Kickback: Inside the Australian Wheat Board Scandal

Caroline Overington is a senior writer for the Australian. A former sports writer, she won the Prime Ministerial Women a...

Author: Caroline Overington

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Caroline Overington is a senior writer for the Australian. A former sports writer, she won the Prime Ministerial Women and Sport Award for journalism in 1996. In 2004 she won a Walkley Award for Investigative Journalism for her report in the Sydney Morning Herald on the Norma Khouri investigation. She was Fairfax newspaper’s New York correspondent when rumours of the AWB scandal first began circulating through the United Nations and, despite accusations of ratbag journalism, she chased the story until the truth was finally revealed. In 2006, her tenacity was rewarded. She won another Walkley as well as the Sir Keith Murdoch Award for Journalism for her series of more than 100 articles uncovering the AWB Iraqi kickbacks scandal. She is the author of Only in New York (2006) and lives in Sydney with her husband and two children.

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K CK BACK INSIDE THE AUSTRALIAN WHEAT BOARD SCANDAL

CAROLINE OVERINGTON

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For Laurie First published in 2007 Copyright © Caroline Overington 2007 All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10% of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act. Allen & Unwin 83 Alexander Street Crows Nest NSW 2065 Australia Phone: (61 2) 8425 0100 Fax: (61 2) 9906 2218 Email: [email protected] Web: www.allenandunwin.com National Library of Australia Cataloguing-in-Publication entry: Overington, Caroline. Kickback: inside the Australian Wheat Board scandal. Bibliography. ISBN 978 1 74175 194 9. 1. Australia. Inquiry into Certain Australian Companies in Relation to the UN Oil-For-Food Programme. 2. Australian Wheat Board - Corrupt practices. 3. United Nations. Oil-for-Food Program – Corrupt practices. 4. Administrative responsibility – Australia. 5. Government liability – Australia. 6. Food relief, Australian – Corrupt practices – Iraq. 7. Australia – Politics and government. I. Australian Wheat Board. II. Australia. Inquiry into Certain Australian Companies in Relation to the UN Oil-For-Food Programme. III. United Nations. Oil-for-Food Program. IV. Title. 352.350994 Edited by Alexandra Payne Cover & text design by Phil Campbell Typeset by Bluerinse Typesetting Printed in Australia by Griffin Press 10 9 8 7 6 5 4 3 2 1

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What you don’t know, you don’t know. And you can’t get to the heart Of what you don’t know. Foreign Minister Alexander Downer on the Cole report into the AWB kickback scandal, 27 November 2006

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CONTENTS

PART ONE: THE KICKBACK

1

June 1999–August 2002 Baghdad, Melbourne, Cairo, Canberra PART TWO: THE COVER UP

95

September 2002–October 2005 New York, Melbourne, Bali, Washington, Baghdad, Canberra PART THREE: THE COLE INQUIRY

185

December 2005 – November 2006 Sydney, Washington, Beijing, Melbourne Postscript

Endnotes Acknowledgements Index

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269 293 297

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PART ONE

THE KICKBACK June 1999–August 2002 Baghdad, Melbourne, Cairo, Canberra

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CHAPTER 1

The greatest trade scandal in Australian history started over lunch. Dominic Hogan was there, which was as much a surprise to him as to anyone. To look at Hogan is not to think: well, here is an international man of mystery. Here is a player in a grand plot to funnel hundreds of millions of dollars to Saddam Hussein’s brutal regime; to put the lives of Australian troops at risk; to send the stock price in his own company into freefall; to strip the investments of more than 30,000 Australian wheat farmers; to poke holes in a jealously guarded, 67-year monopoly over wheat sales; to trigger at least three major investigations (including one by the mighty United States Congress, another by the United Nations, and a third, headed by a retired Australian judge, Terence Rhoderic Hudson Cole); to rock the Department of Foreign Affairs and Trade and to cripple the standing of the Australian Foreign Minister, Alexander Downer; or, indeed, to set in motion events that would lead to a collapse of trade deals worth $1 billion a year. No. On the contrary, to look at Hogan is to think: now here’s an ordinary guy. He is stocky, freckled, with a sunburnt face and sandy-grey hair. He wears short-sleeved shirts and rimless glasses. Hogan was born and raised on a hot, dry property in the north-western Victorian country town of Nullawil, population 97. There was no schoolhouse, so a young Dominic was educated at the Wycheproof Education Centre, a regional school for children from around the district. He was quite smart: as a teen, he won a scholarship to an expensive private college, Xavier in Kew, to do his Higher School Certificate. He also won a place in the engineering course at Monash University in Melbourne, but Hogan stayed only two years: in his heart, he was a farm boy. He liked tractors, trucks,


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machinery – and he wanted to work with grain. In 1993, he took a job in the Victorian office of the Australian Wheat Board (later, it would become AWB Ltd). In those days, it was a statutory authority, owned and controlled by the federal government, and it had a monopoly on the export of Australia’s ‘national pool’ of wheat. In recent years it has been privatised and listed on the Australian Stock Exchange; by the end of the 20th century, it had become one of the world’s largest agribusinesses, exporting wheat for Australia’s 30,000 wheat farmers to more than 50 countries, with sales totalling some $4 billion annually. Hogan was hired as a transport officer. Later, he became a freight merchant. In 1997, he moved to Sydney, where he joined the Middle East desk, shuffling the many pieces of paper produced when a company sells enormous amounts of wheat to clients overseas. Then, in 1998, Hogan got an impossibly glamorous gig. He was promoted to AWB’s office in Cairo, where he would be responsible for some of the company’s most important but difficult clients: Egypt, Yemen and Sudan. He took his young bride, Anisa (Arabic for ‘the entertainer’), to live overseas with him. She was another AWB employee and would work two days a week, managing the office, which was actually in their spare room. They had been there a little under a year when Hogan received a message from his boss, Mark Emons, who was regional manager of the Middle East, African and European section of AWB’s international sales and marketing division. It was 19 June 1999 – a date that didn’t seem important then, but one that would become crucial later on. Emons told Hogan that he would be flying from Melbourne to Amman, Jordan, the following day and he wanted Hogan to meet him there. ‘What’s it about?’ asked Hogan. ‘We’ve got to go to Iraq,’ said Emons. The Iraqi Grains Board (IGB) – the government body that controlled the purchase of wheat for Iraq – apparently had something urgent to discuss.


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4

‘Don’t tell me – they want something, don’t they?’ said Hogan. ‘They always want something,’ said Emons. It was true: Iraq was then ruled by a madman known as Saddam Hussein (at the time of writing in January 2007, he had just been hanged in Baghdad for crimes committed when he was dictator). He had been the president of Iraq since 1979. His regime practised horrors such as the forced removal of people’s hands, the murder of dissidents and the imprisonment of people who were of the wrong tribe, clan or ethnicity. In the 1980s, Saddam ordered the execution of thousands of Kurds simply because he didn’t much like Kurds; in 1990, he invaded an oil-rich neighbour, Kuwait. None of this mattered very much to executives of Australia’s wheat board, however. They were not callous but, in the course of doing business abroad, Australian executives are routinely forced to deal with all manner of dictators, thugs and murderers. AWB’s best customers over the years had included corrupt officials in Indonesia, dodgy middlemen in Pakistan and generals in African nations that had never held elections. In all likelihood, AWB executives probably could not have told you whether Saddam was elected or appointed, or had blasted in from outer space. They were not interested in whether he was better or worse than the next dictator. AWB’s only interest was trade – specifically, trade that would benefit Australia’s 30,000 wheat farmers. AWB did know, however, that Iraq’s economy was strangled by something known as the ‘UN sanctions’. In 1990, the United Nations placed sanctions (in other words, a full trade embargo) on Iraq, partly to punish Saddam for invading Kuwait and not being properly sorry about it, and to strangle Iraq’s economy so Saddam could not build up a supply of weapons to threaten his neighbours and, perhaps, the world. Under the terms of United Nations Security Council resolution 661, all states – including Australia – were required to prevent their nationals from making funds available to Iraq. The sanctions were effective – too


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effective. Within months of the sanctions being in place, money was so tight in Iraq – and food shortages so severe – that the Iraqi people were starving. In 1995, five years after the sanctions were introduced, a former AWB chairman, Clinton Condon, visited Baghdad. He later told the ABC’s Four Corners program that the situation was desperate. ‘They were blending barley with wheat flour, they were, you know, they were trying to put all sorts of rubbish in tea to make it go a bit further,’ Condon said. ‘Women and kids, little kids, were in all sorts of trouble, so walking down the street was nearly enough to make you cry.’ When pictures of sick and starving children started to leak out of Iraq, pressure mounted to have the sanctions lifted. The United States president at the time, Bill Clinton, was reluctant, saying Saddam was exaggerating the plight of his people in an effort to work his way back to a position of international menace. But, in the face of growing criticism, the US did vote with the United Nations Security Council to set up the so-called UN ‘oil-for-food’ program – an innovative scheme under which Saddam would be permitted to sell vast amounts of oil provided he used the money only to buy food and medicine. The funds from the sale of oil would be kept in a special UN-controlled bank account. When Saddam wanted to buy something, he would have to submit the bill to the UN, so he would never handle the currency himself. Under the rules of the program, Iraq was forbidden from buying products that might be used to manufacture weapons: chemicals and fertilisers, for example. Many other apparently innocuous items were also banned: steel pipes ostensibly for irrigation might be transformed into missiles. The system of applying for the right to buy food, waiting for approval and having goods delivered was grindingly slow. Iraq therefore had no choice but to beg for aid, and often asked AWB for ‘gifts’: it wanted free or cheap wheat, obviously, but also bobcats, grain elevators, parts to help repair the infrastructure at the main Iraqi port of Umm Qasr, which is more than 1000 kilometres south of Baghdad. (Like Iraq’s economy, the deep-water port, with its rusting cranes and


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6

shaky grain elevators, was heaving and sighing under the strain of UN sanctions.) ‘What do you think they want this time?’ asked Hogan. Emons had an idea. Early in June 1999, the IGB had issued a wheat tender, calling for grain to be shipped to Iraq between October and December 1999. In and of itself, this was no big deal; Iraq issued such tenders three or four times a year. But this time, the terms were slightly different. For the first time, Iraq was saying that the company that won the contract to supply the wheat would have to pay not only for the cost of shipping the grain to Iraq (or the sea freight, the price of which is often tacked onto grain contracts), but also the inland transport (or the cost of moving the wheat from the Iraqi port of Umm Qasr to mills and silos across the desert). Emons had heard about the new condition some weeks earlier, directly from the man who was director-general of the IGB, Zuhair Daoud. Zuhair plays an important role in this story, so it is worth describing him here. In some ways, he was typical of many Iraqis in Saddam’s ruling class: sophisticated, intelligent and well travelled. He spoke English, French and Arabic. Like everybody in a position of power in Iraq, he was of course a member of Saddam’s Ba’ath Party and he was forced to swear a blind loyalty to Iraq’s dictator but, several times a year, he was permitted to travel outside Iraq, to attend meetings in London, Paris and other sophisticated cities, far from Saddam’s madness. On those trips he could talk freely and he did, inquiring about people’s families and hobbies, and living the life of a normal man. Instead of the green military uniform favoured by so many unelected men who end up in positions of power, he usually wore Western suits. He was always good for gossip about the grain trade and, perhaps, valuable snippets about what AWB’s competitors were doing. A strong relationship with Zuhair was important to the Australians because he was the one who decided how much wheat Iraq had to import, and from whom. It needed a lot. Iraq’s domestic farmers could


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barely feed their own families, let alone Iraq’s people. Eighty per cent of Iraqis depended on monthly rations, or ‘food baskets’, to survive. These baskets, which could be collected from any one of 44,226 corner stores in Iraq, contained sugar, rice, milk powder, tea, salt, lentils and cooking oil. For families with infants and young children there was infant formula and weaning cereal. But the main ingredient in the baskets was wheat, usually a mix of domestic and imported, milled together to improve the quality. In villages, Iraqi women would grind it with a mortar and pestle, and bake it flat. In the cities, leavened bread was baked three times a day. Most Iraqis would not consider a meal complete without the addition of small, white rolls, known as ‘samoon’, or flat bread, eaten while hot. Zuhair had been at the helm of the Iraqi Grains Board for 33 years. As such, he oversaw the purchase of that wheat and, over the years, he had developed a preference for the high-quality, hard, dry Australian version of the grain, so much so that the Iraqi palate had actually adapted to the texture and flavour of Australian wheat. Much of the business was done on a handshake or with a one-page contract that simply listed the price, tonnage and the expected delivery date. In May 1999, Zuhair had called Emons in Melbourne to say that he was flying to Bangkok. Emons agreed to fly over to see him. They met in the foyer of a five-star hotel. Seven years later, when Emons was asked to recall the details of this meeting for Terence Cole’s year-long inquiry into the Iraq kickback scandal, he said that Zuhair – a doomed man, even then – seemed happy. In Iraq, Zuhair was always ‘accompanied by what one would call a minder and so the conversations were necessarily brief and impersonal to some extent’, Emons explained. ‘On occasions when Zuhair did travel [alone] – and he used to travel to Vietnam to source rice – if I could, I would take the opportunity to meet him personally. In Bangkok … it was a very one-on-one relationship, just having a sit-down in the hotel lobby.’


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8

The two men discussed family, ‘and that’s when he said that [Saddam Hussein wanted the Australian Wheat Board to pay] a trucking fee to Iraq’. Emons told him it would be difficult, which – given the fact that sanctions expressly forbade the payment of money to Iraq – was something of an understatement. But he had promised to at least consider it. Now Zuhair had called again, suggesting another meeting, not in Bangkok this time but in Baghdad. AWB had a policy of never sending executives alone into Iraq, so Hogan would have to go with Emons. He wasn’t entirely thrilled: the journey into Baghdad was horrendous. To punish Saddam for refusing to give up his military ambitions, the US and Britain maintained a ‘no-fly zone’ over Iraq. Planes could be shot out of the sky. Emons and Hogan would have to fly to Amman, and be driven 14 hours across the blistering desert into Baghdad. It wasn’t expensive – but it was absolutely hairraising. The drivers – mad Arabs, Hogan called them – shouted and chainsmoked, refused to wear seatbelts or abide by speed limits, and kept pistols hidden under their white robes in case they met bandits, known as Ali-Babas, on the road. The first 400 kilometres of the journey – from Amman to the Jordanian border – were the most difficult. The road was made of black tar and was just two-lanes wide. Drivers were paid for the journey, not by the hour, so they belted along at well over 150 kilometres an hour, with other four-wheel drives whistling by in the opposite direction. At the Iraqi border, police inspected their passports and passed a mirror on a pole under the car. They were waved through with a torch and, suddenly, the two-lane road became a six-lane superhighway that stretched another 800 kilometres, all the way to Baghdad. Through the car windows, Hogan and Emons could see skeletons of old vehicles dumped in ditches, burntout army tanks left over from the war with Iran, rusty missiles and, sometimes, Bedouins, or single men in long robes, with hooked sticks, herding camels, sheep and sometimes their wives, miles from water and civilisation.


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There were only two hotels in Baghdad where Western visitors were permitted to stay – one was the Al-Rashid. The Iraqis proudly called it five-star. In fact, it was two-star. A frequent guest described it this way: ‘The wallpaper peeled, the carpet was putrid and the water was either boiling hot or freezing cold. You would get in the shower, and you’d have to take handfuls of water and just splash yourself with it. You would get half a bar of soap that had been used by somebody else. You had to pay extra for towels.’ The doors didn’t lock, the beds squeaked and the electricity regularly blew out. In every room, there were pictures of Saddam. Until the US invasion in 2003, there was also a mosaic pattern on the floor in the foyer. It was the face of the former US president George H.W. Bush, and the words ‘Bush is Criminal’ were spelt out, in English. You had to walk over Bush’s face – the ultimate insult – to get to reception. There was a bar in the foyer, ‘of that 1970s, disco style, and it served some kind of Arab coke, lemonade, and mango juice or coffee, and that’s it,’ said Hogan. ‘A missile from the 1991 war was fired into the building. It hit the eighth floor. If you looked down from your room, you could still see bits of it in the garden below.’ The informer ratio in Iraq was thought to be one in four. In other words, one in every four Iraqis was probably a spy for Saddam, and that included most of the staff at the Al-Rashid. Ordinary Iraqis were banned from the building. It was also beyond their ability to pay: in 1999, the room rate at the Al-Rashid was US$150 a night, a fortune for such a terrible hotel. It had to be paid in US dollars and in cash. Credit cards were useless in Iraq. No Western financial institution – not Visa, MasterCard and certainly not American Express – could do business with Saddam’s regime. Emons and Hogan checked instead into the Al Mansour which, if anything, was worse. It would be hours before they received a summons to attend a meeting with Iraqi officials. Iraqis like to do business at night, and ‘business’ in Iraq meant drinking sticky black coffee; smoking the hookah; talking about wives, families and the evil Americans; and


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10

then signing contracts. And so it came: at around 10 pm, long after the Australians had eaten their evening meal at the Al Mansour, a white fourwheel drive pulled up outside the hotel, to take Emons and Hogan to a meeting with Zuhair. By now, it was 21 June 1999. As was custom, Zuhair met his guests in his office to exchange gifts. ‘Welcome!’ he said, when his old friends walked into the office. And then, before any business could be discussed, they retired to a local restaurant for a meal that stretched over several hours: there was lamb stew, garnished with dried lemon. There was rice, olives and hummus, chicken, chick peas and sweet tea – all of it accompanied by flat, white bread, made mostly from Australian wheat, which the guests tore open with their hands. The atmosphere was relaxed and friendly, which was both sad and strange. None of the people around the table that day could possibly have known it but Zuhair’s life was soon to come to an end. In a little over seven months, his car – a distinctive white four-wheel drive – would be found on the desert highway, with Zuhair’s body slumped in the front seat. An AWB executive, Charles Stott, would later tell people that Russian grain traders who drove past the scene of the ‘accident’ found Zuhair’s body riddled with bullets. Dominic Hogan, however, heard a different story – that it was simply an accident due to excessive speed, and the fact that Zuhair, like many Arabs, refused point-blank to wear a seatbelt. But that was in the future. Today, there was simply plenty of food to eat and an important matter to discuss. Zuhair leaned back in his chair, picked up a glass of sweet black coffee and began to talk business. Much of what he told the Australians they already knew: Iraq had fought a bitter, ten-year war with Iran, and another war – Desert Storm – with George Bush Senior and England’s Margaret Thatcher after Saddam invaded Kuwait in 1990. Now it was 1999, the sanctions had been in place almost ten years, and Saddam was running out of money. Yes, under the terms of the oil-for-food program, he could buy food and medicine for his people.


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But it wasn’t enough: Saddam needed hard currency. The revenue from oil sales went into the UN’s Iraq escrow account. It couldn’t be withdrawn, except to pay suppliers. So Saddam had ordered his henchmen to find new means of raising money. From now on, every supplier under the oilfor-food program would have to kick a little in the can. ‘I have come here with a message from Saddam Hussein, may Allah protect him,’ Zuhair told the Australians. Emons was ready for this. ‘Please go on,’ he said. ‘In the next phase of the oil-for-food program Iraq intends to buy between 1.5 and 1.7 million tonnes of wheat,’ Zuhair said. Emons felt himself salivating. Wheat was then trading at US$180 a tonne; Zuhair was talking about deals worth in excess of $288 million. He wondered: how much of the business would Australia get? ‘Australia will be asked to supply 600,000 tonnes,’ Zuhair said, reading his mind. ‘For political reasons, you will not be permitted to supply it all. Saddam Hussein would like to thank various countries for their support in the political arena. Other nations need to be punished. Their wheat farmers will get no deals. ‘Russia will get 600,000 tonnes, and France will be rewarded, too. But there is something you should know. There is a new condition attached to this sale. You will be required to pay a fee – a trucking fee – to cover the cost of moving the wheat from our main port at Umm Qasr to the population centres in Baghdad, and beyond.’ Emons was delighted by the offer to buy so much wheat, but the trucking fee concerned him. ‘We have asked the UN to approve this fee,’ said Zuhair. Even to an outsider it seemed unlikely that the UN would approve a scheme whereby Iraq received money for trucking, or for anything else? The point of the sanctions was precisely to prevent Iraq from gaining access to hard currency. Zuhair detected Emon’s doubts.


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‘Saddam Hussein, may Allah protect him, has asked me to stress to you the importance of paying this fee,’ he said. ‘The UN will approve it.’ Emons asked, ‘How much money are we talking about?’ Zuhair paused. ‘Twelve dollars a tonne,’ he said. Hogan, who had been sitting quietly, quickly did the maths. A $12 fee on a 600,000-tonne shipment of wheat … Iraq was asking for US$7.2 million, apparently in cash. Emons was shocked. He had previously been involved in the payment of commissions – they are commonplace around the world – but how were they supposed to pay this fee? All of Iraq’s bank accounts were frozen. AWB was prevented by law from transferring money to Iraq. Its banks in New York would never approve the transaction, nor would any bank in Australia. ‘We recognise this is a problem,’ said Zuhair, ‘so we are pleased to accept cash.’ Seven million in cash? Emons knew it was impossible. He had just made a 14-hour journey across the desert. He tried to imagine making the same journey every six months or so, with seven million stuffed in a bag under the driver’s seat. ‘It’s going to be very difficult,’ said Emons. Zuhair sat silently. He had been a serious player in the international grain trade for more than 30 years and he, more than anyone, understood the culture, the toxic combination of greed and lawlessness that reigned among the serious players. He understood that the men sitting before him were not evil, and they had no real interest in Middle East politics. They couldn’t have cared less about whether sanctions were or weren’t working, or whether sanctions bolstered or weakened Saddam’s regime; and they had no real position on whether Iraq should or shouldn’t be hobbled by sanctions, or left to sink under the weight of its own unsold oil. No, first and foremost, the Australians were salesmen – driven by the same things as salesmen everywhere. It wasn’t the money (or, more


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accurately, it wasn’t only the money) they were paid for working at AWB. The thrill of the chase, the euphoria of landing a big deal, the sheer joy of scooping a rival trader, the kudos that would come from management and colleagues, the adrenalin that came with success: that was what they loved. Dominic Hogan was among the most spirited negotiators in the world. He loved to drive home a deal. As executives working for the Middle East section of the Australian government’s wheat board (the company had not, at the time of the meeting with Zuhair, been cut free of government control or listed on the Australian Stock Exchange), they had been instructed to go to Iraq and land a wheat deal, and – come hell or high water – that was what they intended to do. Would corners have to be cut? Yes, but corners were cut in most markets. Would grease have to be paid? Yes, but that was situation normal, too. Would some evil people do well out of the deal? Almost certainly – but AWB did not do deals on the basis of whether the customer was evil, only that he was wealthy enough to pay. There was still a chance the UN might approve the trucking fee. Zuhair’s argument was perfectly reasonable: somebody had to pay to move the wheat to Iraq’s people, and Iraq had no money. ‘Well,’ said Hogan, after a few minutes of quiet thought. ‘We will get back to you with the paperwork.’ Zuhair was pleased. ‘Excellent,’ he said. ‘Now, shall we smoke a pipe?’


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CHAPTER 2

When Mark Emons and Dominic Hogan left Baghdad late in June 1999, the problem of how to pay the trucking fee to Saddam’s regime was uppermost in their minds. Zuhair had dangled a mighty carrot – an enormous deal – and they did not want to lose it. But it was a frantic time. On 1 July 1999, the wheat board would be privatised, or be released from government control. It would split into two companies: AWB Ltd and AWB (International), which would market and export Australia’s wheat, for a not inconsiderable fee. Later, it would be listed on the Australian Stock Exchange. It was not a good time to run into trouble with a major customer. So, when Hogan returned to Cairo from Baghdad, he began sending a series of increasingly frantic emails to his superiors to bring them up to date with both Iraq’s demand for a trucking fee and the problem of getting the money back to Baghdad. His first email was circulated widely at AWB, reaching executives Peter Geary; Sarah Scales; Tim Snowball; Emons; Emons’s boss, Nigel Officer; AWB’s chartering manager, Michael Watson; and the old company finance manager, Graeme Owen, nicknamed Slug. None of these executives could remember ever having to pay a trucking fee to anybody as part of the conditions for a wheat sale. Throughout history, AWB’s contracts had been ‘FOB’, or ‘Free On Board’, which means AWB came up with a price that covered the wheat, its own marketing fees and the cost of getting the wheat over the ship’s rail. After that, the buyer was responsible for sea freight and all other costs incurred while getting wheat from port to mill or silo.


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Iraq was a little different: it had no money for sea freight, and it couldn’t insure its own cargoes, so it was a ‘CIF’, or ‘Cost, insurance and freight’, customer. AWB’s price included the cost of the wheat, marketing fees, insurance and sea freight. AWB sent a bill for the total to the United Nations, which paid the bill using oil money held in the UN’s Iraq escrow account. Now Iraq wanted AWB to pay $12 a tonne – or around $500,000 for every vessel – for trucking. It seemed fair enough to Hogan: how else were the Iraqis supposed to get the wheat from port to silo? As he would later tell the Cole inquiry: ‘They had a true cost of moving grain from Umm Qasr to all over Iraq. Zuhair explained to us that what was happening in Iraq, and we saw this first-hand, to pay your transport people … labour, et cetera … they were actually in a situation where they were pretty much printing their own Iraqi dinar, which was creating a huge inflation problem … We saw first-hand that the classes of society within Iraq were not getting paid any wages anymore, they were selling their furniture and people like Zuhair and that were selling their own goods … just to survive on a daily basis. So the inflation problem became an issue.’ In years to come, the senior counsel employed to assist Terence Cole QC with his inquiry into the kickbacks, John Agius SC, would ask: ‘Iraq wanted, in effect, to assist their economy by not having to print dinars but by being able to use US dollars?’ ‘Correct,’ said Hogan. ‘That was my understanding of it.’ Hogan figured the best way to raise the money would be to inflate the price on the new contract by $12 a tonne or a total of $7.2 million – but how would AWB get the money back to Iraq once the UN paid the bill? Hogan definitely did not want to deliver the money in cash, and no Western bank would agree to make such a huge transfer to Baghdad. In his email on 24 June 1999 – three days after leaving Baghdad – Hogan noted ‘the problem which still needs to be resolved is the payment mechanism, as all Iraqi accounts have been frozen’. At the Cole inquiry, Agius asked, ‘You were aware that the Iraqi bank accounts had been frozen?’


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‘We knew that there was no banking system in Iraq. There was no possible way of transferring $1 to Iraq,’ Hogan replied. In his statement to the Cole inquiry, Mark Emons said he discussed the problem with his boss, Nigel Officer, who said: ‘Let me have a think about it. I will probably discuss this with Muzzer’ (Muzzer being the then managing director, Murray Rogers). Nobody seemed to have doubts as to who might benefit from payment of the fee: it was Saddam’s regime. At the inquiry, Agius asked Hogan: ‘They [the Iraqis] wanted US dollars because they wanted … to be able to use US dollars?’ Hogan: ‘That the money would go into Iraq, yes.’ Agius: ‘And you’ve never had any doubt about that?’ Hogan: ‘Not really, no.’ AWB’s Michael Watson also told the Cole inquiry that he knew that the trucking fee was going to be received ‘in some form or another’ by the Iraqis. ‘Clearly … [it was] a payment that had been made to the Iraqis,’ Watson said, when asked why people at AWB were so jumpy about the trucking fee. Agius asked him: ‘Was it your apprehension then that what was being proposed involved a contravention of the United Nations sanctions?’ ‘I would have to say yes,’ he replied. His boss, Nigel Officer, put it more bluntly. ‘There was no option, there was no choice,’ he said. ‘It was $12 or not, or if you don’t make that payment then of course there would be no business. That was made very clear.’ The only problem, then, was how to get it done. The team suggested to each other that the money could be paid into Iraqi bank accounts in Jordan, or through maritime agents or through the vessel owners themselves. As they plotted and argued about how the trucking fee might be paid, the situation grew desperate: Iraq had issued its tender in June, and Zuhair told AWB he wanted the deal done by 14 July 1999.


