior BHP Billiton figures in London to discuss BHP’s bid for the Halfayah oilfield in Iraq. BHP told Mr Downer that BHP executives had been working on oil for food projects in order to maintain relationships with Iraq and:

... in September 2000 BHP transferred rights in Halfayah to a Joint Venture led by Tigris Petroleum, headed by BHP executives who were responsible maintaining relationships with Iraq by working on oil for food related projects until a normal political situation could be established in Iraq.

BHP said they and Tigris had already briefed the PMO, DFAT, Defence and AFFA about their interests in the Halfayah oilfield.

On 3 June of the same year, US Wheat Associates wrote to the US Secretary Of State, Colin Powell, about concerns that some of the money paid under AWB contracts ‘may have gone into accounts of Saddam Hussein’s family’. On 6 June 2003, the then Minister for Trade rejected the US allegations out of hand, describing them as ludicrous and insulting, and instructed the embassy in Washington to convey his views to Secretary Powell. On 10 June of the same year, an Australian representative on the CPA, Michael Long, received a memorandum of instruction from the CPA. This memorandum asked ministry advisers to, among other things:

Identify which contracts have a kickback or surcharge. We need to know what percentage kickback or “after sales service fee” was involved under the “Extra Fees” category. Your ministry is likely aware of this charge so please work with them to identify and indicate on the matrix.

Long forwarded the memorandum of instruction to DFAT, who forwarded it to the AWB on 13 June.

On 23 June 2003, the Australian representation in Baghdad sent a cable to Canberra outlining the new Coalition Provisional Authority’s reprioritisation of contracts in the immediate postwar period. It stated:

Every contract since phase 9 included a kickback to the regime from between 10 and nineteen per cent. The CPA was advising ministries to tell companies with contracts that the “after sales service fee”, which was usually to be deposited in offshore banks, would be remitted to them.

This cable listed for action Dr Calvert, DFAT, Mr Smith, secretary of Defence, and General Cosgrove, Chief of Defence Force. For information it listed the Prime Minister, the Minister for Trade, the Treasurer, the Attorney-General, the Minister for Foreign Affairs, the Minister for Defence, ASIO, DIO and ONA. On the warning between June 2003 and January 2004, the AIC held intelligence that the former Saddam regime had four suppliers and that the OFFP was to pay Iraq the 10 per cent commission. These reports were distributed to DFAT, the Department of Defence, the Treasury and the department of industry.

In an interview with SBS’s Dateline on 8 February 2006, Senator Bill Heffernan said that AWB had been coming into his office for the past 2½ years and that:

I kept saying to them we hear that you blokes are on the take as it were or giving kickbacks.

On 12 September 2003, the US Department of Defense published a report into the misuse of oil for food which found that AWB’s contract was potentially overpriced to the tune of $US14.8 million. In October 2003, Treasury officials working on secondment to the Iraqi ministry of finance as part of the Coalition Provisional Authority forwarded to Canberra a report that found that Saddam’s regime required that 10 per cent of the face value of contracts they submitted under the oil for food program be paid directly to the regime.

In the same month in 2003, on 22 October, US Senator Tom Daschle, the Democrat senator from South Dakota, wrote to US President Bush asking him to investigate claims that Australian wheat was sold to Iraq at inflated prices and that money was then given secretly to Saddam Hussein’s family to maintain trade. He urged Bush to discuss the matter with the Australian Prime Minister, John Howard, during his visit to Australia. The Australian Embassy in Washington wrote to Senator Daschle describing the allegations he raised in his letter to the President as reprehensible. In the same month in the same year, on 23 October, the embassy in Washington sent a cable reporting a discussion with Senator Daschle’s staff about the Democrat letter to President Bush. A contact told the embassy that they had been advised by State that:

... its scrutiny of OFF contracts revealed that 10% had been added to the price of every OFF contract.

There are another 10 warnings that were provided to departments of this government, indeed to the minister’s office, that were ignored by this government.

It is a sad indictment that the government has not even had the good grace to accept that it has fundamentally failed the Australian people, it has fundamentally failed to regulate AWB’s behaviour. There has been no acceptance of ministerial responsibility, whether it be by the Minister for Foreign Affairs or by the Minister for Trade. I think the fact that the government has failed to do so shows that this is an out-of-touch government, a government that thinks it can get away with anything, that holds the Australian people in such contempt that it does not believe people must be accountable for their actions or, in this case, their inactions.

It seems to me that everybody knew that the AWB were providing kickbacks to the Saddam regime except Minister Downer and Minister Vaile, if we are to believe the government. That clearly could not be the case. That clearly is not true, and we argue therefore that these ministers must go. They must resign. They must follow the principles of ministerial accountability. This government has to take some responsibility for the failures of the AWB, the crimes that have been committed in the name of this country, otherwise we will be condemned around the world for deliberately turning a blind eye to this corrupt practice—which, in the end, aided and abetted an enemy of this country, a dictator who ultimately was being funded and therefore armed to potentially kill and maim our Australian defence forces.

Debate (on motion by Mr Neville) adjourned.