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‘Does Australia want this business or not?’ said Zuhair, in one phone call to Emons. ‘If you do, just add $7.2 million to your price, put it in the contract, and the UN will pay the bill.’ ‘Okay, okay,’ said Emons, but privately he was thinking: ‘How can we do this?’ He told the Cole inquiry: ‘There were a lot of discussions going on across the entire organisation about solving the problem of paying the fee.’ Agius asked: ‘What was the problem, as far as you understood, at the time?’ Emons: ‘It was an issue of paying US dollars into an Iraqi account.’ There was also the problem of how to include the fee in the new contracts. The new contracts would include the words ‘The cargo will be delivered free into truck to silos within all governorates of Iraq … The discharge cost will be a maximum of US$12 and shall be paid by the Sellers’. Hogan now says: ‘This is when I was certain the transport fee was UN approved. If it was all so secret why would Emons even list this in the contract?’ Under the terms of the oil-for-food program, the Australian Government was responsible for ensuring that no companies, individuals or entities broke the UN sanctions when they traded with Iraq. AWB was therefore required to send its contracts with this new ‘trucking’ clause to bureaucrats at the Department of Foreign Affairs and Trade (DFAT) in Canberra and to another set of bureaucrats at Australia’s permanent mission to the UN in New York. From there, the contracts would be passed to the UN’s Office of the Iraq Program, also in New York, where they would be checked a third time. The point of all this checking was to ensure that Iraq wasn’t rorting the oil-forfood program by, say, importing goods such as metal cylinders or fertilisers that might be used for chemical or biological weapons – and to ensure that Saddam Hussein wasn’t receiving kickbacks and bribes from suppliers. Emons wondered what DFAT’s bureaucrats would do when they saw the strange clause regarding the $12 kickback on the three contracts he forwarded to them on 14 July 1999 (and, later, on a fourth contract,


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18

No. A4822, dated 14 October 1999). He need not have worried. By law, DFAT was required to check the contracts to ensure there were no breaches of sanctions. In practice, there was nobody working in DFAT’s Middle East branch who knew how to do that. On the contrary, as dozens of bureaucrats would – incredibly – tell Cole, they saw themselves as nothing more than a ‘post box’ for AWB. Some admitted that they couldn’t properly read the contracts because they didn’t understand the terms. FOB, CIF, Free in Truck – what did all that mean? To them, it looked like gobbledegook. Any maritime lawyer who studied the contracts would, in moments, have been able to explain that ‘free in truck [or FIT] to … all governorates in Iraq’ meant that AWB was paying a trucking fee. Any lawyer worth their salt would then have asked: ‘To whom is this money paid? And does the UN know about it?’ But no maritime lawyer was ever consulted. DFAT officials simply took the contracts from AWB, merrily stamped them and passed them up the line to Australia’s permanent mission to the UN, who then passed them to the UN’s Office of the Iraq Program, where they were merrily stamped again. ‘Well, that went smoothly,’ said Emons, when the process was complete, and the new deal with Iraq was done. But Slug, in credit finance, was near hysterical with anxiety. He couldn’t figure out how AWB would get the money to Iraq. Emons told him to relax. He was heading to Iraq in October, and he would sort it out with Zuhair when he got there. Before Emons had a chance to travel to Baghdad, however, a private calamity struck: his mother fell desperately ill. There was no way he could go to Iraq, not even to sort out problems with the trucking fee. He thought about cancelling the trip, but that would be awkward because this was no ordinary business trip. It was a celebratory journey: AWB had been privatised (to the chagrin of some wheat farmers who wanted more competition in the market and resented AWB’s high fees, it had kept its monopoly over wheat exports). The managing director, Murray Rogers,


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and the new chairman of AWB Ltd – a wheat farmer and National Party stalwart named Trevor Flugge (pronounced Flu-gee, with a hard g, like geese) – were travelling to Baghdad to explain the new structure to the Iraqis, and Flugge was planning to deliver a keynote speech at the Iraqi Grains Board Technical Training Conference. Now, to some people, the idea of listening to a wheat speech at a grain training conference might sound dull, but Flugge had lived and breathed wheat sales all his adult life. He was raised in a wheat-growing town, Katanning, in Western Australia and he left school at the age of 15 to become a wheat farmer. He was also, even as a boy, a fierce, political animal: as a teen, he was a member of Rural Youth, Apex and, for seven years, the Citizen Military Forces. He joined the Young Country Party at the age of 17. Flugge was appointed to the board of directors of the Australian Wheat Board in 1984; by 1991 he was deputy chairman and, by 1995, he had been appointed non-executive chairman with a starting salary of $74,970. In 1999, shortly before he became the first chairman of the privatised AWB Ltd, he was appointed an officer of the Order of Australia for services to the Australian grain industry. The Iraqis were keen to see Flugge; indeed, they got excited about any Western visitor. It wasn’t uncommon for the English-language Iraq Daily News to publish photographs of anxious, embarrassed Western businessmen meeting with Iraqi officials on its front page. Iraq didn’t see Flugge as others saw him: as a farmer and a good old boy in the National Party. They saw him as a representative of the Australian Government. It was an image he cultivated. ‘In Iraqi terms, effectively you were part of the Australian Government,’ Flugge told the Cole inquiry (on 27 February 2006). ‘I mean, that’s how people started to view you.’ Modestly, he added: ‘It wasn’t necessarily because of me as an individual.’ No, but as chairman of the Australian Wheat Board, the biggest exporter of wheat out of Australia, ‘people would take a keen interest if they thought that you were the chairperson’.


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KICKBACK

20

As important as he apparently was, Flugge could not go to Iraq alone. Emons decided to send Hogan, as a kind of chaperone. On 30 September 1999, he shot off a quick note to bring him up to date. ‘Thanks for stepping into the gap for me,’ Emons wrote. ‘We have a little time to get you up to speed before you meet Trev and Muz [Murray Rogers]. ‘I have spoken with Muz and given him a thumbnail sketch of how travelling to Iraq works,’ Emons continued. ‘You know don’t take a computer, etc, and plenty of cash and include $1 bills for tips, etc. I’m sure you will hold their hands well.’ Then he got down to business. ‘There is the issue of the US$12 inland transport fee that we are required to make under the new contract,’ he said. ‘Slug suggests the only way we can make the payment would be hold the money in an account in Australia until sanctions etc are lifted. Alternatively, we drop the USD12 from the contract. Suggest that you discuss with Zuhair.’ Privately, Emons knew this was probably impossible: the edict had come directly from Saddam Hussein. There was no way AWB was going to be able to drop the trucking fee. And so, on 9 October 1999, Hogan again found himself in Baghdad, this time with his chairman and his CEO, with a near impossible task at hand: to wriggle out of a deal that had been cut with a tyrant. He still did not know whether the fee had been approved by the UN. The group checked into the Al-Rashid hotel and waited for their instructions. In the evening, they were picked up by Saddam’s staff in a four-wheel drive, and transferred to Zuhair’s office. Zuhair was not alone when they got there. He was standing, looking very upright and serious, beside a short man in a green military uniform, with a gun on his hip, another strapped to his leg, and a comical moustache, not unlike Saddam’s, above a curled top lip. ‘I would like to introduce you to His Excellency, Mohammed Medhi Saleh, our Minister for Trade,’ said Zuhair.


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THE KICKBACK

Hogan stepped forward and attempted to present the trade minister with a small gift – a miniature sack of Australian wheat, intended as a paperweight – but Saleh raised his hand and dismissed the offering. ‘We cannot accept gifts from suppliers,’ he said. On the other hand, there were gifts from the Iraqis to the Australians: Hogan received a black and grey striped Pierre Cardin tie, and for Flugge there was a small, flat, woven mat with a picture of a mosque on it. The group went immediately to a late dinner, where Hogan told Zuhair that AWB had no idea how it was supposed to pay the new trucking fee. He did not want to carry cash into Iraq. But Zuhair was unmoved. ‘You will find a way to do it,’ he said, and the trade minister agreed, saying: ‘All suppliers are paying a trucking fee. It is now standard on all contracts with Iraq.’ Hogan told the Cole inquiry that his chairman and his CEO – Flugge and Rogers – were present when he discussed the problem of the trucking fee. He couldn’t recall attending any meetings without them. They were in Iraq for such a short time. But both insisted it wasn’t so: when Agius asked Flugge whether he was present when Hogan negotiated a new contract for the sale of wheat, Flugge said, flatly, ‘No.’ ‘Mr Hogan says that you were?’ said Agius. ‘Well, I am saying that I wasn’t,’ said Flugge. In any case, Hogan recalled that the group left Iraq with no real solution to the trucking problem in mind. On 12 October 1999, Hogan sent an email to Emons, Slug and the junior marketing executive (and former Adelaide footballer) Daryl Borlase, setting out his thoughts. ‘Zuhair advised that the President Saddam Hussein [had advised] … that all suppliers must pay the USD12.00 before ship arrive,’ he said. ‘If the USD12.00 was not in place then the vessel would not be unloaded.’ Hogan says he still believed at this time that the UN had approved, or was about to approve, the fee. He suggested paying the money directly into a Jordanian bank account, something he was sure could work ‘as long as the link was not apparent that the funds were going into Iraq’.


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22

He couldn’t help joking about it, suggesting that AWB could also – perhaps as a last resort – ‘buy a very large suitcase’. Slug didn’t think it was funny. ‘Dom, why do we try to make our business more difficult?’ he said, meaning: ‘Why didn’t you just tell them, no, we can’t do this?’ He had already called a ‘friendly bank’ – the ANZ – to see if it had a branch in Amman, and whether AWB could pay the trucking fee into that account, from where it would be kicked on to Iraq. ANZ was very helpful: certainly AWB could open an account in Amman, but transactions involving such huge amounts might have to be handled in person at the bank’s counter in Amman, not by fax, and there would be no transfers to Baghdad. ‘I don’t think this proposal is a possibility,’ Slug said. Emons – still recovering from the death of his mother – promised to call Zuhair in Baghdad to sort out the matter. But the gist of the conversation – on 19 October 1999 – was simply this: if AWB wanted to deal with Iraq, it would have to pay the fee. ‘This is Saddam’s order. If you don’t pay, we will buy wheat from somewhere else,’ Zuhair said. ‘But listen, don’t worry so much. We have a solution. I will provide you with the name of a third party, and you pay the money to them. They will pay the money to us. That way, there is no link between you and Iraq.’ When Slug heard about this, he was appalled. Were these guys from the Middle East desk seriously suggesting that AWB pay millions of dollars to some unknown third party, who would then kick the funds on to Iraq? From a finance point of view, it was a disastrous idea. ‘I have a number of problems with the suggested proposal,’ he said, before going on to outline some of them: AWB was handing millions of dollars to an unknown, third party. What if that party screwed up, and the money was frozen in a bank account in New York? What if the third party simply absconded with the funds? How was he supposed to record the fee in the books?


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THE KICKBACK

The amounts involved seemed huge, too. ‘Over all the contracts, we are talking about USD$11.34 million,’ Slug wrote. And that was just for the tail-end of 1999; over time, as the trucking fees rose from $12 to $15, to $25, to $45, the amounts would rise into the tens and then into the hundreds of millions of dollars. Surely it would be better to notify the UN, get approval for the trucking fee and find out how it could be paid in a transparent, honest way, or else hold the money in an AWB account until sanctions were lifted. ‘They [the Iraqis] still owe us in excess of $400 million,’ he added, referring to debts that Saddam had racked up, before the first Gulf War. ‘They should be able to trust us for USD$11 million.’ Slug ended his note: ‘Mark, I trust you find my comments constructive’. But actually, no, Emons did not find the criticism constructive. Less than an hour after receiving Slug’s email, he replied. ‘The UN is an unnecessary complication,’ he said. They would hold up the negotiations by at least three to six months. ‘Are you prepared to wear the storage and finance costs?’ Besides, Saddam wanted ‘prepayment of the fee, prior to the arrival [of any wheat]’. Therefore, said Emons, ‘we have to resolve payment in the least potentially damaging method to AWB’. Years later, Slug would remember being upset by this response. He told the Cole inquiry he had been working on the problem for ‘two and a bit hours, or two hours, or maybe three hours’ even eating lunch at his desk while he tried to find a solution ‘and he [Emons] responded within, oh, well, slightly over an hour … I was upset … I was not happy … I think at the time I may have left my work area and gone to get a cup of tea because I was upset by the way it was responded to. I may have gone for a walk’. Emons urged Slug to wait to see what ‘third party’ the Iraqis came up with. He didn’t have to wait long. On 20 October 1999, a fax arrived at AWB’s headquarters in Melbourne, addressed to the managing director, Murray Rogers. The fax had a dinky little truck, moving at high speed, on the letterhead and, according to the old-fashioned script, it was from a company called ‘Alia for Transportation and General Trade’.


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24

‘Dear Sir,’ the letter began. ‘We would like to introduce you to our company being one of the Jordanian establishments specialised on the fields of overland and ocean freight transportation.’ In awkward English, it continued: ‘We have informed officially that your company won a contract to supply Iraq [921,000] tonnes of [wheat]. So we are pleased to offer our services on the field of transport’. Emons examined the letter. This must be the ‘third party’ that Zuhair had spoken about. In fact, Alia was not so much a third party or an agent for Iraq. It was part-owned by Iraq. The company – which has offices quite near the Australian embassy in Amman – was established in 1994 by a wealthy Iraqi sheikh, Hussein al-Khawam, who lived in Jordan. His business partner was the Iraqi Ministry of Transportation. Although its owners were Iraqis, when the company was established, Jordanian law required that at least one owner of any company based in Jordan be a Jordanian national. Hussein al-Khawam nominated his close friend Mo’tasset Fawzy Qatishat, a Jordanian, to hold 51 per cent of the shares on his behalf. Iraq’s Ministry of Transportation assigned two of its employees – Shaker abdel-Aziz Abdullah and Fawzia Abdel-Majeed No’man – to hold the remaining shares. Alia’s main business involved rescuing ships that had been stranded or damaged during Iraq’s many wars, and then re-badging them for commercial shipping. As a lucrative sideline, it had agreed to help with Iraq’s grand plan to bust UN sanctions by collecting ‘transport fees’ in US dollars from suppliers. To ensure that Alia kicked on every cent, the Iraqi regime opened dozens of ‘bridge’ accounts at several banks, such as the Bank of Jordan in Amman, the Bank of Beirut, and the Byblos Bank in Beirut. These accounts were designed to receive, but not retain, the funds. They were disguised under the names of Iraqi officials (sometimes with the first and last names transposed) or simply given numbers. Every 24 hours, under the terms of an agreement signed between


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THE KICKBACK

Iraq and the bank, the money in these ‘bridge’ accounts would be automatically transferred to secret Iraq accounts in the same branch. The money was routinely drawn in cash and transported by vehicle from Amman or Beirut to Baghdad, often in a sealed, diplomatic pouch. As noted, the first letter from Alia to AWB was addressed to the managing director, Murray Rogers (although his name had been misspelt). But Rogers does not believe that he ever saw that letter. ‘It was probably one of about 50 letters that used to hit my desk each day,’ he told the Cole inquiry. ‘So, are you saying that you paid no attention to that letter?’ Agius asked him. Rogers replied, ‘May never have seen it, Sir, may never have seen it … It doesn’t mean anything to me … I have never met those people, whoever the letter writer was.’ The letter writer, for the record, was one Othman al-Absi, a sophisticated young Arab who spoke very good English, wore Western-style suits, had impeccable manners and enjoyed Formula One racing and doing business. Emons considered the letter, but did not immediately act. He didn’t know what to do. It was November 1999. The contracts between AWB and Iraq had been signed months earlier, ships laden with wheat were on the water but the plan to send hundreds of thousands of dollars to a trucking company in Jordan made him nervous. On 4 November, Nigel Officer sent an email to Emons: ‘Where are we on the trucking fee issue … please advise ASAP’. Emons replied: ‘We have been approached by a company in Jordan but our response has been to ask for confirmation from the IGB’. He noted: ‘We are not responsible for trucking in Iraq, only the payment’, adding, ‘When I see Zuhair at the end of Nov I hope to clear a number of the details up. I’ll touch base when I have more’. There seems no doubt that Emons knew what was planned was a possible breach of UN sanctions. In a separate email to Nigel Officer


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26

(copied to Michael Watson and Slug Owen) he said: ‘We must be seen to be doing it correctly’. At the Cole inquiry, Agius asked him: ‘You don’t actually say, we must do this correctly. Is there some significance in that choice of words?’ [emphasis added]. ‘I think the words there are explanatory,’ Emons replied. ‘You knew that direct payments to the Iraqis … was outside sanctions?’ ‘We knew it was outside sanctions,’ Emons agreed. ‘And what you were looking for was a way that it could be done, but that it wouldn’t be apparent that it was being done?’ ‘Correct,’ he replied. Zuhair, by contrast, seemed not a slight bit worried about how the payments might be made. ‘I am still having some problems [with Zuhair],’ Emons moaned, in an email to Michael Watson on 19 November 1999. ‘He understands that we can’t pay Iraq direct but he says he wants to tell me personally when I see him how it should all operate.’ All of which was well and good – ‘but, as I said to him, we have a vessel arriving before we see him and the IGB will not discharge until money is received’. Zuhair told him not to worry so much: why couldn’t AWB just pay the money directly to Alia? Al-Absi had supplied them with banking details, so what was the problem? With ships bearing down on Iraq’s port, they really had no choice, so Emons told Watson to pay 90 per cent of the fee, or US$10.80 per tonne, to: Alia for Transportation and General Trade Account No: 6/108372012/2 Arab Land Bank Jordan


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THE KICKBACK

‘I know this is a little too direct but he assures me that it is a one-off,’ Emons said. But many of AWB’s executives were uneasy. There was no contract between Alia and AWB, nothing that set out even the most basic conditions. Alia hadn’t put forward any credentials, other than a letter claiming that it was an agent for Iraq. The idea of sending huge amounts of money to a company without knowing these things seemed, on the face of it, ridiculous. How could AWB guarantee that the cash wouldn’t just disappear? Then, on 24 November 1999, the issue came to a head in the most dramatic way. Alia sent a fax to Emons at AWB. It was marked: ‘Fax Massage. Top Urgent’. One of the ships carrying Australian wheat – Pretty Ruby – was bearing down on the Iraqi port of Umm Qasr. The $12 trucking fee – US$504,000 – had not been paid. The money was supposed to be paid five days before a vessel arrived at Umm Qasr. If it wasn’t immediately paid, the ship would be sent back to sea, creating a disaster of unimaginable proportions. ‘You are kindly requested to, for our us, urgently with the bank transfer detail,’ said the broken-English fax from Alia. ‘Your prompt attention in this matter well be highly appreciated.’ And so the fee was paid and the deal went through. And, just like that, the UN oil-for-food program received the first of many blows from which it could never recover. AWB was on its way to becoming the largest single supplier of food to Iraq. It had set up a mechanism that would secretly inflate the prices on all its contracts. It would send fraudulent invoices to the UN, which would pay the inflated price, and the extra money – tens and then hundreds of millions of dollars – would be kicked back to Saddam’s regime. To hide the scam, there would be no contract between AWB and Alia; no negotiation on price; and no debate, ever, between Alia and AWB over the service that was being provided for this fee. It was a simple scheme, but one that had the capacity to completely undermine the sanctions regime. Over time, the trucking fee would


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28

rocket from $12 to $15 to $25 and then to more than $50 a tonne. In fewer than four years, AWB would shovel more than $290 million to Saddam Hussein’s coffers, even as Australian troops were preparing to go to Iraq. Australian wheat farmers – most of them honest, hard-working men and women – would be kept in the dark, told only that AWB had cracked open the Iraq market and was making a motza there. The Howard government would be deceived. Saddam would be so pleased with the scam he would buy unprecedented amounts of wheat from Australia, making heroes of AWB’s men on the Middle East desk and their managers. Never for a moment – at least not then, when it all started – did it cross the minds of anybody at AWB that what they were doing was immoral, as well as illegal. There is no evidence that anybody stood up, at any point, and said: ‘Wait. Is this right? Or is this horribly wrong?’ On the contrary, in the years that followed, the only thing that seemed to matter was that AWB keep paying the fee – and not get caught.


12/4/07 10:49:22 AM

CHAPTER 3

All trade is competitive – and then there is the international grain trade, which is absolutely brutal. Consider the stakes: Australia sells around $4 billion worth of wheat annually and it supplies just 15 per cent of the world’s market. Canada grows wheat of a similar style and standard and, where possible, it is happy to take market-share from Australia. So, when the Canadians heard that Australia had signed a monster deal with Iraq late in 1999, they did not think, well, there goes that market. They thought, let’s get in there and see if we can’t undercut the Aussies. They knew it wouldn’t be straightforward. There was a horrible journey to Baghdad to make, and at least two nights in the notorious Al-Rashid. But the oil-for-food program made things more attractive: Iraq was buying a lot of wheat and the United Nations would guarantee that suppliers were paid. The Canadians decided to go in to see if they could capture a slice of the market for themselves. In the process, they came close to exposing the giant, Australian kickback scam, just months after it started. The Canadians found the Iraqis quite willing to do a deal, provided one condition was met. The Canadians would have to build a trucking fee – US$14 a metric tonne – into the price, and kick the money back to Iraq. Like the Australians before them, the Canadians did the maths: the Iraqis were asking for US$700,000 in cash for a basic 50,000-tonne wheat shipment. Like AWB, the Canadian Wheat Board wanted to know how to pay the money back to Iraq. Wouldn’t a direct transfer into an Iraqi bank account be banned under the UN sanctions regime?


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Zuhair told them not to worry: all suppliers were doing it, he assured them. Even the Australians were doing it. The Australians were doing it? Then perhaps it was legal. The head of the Canadian Wheat Board, Jean Benoit Gauthier, decided to find out. It was 19 December 1999 – just a few days before the long Christmas break – but the idea of securing a big wheat deal with Iraq was attractive. Everybody wanted to know whether it could be done. At Canada’s permanent mission to the UN, a diplomat, Lieutenant Colonel Berne Saunders, promised to call the UN’s Office of the Iraq Program to find out whether it was possible to pay money to Iraq. He put in a call to John Almstrom, who was then serving as the director-chief of the contracts processing section of the UN’s Office of the Iraq Program. Lt Colonel Saunders told Almstrom that Iraq’s government – that is, Saddam Hussein – wanted Canada to put $700,000 into a Jordanian bank account ‘to cover the transportation costs to Iraq’. Almstrom was amazed: he told the Canadians that this was strictly forbidden, since all payments had to be paid through the Iraq escrow account in New York. If Iraq was able to get money directly from suppliers – well, what was the point of the sanctions? After Christmas – specifically, on 4 January 2000 – he asked one of his staff, the chief customs expert Felicity Johnston, to investigate the matter. Johnston, an earnest strawberry-blonde, was not, strictly speaking, a UN diplomat. She was officially employed by the British Foreign Office, and she had been seconded to the UN specifically to work on the oil-forfood program. Almstrom explained the situation: Canada was trying to secure a contract with Iraq, but the Iraqi Grains Board wanted them to pay a trucking fee, up front, in cash, into an Iraqi bank account in Jordan. Johnston immediately saw the ruse. This was a scam by Iraq to get access to hard currency, which was precisely what the sanctions were designed to prevent. On 13 January 2000, she telephoned Lt Colonel


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Saunders at the Canadian mission and told him there was no way the Canadian Wheat Board could do it. Lt Colonel Saunders was understandably annoyed. ‘That’s what we thought,’ he said. ‘And that’s why we were very surprised to hear that the Australians are already doing it!’ ‘The Australians?’ queried Johnston. She seriously doubted it. Australia was one of very few Western countries dealing with Iraq under the oil-for-food program. Australia wasn’t Syria; it wasn’t Jordan; it wasn’t Egypt. It was a Western democracy, bound by the rule of law. Also, at that very moment, the Australian Government was passing important new legislation that criminalised the payment of bribes to foreign officials. Everybody at the UN knew about it, because such laws are so rare around the world. Johnston asked a member of her staff to ‘bring me the most recent Australian contract, so that I could review it’. According to evidence later presented to the Cole inquiry, Johnston was handed an AWB contract dated 14 October 1999 – by chance, it was one of the last AWB contracts to be absolutely clean. It had no kickbacks built into the price, and the strange clause covering the trucking did not appear. It was a lucky break for AWB, because the four contracts that did contain kickbacks were also in Johnston’s office. Years later, when testifying at the Cole inquiry, Johnston would admit that she didn’t notice the irregularity when those contracts first came across her desk. She had been working for the UN for a short time; she had very little training; she had not been told to be on the look-out for these kinds of kickbacks; and she was also keen to get food into Iraq. ‘Wheat [was] considered of paramount importance within the food basket, and food contracts were always considered to be the most important contracts,’ she said. After reviewing the contract, Johnston called Australia’s permanent mission to the UN, based on the 33rd floor of a bland office building at


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150 East 42nd Street, opposite New York’s Grand Central Station. Australia’s UN ambassador at that time was a veteran diplomat (and soon to be Paris ambassador), Penny Wensley, but Johnston spoke only to her regular contact, a young, keen diplomat with the title of first secretary and the pretty name of Bronte Moules. To understand the role that Moules would come to play in the kickback saga, it is important to understand her background: like Johnston, she believes passionately in public service. As a student, she was dux and head girl at Abbotsleigh, the North Shore school for Anglican girls. From there, she went to university, where she was precisely the kind of girl that the Department of Foreign Affairs and Trade targets in its annual recruiting campaigns: modest, sensible, intelligent and privileged. Girlish in appearance but steely in resolve, she kept her wayward fringe back with a child’s hair clip. Johnston and Moules spoke to each other several times a month, and Moules normally kept notes of those conversations. However, she would later tell the Cole inquiry that she didn’t have a handwritten note of the important conversation she had with Johnston on 13 January 2000. Johnston told Moules that there had been a complaint made about the Australian Wheat Board, an allegation that AWB was paying money to Iraq outside the oil-for-food program. She asked Moules to make some ‘discreet, high-level inquiries’ of AWB and to bring the matter to the attention of the federal government. Later, she told her boss, John Almstrom, that she had told Canada that ‘money should not be paid into a Government of Iraq bank account’. Almstrom received the note on or about the day it was written – 13 January 2000. By this time, he had also alerted his own boss, Benon Sevan, to the possible corruption. It’s not clear whether Sevan ever bothered to reply to Almstrom, but it’s extremely unlikely. Sevan – a Cypriot who had started work for the UN in 1965 – was himself involved in some deals with Iraq, involving transfers of around $147,000 to his own bank accounts. (Years later, when the UN investigated these deals,


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Sevan would say the money came from an elderly aunt. When the UN team arrived in Cyprus to interview the elderly aunt, she’d unfortunately fallen down an elevator shaft and died, and was therefore unable to give evidence in his defence, when he was finally charged with bribery and corruption offences in New York in 2007.) Moules put down her end of the telephone and wrote the first of what would later become a series of cables to Canberra, alerting all and sundry to the possibility that AWB was corrupting the UN oil-for-food program – cables that were, unfortunately routinely ignored, or left unread, or never opened, or read and dismissed as nonsense, or filed away, never to be looked at again. But Moules wasn’t to know that: she thought the information would be taken seriously. Her first cable, dated 13 January, 2000, was headed: ‘Secret. Oil for Food Program. The following contains sensitive information’. ‘We were contacted today by the Office of the Iraq Program,’ Moules wrote, ‘… who wished to draw to our attention information they had received about possible irregularities in the way the Australian Wheat Board may have received payment for wheat supplies to Iraq under the oil-for-food program’. Moules told DFAT that another nation – she did not yet know it was Canada – tried to negotiate a contract to sell wheat to the Iraqi Grains Board but had been asked to pay a fee of $US14 per metric tonne (or around $700,000) ‘outside the oil-for-food program’. She noted that the plan was to have a ‘slightly inflated price’ and to kick the extra money back to Saddam’s regime. Moules told DFAT that Iraq intended to supply ‘details of a bank account outside Iraq – in Jordan – into which the additional money was to be paid’. She suspected what Iraq was up to, saying, ‘In short, it appears to be a system designed to generate illegal revenue’ in US dollars. In an extraordinary example of insight, Moules also referred to the scam as a ‘kickback scheme’.


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She did not say that the kickback was disguised as a trucking fee but, even without a reference to trucking fees, Moules’s 13 January 2000 cable was an extremely good description of Saddam Hussein’s program of compulsory kickbacks designed to generate billions of dollars from suppliers. Three years before the war in Iraq; five years before a former US central banker, Paul Volcker, named AWB as the largest single supplier of illicit funds to Iraq; six years before Australia’s own Cole inquiry blew the lid off the scandal, Bronte Moules laid the whole thing out for the Howard government, in a diplomatic cable. Did anyone pay attention? No. Moules’s cable was addressed to more than 30 officials in DFAT and the Prime Minister’s department. But it arrived in the middle of the summer holidays in Canberra. DFAT secretary Ashton Calvert was on leave, so the cable went to Calvert’s deputy, Miles Kupa, and to three other deputy secretaries: David Spencer, Joanna Hewitt and John Dauth (a former private secretary to Prince Charles who, by happy coincidence, was just months away from taking up a new post as Australia’s ambassador to the UN, based in New York). Moules had explained that the UN expected Australia to make ‘discreet, high level’ inquiries about the allegations against AWB. In other words, the UN was taking the matter seriously and expected the Australian Government to do the same. Did this actually happen? It did not. On the contrary, the allegations against AWB were almost immediately dismissed as nonsense. The task of investigating the claims (the word ‘investigating’ is used loosely here) fell to one Dr Robert (Bob) Bowker, a mid-ranking diplomat who was then head of DFAT’s Middle East branch. In some ways, this was fortuitous – especially for AWB. Bowker was something of a specialist on Middle East and Islamic issues. He had joined DFAT in 1971 (it was then called the Australian Department of External Affairs). His overseas postings had mostly been in Muslim nations: Kuala Lumpur, Jeddah and


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Damascus. He was a former ambassador to Jordan, and he had been a scholar at the Australian National University’s Centre for Middle East and Central Asian Studies. Like anybody who has worked in the Middle East – or for that matter who has ever tried to walk down the main street in Cairo – Bowker knew corruption was rife in the Middle East. Kickbacks were common, and the payment of baksheesh often compulsory. Bowker could – and often did – talk endlessly about it, telling (and re-telling) witty stories he picked up over the years. Most of all, he liked to tell the story about an Arab official at an unnamed port who put his hand inside his coat pocket, pulled out a rat, dropped it into a pile of freshly delivered wheat, and said to the importer: ‘Look, why don’t we start some negotiations about compensation for that contamination?’ Despite this, Bowker told Moules in a cable that it was ‘unlikely’ that AWB would be ‘involved knowingly in any form of payment in breach of the sanctions regime’. Years later, Bowker would admit to the Cole inquiry that he sent this cable without actually raising the allegation with AWB, or, indeed, with anybody. Senior counsel John Agius asked him: ‘You sent [that response to Moules] without having contacted anybody at AWB about the inquiry, is that right?’ ‘Yes,’ said Bowker, with no embarrassment at all. Agius: ‘You were really expressing a personal opinion?’ Well, yes. Agius was curious about this, prompting Bowker to launch into an eight-minute monologue, saying he had lived and worked in the Middle East; written books about the Middle East; lectured on the Middle East; and he knew that AWB had an ‘enviable reputation for integrity in the Middle East’ and would therefore be ‘unlikely to jeopardise that reputation’ by getting involved in corruption. Still, the UN had asked for an investigation and so Bowker set about conducting one. About one week after receiving Moules’s cable (and after he had already dismissed her concerns in a cable of his own), he raised


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the matter with AWB. Not with the CEO, Andrew Lindberg, or with the chairman, Trevor Flugge, but with a junior executive carrying the title of government relations manager, Andrew McConville. Over the telephone, he asked McConville whether it could be true that AWB was funnelling money to Iraq. McConville’s reply was: ‘This is bullshit.’ Now, at this point, Bowker could – and certainly should – have said: ‘Well, let’s kill off the rumour, shall we. Could you please send me a copy of any formal or informal agreements that you have with Iraq and a list of your recent prices. I am going to need to know how the prices are set and whether any extra fees are included, or else let me speak to somebody in your legal department, and let’s make sure everything is running how it should.’ But Dr Bowker did not do that. He did not ask for copies of the contracts with Iraq. He did not request a breakdown of prices. He did not ask to speak to anybody in AWB’s legal team, or to any member of the senior management or the board. He did not refer the matter to anybody higher up the chain of command at DFAT. He did not consider asking AUSTRAC – the agency that monitors the movement of large sums of money from Australia – to run a discreet search, nor did he think to notify the Australian Federal Police. Instead, he took Andrew McConville’s answer as the last word on the matter. He put down the telephone. It would be years before he let the matter trouble him again.


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CHAPTER 4

The first of January 2000 marked the beginning of a new century in the Western world – and the start of a new regime at the Iraqi Grains Board. On that day, genial old Zuhair Daoud was replaced by his deputy, Yousif Abdul Rahman. Zuhair wasn’t yet dead – that event was still a few months away – but he was moving into a new role, directly under the minister for trade. Like Zuhair, Yousif was a member of Saddam’s Ba’ath Party and he was close to Saddam’s regime. Some thought he might even be one of Saddam’s many ‘cousins’. He did not have an agricultural background; he was an engineer from the Ministry of Oil, slotted into the gap created by Zuhair’s upward move. Over time, he would develop a reputation for being ‘something of a prick’, as one insider put it – ‘You couldn’t trust him as far as you could throw him’. He would back out on his word and pretend he had forgotten things he had approved. And, when it came to kickbacks – well, he just loved the idea that Saddam’s regime had found a way to generate hard currency, in the form of kickbacks. He wasn’t frightened to remind AWB that the minute the kickbacks stopped, the trade would stop, too. AWB understood: on 20 January 2000 – two days after Bowker assured Moules that no kickbacks were being paid, and 20 days after Yousif took the reins at the Iraqi Grains Board – AWB signed three more contracts (numbers A4970, A4971 and A4972), all of them with a kickback included in the price. Yousif was pleased. He told Emons that he could easily send more deals Australia’s way, especially if AWB would agree to pay an even higher trucking fee: $15 instead of $12.


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Emons was annoyed. As he later told the Cole inquiry, he didn’t ‘particularly get on very well’ with Yousif, and he was exasperated by his constant demands for cash. Solicitor Miles Condon, assisting John Agius SC, asked him: ‘What did he say to you about the $15?’ In other words, why had the fee suddenly gone up, from $12 to $15? ‘I just remember him saying, “The trucking fee will now be $15”,’ Emons said. ‘Did he explain why it would increase?’ asked Condon. ‘Well, I think I countered by saying … “Why would we be paying more?”’ ‘What was his response?’ asked Condon. ‘I believe it was something like: “You will pay $15”.’ Emons said he talked to a range of people at AWB about the increase (among them, his boss, Nigel Officer), also speaking ‘to the people who were executing the contracts, to the accounting department … the person in charge was Paul Ingleby – he was the chief financial officer. I had had some discussions with him about it; Terry Aucher and Graham Owen’. Now, any one of these people could, of course, have raised the alarm at this point and said, wait, there’s no reason for the fee to suddenly increase. Instead, they shrugged, sighed and agreed to pay the money. In a meek fax, Emons confirmed the details of the new deal, saying: ‘AWB Ltd agrees with the terms of the contract that a trucking fee of USD 15 per tonne will be paid on the three contracts of 300,000 tonnes each’. AWB had no way of knowing – at least, not then – how close it came to being exposed in those early days of the kickback scam. It wasn’t yet aware that Felicity Johnston at the UN had started an investigation into the matter – or that she was in the process of taking it straight to the federal government. On 7 February 2000, the UN’s John Almstrom had raised the possible irregularities in AWB’s contracts a second time, saying: ‘We may have stumbled across a case of sanctions evasion.’ Johnston had fished more


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of AWB’s contracts out of her files, including at least one dated October 1999 that contained a reference to the $12 trucking fee. In March 2000, she also attended a routine meeting with an Austrade commissioner, Alistair Nicholas, who was based in Washington DC and had the task of encouraging small, medium and even large Australian companies to find new markets, export Australian goods and increase the nation’s wealth. Johnston told Nicholas that a third country – she didn’t say Canada – had made serious allegations about the Australian wheat exporter and that she had raised the matter with Australia’s permanent mission to the UN but hadn’t received a sufficient response. At the Cole inquiry, Agius asked Nicholas: ‘Did it appear … that she was frustrated that the Australian mission hadn’t got back to her?’ ‘I would say yes, she was frustrated that she hadn’t received a response,’ Nicholas replied. ‘And that provides the explanation as to why … she was taking the unusual course of going via Austrade?’ ‘Yes.’ Nicholas naturally wanted to know who was making the allegation, but Johnston would not say. She explained only that it was a country that wanted to sell wheat to Iraq. They had been told they had to pay some kind of fee into a bank account in Jordan and, when they refused to do it, Iraq refused to deal with them. For his own reference, Johnston gave Nicholas a copy of one of AWB’s ‘short-form’ or basic contracts with Iraq and told him there were ‘clauses within that short form contract that were of concern to the UN’ – namely, the clause relating to ‘discharge’ (or trucking) and a second clause that seemed to refer to terms and conditions not actually included in the contract. She asked Nicholas whether he could get a copy of AWB’s ‘longform’ contracts so she could examine them. Nicholas told her that he would see what he could do. He was vaguely aware that an AWB delegation, including the chairman, Trevor Flugge, was


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on its way to Washington DC. He called AWB’s United States manager, Tim Snowball, at his office in New York, to set up a time. Snowball would later say that he remembered only that Nicholas was ‘urgently wanting to meet Trevor with not a lot of explanation as to the purpose of the meeting’. The meeting took place on 9 March 2000. Snowball flew from New York to Washington, to watch the sparks fly. ‘Alistair [Nicholas] indicated there was a big problem around the trucking fee and some exposure,’ Snowball said. ‘Canada and the US were questioning something in the UN – his intent was to warn us to do something about it.’ Flugge’s memory – if it can be so described – was very different. ‘I believe that obviously a meeting took place,’ he told the Cole inquiry. ‘It was a relatively short meeting. ‘We had eight meetings prior to my meeting with Mr Nicholas; we had another meeting to attend and then we had a dinner at the [Australian] embassy,’ Flugge said. ‘The next day we had another series of meetings. Clearly, my mind was on dealing with other issues that I was actually in Washington for. My Washington visit had absolutely nothing whatsoever to do with a meeting with Austrade. That was an opportunity that this gentleman took to seek a meeting with me.’ As it happened, meetings were something that Flugge very often attended. An example: just ten days or so before he met Nicholas in Washington DC, he had a meeting with the then agriculture minister, Warren Truss. The two men had known each other for years, and they often got together to discuss the wheat trade. Naturally, when it became public in 2006 that Flugge had, in the same ten days, attended both a meeting with the Austrade commissioner in Washington DC where allegations of corruption were discussed and, prior to that, a meeting with the agriculture minister in Canberra – well, reporters wanted to know what was discussed. Did Truss know that the UN was investigating the matter? Did he raise it with Flugge?


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Both men are adamant: neither the problem of the trucking fee nor the UN’s sudden interest in AWB’s business in Iraq was raised at the Canberra meeting. According to Truss’s office, the topic of conversation on 1 March 2000 was ‘climactic conditions’ or, perhaps, ‘the size of the wheat harvest’. What about Iraq? Was it discussed? An official close to Truss, who spoke on the condition of anonymity, confirms that it ‘obviously came up because Iraq was a big customer’. But did Flugge raise the issue that was forefront of the mind of everybody who worked on the Iraq market? The fact that the UN was meddling in AWB’s business and threatening to scuttle deals worth tens of millions? Flugge says no – and he insists that trucking wasn’t discussed at the Washington meeting with Austrade’s Alistair Nicholas, either. ‘It would have raised a red flag,’ he said. ‘I don’t recall anything of that nature.’ Nicholas agreed. He told the Cole inquiry that he didn’t raise the issue of trucking, only that the UN was concerned about ‘irregularities in AWB contracts’. He told Flugge there would be consequences if AWB did not hand over copies of its contracts with Iraq. On 10 March, he telephoned Bronte Moules at the UN mission and told her the same thing: the UN wanted copies of the contracts. The diligent Moules immediately cabled the information back to DFAT. This cable, dated 10 March 2000, was addressed to Foreign Minister Alexander Downer, Trade Minister Mark Vaile, their departments and a range of other Canberra bureaucrats. It referred specifically to ‘possible irregularities in the way AWB may have received payment for wheat supplied to Iraq under the oil-for-food program’. Moules said the UN had ‘recently noticed that the standard contract used by AWB and the Iraqi Grains Board contained a paragraph which implied additional conditions were attached to the contract, but not


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included in paper submitted to the UN’. The UN thought there was a ‘question mark’ over the matter and it needed to be resolved. She said AWB had insisted ‘this was not an issue’ but the UN was insistent: it wanted a copy of AWB’s contracts with Iraq and ‘if for some reason it is not possible to provide a copy … we/AWB would still need to provide some assurance’. The next day, Nicholas sent his own cable back to Canberra, addressed to Austrade’s managing director, Charles Jamieson, and his deputy, Peter Langhorne, expressing similar concerns. This cable said UN staff had raised concerns with him about ‘irregularities’ in the AWB contracts, and that Felicity Johnston was complaining about an ‘insufficient response’ from Canberra. ‘Johnston emphasised that it is imperative this matter be put to rest,’ Nicholas wrote, otherwise the third country, Canada, might complain directly to the UN’s 661 sanctions committee. More than 50 of Australia’s diplomats, officials and bureaucrats in New York, Washington and Canberra had now been made aware of the ‘allegations’ or ‘irregularities’ in AWB’s contracts. The wheat exporter could feel pressure building. Snowball emailed Emons in Melbourne to tell him that the UN had alerted the Australian Government to potential problems with the Iraq deals. He wrote: ‘Alistair mentioned that someone at the UN was asking him quietly/informally about payments AWB was making to Iraq for discharge/trucking.’ He continued by saying ‘We played down the issue and said we would look at the UN request’. Snowball had, by then, already spoken to Moules at the UN mission, and she had told him that yes, AWB would have to come up with its Iraq contracts. He told Emons: ‘If all the UN wants is some understanding on standard terms and conditions in AWB contracts, then I think we have nothing to worry about.’


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But he warned Emons to ‘provide something to DFAT when they contact you’. He was obviously upset that Nicholas was trying to interfere, saying: ‘I deal solely with Bronte on UN/Iraq and see no role for Austrade. Alistair is always trying to participate … We do not want Alistair sticking his nose into our Iraq business and causing us problems.’ Agius asked Snowball at the Cole inquiry: ‘Why did you say “If all the UN wants is some understanding I think we have nothing to worry about”?’ Snowball said: ‘I don’t know, sir. I really don’t know.’ Others at AWB who were in the loop probably could have provided an explanation: AWB had nothing to worry about because the kickback wasn’t hidden in the standard terms and conditions. It was built into inflated prices, hidden behind a nebulous trucking clause. Still, Emons was furious about the apparent leak to the UN. He suspected that Yousif had told Canada about the trucking fee, probably in an effort to get the Canadian Wheat Board to pay a similar fee. In a fax to Baghdad on 15 March 2000, Emons let fly, saying: ‘We wish to advise that the office of AWB Limited in New York has been approached by the United Nations. They are questioning the payments by AWB to the Jordanian trucking company’. He continued: ‘We are VERY concerned to learn from the UN that the Canadian government has taken action within the United Nations to discover the manner of AWB payments’. Emons warned Yousif: he wanted no more ‘confidential information’ to be released. Yousif apparently got the message because, on the same day, AWB received an awkwardly worded and misspelt fax back from Iraq, saying: ‘UN Equirey concerning trucking fee. We received with tks your fax ddt 15 March 2000 and we are pls to inform you than the necessary action already have been taken regarding this matter’. Had somebody been taken out and shot? It isn’t clear. Emons knew that AWB would have to supply something to the UN.


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On 31 March 2000, he wrote an email explaining that AWB’s business with Iraq was all above board and normal. And yet, around the same time, on 1 April 2000, AWB’s chartering manager, Michael Watson, was sending an email to Alia, saying: ‘The trucking fee will be US$15’. On 3 April 2000, Snowball sent Bronte a copy of the terms and conditions in AWB’s contracts. He again assured her that AWB was not paying kickbacks. Moules passed the contract to Johnston at the UN and two days later, Johnston closed the file. She would later tell the Cole inquiry, ‘AWB was denying that any payment was taking place outside the Oil for Food system’. ‘Did you form the view that the USD $12 per tonne payment was in fact not being made?’ Agius asked Johnston. ‘I did.’ ‘Did you have a concluded view that AWB was not making payments to Iraq?’ [emphasis added]. ‘I did.’ Moules told Canberra that the UN had agreed that the terms and conditions supplied by AWB ‘clarifies the matter’. Snowball told Emons that the ‘UN has now confirmed that everything in the contract is fine and there is no issue’. So, problem solved, or so it seemed. But it had been a close shave and so, soon after the UN started poking around, AWB dropped the kickback clause from its contracts. Those incriminating words ‘The cargo will be delivered free in truck …’ would never again appear on any contracts forwarded to either DFAT or the UN. When Emons was asked about this at the Cole inquiry, he said he couldn’t remember who decided to chop the words out of the contract, but he certainly remembered why it was done. ‘We didn’t want to advertise the fact [that we were paying a kickback],’ he said. ‘Was it your understanding at the time – that is, in early 2000 – that


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the reason those words were removed was to prevent the fact of payments being made from being advertised?’ Agius asked. ‘That would make sense,’ he agreed. As an extra precaution, AWB also set up a new payment mechanism. Instead of sending the trucking fee directly to Alia, as it had done for the first bloated contracts, the money would be funnelled through a London-based grain-trading company known as Ronly Holdings (where, by chance, Trevor Flugge’s daughter, Felicity, would soon be employed. Flugge introduced Felicity to one of Ronly’s Turkish-born managers, Nori Bali, at a cocktail party prior to a dinner at the International Grains Conference in London in June 1999, and they apparently got on well). On 7 March 2000, Emons told Ronly that AWB was required to pay US$15 a tonne ‘for trucking in Iraq’. ‘This is the twist,’ he said. ‘Under UN/Australian policy, no payment can be made directly to Iraq.’ He said a shipping company had agreed to make the payments on AWB’s behalf but ‘ran scarred [sic] of getting caught up in sanctions’. Another had concerns about ‘money laundering’. But AWB still needed a third party to ‘handle the freight and trucking as an item. This not only saves us time but does disguise the fee’. For this service, Ronly would take a fee equal to 20 cents a tonne. In years to come, AWB’s executives – Emons, Watson, Hogan and others – would be asked whether they were on a ‘frolic of their own’, vis-avis the trucking fee. In other words, did management instruct them to do whatever was necessary to keep the Iraq trade on track? Or did they just do what they thought was necessary to keep the deals alive? On 4 April 2000, for example, Emons told Watson in an email that he had ‘a discussion with Trevor Flugge last week to discuss some finer points’ of the trucking fee. ‘He is happy for us to carry on,’ Emons wrote. ‘In fact, he is determined we should be accommodating to the Iraqis so our business does not come under threat.’


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Also, on 30 April 2004 – many years after the first kickbacks were paid – Chris Quennell, a lawyer from the Melbourne firm Blake Dawson Waldron, interviewed Flugge about the trucking fees. His notes from that interview have Flugge saying: ‘Effectively we paid money back to IGB … we paid it back through Ronly … They paid Alia … I thought it was approved by the UN … I have no idea where the money actually went … IGB had no money … needed source of income … UN weren’t saying don’t pay, but this is how to pay’. At the same time, perhaps feeling the heat from the UN, AWB seemed to be trying to wriggle out of paying the fee. On 7 April 2000, Emons wrote to Yousif: ‘When I am in Baghdad, we need to discuss the position of the UN on the trucking fee. ‘You will be aware of the restrictions the UN has placed on such payments,’ he said. ‘And as you are aware, this now means that we must halt further payments.’ Emons would later tell the Cole inquiry: ‘We were getting very frustrated’ and also that the fax was ‘fairly threatening’. Agius asked him: ‘What you were threatening was the reporting … of the whole system [to the UN]?’ ‘Correct,’ said Emons. AWB was threatening to dob Iraq into the UN. ‘We would make the UN aware completely of the trucking arrangements,’ he said. Of course, AWB could do no such thing, not without blowing the whole deal to pieces. It was a threat and it worked. A few days later, a delegation from AWB began the long journey back to Baghdad. They stopped first in Amman, where they met, for the first time, Alia’s managing director, Othman al-Absi. They complained about how long it seemed to take to unload ships of wheat. Al-Absi promised to look into it. The following day, 15 April 2000, Emons and Watson travelled to Iraq, expecting to meet Yousif Abdul Rahman. Instead, they again found themselves in the company of the charming Zuhair, and his assistant, Miss Moona (who claimed that Yousif couldn’t make the meeting because he was travelling). They also met the Iraqi trade minister, Mohammed Medhi


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Saleh, in his office. As often happens in Iraq, nobody bothered to turn off the TV, nor to stop smoking, while the meeting was under way. The TV was tuned to the Iraq news. US fighter planes were bombing a target in Northern Iraq. Civilians were shown bleeding and screaming. Yet, despite these alarming images, Saleh was calm and business-like. Saleh told the Australians, through curls of cigar smoke, that Iraq was not buying any wheat from Canada, and that AWB was now the sole supplier of wheat to Iraq. Watson dragged his attention from the TV. ‘But, you know, we can always change our minds,’ said Saleh, tapping his cigar. ‘We can always decide that actually, we do want to buy Canadian wheat. We can even buy American wheat.’ Watson wasn’t sure whether to laugh or cry. The TV was still showing the Americans bombing the bejesus out of Iraq. Saddam was going to buy US wheat? He didn’t think so. Notes of the meeting, taken by Emons and Watson, show that Saleh complained about Australia’s failure to open an embassy in Baghdad. He droned on about US and Australian foreign policy, criticising Australian Prime Minister John Howard. He told Emons that the port at Umm Qasr had been seriously damaged in the 1991 war. Iraq needed new equipment to fix the wharf but the UN had refused. Emons could see what was coming: Iraq was going to ask AWB to donate wire cabling, bobcats and other bits and pieces to the port. It was small beer to AWB: its contracts with Iraq were worth hundreds of millions a year. A top-of-the-range bobcat cost around $25,000; wire cabling was peanuts. The meeting was over in less than a day. The next afternoon, Watson told his boss, Nigel Officer, that things had gone relatively smoothly for AWB. He noted that ‘Canada, definitely not in their good books’. Well, no. Canada wouldn’t pay trucking fees. Canada had raised the matter with the UN. Canada was now seen as a trouble-maker. A few weeks later, on 30 May 2000, Watson and Emons returned to


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Baghdad, where they were finally allowed to meet Yousif, and had dinner with Saleh – an event that Emons knew would take hours and involve another stultifying lecture on Australian foreign policy. There was a joyful moment, however. Zuhair popped in to the restaurant. By now, he was just a couple of months away from death but if he knew of any plot to bring him down, or to steal whatever he had managed to accumulate while in Saddam’s service, he didn’t show it. ‘My friend!’ he said to Emons, grasping the Australian by the hand. ‘I understand that you are still having problems at Umm Qasr?’ Emons nodded. He told Zuhair that AWB was willing to provide the wire cables and new gearing mechanisms and whatever else was needed to get the wheat moving but wanted Iraq to speed up the unloading of Australia’s wheat, from 12,000 tonnes a day to 15,000 tonnes a day, and then to 22,000 tonnes a day once the new equipment arrived. Zuhair promised to pass the message back to the Iraqi government. And he must have done that because, a day later, as Emons was trying to cross from Iraq into Jordan, he was met by a team of excited border guards who refused to let him cross. ‘We could not proceed immediately for some reason,’ Emons told his boss, Nigel Officer, in an email after the event. ‘After some two hours, I was called to the phone.’ ‘Hello?’ he answered. It was the Iraqi trade minister, Mohammed Medhi Saleh. ‘Your Excellency?’ said Emons, his heartbeat quickening. ‘Is there a problem?’ A problem? No. It was just that Saleh suddenly wanted to offer AWB another million-tonne deal. ‘Needless to say, I agreed!’ said Emons and, with that, he paid another $100 to avoid the queue of oil-stained Arab truck-drivers waiting to have a compulsory AIDS test at the border, and slipped back into Jordan.


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CHAPTER 5

To look at Andrew Lindberg is to think: why does this tall, solid, successful businessman always look so glum? What’s with the sad eyes, the downward pull on the corners of the mouth, the very white hair that is thinning everywhere? The answer, it seems, is that he has never had it easy – or, at least, not for long. Lindberg was born in Scotland but migrated to Australia at age six. As a young man, he worked in a tannery, carted hay and spent time in the boning room of an abattoir. He studied science at the University of Melbourne and, after working his way through various management positions, he became chief executive of Victoria’s WorkCover Authority. The Victorian Labor Party was then in opposition; Jeff Kennett was the premier. In parliament, the Labor member for Niddrie, Rob Hulls, produced documents showing Lindberg spent $34,646 on entertainment, transport and accommodation between 1992 and 1998, and more than $100,000 on overseas and interstate trips. Hulls told the Age at the time that Lindberg lived ‘a lifestyle that would make Australia’s richest 200 people blush’. When Kennett lost the state election to Labor’s Steve Bracks in 1999, Lindberg resigned as WorkCover chief, citing an inability to work with the new government. As the Age noted, that was not surprising: as Opposition leader, Bracks had gone after Lindberg, calling for his head in July that year. Cynics noted that Lindberg’s resignation came just one week after WorkCover announced a massive budget blow-out of $176 million for the previous year.


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Lindberg was not unemployed for long. In April 2000, he was appointed chief executive officer of AWB, replacing Murray Rogers. It was an exciting time: AWB was just months from listing itself on the Australian Stock Exchange. Lindberg immediately initiated a management shake-up. He interviewed some 50 or 60 of the top executives and, on 5 June 2000, just months after arriving, he sacked many of them, including the general manager of international sales and marketing, Nigel Officer, who left on 9 June 2000. Lindberg started building a new team, using staff from WorkCover. He brought an old friend, Jill Gillingham, into AWB, to act as chief executive in his absence, along with Dr Richard Fuller as his company secretary. Lindberg also wanted his own man to head the international sales and marketing team. He briefly considered promoting Emons – indeed, for two weeks Emons was the acting manager of international sales and marketing – but ultimately decided against it. Instead, he made what was perhaps the worst appointment of his entire career. On 10 July 2000 he put one Charles Eric Stott up for the role. Now, Stott wasn’t exactly new to AWB. He started working for the Australian Wheat Board when it was still a government authority in 1983. Between 1988 and 1996, he managed the Middle East, Europe and Africa desk. He looked exactly like so many of AWB’s other wheat salesmen: tall, cheerful and bald, with an impressive tan, even in the middle of a Melbourne winter. He was also happily, clubbily Melbourne: married with daughters in good private schools, he had a home in the leafy eastern suburbs and a weekender in Sorrento; he was passionate about cricket and football (especially when watched from AWB’s private box at the MCG). Before the first Gulf War broke out in 1991, Stott liked to boast that he had more contacts in Baghdad than any other Western businessman. He had been to Iraq so many times that the staff at the Al-Rashid knew how he liked his coffee. He was the first Western businessman back into Baghdad after Saddam was defeated in 1991, landing just 48 hours after the US agreed to stop bombing. His first meeting had been with an old friend – the head


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of the Iraqi Grains Board, Zuhair Daoud – who told him: ‘I’m glad you’re here, because if we can’t get some food soon, our people are going to starve’. Before the 1991 war, Iraq had been buying huge amounts of wheat (although often not paying; AWB was owed about $400 million). Now, after the war, Stott assured Zuhair that Australian Prime Minister Paul Keating had authorised him to resume the trade, but how? Iraq’s bank accounts were frozen and it had no access to hard currency. ‘But we have gold,’ said Zuhair. ‘We can pay you in gold. Won’t you take gold?’ Stott said he would do what he could. It was an hour before he could get a line out of Baghdad to Canberra. He told DFAT officials that Iraq needed wheat, but had to pay in gold. It was a strange proposal, yet DFAT didn’t immediately rule it out. The trade with Iraq was an important part of the economy, and it kept the rural sector occupied. If Australia could pull off the deal, Iraq was likely to be grateful for a very long time. But could Australia accept payment in gold? Foreign Minister Gareth Evans said he would have to check – not with Prime Minister Paul Keating, who had already told AWB to do whatever was legal and necessary – but with the Reserve Bank chief, Bernie Fraser. As it turned out, Fraser had no real problem with the deal either, provided the gold could be weighed and valued. Stott was elated: he told Zuhair that Australia would accept the gold. But how would he get it from Baghdad to Canberra? The airport was still closed. ‘Trucks,’ said Zuhair. ‘We’ll do it in trucks.’ And so, in December 1991, a handful of Iraqi labourers, working under guard, began loading around $150 million worth of gold bullion into 200 straw-laden, wooden crates, which were then loaded into the back of a Mercedes wheat truck with just one driver, doubling as a security guard, at the wheel. At first, Stott wanted to travel with the cargo, but Zuhair said no. ‘There will be only one Iraqi in that truck,’ he said. ‘And you will wait for him in Jordan.’


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What if the gold never arrived? Stott was given no choice. He waited in Amman, pacing the halls of the hotel, checking his watch. The truck driver found the journey difficult. The load was heavy and he was sick with anxiety. Then, just 100 kilometres from the outskirts of Amman, disaster struck. The driver, fatigued and tense, made a wrong move. The truck slid backwards and became stranded on the side of the highway. It was two days before the Iraqi secret police arrived with a second truck, this time an old Bedford, and began transferring $150 million in gold bars from one truck to the next. Finally, the Bedford limped into Amman. Stott ran out of the hotel foyer, relieved. He wanted to take immediate possession of the gold. But the anxious Iraqi driver refused to complete the deal. ‘On whose authority do you act?’ he said. Stott told him that he acted on the authority of the Australian Government; that he was an employee of the Australian Wheat Board; and that the deal had been signed off by the Reserve Bank governor, Bernie Fraser. But it wasn’t enough for the Iraqi. He wanted something in writing. Stott was vexed – but then, suddenly, he had an idea. He pulled a bright orange bill from his pocket. It was a $20 note, and the signature on the bank note – Bernie Fraser – precisely matched the signature on the original fax. Stott had permission from the man whose name was on the money! The crates were transferred to the Australians, hands were shaken, a plane organised – and the gold was airlifted to Australia, where the Royal Australian Mint exchanged it for cash. A few years later, Stott was involved in another strange transaction, in which wheat was sent to Iraq not for money, but apparently for free. It happened in 1995. Iraq had been labouring under UN sanctions for five years but the oil-for-food program was not yet in place. There was not enough food to feed the Iraqi people, and Iraq had started begging. It concentrated its efforts on oil companies, telling them to donate goods and money in exchange for a pot of gold at the end of the rainbow: the right to explore Iraq’s oil fields once sanctions were lifted.


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Zuhair asked a BHP Petroleum (BHPP) executive, Norman Davidson Kelly whether BHPP would send $5 million worth of wheat Baghdad’s way. Davidson Kelly put the proposal to BHPP’s managing director, Bob Prescott, who wasn’t entirely convinced that aiding an ‘international pariah’ was a sound idea. Others within BHPP obviously felt the same. Internally, the plan was labelled ‘Project Italy’ so that nobody would know BHPP was, in fact, dealing with Saddam’s regime. BHPP also went so far as to draw up mock press releases, explaining that ‘eggs’ (wheat) had been sent to ‘Italy’ (Iraq) because the people were suffering under sanctions put in place by the ‘League of Nations’ (United Nations). The Department of Foreign Affairs and Trade in Canberra was informed about the deal and approved it, provided the wheat was sent by AWB as a ‘gift’, not a ‘loan’ – and with no strings attached. On Australia Day in 1996, the maritime vessel Ikan Sepat, carrying $5 million worth of Australian wheat, paid for by BHPP, set sail for Iraq. Shortly after the ship started unloading at the port of Umm Qasr, BHPP poached Stott from AWB. He started at BHPP on 13 March 1996, working under Davidson Kelly in the international sales arena. Both hoped the goodwill generated by the wheat shipment would mean BHP would soon be exploring for oil in Iraq. But the UN sanctions were not lifted in 1995. Instead, the UN Security Council passed resolution 986, establishing the oil-for-food program. Foreign companies were still nowhere near gaining the rights to explore Iraq’s oil fields. Over time, as it became clearer that there would be no business with Baghdad, Stott grew restless at BHPP. He had very little to do. He was alone in his office a lot of the time, or walking empty halls. One sad day, the cleaner asked him when he might be leaving the building, so they could turn off all the lights. When Andrew Lindberg rang to offer him a job back at AWB, as general manager, international sales and marketing, reporting directly to a new boss, Tim Goodacre, Stott jumped at it. But, just before he turned out his lights at BHPP, he shot off an email to Davidson Kelly, reminding him: ‘Norman, in January 2001, it is five years since BHP supplied the


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grain [to Iraq] and payment of US$8,052,550 becomes due. We need to start thinking about what we want to do … happy to discuss’. Davidson Kelly apparently agreed. He emailed his boss, president and CEO of BHPP, Philip Aiken, to say: ‘I don’t know how familiar you are with the details but there is a strong possibility that the Iraqis will owe BHPP a total of around US$8 million [US$5 million, plus interest] under a debt which crystallises in six months time’. Aiken – who never shared Kelly’s enthusiasm for dealing with Iraq – replied: ‘I never cease to be amazed. Will be fascinated to hear this one’. In fact, as everybody who was involved with the initial transaction knew, or should have known, there was no money owed on the wheat. It had been sent to Iraq as a gift, paid for by BHPP. But Davidson Kelly didn’t see things that way. He believed Iraq should pay for the wheat. He wanted the money. He wanted the interest. He told Aiken that he was setting up a new company – Tigris Petroleum, named after the river that runs through Baghdad – and he wanted this company to take over the old debt, to relieve BHPP of the strain of trying to re-coup the money itself. He also offered BHPP 25 to 30 per cent of any new deal he was able to strike with Saddam’s regime – Aiken agreed.

Upon his return to AWB, Stott was surprised to find that, never mind the sanctions, Iraq had become one of AWB’s biggest customers. In 1999– 2000, for example, AWB had sold a record 2.4 million tonnes of wheat to Iraq. AWB had, in effect, secured 98 per cent of Iraq’s wheat market – an inconceivable thing, even a few years earlier. Dominic Hogan, who had returned from Cairo to work in AWB’s Melbourne office, told him that Iraq was also an immensely rewarding market. ‘Oh, it’s fantastic,’ he said. ‘They buy a heap of wheat. The problem is, they are so bloody slow in unloading it. And the UN can be very, very slow to pay the bills.’


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CHAPTER 6

In all of human history there has never been a dictator who had quite enough money, and Saddam was no different. By the middle of 2000, he was making millions every month from kickbacks, but he wanted more. In August 2000, Iraq’s Command Council told the heads of all Iraq’s ministries that all suppliers, including AWB, would now have to pay not only the trucking fee, but also a new, special ‘after sales service fee’ – a flat 10 per cent in cash on top of the contract price. If any minister could extract a higher amount, this would be ‘commendable’. The ‘after sales service fee’ would be mandatory on all goods entering Iraq after phase VIII of the oil-for-food program (or from July to December 2000). Some of the money would be used to cover the cost of trucks, petrol and salaries for the truck drivers, but most would go straight back to Saddam’s regime, for him to use as he pleased. Had the fees actually been used for trucks and trucking, AWB’s wheat would have glided into Iraq as if on rails. But the opposite was true: ships arrived to find no place to berth. Cranes broke down. There weren’t enough trucks and those that did turn up were old, slow and small. It was frustrating – and expensive. When ships are held up in port, they attract demurrage (or fees for being held up when they could be on a paid run elsewhere) and AWB’s demurrage bills were huge. On his return to AWB, Charles Stott was amazed by the convoluted method that AWB had devised for paying the fee, which he would later tell Cole he believed was UN approved. Every year, tens of millions of dollars were being kicked from AWB’s coffers to a company called Ronly Holdings in London or through shipping companies such as Atlantic and Orient


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Shipping Company, which then kicked the money on to Alia in Jordan, which then kicked it on to Iraq, with everybody taking a little cut on the way. In August 2000, Stott put a stop to it. Not to the payment of the trucking fee – no, no, that would have to continue. But he started paying the money direct to Alia, with no stops and cuts along the way. Stott also arranged to travel to the Middle East with Dominic Hogan to meet his old friend Zuhair to discuss the trucking fee and the many problems getting wheat unloaded at the port of Umm Qasr. Before Stott left, BHPP’s Philip Aiken had provided Norman Davidson Kelly with a letter, transferring to Tigris ‘all rights’ to the money owed for the shipment of wheat that set sail on Australia Day in 1996. Aiken would later tell the Cole inquiry he only ever ‘glanced’ at the agreement; he just wanted to get rid of Norman Davidson Kelly and this seemed like a good way to do it. On 15 September 2000, a few days before Stott was due to leave for his first trip back to Iraq, Davidson Kelly emailed him, saying Tigris was an ‘Aussie-registered’ company (there is no evidence for this) that ‘enjoys the support of our friends at DFAT’ (or for this). Davidson Kelly wanted to know whether Stott would be prepared to help him recoup the $5 million – plus interest – that Iraq owed for the wheat shipped as a gift back in January 1996. He wanted Stott to get in touch with Zuhair and other Iraqis in the Ministry of Oil to explain that Tigris would be grateful – enormously grateful – if Iraq would pay the money back. Stott tried to call Zuhair to set up the meeting, but, horrifically, Zuhair had just days earlier been killed. Stott was stunned. He made several hurried telephone calls to contacts in the grain trade in London and Chicago, but it was the Russians who told him about the bullet holes in Zuhair’s car. ‘Zuhair had a unique car,’ Stott would later recall. ‘Most of the cars in Baghdad were dilapidated, but Zuhair, because he did many trips to Syria and Jordan, he had a unique car. One of the Russian traders reportedly passed the accident scene – he was going in to see Zuhair, and Zuhair – he


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said, it was no accident, the car was riddled with bullet holes and it was – everyone in the car had been killed. ‘I dismissed that at the time, because I thought that is – why would they – why would the regime kill Zuhair; it was nonsense; he had been in the business for many years, and it didn’t make sense to me at all.’ Hogan didn’t believe it, either. In fact, he heard quite a different story: Zuhair had been travelling in a GMC – a huge General Motors vehicle, of the type the Vietnamese rice traders liked to donate to Iraq. He was heading in from Syria, along the six-lane superhighway. There were three lanes either side. The driver was doing 160 kilometres an hour, not stopping for anything. The road surface was sizzling in the desert heat. The car blew a tyre and Zuhair – who, like most Arabs, just didn’t get the whole seatbelt thing – was unrestrained. He flew through the windscreen and the air, and was decapitated on the steel barrier that separated inbound traffic from outbound. His head bounced for a mile along the sealed road. ‘No conspiracy,’ Hogan said. ‘Baghdad was not that kind of place. If Saddam wanted to get rid of Zuhair, he would have got a visit one day, and he would have been walked away from home, and he would not have been seen again, and that would have been that. The idea that he was ambushed – well, it’s just not the way they did their executions.’

Charles Stott boarded the plane for Jordan – the first leg of his first trip back to Iraq since rejoining AWB – with a sense of melancholy and trepidation. The death of Zuhair changed everything. Like most people, he had a poor relationship with Zuhair’s replacement at the Iraqi Grains Board, Yousif Abdul Rahman. He hoped to solve the old demurrage problem. But the meetings in Baghdad did not go well. On 14 October 2000, Stott met with Iraq’s trade minister, Mohammed Medhi Saleh, who started by complaining that Australia’s wheat – the best, finest, purest wheat in the world – was too expensive.


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Stott hit back, saying the trucking fee was pretty expensive, too, and AWB didn’t seem to get any benefit from paying it. The demurrage costs were absurdly high. He said AWB wanted the fee reduced or the service at the port improved, or it wanted to put the money into a ‘demurrage account’ and only pay it to Iraq if the ships were actually unloaded on time. ‘No,’ said Saleh. ‘The trucking fee is compulsory, and it will be not be reduced. In fact, the fee is now increasing. On the orders of our President, may Allah protect him, Saddam Hussein, from the next contract, it will be $35 dollars a metric tonne, no exceptions.’ Hogan later told the Cole inquiry there was no reason or justification given for the sudden, 150 per cent increase in the trucking fee. During a lunch meeting, Hogan also raised the issue of the money owed to Tigris – and a guest from the Iraqi Ministry of Oil, a man known only as Sadallah, had scoffed. ‘That wheat was a gift,’ he said. ‘We do not owe anybody any money for that wheat.’ Saleh, however, seemed to understand what was really going on. He narrowed his eyes and moved his cigar slowly between thumb and index finger. He wanted to know how grateful – really, how grateful? – would Tigris be if he were somehow able to find US$8 million for the debt. Stott told him: very grateful. There was silence as Saleh considered the deal. Then he told Stott to tell Davidson Kelly that ‘we are interested’. Stott was pleased. On 16 October 2000, after he got out of Baghdad, he had sent an email to Davidson Kelly, saying: ‘I’m writing this note on the way out from our favourite country’. He continued, ‘The mission went well’. The Iraqi trade minister ‘at first didn’t appear to recall the cargo but then the lights came on’. Stott said Sadallah had ‘one of his loud belly laughs’ when the gift of wheat was described as a debt, so he quickly steered the conversation


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away from the debt to Formula One racing. But, ‘on reflection, it is a good news, bad news story,’ Stott said. ‘The issue has been put on the table at the highest level. Your challenge, risk, is Sadallah. If Sadallah runs around saying it was a gift, then it is going to be tough.’ Back in London, Davidson Kelly couldn’t have been happier. Just days earlier, he had been the owner of a dodgy debt that he wasn’t sure Saddam’s regime would ever acknowledge, let alone pay. Now the debt had been acknowledged, and it seemed like AWB would help him get the $8 million he felt he was owed.

When Hogan and Stott left Baghdad in October 2000, both were concerned about one thing: demurrage. Ships were being held up; it was costing AWB money; and they wanted the problem solved. Years later, Stott would swear on oath that he suspected from the day of his first return visit that Iraq was keeping the trucking fee and spending it on whatever it pleased. ‘I had some concerns … following my October mission to Iraq,’ Stott said earnestly. ‘Maybe these Iraqis have some way of benefiting from those trucking fees.’ But, he said, he asked Hogan about the fees, and Hogan told him ‘it had been approved by the UN’. Stott says that, almost the moment he stepped foot back into Australia, he decided nevertheless to write directly to DFAT to get approval for the trucking fee. Now, Hogan disputes this; DFAT does, too; and Commissioner Terence Cole didn’t believe Stott, either. But this hardly matters: the key thing is that a letter was sent from AWB to DFAT in October 2000 – and it referred both to AWB’s business with Iraq and to ‘trucking companies’ in Jordan.


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CHAPTER 7

The Department of Foreign Affairs and Trade is an enormous organisation: it employs more than 3300 people and it has an office in each state and territory, plus a network of 80 overseas posts, including Australian embassies, high commissions, consulates-general and consulates. One of the reasons the department is so big is that it used to be two departments: foreign affairs and trade. They were merged by the Hawke government in 1987, and now have a headquarters in the R.G. Casey Building on John McEwen Crescent in Barton, ACT. Officially, DFAT’s mission is to ‘advance the interests of Australia and Australians internationally’, but the twin responsibilities of DFAT often clash, sometimes spectacularly. The case of wheat sales to Iraq was a particularly tricky one for DFAT: on the one hand, AWB was to be encouraged to sell as much wheat as possible under the UN oil-for-food program, since trade is beneficial to the Australian economy. On the other hand, Saddam Hussein was an international pariah, and the Howard government long supported his removal. The Howard government also supported the UN sanctions. Obviously, if AWB was going to trade with Iraq, it was important that it did not breach UN sanctions, because the sanctions were designed to impoverish Saddam Hussein and hasten the end of his rule. DFAT would, therefore, one would think, have a serious interest in making sure the massive wheat trade was all above board. But it seems it did not.


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On 30 October 2000 – that is, some ten months after AWB had started paying kickbacks to Iraq – Charles Stott drafted two letters to DFAT, each of them slightly different. Both versions would later become central to the Howard government’s claim that it knew nothing about AWB’s payments to Alia, so both letters are set out in their entirety here. The first, unsigned letter was addressed to a DFAT official (and champion bridge player) who worked on the Middle East desk. Her name was Jill Courtney. It said: Dear Jill, As you are aware, AWB is experiencing problems managing its Iraq business efficiently. The first problem concerns United Nations procedural issues, which we will document in a separate note. The second issue is the physical execution problem resulting in delays of vessels discharging at Umm Qasr, Iraq. As a consequence of these delays, AWB is incurring significant demurrage costs. We urgently need to rectify the problem which our delegation identified is caused by the lack of trucks at discharge port. For your guidance, Jordan-based trucking companies are responsible for arranging trucks at discharge port. We propose entering into discussions with these trucking companies with a view to agreeing a commercial arrangement in order to ensure there are enough trucks to enable the prompt discharge of Australian wheat cargoes. While we believe the proposed solution will eloquently solve our problem, the purpose of writing is to ensure that DFAT is comfortable with AWB proceeding with the suggested approach. The letter was from ‘Charles Stott’ but it was not signed. Stott told the Cole inquiry he wrote this letter because he was ‘seeking approval [from DFAT] to use the trucking companies’.


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He said he wanted to be sure that the government knew that AWB was paying a trucking fee to Iraq, through a Jordanian company known as Alia. It is plausible: the letter does say that AWB was seeking to enter into agreements with ‘Jordan-based trucking companies’. However, it doesn’t mention the name ‘Alia’ and it doesn’t say that the money AWB was sending to Alia was probably ending up in Iraq’s coffers. At the Cole inquiry, John Agius wanted to know: ‘Why not simply write to DFAT and say, “What do you know about this? Is there a concern that money that I’m paying to Alia is finding its way to the Iraqis?”’ ‘Why not present that problem squarely to DFAT and get DFAT’s response, so that you could have it on your file as your protection forever? Why not do that?’ ‘With the benefit of hindsight,’ said Stott, ‘it would have been very sensible to do that.’ Stott insisted under oath that he spoke to DFAT officials about the letter before it was sent, although he couldn’t remember to whom he spoke, saying it might have been ‘either Jane or Jill’, meaning either Jane Drake-Brockman, who was then assistant secretary of the Middle East and Africa branch, or Jill Courtney, who was working in the same branch in 2000, although he said, ‘more likely I would have spoken to Jill but I can’t be certain’. He said Drake-Brockman assured him that ‘dealing with Alia is okay’. ‘She advised that DFAT were aware of Alia, had looked at Alia, and Alia is okay,’ he said. Drake-Brockman denied this vehemently. A second version of the same letter does suggest that Stott spoke to someone at DFAT about problems with the Iraq trade. Unlike the first letter, the second had a bold heading, ‘Commercial in Confidence’, written at the top. It said:


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The purpose of writing is to ensure that DFAT is comfortable with AWB proceeding with the approach outlined below. As previously discussed we are currently experiencing problems managing our Iraq business. The first problem concerns United Nations procedural issues, which we will document in a separate note. The second issue is, vessels discharging at Umm Qasr suffer long delays and as a consequence AWB incurs substantial demurrage bills. Our recent mission identified that the slow discharge of vessels is caused by a lack of trucks at discharge port. For your guidance, Jordan-based trucking companies are responsible for arranging trucks at discharge port. To rectify this problem, we propose entering into discussions with the Jordan trucking companies with a view to agreeing a commercial arrangement in order to ensure that there are enough trucks to enable the prompt discharge of Australian wheat cargoes. We believe the proposed solution will eloquently solve our problem and look forward to receiving your response. This letter was also from ‘Charles Stott’. But unlike the first one, it was actually signed. The differences between the two letters, although small, are critical. The unsigned version – which is the only one that DFAT would ever admit to seeing – does not contain the line ‘as previously discussed’. In other words, there is nothing in the unsigned letter to suggest that Stott ever talked to anybody at DFAT about trucking fees. DFAT says no discussions ever took place; certainly, there is no reference to Alia in any document that ever surfaced from DFAT’s files. There are several reasons why Stott might claim that he spoke to DFAT about trucking fees: if he had, then he was acting with the federal government’s permission when he paid the money to Alia. Likewise, there are several reasons why DFAT officials might insist that no ‘discussions’ ever took place. A conversation about trucking


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fees would surely include references to how such fees were paid: in US dollars extracted from the UN’s Iraq escrow account, a clear breach of UN sanctions, with the amounts possibly set by Iraq. That would – or should – have sent DFAT into a spin. In years to come, DFAT officials would argue that such discussions never took place, and that they only ever received one, unsigned letter from Stott, and that it did not mention Alia. In his final report, Cole would say: ‘There is no evidence – from anyone, including Mr Stott – that he said anything … about the inland transportation fees, the fact that AWB was already paying these fees, that they were being paid to Alia’. He continued: ‘Mr Stott’s evidence that he spoke with someone from DFAT before sending his facsimile of 30 October 2000 cannot be accepted’. In any case, Stott’s letter arrived at DFAT’s headquarters at 3.59 pm on Monday 30 October 2000. A speedy three days later, on Thursday 2 November, he received a reply (again, the short amount of time that lapsed between receipt of the letter and the response suggests that some discussions between AWB and DFAT took place). Like the original letters from Stott, the DFAT reply is set out here in full: Dear Mr Stott, Commercial in Confidence

Thank you for your communication outlining the manner in which you propose to proceed to deal with problems you have encountered in discharging vessels of your wheat exports to Iraq at Umm Qasr port. As you have explained to us the delays in discharge were causing you to incur substantial demurrage costs and affecting the viability of your trade. We understand that, on your recent visit to Baghdad, you identified the source of the problem being a lack of trucks at the


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discharge point. Those trucks are supplied by Jordan-based companies. You therefore propose to enter into discussions with the Jordan trucking companies with a view to agreeing to a commercial arrangement in order to ensure that there are enough trucks available to enable the prompt discharge of Australian wheat cargoes when they arrive. We have examined, at your request, this proposed course of action and 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. I trust this is of assistance to you. The letter was signed ‘Jane Drake-Brockman, Assistant Secretary, Middle East and Africa Branch’. Stott would later tell the Cole inquiry that he picked up the telephone after receiving the letter and ‘thanked Jane for her letter’. When she took the stand, Drake-Brockman said no such thing ever happened. Moreover, Drake-Brockman told the Cole inquiry that, while she might have signed the letter, she didn’t actually write it – and didn’t know who did. She said it was brought to her attention by an assistant, and she was told ‘AWB needs this dealt with urgently’, so she signed it. One can see why Drake-Brockman would want to disassociate herself from the letter: it’s a most peculiar thing. Why would DFAT write to AWB saying ‘we can see no reason from an international legal perspective’ why they could not proceed with an arrangement to pay Jordanian trucking companies to move wheat around Iraq? Why not say: ‘Have you checked this with the UN?’ Why not say: ‘The best people to advise you on this are the people at the UN’s 661 committee, which governs the sanctions. They will know whether it can be approved, who you can pay, and how much. Best you go there’?


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Also, why wouldn’t DFAT check with Australia’s permanent mission to the UN in New York – with, say, Bronte Moules, or even with Felicity Johnston at the Office of the Iraq Program, who would immediately have bashed the thing on the head? Even more curiously, by the time the scandal blew up in 2006, both letters – the one from Stott to DFAT and the reply – had disappeared from DFAT’s files. In his final report, Commissioner Terence Cole noted ‘extensive searches within the department’ by DFAT staff were ‘unable to locate or produce’ the letters. He would later say there was ‘no satisfactory explanation for this’. The disappearance of these letters is troubling. DFAT officials say it’s simply inconceivable that such important documents would go missing in a department where letters are routinely copied, copied again, filed and diligently kept for ever more. Also, what is the chance that the only pieces of correspondence between DFAT and AWB on the subject of ‘Jordanian trucking companies’ would just disappear from DFAT files? AWB didn’t lose their copies of the letters, however. Oh, no, they kept their copies of Jane Drake-Brockman’s letter in a safe place and close to hand. Understandably, the letter was prized. Right there, on DFAT letterhead, AWB had permission to enter into a ‘commercial relationship’ with Jordanian trucking companies to solve transport problems in Iraq. Commissioner Cole would later say that he did not doubt that‘the real reason Mr Stott wrote the letter to DFAT was in an effort to create a paper trail’. Could DFAT see that AWB was trying to hide something? No, it could not. Did it ask for any further information about the Jordanian trucking companies? No. Was there any effort to investigate the matter further? There was none.


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CHAPTER 8

There was a time when Dominic Hogan’s heart and soul belonged to AWB. He put business before almost everything else in life, except for his wife, Anisa, who also worked at AWB. So it was no surprise to people who know Hogan to learn that he celebrated his 33rd birthday on 1 November 2000 by cancelling a planned dinner with Anisa and staying up past midnight, not on the booze, but sitting at a desk in his home office, trying to negotiate a new wheat deal with Iraq. He had received a telephone call from the Iraqi Grains Board’s Yousif Abdul Rahman, on a crackly telephone line from Baghdad at around 11.30 pm. Yousif wanted AWB to pay a new, 10 per cent ‘handling fee’. It was the first time Hogan had heard of the new additional fee. They conducted spirited negotiations. Like the trucking fee, the ‘handling fee’ was to be paid through Alia, and in hard currency – US dollars, Deutschmarks or euros. Hogan said he would have to run it by his manager, Charles Stott (which he did, in an email timed at 1.08 am, saying: ‘10 per cent will be added to the price … this has been approved by UN – I will get this in writing’). The UN had approved no such thing, of course. As Hogan prepared to get off the telephone just after 1 am, Yousif slipped into small talk. Was Hogan watching the US election campaign? Who did he think would win – the vice-president, Al Gore, or the Republican, George W. Bush? Like most people, Hogan thought it was too close to call, but he was a diplomat. He said: ‘Oh, I’m sure it will be Gore.’


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Hogan knew that the Iraqis hated the Bush family; the first President Bush, George H. W., had authorised the Gulf War in 1990, and Saddam had tried to have him assassinated. ‘But the Bush family, they are criminals,’ said Yousif. ‘They will find a way to steal this election, you can be sure.’ ‘Well, we’ll know in a few days,’ said Hogan, who was tired and anxious to get off the telephone. A few days later, on 7 November 2000, election day in the US, most TV networks called the state of Florida – and the election – for Gore. Later, those projections were withdrawn, and Florida was called for Bush. Vice-president Gore conceded and then, embarrassingly, tried to retract his concession. The result was up in the air. Thirty-two days later, on 9 December 2000, in Bush v. Gore, the US Supreme Court upheld a machine recount of Florida ballots. George W. Bush had lost the popular vote, but he had won the state of Florida, giving him 271 electoral votes to Gore’s 266. The United States had a new president – and he loathed Saddam Hussein.


12/4/07 10:49:33 AM

CHAPTER 9

Back in Melbourne, Andrew Lindberg was preparing to list AWB on the Australian Stock Exchange. It was a process that would help make him a millionaire. First, however, Lindberg had to deal with the sticky issue of bribery. There had long been rumours about AWB’s business practices, especially in Pakistan, Indonesia and the Middle East, where the payment of ‘facilitation fees’ or ‘grease’ is commonplace. In many cases, these payments were quite legal. But late in 1999, the federal government had passed new bribery laws. The game was changing. It would soon be an offence to pass money to foreign officials. Lindberg had agreed to set up a major investigation to see whether AWB’s business practices would pass muster. In September 2000, he approved a review of AWB’s business by the fraud section of accounting firm Arthur Andersen. The Arthur Andersen report, when it came, should have horrified Lindberg. It said there were ‘a number of red flags’ – in particular, the trucking fees paid to a Jordanian company, Alia, through a British company called Ronly. At least one draft of the report said ‘this type of arrangement could be misinterpreted as money laundering’. The investigators noted ‘a recent increase in the trucking cost to $45 a metric tonne. This appears to be high. There may be a risk that this money is being diverted to other purposes’. In other words, without even trying too hard or knowing much about how the oil-for-food program worked, the investigators at Arthur


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Andersen had quickly and accurately predicted that Saddam was using the trucking fees to siphon money from his account, held by the UN, and that AWB was playing a role in kicking the cash back to his regime. They weren’t the only ones to notice. Leon Bradley, a West Australian farmer and free-marketeer, with a long and happy history of heckling AWB, received an anonymous fax some time in January 2001 (he can’t recall exactly when). It was a twopage document, obviously written by somebody with knowledge of AWB’s business practices. ‘It bowled me over,’ said Bradley. ‘I had heard rumours that AWB might be up to no good in the overseas markets, but this was incredible.’ The fax correctly alleged that AWB was flouting the rules of the oilfor-food program and had a suspect relationship with Saddam’s regime. ‘It said there were large financial payments being made to Saddam’s government,’ Bradley stated. ‘It said there were kickbacks associated with the oil-for-food program. It said AWB was getting the business because they were paying bribes.’ Bradley had no corroborating evidence. But he was then president of the Pastoralists and Graziers Association Western Grain Growers, a group of wheat farmers in Western Australia who had been actively campaigning against AWB because they resented having to sell their wheat into a pool, rather than seeking the best price from an open market (and paying lower fees). He sought advice from colleagues. ‘We had what we felt was dynamite, the suggestion that AWB was corrupt and we as farmers shouldn’t be forced to deal with a corrupt company. ‘But they felt, like me, that it was unsubstantiated, it was just rumours, we couldn’t do anything with it,’ Bradley said. ‘I read the letter again, quite a few times over the years and then it somehow got lost. But I will never forget – there was somebody out there, outside AWB, who was trying to be honest.’ And, from February 2001, there was also somebody inside AWB who was struggling with his conscience.


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Dominic Hogan had for months understood that his new boss, Charles Stott, didn’t like him very much. The men were as different as men can be: Stott was city-smooth; Hogan was decidedly country. They had stand-up arguments in the Melbourne office but it was a battle Hogan could only lose. He quietly started looking for another job; he couldn’t just leave. He had a wife and a new baby. He put his résumé out to headhunters but, when nothing materialised by February 2001, Hogan again travelled to Iraq, this time with Daryl Borlase, the junior executive who had taken over his old job in the Cairo office. Hogan was surprised, when he got to Iraq, to find the place humming. The Iraqis were newly enriched. The Al-Rashid was still awful but, for the first time in years, there was development under way at the port of Umm Qasr, and the offices of the Iraqi Grains Board had been tarted up. New furniture was arriving; everything seemed to have been given a lick of paint. It made Hogan feel extremely uneasy. Where was the money coming from? He could hear the answer howling in his brain: AWB was, by then, paying US$45 a metric tonne to truck wheat around Iraq. In other words, it was regularly sending payments of US$50 million to Alia for a service that should have been essentially free in Iraq, where employees were all paid by Saddam’s regime and where petrol was free. Then there was something that Yousif said: a throwaway line, but one that was deeply troubling, something that Hogan didn’t quite understand. The ‘transport fee’ would be used to build ‘infrastructure’ in Iraq – a new road to another of Saddam’s palaces, perhaps, or new wheat silos. All of Hogan’s antennae went up. The fee was supposed to be for trucking; specifically, it was supposed to pay for the trucks and the petrol and the drivers to get Australian wheat from the port of Umm Qasr to flour mills around Iraq. It was paid in US dollars – so what did Yousif mean when he hinted that Iraq was spending the fee on whatever it pleased? Feeling panicky, Hogan raised the matter with Borlase. They decided to prepare a report on the matter for executives back in Melbourne. It was a frank report. It said Saddam’s regime appeared to be benefiting from the


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trucking fees and that the new, 10 per cent ‘after sales service fee’ added to the price of the last contract was probably a kickback, too. Under the heading ‘trucking fee’, Borlase and Hogan wrote: ‘The trucking fee is now US$25 per metric tonne … with a 10 per cent service fee on the entire FIT value of the contract. We believe the increase in trucking fee and addition of the service charge is a mechanism of extracting more dollars from the escrow account’ [emphasis added]. In other words, it was a kickback, a scam, a breach of the UN sanctions. At the Cole inquiry, Agius asked Borlase: ‘You … say: “We believe the increase in trucking fee and addition of the service charge is a mechanism of extracting more dollars from the escrow account”. What led you to that belief?’ Borlase wasn’t sure, only that there had been a ‘penny dropping’ moment. ‘I’ve seen the fee going from $12 to $15 to $25, and a 10 per cent service fee equates to roughly a $30 increase in one contract … it raised my suspicions.’ The amounts involved were obviously huge. Borlase had made some notes about the cost of petrol during that trip. On his pad, he scribbled: ‘100 litres in Iraq fuel is USD one dollar’ and ‘$2 at the Jordanian border’. Agius read these notes back to him: ‘One US dollar?’ ‘I believe that’s what it is, yes,’ said Borlase. ‘So … 100 litres of fuel at the border between Iraq and Jordan was … between US$1 and US$2?’ ‘Yes,’ said Borlase. Obviously, in that context, paying $50 million for trucking a shipload of wheat across the country was absurd. Now, if it were true that AWB’s money was not for trucking but for Iraq – well, that was deeply troubling, especially ethically. AWB knew the Iraqi regime was evil. From time to time, executives joked about it. An example: on 9 February 2001, Borlase sent an email to Hogan noting that Iraq wanted to build 2000 concrete bunkers for grain, but with ‘cement


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walls and floors so they are actually designed for burying the Kurds – under the cement?’ The email continued: ‘They intend to build them with fumigation capability … so the mind boggles as to whether they are fumigating insects or any other pest that pisses them off … On a serious note, they will have cement flooring …’. Hogan and Borlase sent their Iraq trip report – with those crucial words about the after-sales service fee being a means of extracting money from the UN account – to AWB in February 2001. It was widely circulated. When Hogan returned to Melbourne after the trip to Baghdad, he says he also approached Stott, hoping to discuss the matter in person. Hogan recalls that Stott’s desk was against the southern wall of AWB’s offices, facing west. He says he walked over to talk the issue through; this was no scheduled meeting, just an urgent chat. There’s no doubt that Stott knew that AWB paid a trucking fee to Alia but he says he believed the money was actually for transport and that the fee was UN approved. Not for the first time, there is fierce disagreement between Hogan and Stott on who said what at this informal meeting. Hogan says he told Stott that Iraq was demanding kickbacks, but says Stott shut him down, demanding to know whether he had evidence and, if not, why he was causing trouble. Hogan says he explained that Iraq wanted to charge US$45 a tonne to truck wheat around Iraq – a country where petrol was essentially free. More than $100 million had already made its way to Baghdad. But he says Stott fobbed him off, saying: ‘Just continue doing your business how you have been doing it’. It went no further. ‘There was no discussion,’ Hogan said. ‘Following raising this issue, that was the end of the issue.’ Hogan said an intimidating culture had gripped the company. So many people had already lost their jobs. Iraq was an extremely important market. In 2001, AWB would send 2,356,849 tonnes of wheat to Iraq, worth almost $1 billion.


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Hogan didn’t want to ‘start raising red flags and investigating that it might be wrong, what we are doing’. Agius wanted to know why he didn’t go over Stott’s head to the new boss, Tim Goodacre. ‘It would have been career suicide,’ he said. Several friends had already been sacked by the new regime. ‘My option was to continue to do it … and don’t talk about it; this was the culture of how we operated. Or leave the company.’ He did not feel able to bring the matter to the attention of the human relations department, saying that if he’d said, ‘“All right now, come on Charles, I’m dragging you down to HR and we’re going to have it out down there”, I would have lasted another – a week. So, no, I wasn’t going around Charles; I wasn’t going to go past Charles; I had raised the issue and that’s where I stopped it’.


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CHAPTER 10

In March 2001, the United Nations published a report on the oil-for-food program that outlined what everybody already knew: it was being rorted like crazy, not only by suppliers, but also by Iraq. On 9 March 2001, Bronte Moules sent a diplomatic cable – her third – from New York back to Canberra, outlining what had been found. ‘Iraq has … begun demanding kickbacks and illegal commissions on contracts for humanitarian supplies,’ she said. At the time, Norway’s ambassador to the UN was acting as head of the sanctions committee. Moules’s note went on: ‘we asked the Norwegian Mission … if and how the committee intended to address this issue. Norway said that although “everybody knows about the kickbacks”, given the lack of hard evidence … it was difficult to address the issue directly’. The recipients of this cable included Prime Minister John Howard, Trade Minister Mark Vaile, the Department of Foreign Affairs and Trade, Austrade and the Office of National Assessments. But like Moules’s other cables, no action was taken. Felicity Johnston, in the UN’s Office of the Iraq Program, was also collecting evidence that Iraq was corrupting the program. Indeed, Paul Volcker, in the UN’s 2005 report on corruption in the oil-for-food program, made a point of praising Johnston for her refreshing honesty, saying she had become convinced that: 1) the Iraqi regime was receiving illicit payments; 2) the practice was widespread; and 3) the kickback payments were occurring, in her words, ‘left, right and centre’. Volcker said Johnston ‘was not secretive about the evidence that she gathered … she habitually forwarded the information to her direct


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supervisor … and discussed the incidents with Mr [Benon] Sevan as well. She diligently brought these reports to his attention’. From time to time, AWB itself put up some weak resistance to Iraq’s demands. On 21 March 2001, when Iraq suddenly decided it would charge another 50 cents a tonne for ‘port fees’ before ships at Umm Qasr would be unloaded, AWB point-blank refused to pay. In a note dated 4 April 2001, Dominic Hogan simply told Alia: ‘Port fees of 50 cents per metric tonne will NOT be paid by AWB’. Alia’s management was stunned. Not pay? What was AWB talking about? They shot a message back to Melbourne, saying: ‘Re: the 50 cent port fee. Kindly inform the Iraqi Grains Board that it will not be paid because we are afraid they might prohibit your vessels from entering the ports of Iraq. We urge you to settle this matter with them, and inform us’. But Hogan was adamant: AWB was paying US$45 a tonne in transport and the after-sales service fees and it would not pay so much as a cent more. Indeed, in a highly risky move, Hogan had already told Tim Snowball in the New York office to report the matter to Australia’s ambassador to the UN, Penny Wensley. Wensley – by now just weeks away from her new post in Paris – wrote to the UN’s sanctions committee. She told them that AWB had an urgent problem on its hands: there were ships on the water and they could not berth because Iraq was demanding port fees in cash from AWB. The ships were ultimately allowed to berth without the payment being made. A short time later, on 10 April 2001, Moules sent another cable to Canberra. This one was addressed to Prime Minister John Howard, Foreign Affairs Minister Alexander Downer, Trade Minister Mark Vaile, the then minister for agriculture Warren Truss, the Department of Foreign Affairs and Trade and its offshoot Austrade, the AttorneyGeneral’s Department, the Department of Defence, the Department of Prime Minister and Cabinet, the Defence Intelligence Organisation, and the Australian Bureau of Agricultural and Resource Economics. Senior DFAT officials on the cable’s distribution list included secretary Ashton


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Calvert and deputy secretaries Pamela Fayle, John Dauth, David Spencer and Alan Thomas. Moules said the sanctions committee was trying to find a way to enable Iraq to charge port fees (to cover administrative and other costs at the port of Umm Qasr) in Iraqi dinars. The real problem, however, was that ‘the issue of port fees is linked to wider concerns about circumvention of the sanctions regime’. She said there was ‘anecdotal and in some cases hard evidence of Iraqi purchasers and agents demanding fees from suppliers’. This cable is critically important. The Howard government – in particular, Alexander Downer – would later assert that it never investigated claims that Saddam Hussein’s regime was demanding kickbacks from AWB because it believed the allegations were simply rumours made up by rival wheat-selling nations. But, as Moules points out, the rumours weren’t coming only from rival traders. They were coming straight out of the UN. AWB’s New York office manager, Tim Snowball, told the Cole inquiry that he also, personally, told Moules that Iraq was demanding a 50-cent kickback. He claimed that she told him the UN was turning a ‘blind eye to corruption in the oil-for-food program, provided it was not excessive’ (DFAT’s lawyer, Alan Robertson, hotly contested this evidence, saying Moules ‘said nothing like’ the UN was turning a ‘blind eye’ to anything). In any case, it hardly matters. Nobody in Canberra paid much attention to Moules’s latest cable. In Baghdad, by contrast, the Iraqis were furious that the lid was close to being blown on at least one of their many scams. Indeed, an Iraqi from Iraq’s mission to the UN actually confronted the Australians in a UN corridor wanting to know why Australia had raised the matter with the UN. Moules told Canberra: ‘While waiting to receive a briefing on a recent sanctions committee meeting … a member of the Iraqi delegation approached us in the corridors at the UN to ask why Australia had sought advice from the sanctions committee on the question of port fees.


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‘The Iraqi delegate suggested it would be better for the Australian company to talk to other suppliers, since “they know how to deal with this”.’ The UN would only ‘complicate’ the matter. To Moules, it was clear that Iraq was trying to ‘circumvent the sanctions regime’ and that it seemed keen to deal in cash ‘outside the Oil for Food program’. But, once again, nobody was listening.

The incident between the Iraqis and the Australians in the corridor at the UN headquarters should not come as a surprise, since Iraq was not actively concealing the kickbacks. Indeed, the fact that fees were often charged to suppliers was so well known that the shipping giant P&O Nedlloyd Ltd actually published the information on its website in August 2001. Michael Wallbanks, general manager of the Dubai office, would later say that Iraq’s demands for cash were ‘well known and widely communicated’. According to Wallbanks, ‘Anyone involved in shipping goods to Iraq from August or September 2001 would have known about it’. Wallbanks passed information about the kickbacks to the US Navy and the British Royal Navy. It’s impossible to imagine that the same information wasn’t communicated to the Australian navy, since HMAS ANZAC was in the Persian Gulf, alongside British and US ships, at that time. Indeed, HMAS ANZAC was taking part in a multinational operation specifically to monitor Iraq’s compliance with UN sanctions. Despite the steep and steady increases, AWB never told Alia to try to keep a lid on costs; never asked for a breakdown of the fee to see where savings might be made; and never hunted around for a better deal. It was told to pay, and so it paid. The question, of course, is why? Why did AWB executives set up a scam to funnel money to Saddam Hussein’s regime and why did senior management encourage that scam, right up until war broke out in Iraq? In part, the answer is because it cost AWB nothing to do it – nothing


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but the reputation of the business, of course, and that would only be damaged if AWB got caught, a scenario that seemed unlikely. There was no financial cost: the trucking fees were tacked onto AWB’s prices, extracted from the UN and kicked back to Iraq. Who cared whether it was $1 a tonne or $15 or more? As Hogan once said, it was ‘no skin off our nose’. Greed played its role, too. Money was pouring into AWB’s coffers from the UN’s Iraq escrow account. Also, in August 2001, AWB was floated on the Australian Stock Exchange. The stock had listed at $3.42; two days later, it climbed to $4.15 and it would keep climbing, up and over $6 before the crash came. There was a culture at AWB that did not counsel caution, but screamed: get that deal. Get the best possible price! We want to see our grain being sold all over the world, steaming out of our ports, into the mouths and bellies of millions, because for us it means money and more money, and so go out and sell, sell, sell. In the prologue to his report, Terence Cole captured the culture precisely. ‘The question posed within AWB was: what must be done to maintain sales to Iraq? The answer given was: Do whatever is necessary to retain the trade. Pay the money required by Iraq. It will cost AWB nothing because the extra costs will be added into the wheat price and recovered from the UN … But hide the making of those payments for they are a breach of sanctions.’ Despite the huge success of the wheat trade to Iraq, Stott was always thinking: I wonder how AWB can do a little better? Can we speed up delivery and can we get paid a little quicker? In August 2001, he dispatched Dominic Hogan to Jordan to meet Alia’s managing director, Othman al-Absi, and sort out the constant and never-ending delays in Iraq. Al-Absi told Hogan that he met Saddam in Baghdad the previous Thursday and Saddam was angry to hear that AWB was still experiencing delays at Umm Qasr. ‘Saddam told me that he had been informed that the port was operating smoothly,’ al-Absi told Hogan, who sat there, open-mouthed. ‘He said: “I want all outstanding vessels discharged … and the situation fixed!”’


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But, as Hogan noted in his subsequent email back to Melbourne on 27 August, ‘this order was issued last Thursday for immediate action’ – yet ships still sat idle, ringing up AWB’s costs like cash registers. Never mind the intervention of the President of Iraq – it was the same old story. And then, out of a clear blue sky, the world changed.


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CHAPTER 11

On 11 September 2001, al-Qaeda terrorists hijacked four commercial aeroplanes and attacked the United States. More than 3000 people were killed. George W. Bush, who had been in the White House for just nine months, reacted with measured but definite fury. He assembled a coalition of willing nations to attack Afghanistan, home of al-Qaeda’s training camps and the Taliban, and roared into a war on terror. On 10 November 2001, a jittery Australian electorate re-elected John Howard, setting him on the path to becoming Australia’s second-longest serving prime minister. Just weeks later, President Bush signalled his intention to deal with a long-standing enemy, Saddam Hussein. In a State of the Union address on 29 January 2002, he spoke of an ‘axis of evil’ comprising Iran, North Korea … and Iraq. ‘The Iraqi regime has plotted to develop anthrax and nerve gas and nuclear weapons for over a decade,’ he said. ‘Iraq continues to flaunt its hostility toward America and to support terror.’ Bush said war in Iraq was not inevitable, but he wanted weapons inspectors to return to Iraq (they had been expelled by Saddam’s regime in 1998, after which President Bill Clinton dropped several bombs on Iraq, for no happy result). President Bush wanted Saddam to prove he had not stockpiled any weapons of mass destruction. It seemed unlikely that Iraq would agree. In Australia, John Howard made it clear that, while he prayed for a peaceful solution, war was a real possibility and, if war were declared,


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Australia would fight alongside the United States and Britain, just as it had done in every war since Federation. Against this background, Dominic Hogan began to fall apart. By day, he worked in a company that he knew was sending huge amounts of money to Iraq; at night, he could see on the news that Australian troops would soon be on the ground in Baghdad, fighting for their lives. His first instinct had been to report the matter to his superiors; his second was to run. He had tried for a while to get a new job: he found an advertisement for a good, safe, honest position at Elders in Adelaide, but he didn’t even get an interview. He began to suffer from nausea, a swirling feeling that had him contorted in pain, with beads of sweat on his forehead, especially when he felt ‘trapped’, such as in a middle seat on an aeroplane or in the middle of a booth at a restaurant. He consulted a doctor, telling him: ‘I feel like I can’t go outside. I’m terrified I’m going to vomit in a public place.’ ‘You are suffering stress and anxiety,’ the doctor said. ‘Are you under pressure at work?’ What could Hogan say? Well, actually, Doc, I’m involved in a plot to funnel money to a dictator in a country we’re about to invade?

There were internal ructions at AWB, too. After two years on the Middle East desk, Charles Stott had been moved into a new, better position at AWB. Into his place strode the charismatic Michael Long, appointed to the position of general manager, international sales and marketing (the position previously held by Nigel Officer). It was a huge job, and Long was on quite a learning curve. He studied the Iraq market closely because the deals were obviously not straightforward: bills were paid by the UN, not by the customer, and there was paperwork to pass to DFAT and the UN. Long would later tell the Cole inquiry that he ‘inherited a system’ that involved the payment of trucking fees. He talked to Stott, who ‘showed me the letters that he had sent to


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[Jill Courtney at] DFAT and he showed me the reply that … he received from [Jane Drake-Brockman at] DFAT’. Long decided the letters were ‘fairly convincing’ evidence that using Jordanian trucking companies was in order – despite the fact that no formal contract between Alia and AWB existed. At the inquiry, John Agius wanted to know: ‘Did you ever ask Mr Stott why there was no written agreement [between AWB and Alia]?’ ‘Perhaps,’ said Long. ‘What did he say?’ ‘I can’t recall,’ Long replied. The staff changes inside AWB, however, were nothing compared with the crisis on the board: in March 2002, Andrew Lindberg welcomed the company’s new shareholders to the ‘first meeting as a publicly listed company’. There was much to celebrate: since the listing, AWB increased its value from $750 million to $1.2 billion and it was now among the top 100 listed companies. AWB was expecting an after-tax profit of $100 million to $110 million for the year ending 30 September 2002. Shares were at $4.45. But then, at the very first board election, the chairman, Trevor Flugge, was beaten by a man he completely loathed: fellow West Australian farmer, Christopher Moffet. The result was a shock to Flugge and, being pugnacious, he refused to go quietly. Friends and supporters on the board were reluctant to see him leave: he knew so much about wheat sales. Before long, he was back as a ‘special consultant’ earning $100,000 a year, plus $5000 for any actual consultancy work. Christopher Moffet was outraged at this. He roared at the board: Flugge had been given the boot by wheat growers and ought to take a hike. But Lindberg, and the company’s new chairman, Brendan Stewart (a farmer who operated a 3200-hectare property producing grain, cotton and cattle at Chinchilla, Queensland, with close links to the National Party), insisted that Flugge be allowed to stay. As AWB boiled with internal politics, the beleaguered Hogan tried to


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keep a handle on things. In June 2002 – just a few months after President Bush signalled his intention to deal with Iraq – Hogan travelled to Baghdad to secure new contracts. The prices were, by now, inflated with a whopping kickback equal to US$47.75 a metric tonne. For this trip – it would prove to be one of his last – Hogan travelled with Michael Long. Most people who know Long – including many diplomats at DFAT – would agree he is a man not easily rattled. On the contrary, he prides himself on an ability to stride through life, apparently unfettered by dreary earthly cares. He says of himself: ‘I have a can-do attitude. When there is a problem I look at it and say, how can I deal with this? What needs to be done? And then I get on with it’. On this occasion, his teeth were on edge. The journey from Jordan into Iraq had been bone-shaking. On one occasion, he woke to find their four-wheel drive sliding into the desert sands. Years later, he could still remember the details, to the amusement of the public gallery, at the Cole inquiry. ‘I do recall waking up in the back seat at 160 km an hour and both drivers were asleep,’ he said. ‘I take it you woke them?’ said Agius. ‘I’m here today to attest to that, yes,’ Long replied. Long also provided the Cole inquiry with a memorable description of his first meeting with Iraq’s trade minister, Mohammed Medhi Saleh. ‘The minister was dressed in full military regalia, he was armed, there were several people around us,’ Long said. ‘I counted some 17 posters of Saddam Hussein staring down at me, and it was a particularly stressful environment, particularly when we were being hauled over the coals for the position of the Australian Government.’ ‘A very vivid recollection that you have,’ said Agius, appreciatively. ‘Does it include as vivid a recollection of what was said about the 10 per cent [kickback]?’ ‘No, it doesn’t,’ Long replied. Hogan had a vivid memory of the meeting, too. He says that when


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they strode into the Al-Rashid, Long wanted to get straight down to business – ‘in and out again, as quickly as possible’ – but Hogan told him they would have to wait for a telephone call from the minister for trade. At 10 pm, the phone rang. A voice on the other end said: ‘The minister will see you now’. ‘Where do we go?’ said Long, as they hurried into the corridor. ‘I suspect his office,’ said Hogan. ‘But there will be a car waiting, and minders, for sure.’ In the foyer, men in military uniforms, reeking of cigarettes, took them to a four-wheel drive and on to the minister’s office. ‘Why does your government align itself with the regime of George W. Bush? Why does your government propose aggression against Iraq?’ the minister shouted. Hogan let the minister rant, uninterrupted. Saleh railed about Australia’s attitude to Iraq, cursing the Howard government for cuddling up to George W. Bush, pounding his fist on the table as he talked about America’s thirst for oil and its plan to overthrow all unfriendly regimes in the Middle East to fuel its gluttony. Hogan had heard it all before, and he expected no more than the usual haranguing. But this time there was a kicker, in the tail of the speech. ‘We have decided we cannot tolerate your government’s support for the evil tyrant, George W. Bush, anymore!’ Saleh shouted. ‘And that is why I am under instructions to cut your deals in half.’ Hogan, who had been sitting respectfully in his chair waiting for the lecture to end, was suddenly on high alert. ‘Cut our deals in half?!’ he said. ‘Your Excellency, that’s impossible. The wheat is ready to ship!’ ‘That is your problem, and not ours,’ replied Saleh. ‘And I will tell you this now: if the government of Australia does not change its policy toward Iraq, we will cancel all the trade, altogether!’ Long’s mind was racing. He tried to protest, telling Saleh that AWB wasn’t part of the government, but a private company with no control over government policy.


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Saleh flicked the ash from his cigar onto the floor and waved at his minders to remove Hogan and Long from the room. Back at the hotel, Hogan and Long were astounded by what had transpired. This was high-stakes poker. Australia had expected to sell one million tonnes of wheat to Iraq in 2002; the loss of half that market would upset farmers, and – given that farmers are an important political constituency – create a certain crisis for the Liberal–National coalition, just as it was desperately seeking unity on the eve of war. As soon as they were out of Baghdad – ‘back in the land of the living’ they called it – with access to mobile phones and computers, Hogan prepared a report on the matter for his superiors. His note went to Andrew Lindberg, Charles Stott and at least 20 other executives. Hogan cut to the chase: AWB had a potential disaster on its hands. ‘We only secured 500,000 tonnes of our planned one million tonnes,’ Hogan wrote. ‘Iraq have reduced their requirement from Australia by 50 per cent.’ He explained that the Iraqis could not understand the contradiction in Australian policy and trade, or why Prime Minister Howard wanted to ‘send bombs and kill the Iraqi people’. The minister wanted a ‘change in Australian government policy to Iraq’ or else there would be ‘a SIGNIFICANT change to our trade of Australian wheat’. Iraq also wanted a guarantee that there would be no military actions against Iraq and, if that was not possible, then ‘the Australian government should SAY NOTHING’ and avoid an aggressive attitude to Iraq. This position, Hogan wrote, ‘would be seen as non-confrontational’. Lindberg was dismayed by developments. Trade worth $1 billion a year was at risk. He requested a meeting with Foreign Minister Alexander Downer to press his concerns in person. Downer agreed. Lindberg told him that the government’s policy of regime change was hurting a 50-yearold, lucrative trading relationship.


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Downer was sympathetic – but only up to a point. In an exchange with journalists in July, he’d made it clear that the Howard government was in no mood to negotiate with Iraq. ‘Saddam Hussein … isn’t just developing chemical weapons. He has been clearly developing biological weapons,’ Downer said (words that surely must now haunt him?). ‘A policy of … just turning our back on Saddam Hussein and saying: it doesn’t matter, let’s just hope weapons of mass destruction go away, is a policy for which the international community would ultimately pay a very high price.’ When these and other remarks were relayed to Iraq’s trade minister, he called his own press conference in Baghdad, where he promptly carried out his threat to cut Australia’s trade by half. They weren’t joking – but Downer wasn’t joking either, when he said Australia’s foreign policy would not be influenced by threats made by the moustachioed trade minister in Baghdad. ‘Iraq is a significant market, there’s no question of that,’ Downer told reporters. ‘But, you know, at the end of the day, international security can’t be held hostage to trade threats. Whatever the trade is worth, we can’t put ourselves in a position where we chop and change … It’s extremely important that the international community shows the appropriate resolve, the appropriate strength.’ Lindberg was furious. On 1 July, he had written a long letter to Prime Minister John Howard explaining that Iraq was about to cancel its trade, all because Downer was banging the war drum. Howard replied on 27 July 2002: ‘I fully share AWB’s concerns [about the trade]’. But, he added: ‘As you will appreciate, the government cannot accept any Iraqi attempt to politicise our wheat trade, or to pressure us into dropping our support for UN Security Council resolutions’. In other words: Australia was an ally of America, and it would not be backing down. But, then, neither would Iraq.


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Four shiploads of Australian wheat anchored at the port of Umm Qasr. Port workers got busy, discharging the load. But, halfway through the process, Iraq suddenly called a halt. ‘We won’t be unloading any more of that wheat,’ Yousif Abdul Rahman told AWB in an email. ‘Sadly, we believe the wheat is contaminated.’ AWB couldn’t believe it. Australian wheat, contaminated? ‘Yes,’ said Yousif, ‘the wheat aboard the vessel Mani P, it contains traces of iron powder, or iron filings. I’m afraid you’ll have to take it back and, of course, we won’t be able to pay for it.’ Two days later, the Iraqis sent a fax to AWB confirming that the wheat aboard the Mani P was contaminated. So, too, was wheat aboard the Tuo Hai and the North Duchess. A fourth shipment of wheat had also been rejected, because of the presence of a ‘dead rat’. ‘He’s kidding,’ said Long, when he heard about it. Surely this was just part of Iraq’s plan to punish the Australian government? Iraq may have been faking – but it was certainly not kidding. The ships were stranded at Umm Qasr. Port workers were too panicked to unload them. Demurrage started mounting. Within days, AWB faced a massive bill. AWB did not for a moment believe that the wheat was really contaminated – and it probably wasn’t. The real issue was the looming war, and Australia’s planned support of it. Iraq made this clear on 10 August 2002, when Iraq’s chargé d’affaires, Dr Saad al-Samarai, from Iraq’s de facto embassy in Canberra, complained about ‘iron language’ from Australia. At AWB’s headquarters in Melbourne, executives were in a spin. Lindberg wanted to know who was best placed to deal with the Iraqis. So many executives had left AWB. Dominic Hogan was struggling with depression – indeed, in June 2002 he took four weeks stress leave – and Trevor Flugge, who had visited Iraq many times, was no longer on the board. Lindberg instructed his secretary to get Flugge on the telephone. She scrambled to her desk and located Flugge’s numbers. After losing the board election, Flugge had returned to his native Western Australia, and was trying to heal the damage to his ego. He was very pleased to get the


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call from AWB: would he take part in a mercy dash to Baghdad to try to save the day? Of course he would! ‘I was pleased to take their money,’ Flugge said. He told AWB: ‘I’ll make the trip to Baghdad but Lindberg is going to have to come with me. They’ll want to see the boss. You’ve got to understand these Arabs. They have levels of authority and you’ve got to respect that. We’ve got to show them that we’re taking this seriously, not just sending over the workers. ‘We’ll need Michael Long, definitely. We need some kind of technical expert, a guy who can show them the wheat isn’t really contaminated. What about Bob Cracknell? We’ve got to get on the front foot, and take control of this.’ The final team to go to Baghdad would comprise Flugge, Long, Cracknell and Lindberg. The group flew first-class to Dubai, then to Amman where they travelled by two cars to Baghdad, arriving on Tuesday 13 August. They were nervous: there was a lot at stake. Also, as if AWB didn’t have quite enough problems, Long had in his pocket a letter from Norman Davidson Kelly, who was still trying to extract the $8 million from Iraq. Incredibly, despite the fact that war was looming, despite the fact that Iraq was cutting and slicing its deals with AWB, Davidson Kelly seemed to think he had a good chance of getting the money back. The previous May he’d sent a letter to Aiken saying: ‘Things are hotting up in relation to the possible repayment of the Iraqi loan. There is a chance, but only a slim one, that this initiative will make some progress’. He added: ‘I expect the actual repayment process to be complicated’ and ‘I suspect it will be linked to shipments of Australian wheat’. Aiken responded in June, saying: ‘Norman, glad to hear you are still alive. As you can imagine, I am not holding my breath that this debt will roll in the door but I do appreciate your efforts to recover’. When Davidson Kelly heard that AWB was sending a delegation to


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Iraq to solve the ‘iron filings’ contamination issue, he jumped into the fray. In a letter to Stott, he said: ‘Would your delegation be willing to deliver a letter from me to the Trade Minister, asking him to stimulate action? Obviously, they would only deliver if things were going well!’ Didn’t Davidson Kelly know that such a scam would be a clear breach of UN sanctions? That it simply wasn’t legal to extract money from Iraq? Also, how did Davidson Kelly imagine he would get the Iraqis to agree to his mad scams? Why would Iraq agree to pay $8 million for a cargo of wheat delivered six years earlier that had always been considered a gift? Why would it agree to pay any money to any Australian company, given that Australian troops were polishing their boots, preparing to overthrow Saddam Hussein’s regime? We cannot know for certain since Davidson Kelly has never spoken about it publicly but, as ever, money is one obvious motive. Perhaps Davidson Kelly offered to split the cash with people in Iraq who cooperated? But perhaps not: he is rumoured to be incredibly charming, and he counts among his friends the former British foreign minister Malcolm Rifkind; the former Australian defence minister Robert Hill; Iraqi sheikhs; and other movers and shakers. He has a lovely, large home in the English countryside; he can tell a joke; he flatters like mad, and subsequently gets things done. Clearly, he had managed to get Stott on board for the deal. He wrote back to Davidson Kelly on 7 August 2002, saying he was ‘happy for the team’ travelling to Baghdad ‘to be armed with a letter from you’. But he warned the letter would only be put ‘on the table if things are going well’. It is not precisely clear how things could have been going any worse. Baghdad was talking about scrapping deals worth $1 billion. Surely it wouldn’t be interested in repaying an ancient, barely acknowledged debt to a company it had probably never heard of ?

*


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The AWB delegation met the Iraqi trade minister in his office on Wednesday 14 August. This time, there was no exchange of gifts, no carpet for Flugge. Instead, the minister stood up, adjusted the pistol on his belt and said: ‘Follow me’. Saleh led the startled Australians into an adjoining room where they found themselves shielding their eyes from a blaze of flashing lights and cameras. The Iraqis had arranged a press conference and invited CNN, Reuters and other news groups. Lindberg was shocked and Long horrified, but what could they do, other than participate? With hot lights shining off their bald domes, they tried to explain that they didn’t personally hold any animosity towards Iraq – it was the Howard government. The next day, the group flew from Baghdad to Basra and drove down to the port of Umm Qasr to inspect the ships that were lolling at the port. It was extremely hot – around 40 degrees Celsius – and the crew onboard were uncomfortable. They had been stranded for days; they wanted to leave, but there was an impasse and they weren’t told why. Hundreds of trucks – all shapes and sizes – were idling, waiting to take the wheat. The Iraqi Grains Board’s chief technical officer, Khalid el-Obedy, led the group of Australians into the discharge terminal with the wheat conveyor belts. Overhead, the Iraqis had strung an industrial magnet. The conveyor belts were turned on and, as wheat came from the hold, iron filings were detected as they were removed by the magnet. ‘Contaminated!’ he said, triumphant. The Australians, especially Bob Cracknell, were sceptical. The iron filings picked up by the magnet were shiny, and metal rarely stays shiny for long, especially not in a ship’s hold. Cracknell didn’t believe the iron had been in the wheat when it was loaded but, like the rest of the group, he resigned himself to the fact that Iraq was trying to make a point. ‘There is a simple solution to this problem,’ said Yousif, when he joined the group back in the Iraqi capital. He wanted the Australians to pay compensation for the contamination. He thought a few dollars a tonne – around US$2 million – would cover it.


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The Australians agreed. With that matter resolved, talks began on new contracts. The terms and conditions would not become public for years but, essentially, Iraq agreed during these fraught meetings to buy another one million tonnes of wheat from AWB. The total price would be 280.37 euros per tonne – as much as twice the world wheat price at the time. The price included the actual cost of the wheat, plus trucking fees (or kickbacks) of $51.15 per metric tonne. AWB agreed to pay US$2,016,033, ostensibly to cover the cost of ‘cleaning’ the perfectly clean wheat (this fee would later become known as the ‘iron filings rebate’). So the day was saved. On 18 August 2002, after Lindberg returned to Australia, he announced, via press release, that the delegation that travelled to Baghdad had managed to convince the Iraqis not to sever its ties or reduce its trade with Australia. Trade Minister Mark Vaile – who insists to this day that he was never told, and never asked, how the delegation pulled it off – was ecstatic. ‘This is positive news for Australian wheat farmers and their families,’ he crowed. ‘The outcome … has vindicated the Federal Government’s faith in the AWB to successfully manage their commercial dealings with Iraq.’ Prime Minister Howard was similarly relieved. ‘Yes, it is good news,’ he said, at a press conference at Kirribilli House. ‘I congratulate the wheat board, it’s a good outcome for the Australian wheat industry and a lot of credit is due to them. ‘I’m glad it’s been resolved. The wheat trade is important to this country and I know that wheat growers around Australia will be very pleased at this news.’ Reporters naturally wanted to know how the deal had been done. After all, the deal ran contrary to common sense: not only had the Iraqis agreed to resume purchases, despite no change in Australia’s policy


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towards Iraq, but also they had agreed to pay even higher prices for the wheat than they were paying before the trouble broke out. Why would Iraq threaten to cut sales, and then agree to boost sales, and pay even more than before? In hindsight, it would become obvious: the deal was done because AWB was regularly inflating its prices by around $50 million and kicking the extra money around to a gang of dodgy Iraqi officials on the eve of an ugly war – with hand-to-hand combat in the bloody streets of Baghdad – that Australian troops would have to fight.


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12/4/07 10:49:40 AM

PART TWO

THE COVER-UP September 2002–October 2005 New York, Melbourne, Bali, Washington, Baghdad, Canberra


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CHAPTER 12

On 12 September 2002 – a year and a day after the September 11 terrorist attacks – United States President George W. Bush observed a solemn ceremony for fallen fire-fighters in New York and then, having made his way through Manhattan’s gridlocked streets, he entered the United Nations headquarters and launched his still-controversial plan to bring democracy to the Middle East. In a passionate speech at the UN General Assembly, President Bush tried to win global support for a looming war. ‘We meet one year and one day after a terrorist attack brought grief to my country, and brought grief to many citizens of our world,’ the President said. ‘We’ve accomplished much in the last year – in Afghanistan and beyond. We have much yet to do – in Afghanistan and beyond.’ The Taliban had been toppled. Now it was time to bring Iraq to its knees. President Bush provided a graphic picture of Saddam’s wickedness, saying: ‘Tens of thousands of political opponents and ordinary citizens have been subjected to … beating and burning, electric shock, starvation, mutilation, and rape. ‘Wives are tortured in front of their husbands, children in the presence of their parents – and all of these horrors concealed from the world by the apparatus of a totalitarian state.’ President Bush insisted that Saddam was a ‘grave and gathering danger’ to world peace, saying, ‘We know that Saddam Hussein pursued weapons of mass murder even when inspectors were in his country. Are


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we to assume that he stopped when they left? The history, the logic, and the facts … suggest not. ‘To suggest otherwise is to hope against the evidence. We cannot stand by and do nothing while dangers gather. We must stand up for our security, and for the permanent rights and the hopes of mankind.’ Alexander Downer was in lock-step. Like the President, he visited New York on the anniversary of the terrorist attacks. I was working in New York at the time, as a foreign correspondent for the Sydney Morning Herald and the Age. At a ‘doorstop’ press conference at the UN, Downer said: ‘The President’s speech was a very strong, a very forceful statement of his concerns about Iraq and obviously we identify very closely with the concerns that he expressed in his speech’. Downer told reporters that the ‘Iraqis will now understand that there is a broad and growing consensus that Iraq should comply with the Security Council resolutions … and by following that path Iraq will avoid military confrontation with the rest of the world’. But he also suggested that Saddam wasn’t clever enough to avoid war. ‘He has broken so many promises in the past, why would he change now?’ he said. Reporters wanted to know if war could actually be avoided. ‘Well, that just remains to be seen,’ Downer replied. ‘Obviously the US and many other countries, including us, are concerned about the long list of broken promises and false commitments that Saddam Hussein has made, but we will have to wait and see whether there is a positive response from the Iraqis this time around … There clearly is the threat of military conflict that they have to take into consideration.’ A day later, on 13 September 2002, Downer told the UN’s General Assembly: ‘We face a grave threat to international peace and security …


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Iraq has flouted legally binding obligations … Iraq has refused to work with the UN. Iraq is a grave threat to its neighbours and to the world’. He did not say that war was inevitable or that Australia would send troops to Iraq when asked, but it was clear to even the least-interested Australian that if the United States invaded Iraq, Australia was likely to follow. After all, the two nations have an alliance, and what’s an alliance unless it means that one nation will help another in war? Still, it seemed surreal to many Australians. If Iraq posed a threat to their country, it seemed so remote as to be absurd. The threat of terrorism seemed remote, too – but then at 11.05 pm on 12 October 2002, a small bomb hidden in a backpack exploded in Paddy’s Bar in Bali. Fifteen seconds later, a more powerful car bomb hidden in a white van in the street outside the Sari Club also exploded. The toll was horrific: 202 people dead, 88 of them Australians, most of them young tourists who had been holidaying on the sun-soaked island. Ten Australians had been killed in the attacks on America on 11 September 2001. Now Australia was again a victim of mindless violence. A little over three weeks later, as Australians were still coming to terms with the bombing and the horrific aftermath (the burns victims were coming home, terribly wounded and shaken; many of the dead were rotting in Bali’s heat), the UN stepped up to deal with Iraq. On 8 November 2002, the Security Council passed resolution 1441 (in parlance, ‘fourteen-forty-one’). Strictly speaking, it was not a declaration of war. But it did say that Iraq was in ‘material breach’ of its obligations to the UN because it had refused to provide ‘an accurate, full, final and complete disclosure’ of its weapons program. The resolution offered Iraq a ‘final opportunity’ to comply, and said there would be ‘serious consequences’ if it did not. Of course, ‘serious consequences’ is also diplomatic parlance. It means war. The resolution passed 15–0. It was supported not only by Iraq’s closest


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friends on the council (France and Russia) but also by the commonly neutral China and, even more surprisingly, by the only Arab nation among the ten temporary council members, Syria. Saddam knew that the situation was growing desperate. He now had no choice other than to allow UN weapons inspectors to return to Iraq (they had left the country shortly before President Bill Clinton bombed Baghdad in 1998). To avoid war – if that were still possible – Saddam would have to somehow prove that he was not stockpiling a range of deadly weapons. The UN quickly assembled a new team of weapons inspectors, to work under the auspices of UNMOVIC (the UN’s Monitoring Verification and Inspections Commission, headed by a retired Swedish public servant, Hans Blix, who was then 72 years old). A future Nobel Prize winner, Mohamed ElBaradei of the International Atomic Energy Agency (IAEA), would play an important role, and so, too, would several Australians, among them Rod Barton, formerly of the Defence Intelligence Organisation in Canberra. The first of the weapons teams travelled to Baghdad late in 2002. They broke open the locks on their old headquarters at the dilapidated Canal Hotel and fanned out across the cities, towns and desert, on foot, by motor convoy and in helicopters, to start the great weapons hunt. They told officials of Saddam’s regime to start preparing a hefty, full and complete ‘weapons declaration’. On 27 January 2003, Blix returned to the UN Security Council with a heavy heart. He was required to provide an update on the weapons inspections, and he had very little good news. Blix told the world body that Iraq’s 12,000-word weapons declaration was ‘mostly a reprint of [an] earlier document’. Worse, it contained evidence that Iraq had produced anthrax ‘and no convincing evidence for its destruction’. The US ambassador to the UN, John Negroponte, seized on Blix’s presentation, declaring that Iraq had ‘failed the test’ and was ‘close to squandering its final opportunity’ to avoid war.


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Many people in the international community thought a war in Iraq was now inevitable – but would the UN support it? On 5 February, the US Secretary of State, Colin Powell, travelled to New York to address the Security Council. The topic of his presentation – watched by a billion people around the world – was ‘Iraq: Failing to Disarm’. ‘This is an important day for us all,’ Powell said. ‘Last 8 November, this council passed Resolution 1441 by a unanimous vote. The purpose of that resolution was to disarm Iraq of its weapons of mass destruction. ‘Resolution 1441 was not dealing with an innocent party, but a regime this council has repeatedly convicted over the years … Resolution 1441 gave Iraq one last chance, one last chance to come into compliance or to face serious consequences.’ He said nobody should have any allusions about ‘what serious consequences meant, if Iraq did not comply’. Powell seemed to be saying that war with Iraq was now all but unavoidable – and so it seemed. More than 100,000 United States troops were massed on Iraq’s borders. British naval ships were en route to the Gulf. Australia’s role seemed certain, too. Prime Minister John Howard had returned from his annual Christmas holiday to tell host Steve Liebmann of the Today show: ‘I’m convinced the real solution is compliance by Iraq with the Security Council resolution. That’s what I want, that is my overwhelming preference’. But, he said, ‘We have a situation where for 12 years this country has thumbed its nose at the rest of the world. We have a resolution that France and China and Russia and all the other members joined in unanimously. That resolution talks of serious consequences. ‘Now, I want the Security Council of the United Nations to do its job and if it does its job … Iraq will be disarmed.’ So, Australia wasn’t necessarily going to war?


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‘Steve, I don’t want a war,’ said Howard. ‘Nobody in their right mind wants a war. It’s a horrible thing.’ Three days later, Howard went to Garden Island in Sydney to formally farewell troops aboard the HMAS Kanimbla, departing for the Persian Gulf.


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CHAPTER 13

If opposition to war can be measured by the number of people prepared to march in protest, the war in Iraq was among the most unpopular conflicts in history. On 15 and 16 February 2003, millions of people took to the streets in London, New York, Paris, Berlin and other distant cities, in numbers not seen since the conflict in Vietnam. In Sydney, protestors converged on the Opera House. In Melbourne, they marched to Federation Square. But they marched against time. The regime of Saddam Hussein would be tackled – and collapse – in fewer than 35 days. ‘You just can’t have Security Council 1441 flouted forever,’ Alexander Downer explained in an exchange with journalists on 19 February 2003. ‘It’s perfectly clear Saddam has not fully co-operated with the UN inspectors … and is not complying fully with Security Council resolution 1441.’ Against this background, AWB started working furiously to ensure that the one-million-tonne contract it had signed with Iraq late in 2002 was honoured. DFAT had signed off on the deal, the wheat had been harvested and was ready to ship, but if war broke out, and the UN oil-forfood program was suspended, who would pay the bill? There were other complications: the price had, by now, been inflated to cover not just the trucking fees, but also the US$2 million compensation for the spurious contamination claim and, incredibly, by another US$8.8 million to cover the ‘debt’ owed to Tigris. Yes, Iraq seemed to have somehow come around to the idea that it owed Tigris US$8.8 million, a debt that hadn’t previously existed.


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On 13 September 2002 – the same day that Downer, at the UN, had made it as clear as possible that matters were headed for a showdown in Iraq – the Iraqi embassy had actually put out a statement, acknowledging the debt. It said Iraq owed ‘USD$8.8 million in favour of Australia/Tigris’ for ‘a quantity of wheat shipped in 1996, plus interest’. Michael Long sent an email around AWB saying: ‘Iraqi Grains Board have acknowledged the outstanding debt’. Norman Davidson Kelly was thrilled, too. He wrote to Long, saying: ‘We [Tigris] reckon a fee to you of US$500,000 would be a fair reward for your [AWB’s] assistance’ in recovering the debt. Yet how would it be done? Iraq couldn’t simply give US$8.8 million to Tigris; AWB likewise couldn’t simply pay US$2 million to Iraq for the contaminated wheat. The only way, it seemed, was to inflate the prices on the final contracts with Iraq, and then kick the money around when the UN paid the bill. And so, in December 2002, AWB and the Iraqi Grains Board entered into contracts 1670 and 1680 to supply a total of one million tonnes of wheat, with a price that had been inflated to cover the monstrous trucking fee, the after-sales service fee, the Tigris debt and the iron filings claim. That these fees were included in the price was communicated to many of AWB’s senior managers. On 7 February 2003, a junior executive, Chris Whitwell, sent out a memo, signed by Long, laying it out in full: the contract price would be inflated by US$2.016 million to cover the ‘iron filings’. This was ‘as requested by the Minister for Trade, Iraq’. Plus, AWB had ‘agreed to allow the new contract to be a conduit for a repayment of US $8,375,000 owed to Tigris’ for the wheat shipped in 1996. ‘IGB have agreed to raising the contract price by the debt amount,’ the memo said. ‘When payments are made … AWB will pay Tigris its debt, less AWB’s recovery fee.’ Now, AWB knew that it was possibly a breach of UN sanctions to


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inflate prices in this way, but the memo explained that AWB really had no choice. ‘In discussion with the Minister of Trade, he has continually insisted on repayment directly,’ the memo said. ‘This was his understanding of the agreement with Andrew Lindberg – Michael Long was present and confirms that this was discussed.’ (In his final report, Terence Cole would cast doubt on this, saying there was no evidence that Lindberg was yet in the loop on how the iron filings compensation would be paid.) The memo acknowledged ‘possible implications for AWB on corporate governance’. It even laid out the relevant part of the UN Security Council resolution 661, which states: ‘all States shall not make available to the Government of Iraq … any funds or any other financial or economic resources …’. The memo noted that ‘the Government of the Commonwealth of Australia would be obliged to prevent AWB Ltd from making any remittance of funds to the IGB’. If AWB was going to pay the money, it needed to find a way through the rules. There seemed to be only one thing to do: call in the lawyers. But lawyers – bless them – couldn’t seem to agree on whether AWB would get into trouble for extracting Iraq’s money from the UN account and kicking it around to various bodies. Some thought the deal was dodgy, but others were quite willing – on the facts available to them – to give the deal a tick. The contracts were sent from AWB to DFAT two days before Christmas in 2002. DFAT stamped them and sent them on to the UN in January 2003. Nowhere did it say that the price had been inflated by around US$53 a tonne – that is, by US$53 million – or that the bulk of that money was headed back to Iraq.


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CHAPTER 14

It is apparently impossible to have a war these days without giving it a name. When Bill Clinton bombed Iraq in 1998, the Operation was called ‘Desert Fox’. When the US forced Saddam out of Kuwait in 1991, the Operation was called ‘Desert Storm’. By February 2002, it was clear that President George W. Bush was off to Iraq, but what would the excursion be called? In New York, diplomats insist that President Bush planned to call the strike ‘Operation Iraqi Liberation’ … until somebody realised that it spelt ‘OIL’. They settled on Operation Iraqi Freedom, instead. Not everybody thought the war was a good idea. Hans Blix was still complaining about Saddam’s refusal to co-operate with weapons inspectors but he was willing to give the regime more time. France and Russia tried to convince the US to persist with weapons inspections, or at least consider a second resolution to give Iraq just one more last chance (only later did it become apparent that France and Russia had strong economic ties with Saddam’s regime, which doubtless influenced their efforts to save him). The US and its main ally, Britain, promised to consider it – and were indeed working hard on a second resolution that would have given Saddam more time – when the French president, Jacques Chirac (who was particularly fond of Saddam – ‘like lips and teeth’, as one US diplomat put it), announced on 10 March 2003 that France would veto – or kill off – any resolution that led automatically to war.


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President Bush was furious. Colin Powell had pushed him to go to the UN when his instincts had been to leave the world body well out of it. Now he felt humiliated. He yanked the second resolution out of the Security Council before the member nations had a chance to vote it out. On 17 March, Bush gave an address to the American people via his preferred medium, the television. He regretted what was about to happen, but felt he had no choice other than to act. The world had changed since September 11; he wouldn’t take risks with rogue dictators. Looking straight into the camera lens, President Bush said: ‘No nation, no nation can possibly claim that Iraq has disarmed’. He continued: ‘Saddam Hussein and his sons must leave Iraq within 48 hours. Their refusal to do so will result in military conflict – commenced at a time of our choosing’. He added: ‘For their own safety, all foreign nationals – including journalists and [weapons] inspectors – should leave Iraq immediately’. On 20 March 2003, the war began, with a campaign the Americans called ‘shock and awe’. Rather than pouring over the Iraqi border and making steady progress to Baghdad, the US dropped an enormous number of missiles on strategic targets in the city of Baghdad, in an attempt to make the Iraqi Republican Guard throw down their weapons and flee. It seemed to work: shortly after the war began, the smarter of Saddam’s two sons, Qusay, screeched into the Central Bank of Iraq in Baghdad with a note, quaintly signed by his dad, Saddam. It ordered the withdrawal of US$1 billion in cash. The madly sweating bank manager was inclined to comply with the request, in part because Qusay was pointing a pistol at his head. Qusay took the money – bundles of greenbacks that AWB might well have had a hand in supplying – from the Ministry of Finance accounts, loaded it into 200 boxes and took off in a cab. The next time he was seen, it was as a bloated corpse. In the meantime, there was chaos on the streets of Baghdad. Bombs had taken out walls, windows, whole buildings. Glass and blood littered the


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streets. Shops and offices were looted, as were palaces and even stables. Journalists who had stayed in Baghdad to bear witness to the fall of one of the world’s most odious regimes saw incredible sights: people wheeling office chairs loaded down with filing cabinets along the street; men in white robes leading handsome Arabian horses away from the stables of Saddam’s son Uday. One horse got loose and ran into the crowd. In the beginning, at least, it was fine for people to celebrate, too. Some Iraqis held up pictures of President Bush and blew kisses for Western cameras. ‘Bush, Bush, Bush!’ they chanted. Saddam – or a very good body double – made a brief appearance on the streets, smiling and waving to his ever-shrinking number of supporters. He must have known that he was doomed. US marines were flowing into the city. Abandoned by personal staff and frightened for his life, Saddam wanted to make a run for the Jordanian or the Syrian border but US troops were bearing down on all his palaces. Saddam decided to head for his hometown, Tikrit. He believed that people would rise up to protect him there. He was deluded. Nobody rose up to protect Saddam Hussein. The despised, deluded tyrant ended up hiding in a ‘spider hole’ dug into the back of somebody’s yard.


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CHAPTER 15

At the time of writing, Iraq has been declared a country in a state of civil war. Colin Powell, who pushed so hard for a second UN resolution, to get the world on side, has described the invasion as a disaster. More troops have been committed; there are few signs that victory – whatever that now means – is imminent. In the weeks immediately after the first attack, things did not look so bleak. Indeed, there was a hopeful time when it seemed that a new day was dawning in Baghdad. On 5 April 2003, US armoured vehicles made a ‘thunder run’ from the desert to the Baghdad airport; two days after that, they drove straight into the heart of the city and, on 7 April 2003, the regime of Saddam Hussein was declared ended. There was chaos, fire, smoke and horror, but many Iraqis were also celebrating, belting Saddam’s portrait with their shoes. US marines helped an ecstatic group topple a large statue of Saddam that stood in central Baghdad. Saddam had barely disappeared from Baghdad when contractors in the West began talking about ‘opportunities’ in Iraq. There was obviously huge money to be made rebuilding Iraq’s infrastructure. Petroleum companies were tempted to get into Iraq, to have a look at the oil fields and see how quickly they could be developed. In the United States, wheat farmers started to stir, too. The Iraqi people were hungry; wheat would be required. US wheat farmers wanted to supply it. AWB obviously had other ideas: it had two ships on the water when


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war broke out, the Pearl of Fujairah and Andromeda. Each was laden with 50,000 tonnes of wheat. The Pearl of Fujairah arrived at Umm Qasr just four days before the war broke out. The ship’s owner, anxious and afraid, wrote to AWB, saying there was a ‘grave situation’ unfolding … He quickly moved 10 nautical miles from the new, military inspection port. The Andromeda would suffer a similar fate, unable to berth at Umm Qasr. AWB had not been paid for the wheat aboard those ships. Worse, it had two outstanding contracts with Iraq, each for a massive 500,000 tonnes of wheat. These contracts – numbered 1670 and 1680 – were those that included the kickbacks, the Tigris debt and the iron filings claim. AWB had sent the fraudulent invoice to the United Nations but, when the war broke out, the oil-for-food program had been suspended, so now who was going to pay? The UN didn’t know. Its diplomats and officials were still staggering around, dumbstruck by events that had unfolded. One minute, they had been at the centre of the debate over whether a military strike was necessary to topple Saddam Hussein. Next, the US and Britain had dragged the second resolution out of the Security Council and launched an attack on Baghdad. AWB turned for help to its friends in the Department of Foreign Affairs and Trade. Would DFAT – or, more particularly, its aid agency, AusAID – pay for some of the wheat? Well, yes, it would. The day after the war, Alexander Downer announced that AusAID would pick up the $83 million tab for the wheat that was already at sea. ‘This is a substantial contribution to the humanitarian task in Iraq,’ he said. ‘The Iraqis have about eight weeks of food supplies, but obviously we’re not sure how long the war is going to last.’ At a meeting with Andrew Lindberg at Parliament House in Canberra on 24 March 2003 – just days after the bombing began – Downer confessed


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to concerns that, never mind the alliance, America would be after Australia’s share of the wheat trade. Attendees at that meeting included the deputy director of AusAID, Charles Spratt. A record of the conversation shows that Downer told AWB that his ‘primary concern’ was that ‘once hostilities were over’ the Americans would ‘conclude that its sacrifices on the battlefield entitled its farmers to the Iraqi wheat market’. Downer hoped the US ‘would let Australia keep a substantial slice of the market but admitted it would be difficult’. He realised that the port of Umm Qasr was closed, but he wanted the first ship to enter Iraq to be carrying Australian wheat ‘particularly if it was escorted by HMAS ANZAC’. Lindberg agreed there was ‘symbolic value’ in getting Australian wheat into Iraq before the US ships could arrive. Downer told Lindberg that he was planning to travel to Washington DC, and wheat would be a ‘major topic’. He said he was ‘sure the US well understood that the Australians would go “feral” if the US … was to steal our wheat market’. In the meantime, AusAID would pay AWB for the stranded wheat. But then, before it could happen, the plan changed. AusAID wouldn’t buy the wheat; the World Food Programme – an aid agency run by the UN – would do it instead. It isn’t clear why AusAID baulked at the deal, although surely the price – $83 million, which included more than $30 million in ‘handling costs’ – shocked them. Downer never explained the reasons for the switch. He simply said the UN would pay for the wheat instead, a move that allowed his government to spend the $83 million on other ‘humanitarian projects’. The Pearl of Fujairah went to Kuwait City; the Andromeda went to the Jordanian port of Aqaba. A short time later, Trevor Flugge went to Baghdad. Lindberg told Downer it was important to get Australians into positions of authority in Baghdad, ostensibly to help the Iraqis rebuild their own agriculture sector, but also to ensure that the US didn’t grab too much of the pie.


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The Howard government wanted to know who to send, although the answer seemed obvious: Flugge had helped privatise the old wheat board and had been awarded a Centenary Medal for his work. He was probably the most experienced grain trader in Australia. He had visited Iraq several times. But he had also just been booted off the board; he was angry and upset. Could he be tempted to go? With a salary package of $978,776 – to be paid to him, tax free, by the government’s aid agency, AusAID – well, yes. Yes. He could. Melbourne’s Herald Sun announced the appointment in April, saying: ‘Flugge’s first priority will be to protect the billion-dollar-a-year wheat market for Australia’. When US farmers heard about the appointment, they went berserk. Never mind that Australia and the US were allies on the battlefield; in the trade arena, it was war. Flugge was the last possible person the Americans wanted to see in Baghdad. They felt certain he would sew up the trade for Australia. In a grain-trade newsletter, the lobby group US Wheat Associates described Flugge as a ‘master monopolist’. Alan Tracy, who was then (and, at the time of writing, still is) president of US Wheat Associates, wanted an American in Baghdad too, and so, a few days later, it was announced: Dan Amstutz, a former US Agriculture Department official, would join Flugge as a ‘co-senior advisor’ in the Iraqi agriculture ministry. ‘We are extremely pleased with the appointment,’ said Tracy, adding, ‘Dan is the ultimate free trader.’ To people outside the wheat trade, these announcements were silly and unimportant. But AWB knew that it meant the battle for control of Iraq’s vast market was truly under way. A few weeks later, Amstutz and Flugge met in Kuwait to discuss the work ahead. Flugge continued on to Iraq, but – to the great dismay of US farmers – Amstutz immediately returned to the United States, saying he


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didn’t have the right paperwork and, anyway, US officials had urged him to wait until the security situation in Baghdad improved and, besides, there was apparently no office ready for him to use and the telephone service was unreliable. AWB chortled: what a pussy! Flugge was clearly on the front foot. He arrived in Baghdad in April 2003, aboard a US military C-130 Hercules cargo plane. ‘We flew in at night because the area wasn’t secure,’ he later told reporters. ‘Once you were on the ground, the back doors would open. You’d get out as fast as you could. The engines would still be running, they’d close the doors again, and they’d be gone after three to five minutes maximum on the ground.’ Flugge’s job, as he publicly stated it, was to help the Iraqis revive their agriculture industry, and he was genuinely shocked by what he found when he landed. The countryside had been bombed to smithereens, and machinery left to slump and rust under the sanctions regime. Farmers were struggling to feed their families. Michael Long, who had followed Flugge into Baghdad, knew what to do. He strode confidently into the offices of an American general and – in an audacious move still talked about years later – he asked, then and there, for $50 million. He explained that there were 12 or 13 rural banks in the Iraqi wheat-belt but they had no money. On the other hand, Central Bank in Baghdad had US dollars. All that had to happen was for the cash to be shared around. The general – unnamed here, for obvious reasons – was horrified. ‘You want me to give you $50 million?’ he asked. ‘Sure,’ said Long. ‘Count it, mark it, give it to us, and we’ll hand it out.’ The general studied Long – taking in his massive frame, his cleanshaven head and his confidence – and reached for an order book on his desk. ‘He was looking the other way when he did it,’ said Long, ‘but he signed.’


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‘Don’t disappoint me,’ the general said, and Long – who had taken the code-name ‘Proton’ for his five-month stint working in Baghdad – was as good as his word. None of that money, stuffed into green canvas bags, went missing. The Iraqis got paid. Flugge would later tell reporters that he took part in several of the Black Hawk ‘money runs’ across the desert carrying bundles of $6 million to $10 million across the country. ‘It’s not a very big amount,’ he said. ‘Ten thousand dollars in hundreddollar bills is actually pretty small. If we had to wait for cheques nothing would get done. The important thing was to get people paid and get them back to work.’ Flugge and Long worked their butts off in Baghdad: ten, 12, sometimes even 15 hours a day. They never felt secure. It was incredibly hot, like furnace in summer. Desert sands got under the door and into their clothes. Terrifying fire-fights often broke out in the cities – it was called ‘Baghdad rain’. The pressure was immense, the facilities rundown, communications terrible and, of course, there was carnage. In the evenings, to relieve the stress, to conquer their fears of being fired upon, blown apart or kidnapped, they often had a few drinks. Sometimes, they went a bit crazy, which perhaps goes some way towards explaining why Flugge was once photographed, red-faced and bare-chested, pointing a pistol at the camera, grinning like a loon. The pictures of Long weren’t quite so damaging: he was photographed smiling while handling a sub-machine gun and while admiring the sacks of greenbacks. Years later, some of those pictures – terribly embarrassing, not only for Long and Flugge, but for Prime Minister Howard, who effectively sent them to Baghdad as representatives of the Australian people – were dropped into a Melbourne newspaper office by a person with a grudge against one of the men. They appeared on the front page of both the Sydney Morning Herald and the Age at the height of the Cole inquiry, on 3 February 2006.


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Flugge – a man who takes his image seriously – was horrified, but Long took the incident in his stride. ‘Was I happy about it? No. But my motto in life is: what can I do about this situation? If the answer is nothing, then I simply try to handle myself as best I can,’ he said. ‘Most people – I mean the public – were able to put those pictures in context. We were living in a city with 150,000 US soldiers, all of them armed to the teeth. You would go to the mess hall in the morning. There would be soldiers there, with guns next to them while they sat and ate their porridge. ‘There were machine guns on the seat beside you, soldiers in the streets, the hotels. Of course, after a while, you get used to it. I’d say, what kind of gun is that? Can I have a look at it? And some pictures were taken. And with the cash, it was the same thing. We were carrying huge sacks of American dollars around. You had to photograph it, or nobody would believe it.’ Long was proud of the work he had been able to do for the Iraqi people on behalf of Australia, too. He doesn’t mind people knowing that he got right into his role as ‘Proton’ – the warrior for the Iraqi people. His weekly reports to DFAT show what he got up to, and they still make fascinating reading: in the week ending 8 June 2003, for example, Long visited all the Kurdish areas, staying ‘at Saddam’s palaces. In Tikrit, there is a huge area on the river with canals including 21 palaces. We stayed at the Water Palace. Flying over the mountains … down into the most fertile valleys you can imagine, across the Tigris, and then onto a huge dam near the border. ‘Wheat everywhere,’ he reported. ‘Flew over the Turkish border and looked at the three mile line of trucks trying to get into Iraq. In many places, bombed tanks were everywhere. Mirage fighter jets blown up, tails fallen off. One airfield had been systematically bombed about every 50 metres right on the white line in the centre of the strip. ‘Saw the work of a couple of bunker busters [bombs] … must have created a crater about 30 feet deep and the same wide.’


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Long was also extremely concerned about security – and a little annoyed that the federal government officials seemed to have more of it than he did. He noted: ‘Due to the Aussie way of getting on with the job, we are constantly in vehicles that are either unarmoured or not escorted by military. It is only a matter of time before a significant incident involving a civilian occurs. ‘Currently, only the Australian Ambassador and DFAT staff are in armoured vehicles. Won’t look good in the Aussie press if something happens, if it’s one thing for DFAT and let the rest fend for themselves.’ Long’s note from the week ending 15 June 2003 was interesting, too. He reported that the military was ‘pulling out’ of guarding wheat silos, and he felt that Iraqi police would ‘not be effective against serious criminals/ looters’. ‘In fact,’ he said, with something that may have been genuine surprise, ‘despite being armed with AK-47s, they won’t shoot fellow Iraqis’. Long and Flugge maintained an interest in AWB’s fortunes while working for the federal government. How could they not? Flugge had been a wheat farmer all his life; Long was sent to Baghdad by the federal government but was still employed by AWB, and he is a salesman to the bone. Both relished a good trade stoush, especially against the Americans. AWB regarded its trade with Iraq as a huge success story. It was one of the few markets where Australia didn’t have to battle against the United States (whose farmers receive generous subsidies) and where it beat off competition from other nations with lower overheads and cheaper wages. AWB knew that it had the government on side. Prime Minister Howard would later admit that his government selected Flugge to go to Baghdad ‘because our principal concern at that time was to stop American wheat growers from getting our markets’. AWB hoped that some of the old Iraqi Grains Board staff would be loyal to Australia and keep the trade alive. But, if they were counting on


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help from the Iraqi trade minister, Mohammed Medhi Saleh, they would be severely disappointed. Early in April 2003, the United States had released a provocative ‘Most Wanted’ pack of playing cards, showing all the Iraqis it wanted to capture or kill. Saddam was there, as was Uday and Qusay. And Saleh? He was there, too. He was the Six of Hearts. Mohammed Medhi Saleh was captured trying to flee Baghdad on 23 April. He was immediately sent to one of the new, US-run prisons (the US has never confirmed it, but he was surely taken to a special facility for officials of Saddam’s former regime, known as Camp Cropper). Within days, he was singing like a bird.


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CHAPTER 16

There are people who claim that the second Bush presidency has been a disaster. At the risk of generating ridicule, it is, perhaps, too soon to say that. It is, however, true that President Bush has made some simple mistakes, as well as some massive ones. On 1 May 2003, for example, he triumphantly declared the end of major combat operations in Iraq by landing on the aircraft carrier USS Abraham Lincoln in a Lockheed S-3 Viking, while wearing a too-tight flight suit. Clearly visible in the background was a banner stating ‘Mission Accomplished’. President Bush had clearly jumped the gun: more than 3000 US soldiers – men and women, some of them achingly inexperienced and unprotected by body armour – would die in the war in the three years and nine months to December 2006. The ‘insurgency’ – the name given to attacks by terrorists on the allied forces – had barely begun. There was a humanitarian crisis under way, too. The Iraqi people had for years been almost entirely dependent upon food baskets supplied by Saddam’s regime. Now Saddam was gone, the banks and corner stores weren’t operating properly. The Iraqis had no way to feed their families. The UN wanted to re-start the oil-for-food program but the United States was still angry with the UN for refusing to sanction the invasion. The Bush administration wasn’t only piqued, however. Within days of arriving in Baghdad, it had become apparent that Saddam had somehow been gaining access to vast sums of money. How else to explain the colossal palaces? The gold taps? The ostentatious marble floors, the soaring ceilings and the pornography found in every drawer? There was


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only one possible answer: the oil-for-food program had been corrupted, and the US wanted to know why and how and, crucially, by whom? The Coalition Provisional Authority (CPA) immediately set up a special investigations unit to look into the scam. It was particularly interested to know whether France, Russia or indeed the UN itself was involved. After all, the US had committed troops to Iraq at least in part because it believed Saddam was flouting UN sanctions, generating cash and building a weapons program. Some of Iraq’s returning exiles, such as future politician Ahmed Chalabi, established inquiries of their own. But the Iraqi people could not afford to wait for these investigations to be completed. Something had to be done immediately to get supplies into Iraq. On 27 May 2003, the UN Security Council passed a new resolution – UNSCR 1483 – that effectively re-started the oil-for-food program, while preserving the records of the old regime. Under the new rules, outstanding contracts for food – such as wheat – and other emergency supplies would be honoured, and the bills would be paid, but only after the contracts had been examined for signs of corruption. AWB was elated. Its contracts – 1670 and 1680, for a total of one million tonnes of wheat – were already in the queue. If AWB could get them honoured, the wheat would be shipped over a period of eight or nine months. Iraq wouldn’t have to buy any more wheat – and the US would effectively be shut out of the market – for at least that long. Naturally, when the Americans found out about this, they were horrified. They began looking for ways to loosen the Australian hold on the Iraq market. Under these circumstances, it was hardly surprising when copies of the supposedly secret AWB contracts fell into the lap of Alan Tracy at US Wheat Associates. Tracy would later explain that he took one look at the price – 280 euros per tonne or, by his reckoning, twice the world wheat price at the time – and decided: ‘There is something very suspicious going on here’.


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On 3 June 2003, he took his concerns public, writing an open letter to the US Secretary of State, Colin Powell, asking for an investigation into AWB’s deals with Iraq, and its exorbitant prices. This letter – widely circulated on Capitol Hill and in Canberra – said AWB had ‘undoubtedly inflated’ pre-war contracts with Saddam’s regime and the extra money had probably gone straight ‘into the accounts of Saddam Hussein’s family’. Naturally, there was pandemonium – but of the measured, diplomatic kind. Frances Freeman, who was then based at the Australian embassy in Washington DC, received a copy of the letter soon after it began circulating. Like every Australian official before her, Freeman did not take seriously the allegation that AWB had funnelled money to Saddam’s regime. That was simply considered ridiculous. She did, however, draw the letter to the attention of Australia’s then ambassador Michael Thawley and to the deputy chief of the mission, Peter Baxter. At around the same time, one of AWB’s new public affairs managers, Darryl Hockey, also wrote to Freeman, saying that he, too, had received a tip from a ‘contact in Washington’ that ‘US Wheat Associates are pursuing you guys’. ‘They have got the pricing information on AWB’s contracts over the past two years with Iraq. They are saying that it was 30 per cent above the market price,’ Hockey said. ‘US Wheat is firing off a letter to the State Department, requesting an inquiry on this,’ he continued. Hockey conceded that ‘yes, this has always been a lucrative market and we have always been upfront about that’. But as for corruption, he was affronted. ‘No squeals are justified,’ Hockey said. ‘Our contracts have always been openly negotiated with Iraq.’ AWB went quickly into defence mode. On 6 June – three days after Tracy’s letter to Powell was made public – it put out a media release titled: ‘AWB hits out at baseless US allegations’. It said the allegations made by


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US Wheat Associates were ‘absurd, with no foundation’ and an ‘insult to Australian wheat farmers’. Andrew Lindberg was quoted: ‘All our contracts have been approved and executed through the United Nations oil-for food program and have been totally transparent and above board’. For his part, Hockey decided to take the fight directly to the enemy. In a wonderfully expressive personal note to Tracy, he said: ‘In Australia, we have a reputation of sportsmanship. We are vigorously competitive. We play the game hard and fast and take no prisoners but after the game, we shake hands with our opponents and drink in the bar as friends. ‘This is the way we approach our wheat business. We have always treated our competitors with personal respect and bonhomie. ‘You would be aware that your comments were perceived as personally insulting,’ Hockey said. ‘Not just towards AWB but towards our staff, our ex-Chairman, by wheat farmers and by Australians in general.’ Tracy said he was amused by the tone of this letter. He was not, however, persuaded that it was true. On 9 June 2003, Trevor Flugge jumped into the fray, telling Associated Press in Baghdad that allegations of kickbacks were ‘complete rubbish’ and a ‘revolting’ slur. AWB’s media spokesman, Peter McBride, told journalists who called that ‘the allegation that we may have been paying kickbacks to Saddam Hussein’s family is totally untrue’. Trade Minister Mark Vaile was up for the fight, too, saying the reports were ‘quite insulting’ and that ‘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’. He went on: ‘I was very, very annoyed, given the close co-operation that Australia and the US have played together as both members of the Coalition of the Willing and as two countries who participated together as close allies in the first Gulf War’.


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In fact, Vaile had no idea whether AWB had paid a kickback. He never actually bothered to investigate the allegations that were being made. Not then, not when the allegations were first raised in 2000, and not in 2005, by which time they were common knowledge to almost everybody. The question needs to be asked: why? There are three possible answers: one, he knew the allegations were true, and didn’t want the truth to come out (something he strenuously denies, and for which Cole found no evidence); two, it never occurred to him that AWB might have been caught in the middle of the scam, even unwittingly (which is Vaile’s explanation for his own failure to investigate); or three, he didn’t want to know whether the allegations were true (again, something he denies). Vaile told reporters he would go to the US embassy and launch a formal complaint. What a pity he didn’t: at the very least, it might have precipitated a formal investigation. In any case, Vaile barely had time: just a few days later, on 10 June 2003, there was another clear warning, straight out of Baghdad, that Saddam’s regime had been rorting the UN oil-for-food program. This second warning came in the form of a memo written by a US army captain, Blake Puckett, who was serving with the US Army’s civil affairs command in Baghdad. Captain Puckett explained to recipients of that memo, many Australians among them, that all oil-for-food contracts – presumably including AWB’s multi-million-dollar deals – were being reviewed because a sweep of Iraq’s files had revealed that Saddam had been adding ‘kickbacks or surcharge (often 10%)’ to its prices. Michael Long – who was still working for the federal government in Baghdad – received the so-called ‘Puckett memo’ on or about the day it was sent. He immediately faxed it to AWB, with the heading: ‘Please don’t let DFAT know you know … I will tell them and ask them to tell you’. He then faxed the memo to DFAT saying: ‘please advise AWB’.


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Long’s fax to Canberra landed on the desk of a former journalist turned diplomat, Zena Armstrong, who was then a member of the federal government’s Iraq Task Force. The taskforce had been established in September 2002 to bring together a range of departments and agencies, including Prime Minister and Cabinet, Defence, AusAID, Austrade and the Attorney-General’s. It held daily meetings during the war and produced more than 185 ‘concise situation reports for ministers’. But Long wasn’t the only person to send the information about kickbacks to this taskforce. Around the same time, the deputy head of Australia’s new diplomatic post in Baghdad, Heidi Venamore, received much the same information during a briefing by Captain Puckett. In a cable dated 23 June 2003 she noted that Captain Puckett had said that ‘every contract since phase 9 [of the oil-for-food program] included a kickback to the regime from between 10 and 19 per cent’. Her cable was addressed to Prime Minister Howard; Mark Vaile; DFAT secretary Ashton Calvert; Defence Minister Robert Hill; chief of the army, General Peter Cosgrove; and Attorney-General Philip Ruddock, among a long list of others. So, allegations were now pouring into Canberra. Zena Armstrong definitely got these messages – but she did not act. At the Cole inquiry, John Agius asked her: ‘This is a fairly definitive statement, Ms Armstrong – “every contract included a kickback”. Did it occur to you that AWB’s contracts … should be subject to rigorous examination?’ ‘By the Australian Government?’ she queried. ‘Yes.’ ‘No.’ On the contrary, Armstrong said staff in Canberra had dismissed Captain Puckett’s advice because ‘we couldn’t see, from Canberra, how they could make such a definitive statement’.


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How? Maybe because they were there, on the ground, in Baghdad, sorting through the files, seeing things for themselves? But, no, Armstrong went on: ‘I thought it was far too early for the CPA to be making categorical statements like that’. Besides, DFAT and the Howard government were more interested in keeping Australia’s wheat trade with Iraq than in investigating the allegations of corruption. ‘My work … was very much focused … on ensuring that the wheat market in Iraq – that Australia had continued access to the wheat market in Iraq. It was not to investigate AWB … So my priority, my focus, was actually on trade, rather than an investigation,’ Ms Armstrong said. One could argue that the focus at AWB was also on trade – and yet, just a few days after the letter to Colin Powell began to circulate, Lindberg did something the federal government didn’t bother to do. He asked a lawyer, Dr Jim Cooper, to start an internal investigation into the matter. Over time, this investigation would become known as Project Rose.

Curiously – one might even say stupidly – when AWB was told by the UN that all suppliers would soon be asked to take a 10 or even a 19 per cent hair-cut on their prices, it pursued a strategy that would become wearily familiar in years to come. It decided to put up a fight. Chris Whitwell led the charge, appealing directly to Armstrong who had joined the public service in 1991 after a career as a journalist, but who showed remarkably little interest in investigating any of the merry allegations that came her way. On the contrary, Armstrong did what no journalist would ever do: she kept taking AWB at its word, over and over again. It is possible that she felt completely out of her depth at the Iraq Task Force. By her own admission, she had nothing at all to do with Iraq or the Middle East before the war broke out – and she certainly had no familiarity with wheat contracts.


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On 13 June 2003, Whitwell wrote to Armstrong in Canberra, saying that AWB desperately needed the CPA to fund the outstanding wheat contracts because ‘any cancellation will have a major effect on growers in a drought year’. To bolster his case, he reminded Armstrong that Australia was one of few countries that had supported the US-led war in Iraq. ‘Not too much to ask for a coalition member?’ he said, meaning, why shouldn’t Australia’s contracts be pushed to the front of the queue. Around the same time – on 18 June 2003 – Hockey wrote another note to Frances Freeman at the embassy in Washington DC. He was so angry at the rumours the Americans were spreading he could explode, threatening even to sue Alan Tracy at US Wheat Associates. ‘The idea is to start some pressure on him,’ Hockey said. ‘Let him know the legals are working on him, make him see a lawyer himself, and start blowing his meagre budget. He can start to calculate that he might get a whopping defamation/compo bill.’ Freeman sent Hockey a copy of an article by an experienced agriculture writer, Jerry Hagstrom, who was filing for a Washington DC newsletter known as the Congress Daily. It suggested that AWB’s contracts with Saddam’s regime would soon be made public. Hockey was appalled. ‘I’m not sure that revealing this private information is anyone’s business,’ he said, in response. ‘We signed a contract … And it was superintended by the UN.’ Somewhat undiplomatically, he added: ‘The US should fuck off. Obviously, we don’t want any of our details of any sales in any markets revealed. That’s not the way one operates in a commercial and corporate world’.

On 24 June 2003, the UN Humanitarian Co-ordinator for Iraq, Ramiro Lopez da Silva, told a news conference at the UN headquarters in New York that officials at the UN Office of the Iraq Program were planning to


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‘re-examine’ all food contracts that had been signed under the oil-forfood program. They were on the look-out for kickbacks, he said. He believed there was evidence that ‘money was going elsewhere’ and suppliers – such as AWB – would be asked to cut their prices if kickbacks were found. AWB couldn’t bear it. It didn’t want to take a cut on prices, and nobody who was then in the loop wanted to admit that trucking fees and other kickbacks were built into its contracts with Saddam’s regime. Whitwell argued forcefully that, as an ally, Australia should have its contracts honoured, sooner rather than later – and in September 2003, AWB got what it wanted. Both contracts – 1670 and 1680 – were cleared by the UN. Australia’s trade minister, Mark Vaile, was predictably ecstatic. ‘The two contracts total 800,000 tonnes and are valued at more than $300 million,’ he said. ‘This tremendous result is the culmination of many months of close cooperation between the Federal Government and AWB to secure these contracts for Australia.’ What Vaile did not say – but everybody who had been involved in the renegotiation in Canberra, Washington and Baghdad knew – was that AWB had agreed to cut the price. The original price – in December 2002 – was 280.37 euros; the new price was 254.88 euros. The new total was 133,812,000 euros compared with 147,194,250 euros in the original contract. No doubt many at AWB felt they were home and hosed: the contracts had been prioritised and approved. Surely that was the end of it? No. When US Wheat Associates heard that Australia’s outstanding contracts for wheat would be honoured by the UN (and that their own wheat wouldn’t be needed for at least a year, maybe more) they were outraged. Tracy went looking for copies of the old contracts and, when he found them, he made sure that every congressman and congresswoman on Capitol Hill knew that the prices had been inflated.


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On 22 October 2003, six US senators from America’s northern wheat plains, including the powerful South Dakota senator and house minority leader Tom Daschle and Iowa’s Tom Harkin, wrote to President Bush demanding an explanation. ‘Dear Mr President,’ the letter said. ‘We read with interest a news report today that indicates … that Saddam Hussein’s government agreed to buy Australian wheat from the Australian Wheat Board at a price nearly double the price of comparable US Wheat.’ It said the high prices ‘would appear to support charges that AWB was involved in kickbacks to Hussein or his family’. By now, newspapers across the globe were reporting that the UN oil-for-food program had been rorted, but the article to which the letter referred was written by Jerry Hagstrom and published in the Congress Daily on 22 October 2003. The senators urged President Bush – who was, at the time, on a historic visit to Australia – to raise the matter with Prime Minister John Howard and ‘to ensure that all such wheat purchases … are examined closely’. But President Bush did not refer to the contretemps while he was in Canberra. Instead, he told Prime Minister Howard that he was ‘committed to seeing that we can get this free trade agreement done by the end of December. That’s what John and I talked about in Crawford [the site of his Texas ranch]. I think a free trade agreement with Australia would be good for America, good for American workers. I also believe that it would be good for Australia. ‘There’s a lot of important issues that we’ve got to work through, but I think we can,’ President Bush said. The Free Trade Agreement (FTA) with the US had been one of Howard’s policy goals for at least a decade. There were a few sticking points: one was sugar (during negotiations, Vaile told Australian sugar farmers he would try to get the US to open its markets to Australian sugar products but was not successful; another was the pharmaceutical benefits scheme (the US did not like the way the Australian Government subsidised some


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medicines but not others); and then there was the problem of the socalled single desk for wheat. The US wanted AWB’s single desk, or pooling arrangement, to be demolished as part of the free-trade negotiations, saying it gave Australian wheat farmers a clear advantage over US farmers (the Australians laughed this off saying US farmers received generous subsidies from the US government). The National Party threatened mutiny if Howard bent on the single desk. The then agriculture minister Warren Truss was quite manic about it; so, too, was Vaile. But if US Wheat Associates was able to prove that AWB was corrupt – well, that would be disastrous. The single desk might come into play. Against this background, it was probably quite easy for AWB to convince the Australian government that allegations about AWB’s dealings with Saddam’s regime were malicious, and could be traced back to the free-trade negotiations. It was all part of a plot to make Australia give up the single desk. The Australian embassy in Washington was remarkably sympathetic to this point of view. On 23 October, the chargé d’affaires, Peter Baxter, went to meet one of the US senators, Tom Daschle, and ‘strenuously rebutted the allegation that the price received by AWB for wheat to Iraq in any way implied that kickbacks were paid to the Saddam regime’. The embassy said the allegations were ‘utterly reprehensible’. It did not, however, investigate them. Zena Armstrong told the embassy that AWB insisted that the allegations were ‘baseless and outrageous’ and that ‘no such kickbacks were paid’. How did she know? Well, who knows? There still hadn’t been an official investigation. Armstrong was simply parroting what AWB had told her. She did not sit down with AWB’s senior managers – people like Andrew Lindberg – and ask them to honestly explain how the wheat price was set or what fees were included in the price. She did not say: ‘Listen, if


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the Australian Government is going to bat for you, we need to know all is above board. Put your contract on the table, let’s work out whether any of this money could have found its way back to Saddam’s regime’. By chance, she did copies of contracts 1670 and 1680 – the two contracts bloated with kickbacks – and she could see for herself that the price was 280.37 euros, or around US$300 a tonne. But the information was essentially meaningless to Armstrong: she had no idea what wheat should cost, and no experience with the special terms used to describe the transportation arrangements. AWB had told her that the price was high because it included a premium for dealing with Iraq in the leadup to the war, and she accepted that explanation. Whitwell told her that the allegations were ‘preposterous’. She had asked AWB about the price renegotiation and they told her the price had ‘only been reduced by a very nominal amount’ and it definitely wasn’t because there were kickbacks in the price. Armstrong could, of course, have picked up the telephone, called a maritime lawyer and asked for an explanation of the terms in the contract. She didn’t. She might also have asked AWB for a breakdown of the fees included in the price. But she didn’t do that. Instead, she conducted what she would herself describe as a ‘very inexpert lay person’s analysis’ of the situation: she compared some Australian prices to some Russian prices and decided that AWB was not guilty of wrongdoing. ‘Did you ever ask Mr Whitwell or Mr Long for a break down of the inland transport costs, some further information about it?’ Agius asked her, at the Cole inquiry. ‘I don’t believe I did,’ she said. US Wheat Associates was not so easily swayed. It put out another newsletter detailing some of AWB’s sky-high prices. The Australian embassy’s Peter Baxter wrote to Armstrong: ‘Do we know whether this [the high prices] is accurate? It’s hard to keep trying to defend them when we don’t have the facts to do so’. He wanted to know why AWB wouldn’t provide a complete break-


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down of their prices. Armstrong replied on 3 November, saying: ‘AWB has confirmed that they do not want to pass across details of the costs of the contracts. They don’t want to get involved in a slanging match’. It is difficult to understand why Armstrong didn’t do more to uncover the kickbacks. Was she gripped by patriotic fervour, invigorated by the trade stoush, or even charmed by Michael Long? Whatever, she simply took AWB at its word. Years later, when the scandal was unfolding before the nation, she still seemed stunned that so much had passed in front of her nose without, apparently, her getting a sniff of it. ‘I thought it was very positive,’ she would say, of her relationship with AWB. ‘I thought my relationships with the AWB officers that I was working with were very professional, they were cooperative. ‘We were working to secure the reprioritisation of wheat contracts which were of great importance to the Australian wheat grower and I believe we dealt with each other very professionally but also cooperatively.’ The reality? Zena Armstrong got snowed.


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CHAPTER 17

Twelve days before Christmas in 2003, coalition forces announced that ‘Operation Red Dawn’ – the mission to find Saddam Hussein – had been successful. The Iraqi leader had been hiding in a ‘spider hole’ in the small town of ad-Dawr, near his birthplace of Tikrit. He was armed with a pistol, but offered no resistance during his capture. US marines who grabbed him by the collar and pulled him to the surface of the earth also found two AK-47 rifles, US$750,000 in $100 bills, Mars bars and a stash of Spam. The news was greeted by cheers in Baghdad, where Australians were still working to help get the Iraqis back on their feet. Michael Long had, by then, packed his bags, and returned to his young family in Melbourne. He had earned the respect of senior officers in the Coalition Provisional Authority; they were impressed by the speed at which he worked and his cheerful, no-nonsense approach to the tasks he handled. He had come up with simple solutions to problems the Americans regarded as intractable. He received a glowing reference. The Howard government was naturally keen to have Long replaced at Iraq’s Ministry of Trade by another Australian. They selected Darryl Hockey, who had the same knock-about manner that Americans find utterly charming. He hails from Perth, but has lived in Canberra and Melbourne, and he had been both a political advisor (for the former deputy prime minister John Anderson) and a media relations manager at AWB. Hockey would later tell friends that his flight into Baghdad was absolutely horrific: there was a long, low cruise over Baghdad, to avoid


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the shoulder-fired missiles, then a sudden bump onto the tarmac. He was greeted at the airport by Long, who warned him that working conditions were tough. (The Ministry of Trade building had been damaged in the assault on Baghdad, so they were working out of a bunker below the Baghdad Convention Centre. The power was often out; the telephone lines rarely worked; and it was hot, hot, hot.) Unlike others who arrived to take over Iraq’s administrative duties, Hockey was not shocked by what he found in Baghdad. He was familiar with the city, because he had spent three months there in the 1980s. In contrast to those Westerners who loathe the heat and the 1960s infrastructure, Hockey had fallen in love with the place. ‘Straight as arrows,’ he would say of the Iraqis. ‘Honest, friendly, genuine – the nicest people you’ll meet in your life.’ Hockey admired Baghdad precisely because it was not slick like Western cities. He liked the thrill of the desert: the sand dunes, the Bedouins. ‘A spectacular city,’ he said, of the capital. ‘The riverfronts were gorgeous. Fishermen would cook their catch on the banks of the river, in wire cages they held over open fires. People suffered terribly, obviously, but as a city, it was beautiful.’ Hockey and Long had a week’s ‘cross-over’ where Long helped Hockey get used to the place. The Al-Rashid was grubbier than Hockey remembered, but US marines had ripped up the mosaic of the elder Bush’s face, and they had cleared and repaired the pool and filled it with inviting, clear blue water. The guests were the envy of Baghdad – at least until the insurgency began. The Al-Rashid was close to the perimeter wall of the Green Zone (a zone fortified and protected by US forces). Insurgents could basically stand outside and fire at the building. One morning, when Hockey was looking out the window, brushing his teeth, he saw a shoulder-fired missile coming towards him. Within seconds he was flat on the floor, and a fleet of missiles had struck the building. A woman staying two doors down – who had arrived just the day before – had part of her


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arm blown off. There was blood on the wallpaper in the hall. Another day, Hockey was swimming in the clear, turquoise pool downstairs when bombs started hitting the windows. Glass poured down, into the water. The speakers started screaming ‘Evacuate, evacuate!’ but Hockey was wearing only his Speedos. He refused to run into the street without first returning to his hotel room to at least get some pants on. A few days later, Hockey was told to leave the hotel. It had become a target for insurgents who wanted to hit foreigners. His new accommodation was outside the Green Zone, which meant he had to make two treacherous journeys across Baghdad, morning and night, travelling in a car wearing a flak jacket and helmet. Once, when gunfire could be heard all around, he took his helmet off and held it over the passenger window, thinking, ‘If we get hit, I don’t want to lose my face’. Upon arrival at the new hotel, marines would grab him by the collar and frog-march him into the foyer, up the stairs and to his room where he was bolted indoors, until morning. Despite these challenges, it was difficult for Hockey and others who went to Baghdad after the war not to feel thrilled by the opportunity to help get Iraq back to its feet. He genuinely wanted to help the Iraqi people and resented the suggestion by the Americans that because he was employed by AWB, his loyalty was only to AWB. Hockey worked in a room surrounded by Americans, many of whom were convinced that AWB was up to its neck in corruption, or at least happy to heckle him about it. ‘There’d already been a blanket decision made in Washington DC to remove 10 per cent off every contract,’ Hockey told the Cole inquiry. ‘Now, therefore you could imagine in the office that I worked there was probably five or six Americans working on taking this 10 per cent out. That’s all they ever talked about, was the 10 per cent kickback scheme and how they believed it was in breach of Security Council resolutions. They were saying that every single contract was going to have that 10 per cent deducted off it.


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‘One of our key guys in the office said to me – an American guy – “I’m just giving you the tip-off that I’ve been asked to work on this investigation, we’re going to do a search of all the files here in Baghdad, I’m going to be working on this full time”. ‘He said: “You guys had better look out, you Aussies, because this has been generated by political concerns in Washington and there’s going to be a big investigation and they’re going to be chasing you guys, because you’re the Aussies, because you are the biggest contributors and it’s because of the wheat market”.’ Hockey said he replied: ‘I think you are wasting your time. ‘I got quite angry about it, to be honest.’ In Hockey’s view, Iraq was on the verge of a humanitarian crisis and he did not think Western aid workers should be ‘sitting down there, looking through old contracts’. Hockey sent a message back to Canberra, warning them that the US was trying as hard as possible to steal the wheat trade from Australia, by spreading the allegation that AWB had been involved in the corruption of the oil-for-food program, and had been funding Saddam’s regime before the war. ‘They are using some dirty tactics,’ he said. But the fact that the UN’s oil-for-food program had been rorted by Saddam’s regime had, by now, become a global scandal (indeed, some newspapers had begun to refer to it as the ‘world’s greatest swindle’). Millions had gone missing. The US was dismayed and yet delighted: it proved that the UN was incapable of managing even a basic aid program, and the swindle took some of the heat off Washington, which was struggling to find any weapons of mass destruction in Iraq. Best of all, the UN Secretary General, Kofi Annan, who was a favourite target of the Americans, had a son, Kojo, who was reportedly implicated. Annan insisted that Kojo was not guilty of wrongdoing, but the pressure to formally investigate the scandal was immense. In March 2004, almost a year after the war began, Hockey told Zena


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Armstrong that an investigation would soon be under way, and that AWB – as the largest single supplier under the oil-for-food program – probably wouldn’t escape scrutiny. As it happened, a small delegation of Iraqis from the Iraqi Grains Board was visiting Australia at that time. Armstrong was among their chaperones. Shortly after she received Hockey’s message, she found herself in a taxi queue with the head of the delegation. She couldn’t remember his full name, only that his first name was ‘Nazar’, but she thought she would grab the opportunity to test whether the allegations being made against AWB were having any effect on the relationship between the IGB and Australia. She sidled up to the Iraqi and asked whether everything was okay between Iraq and Australia – you know, aside from the war and all – and whether Iraq still had a good relationship with AWB. Nazar – on a free trip to Australia – assured Zena it was all fine. ‘He spoke profusely about the professionalism of AWB,’ Armstrong said later. ‘If they had said, “Oh, there are a few issues here” … that might have sent up a red flag, but that didn’t happen.’ Quite a few people sitting at the Cole inquiry when Armstrong made those remarks wondered whether she really thought that a quick conversation in a cab queue constituted an investigation into this magnificent scandal. She was defensive. In one snippy exchange with Agius, she said: ‘I take my responsibilities as an Australian public servant very seriously, Mr Agius’. And yet, by 18 March 2004, Armstrong knew full well that AWB had, in fact, been paying money to a Jordanian trucking company, and she also knew that the Jordanian trucking company may have kicked the money on to Saddam’s regime. Armstrong admitted this in evidence to the Cole inquiry, saying that Whitwell told her ‘AWB paid the Jordanian trucking company. The Jordanian trucking company might have made payments to the Iraqis of their own volition’. (For his part, Whitwell denied saying any such thing.) But Armstrong clearly heard it from someone because a very short


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time later, she sat down with her boss at the Iraq Task Force, diplomat John Quinn, and prepared a formal note or ‘ministerial submission’ for ministers Downer and Vaile. It said AWB was ‘unlikely to escape scrutiny’ in an upcoming investigation into the UN oil-for-food program. It went on: ‘Those with access to the relevant documents believe that any company doing OFF [oil-for-food] business in Iraq could not have escaped being implicated in inappropriate activity, whether or not they were aware of it’ [emphasis added]. It also said: ‘The Iraqi Grains Board delegation currently in Australia has advised that AWB Ltd has acted with propriety at all times in Iraq’. And then it got to the point: AWB had conceded that ‘the Jordanian company handling local transport might, of its own volition, have provided kickbacks to the regime’. In other words: AWB’s money might have found its way to Saddam’s regime. There was no word on how this might have gone undetected for so long, no word on what the government should do with this new information. But this note, or ministerial submission, marked an important turning point for the Howard government. The Cole report declared that the evidence did not support a finding of ‘actual knowledge’ of the scandal, but in years to come, there would be hot debate about whether and when Howard’s cabinet ministers found out about the kickbacks. Some people believe the relevant ministers, Downer and Vaile, either always knew or studiously avoided trying to find out. Others believe they were so gullible, so ignorant or – to be more charitable about it – so busy, that the $290 million trade scam may well have passed them by. What is incontrovertible is that Armstrong’s ministerial submission – that is, her formal notification to ministers Downer and Vaile – was written on 30 March 2004. That is, it was written and received a full 18 months


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before the UN’s own inquiry into the corruption ended, and almost two years before Australia’s own Cole inquiry really got started. The government now had a choice: it could take this information and launch its own private inquiry into the matter or it could call in the Australian Federal Police and ask them to investigate. There’s no doubt that skilled officers could have tracked down former employees like Dominic Hogan or Mark Emons in an instant. When the scandal finally exploded in October 2005, it would take the Australian just three days to find Emons on his farm outside Melbourne. He was mending a fence, and he started talking immediately. But the government made a decision not to investigate the matter. The question must be asked: why? Perhaps, as they claimed, they just couldn’t believe it was true. And yet, by now, AWB had admitted that it might be true. Was there too much at stake? Were diplomats too focused on protecting AWB from US wheat farmers? Were they worried about what else they might find if they peeled the lid off AWB’s business practices? Or, on some level, did some people in government understand that AWB must have been involved in the corruption, and that it was better to try to hide this fact rather than open it up to scrutiny? Iraq was already such a problem: no weapons of mass destruction had been found, and the battle against insurgents was, in 2004, just beginning. Some might say: well, perhaps the message never got to Downer. But, unlike the diplomatic cables – which nobody of importance even pretends to read – a ‘ministerial submission’ can’t really be ignored, and there is no doubt that Downer got this one. His handwriting was on it. ‘This worries me,’ Downer had scrawled, on the bottom of his copy. ‘How were AWB prices set and who set them? I want to know about this.’


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CHAPTER 18

In April 2004, I was living in New York, working as a foreign correspondent for the Sydney Morning Herald and the Age. My duties included coverage of events as they unfolded at the United Nations headquarters on the East River. In the lead-up to the war in Iraq, I had spent a lot of time at the UN, watching daily debates about the necessity or otherwise of the looming conflict. I saw President Bush address the council on the first anniversary of the September 11 attacks, and US Secretary of State, Colin Powell, make the case for war in Iraq before a packed General Assembly on 5 February 2003. After the war, debate at the United Nations turned to the future of the organisation. What purpose did the UN serve if it could not prevent one of its founding members – indeed, its key supplier of funds, the United States – from launching a pre-emptive strike on a sovereign nation? Alternatively, what earthly purpose did the organisation serve if it could not dismantle a regime as ugly as Saddam Hussein’s? The Secretary General, Kofi Annan, tried to weather the storm, arguing that the UN was best placed – morally and practically – to at least handle the business of humanitarian assistance in Iraq. In fact, that’s not so: the UN has no troops, no trucks, no helicopters, and no supplies beyond what is donated. It can do only as much as the US and other nations want it to do. In Iraq, the US had provided the troops and the hardware to topple Saddam, and it wanted the UN to have a limited role in reconstruction. Before the war, the US had criticised the UN for failing to find weapons of mass destruction, weapons it was certain were there. After


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the war, the US found itself in the acutely embarrassing position of not being able to find any weapons, either. For months after the fall of Baghdad, American weapons inspectors spread out across Iraq, determined to find the elusive store. Each day, they came back empty handed. There was no nuclear program; there were no long-range missiles equipped with biological agents. The US weapons inspection team did, however, find evidence of mass graves and torture chambers, and, during a thorough search of Iraq’s files, they uncovered widespread corruption in the oil-for-food program. I think it is fair to say that neither the Sydney Morning Herald nor the Age was particularly interested in stories about Saddam’s odious regime or corruption in a UN program. Both newspapers have limited space for foreign news and most was taken up by the ongoing war in Iraq (plus, of course, events in Asia, such as the race to imprison the Islamic extremists who bombed Bali in October 2002, and the subsequent attack on Australia’s embassy in Jakarta). I was interested in the story, however, in part because I believe the UN is too rarely held up to scrutiny. It occupies a lofty position. Many in the West seem to believe that it would make a superb world government. Having worked in the building and covered the debates there, I’d argue that’s ridiculous. The UN’s members include violent thugs and criminals, masquerading as democratically elected leaders. It is virulently antiIsrael. At one point, it had Libya on the Human Rights Commission. It aims for world peace but has no means of achieving peace. It has no army of its own and no resources. Virtually all the bills are paid by the US. During the years that I worked in New York, there were sometimes staggering reports of corruption or waste at the UN. In the Congo, for example, UN peacekeepers were found to have exchanged precious eggs and jam for sex with children. The UN failed to prevent a massacre in Rwanda, in which 800,000 people died – many of them hacked to death. Many UN diplomats believe they are above even the simplest laws – famously, they refuse to even pay parking tickets for the huge number


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of limousines they leave idling in the streets of Manhattan while they go to lunch. It also seemed reasonable that, if the UN oil-for-food program was corrupt, and AWB was the largest supplier of food under that program, there was a good chance that AWB had somehow become caught in the scandal. Like many Australians, I found it hard to believe that an Australian company – indeed, the monopoly wheat exporter – would knowingly fund Saddam’s regime in the lead-up to a war that Australian troops would have to fight. I remember mentioning the story to a foreign editor in Melbourne one day and she said, ‘Oh, the Americans have been trying to spread that rumour for years’. The ABC had raised the matter with Trade Minister Mark Vaile when the corruption allegation was first raised by Jerry Hagstrom in Congress Daily in 2003 but Vaile had rejected the story as nonsense. But allegations were one thing: now was the time, it seemed, to search for evidence that AWB had been duped somehow, and that Saddam had been secretly siphoning money from the contracts into his coffers. If so, that would be fascinating. To my dumb surprise, nobody at AWB or within the federal government seemed very curious about this. Indeed, it proved absolutely impossible to get any information about Australia’s wheat contracts from either AWB or the Howard government. AWB backed right away from any questions about their dealings with Saddam, saying only that ‘all contracts had the approval of the United Nations’. An Australian diplomat, John Dauth, who was then Australia’s ambassador to the UN, showed no interest in unravelling the mystery either, telling me flatly during a telephone conversation in 2004 that he knew nothing about AWB’s trade with Iraq, except that it was all above board. I wondered whether I might be able to figure out for myself if the deals were dodgy by examining AWB’s contracts, but Dauth brushed me off when I asked whether I could see the contracts that had passed across his desk or, indeed, any desk at Australia’s UN headquarters.


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Well, then, perhaps AWB would be curious about the matter. I didn’t know anybody at AWB so, at midnight my time, I placed a call to the Melbourne office of AWB and asked to speak to the company’s media relations manager, Peter McBride. I did not personally know McBride, since I had never previously dealt with AWB. I am not a business reporter: the privatisation of the company, the listing on the stock exchange and the big dry of 2002 had all passed me by. In years ahead, I would come to know him very well and – worse – to like him very much although we were, of course, often at war. When I first called McBride in 2004, he was 18 months away from becoming one of the busiest public relations people in the world. He had no idea what a ride he was about to take, commuting first to New York to handle the world’s press and then from his hometown of Melbourne to the Cole inquiry in Sydney every Monday for the best part of a year. He would take upwards of 50 telephone calls a day (interspersed with that, he’d have to monitor the radio, read the newspapers and call reporters to complain when they got stories wrong, and call them again the next day when they failed to correct their mistakes). Happily for McBride, his approach to work is like his approach to life: he’s direct. Journalists would button-hole him outside the Cole inquiry with some outlandish angle on the story and he would say, ‘Mate, come on. This is fucking ridiculous’. He is from a large Catholic family with more siblings than he can count and you can tell he was loved as a boy: everybody is ‘mate’. He is married to a foxy redhead from a theatrical family who keeps him on his toes. They have two young sons on whom he dotes (sometimes, on slow days at the inquiry, he’d pop out to buy them picture-books about monsters). He wears RM Williams boots with his suits and keeps cigarettes, mobile phone, mints, and a folded copy of the Australian Financial Review in his top pocket. His friends – there are many – call him Pete. I asked McBride if I could see some of AWB’s contracts with Iraq. He said no. I was annoyed, but he explained that wheat prices are extremely sensitive and are never made public for commercial reasons. I suspect


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that he immediately knew that I was out of my depth but he was pleasant and professional – and it was on that occasion, in 2004, that it first dawned on me how good he was at his job. He didn’t give me anything I needed – no contracts, no prices – and yet I found myself feeling grateful for his assistance. He explained to me that certain fees were built into AWB’s prices – war insurance and fees for sea freight, for example – and he helped with basic information about the wheat trade. But, when I put down the telephone, I still wasn’t convinced that there was no story to be told. To me, it wasn’t enough to have AWB say there was no corruption, not when there was so much evidence pouring out of Baghdad that the whole program was corrupt. I wondered if there was another way to get the contracts. I called the UN’s Office of the Iraq Program, but they refused to give them to me, saying contracts signed under the program were secret. Finally, I called AWB’s mortal enemies, US Wheat Associates – and found them utterly overjoyed to hear from me. ‘We’ve been wondering how long the Australian media would keep protecting AWB,’ said their communications manager, Dawn Forsyth. ‘Isn’t anybody in Australia interested in a good corruption story?’ I protested. Journalists weren’t protecting AWB. Yes, we had heard the allegations about corruption in the oil-for-food program but we had no evidence to prove that AWB was involved. We also knew that American farmers had for years been locked out of Iraq’s wheat market. Now the US was in control of Iraq and farmers wanted a slice of the pie. Australian journalists had good reason to believe that US Wheat Associates was using every weapon in its arsenal to steal the trade from Australia, including spreading foul stories that Australia had funded the regime of Saddam Hussein. ‘Well, if you’re serious about chasing this story, why don’t you come to Washington?’ Forsyth said. ‘Perhaps we can help you with some information.’ I toyed with the idea. It would mean leaving my children – twins,


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Michael and Chloe, who were then just three years old – in New York with their dad while I travelled to DC on the train. I might have to stay overnight. Was the story really that important? Because really, I had enough to do in New York and, in those early days, it did seem unbelievable that AWB would have rorted the oil-for-food program, to fund Saddam’s regime on the eve of war. It was Australia’s sole wheat exporter and, not so long ago, it had been an arm of the federal government. On the other hand, Washington DC is a pretty place to visit in April and, most importantly, in journalism when you have just a snippet of information, a tiny little scrap, a sniff of a story, you just have to follow it. To do otherwise – well, it just feels wrong. I caught the subway from my apartment near 86th Street to Times Square, and changed to a fast Amtrak train from New York to DC, disembarking at the grand terminal in Washington, which has the world’s dirtiest and ugliest cabs. I hailed one and was soon being driven to the office of Alan Tracy at US Wheat Associates. To be honest, I felt a little odd as I reached out to accept his hand. Tracy is everything a lobbyist needs to be: handsome, charming with an open, friendly face. I don’t doubt that women go to pieces in his presence. But then, he’s paid to be all that. It was his job to get me on side. I wanted to be on my guard. Tracy’s organisation wanted to crush AWB and steal markets from Australian farmers, some of whom were already reeling from the terrible drought. He didn’t care about farmers in my native state of Victoria or in drought-plagued Western Australia. He cared about wheat farmers in Kansas. It was hard not to feel like I was cutting a deal with the devil when I sat down with him. ‘Why are you here?’ Tracy said. ‘I’m investigating corruption in the oil-for-food program, and it was suggested to me that you might have information to prove that our wheat exporter, AWB, was involved,’ I said. He laughed, and it was a lovely laugh. ‘We’ve known this for a year,’ he said. ‘We’ve never been able to get anybody to take us seriously. Why now?’


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I didn’t know. It just seemed a story worth pursuing. Tracy looked at me curiously. We spent some time just chatting. He asked me what I thought of monopolies in general, and whether AWB knew I was chasing the story. It must have been clear to him that I didn’t know much about agriculture, monopolies, single desks or wheat sales. ‘Have you actually seen AWB’s contracts?’ Tracy said. I shook my head, no. Indeed, at that stage, I did not know that Jerry Hagstrom from Congress Daily had secured copies of two of AWB’s wheat contracts and published details of them in a newsletter that circulated on Capitol Hill in October 2003. ‘Are you aware that Australia’s wheat prices were suspiciously high? And we think that means that a bribe was being paid.’ I was stunned. A bribe? Until that point, I hadn’t been thinking in terms of bribes. On the contrary, I had considered the possibility that Iraq had, perhaps, forced AWB to lower its prices or tricked the company into wrongdoing. Now I knew I needed to see the contracts for myself. I needed to have somebody study them for me, compare the prices with world wheat prices, look at the terms to see if they could detect any shenanigans. ‘Well, I’ll give you the contracts,’ said Tracy. ‘But you must promise me something in return. I want you to take these allegations seriously. I want you to investigate these claims. I don’t want you to dismiss it just because it comes from US farmers. We don’t deny that we want to dismantle your single desk. But we also think there has been some corruption here.’ I agreed. Tracy picked up his telephone and spoke to Dawn Forsyth in another office. A short time later, she came into the room and handed me a sheaf of papers. How can I admit what happened next? I had in my hands copies of two of AWB’s most explosive contracts – 1670 and 1680, the contracts with the most bloated prices, the most terrible kickbacks. They showed AWB selling wheat at 280 euros a metric tonne – twice the world wheat price at the time. They were so hot they should have scorched my fingers.


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Instead, I looked blankly at them. I didn’t know if the price was unusually high or unusually low or just about right. I didn’t know what a tonne of wheat was worth – or, indeed, that wheat was sold by the tonne and not, say, by the gram, the ounce, the litre, the truckload. I didn’t know what the price was supposed to include: was the insurance that McBride had talked about built in? What about transport? Besides that, I didn’t know whether Australian wheat should be more or less expensive than US wheat. I didn’t even know there were different types of wheat. ‘I can get some people to interpret them for you,’ said Tracy, detecting my puzzlement. We sat together for a while longer, just talking. I’d recently returned from Cuba, and so had he. We talked about the US embargo there. Then, as I was leaving, he stood and offered me a cigar from a wooden box that Fidel Castro had given him during his last visit to Cuba. I did not accept the cigar – oh, how I wanted to accept it – but I did take the contracts back to New York with me. To my shame, I left them on my desk for a week. I simply didn’t know how to proceed and I had other stories to write. Finally, on a slow day, I picked them up again, and picked up the telephone. I made some calls, trying to find a lawyer in New York who could look at the documents for me. Over time, I was given some numbers for people in Baghdad and London who were themselves working to unravel corruption in the oil-for-food program. Many of the people I spoke to were quite sure something was awry: the prices on AWB’s contracts seemed high and, besides, everybody knew that all the contracts were tainted. Also, it seemed that AWB was paying some kind of transport fee, although it wasn’t clear to whom, or why. One person told me he believed the transport payments had been made to a transport company in Jordan with close links to Iraq. He said the Jordanian trucking company was a front for Saddam’s regime; it collected money from AWB and passed it back to Iraq. I remember thinking to myself: goodness, we could be talking about a real problem here. This company could have sent – what, $20 million? $25 million? – to Saddam’s regime. I had no idea that I should have been thinking in the hundreds of


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millions, and that AWB had willingly funnelled it to Iraq, right up to the outbreak of hostilities. I assembled as much evidence as I could. Once I felt sure I had enough information to proceed, I waited again until midnight my time in New York, picked up the telephone and called AWB’s headquarters in Melbourne. I wanted to go to the top and put the allegations to AWB’s managing director, Andrew Lindberg. I was very nervous, because I was still sure that I was probably wrong, and because I really had no idea what I was talking about. But Lindberg refused to come to the telephone. McBride took the call instead. There was speculation that this was part of Lindberg’s strategy for dealing with the allegations. He simply wouldn’t speak to the media about them. By his reckoning, if he came out to comment, it would give weight to the allegations, so he simply wouldn’t be drawn. It helped give the impression that the story was a minor one, a piece of nonsense that nobody would take seriously. I was put through to McBride. I told him I now had the contracts and I suspected that the prices were high. He explained that the prices would seem high because the circumstances in Iraq were extraordinary. The price included the cost of the wheat, freight, war insurance and normal insurance. ‘And what about transport?’ I asked. ‘Is there some kind of fee for trucking?’ ‘Yes,’ said McBride. ‘Is it paid to a Jordanian trucking company?’ I asked. ‘Yes,’ he said. ‘Which one?’ I questioned. ‘I don’t know,’ he replied. ‘Well, how did you select them?’ McBride told me that Iraq selected the transport company, and told AWB how much to pay. So, I wasn’t wrong. Iraq had forced AWB to pay a ‘transport fee’ and it had decided how much the fee should be. It chose the ‘trucking company’


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and there was never any tender or any argument about price. It simply had to be paid, and that was that. I wrote the story – 1004 words – as clearly as I could, explaining everything I knew. The Age was reasonably excited, but concerned that we were accusing AWB of corruption without rock-solid evidence to back that claim. The editors toned parts of my story down. But the Age published the piece on the front page on 29 April 2004. The editors at the Sydney Morning Herald were less impressed. They didn’t think it was a great yarn. They put a truncated version – just 400 words – at the bottom of page three. The story was the first to say that AWB had engaged the services of a Jordanian trucking company to move its wheat around Iraq; that Iraq chose the trucking company; and that Iraq decided how much AWB should pay. The report also included an analysis of AWB’s prices that had come from the contracts that US Wheat Associates had given me. They were far higher than world wheat prices at the time. I quoted one of the investigators working to uncover corruption in the oil-for-food program, saying AWB was almost certainly guilty of paying kickbacks to the regime. The story said Fairfax, publisher of the Age and the Sydney Morning Herald, had ‘obtained some of the contracts that the AWB signed with Iraq under the oil-for-food program. One of those contracts shows that, three months before the war, the AWB signed a deal to provide 525,000 tonnes of wheat to Iraq for 280 euros ($A455) a tonne’. It quoted McBride saying the price ‘might seem high’ because it included the cost of paying a third party – the unnamed Jordanian trucking company – to transport the wheat to mills around Iraq. It said that contracts that involved third parties – such as Jordanian trucking companies – were of particular interest to oil-for-food program investigators, since an Iraqi Oil Ministry official, Faleh Khawaji, had, by then, already told the New York Times that Iraq would make a deal with a supplier and then say, ‘Give us another 10 per cent’. ‘The Western companies would say: “I can’t do it. I’ve got a board,


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how do I get around the auditors?”’ Khawaji said. ‘And somebody would tell them there are companies in Jordan willing to do this for you.’ McBride said AWB had never agreed to kickback money to Saddam’s regime, directly or indirectly. ‘We used a Jordanian trucking company to do that [transport wheat] on our behalf,’ he said. He said he was ‘unaware of any relationship between them and the Saddam regime. I actually do not know what their relationship was. All we did was pay them a reasonable fee to transport the grain in Iraq’. I thought it was a good, strong, serious piece. But there was, as we say in journalism, a dead cat bounce. Nobody followed the article up. Normally, when a good story breaks, other journalists jump on it, expand on it, flesh it out and make it better. They get feedback from the government or the Opposition or, in the case of a business story like this one, from analysts and rival companies that might have an axe to grind. On this occasion, none of that was possible. The Howard government wasn’t going to comment on allegations that Australia’s wheat exporter had funnelled money to Saddam’s regime. The Opposition was cautious because it didn’t know enough about the deal. Years later, I found out that a Howard government staffer – I never did find out who – told reporters who called that the story was junk, rubbish, put together by somebody who had never covered business and had no clue about international trade. ‘They said to us, this reporter in New York was writing about Nicole Kidman yesterday, and now she’s trying to do international affairs? It’s a joke,’ one reporter told me. It was true: a day earlier, I had written about Nicole Kidman. Shewas filming a new movie, The Interpreter, at the UN headquarters. She attended a function to meet UN diplomats. I went along, because the Sydney Morning Herald was very excited. They had published my piece about the event. It started:


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UN diplomats are supposed to be a dignified bunch with terribly important work to do. But give them a chance to meet a movie star and they go ga-ga, like everybody else. The star in question was Nicole Kidman, who is making a movie called The Interpreter at the UN headquarters in New York. UN diplomats have been dying to get a glimpse of her so on Monday night they got together with staff from Australia’s mission to the UN, some Australian restaurants in New York, an Australian wine company and some talented Australian musicians, and threw a party in her honour. The scenes were unreal. There were people from countries that do not normally speak to each other, feasting on barramundi and kangaroo, drinking Australian wine, and giggling like teenagers. Kidman did Australia proud, arriving exactly on time, dressed in a sexy black Chanel suit with very low heels, so she did not overpower the important people. She had a rock on her finger (alas, not that finger) the size of an ice-block. It shimmered. She radiated charm and goodwill, and worked the room like a politician.

The government was quite right: I was a jack of all trades in New York. I didn’t know much about the single desk, other than what I’d been able to learn from the Internet. So nobody followed up the wheat story. But I couldn’t let it go. There is an unofficial rule in journalism: if you are on the front page one day, you must at least be on page three the next day, otherwise what was all the fuss about? I didn’t want the story to die. I went back to my notebooks. A contact that I had made while investigating the first story had alerted me to a still-secret investigation by a US agency known as the Defence Contract Audit Agency, which had studied two of Australia’s wheat contracts and concluded that at least one of them was ‘potentially over-priced’.


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Curiously, it was over-priced by 11 per cent – almost exactly the amount of the kickbacks. My second story, published on 30 April, didn’t make page three. It was shunted back to page two of both papers (left-hand pages are not prized like right-hand pages; they tend to fall off the edge of the breakfast table). In part, it read: ‘One of the Australian Wheat Board’s contracts to sell wheat to Iraq may have been inflated by as much as $US14.8 million ($20 million), according to documents seen by the Herald’. It said the contract, ‘signed under the terms of the UN oil-for-food program just three months before the start of the Iraq war’ was for US$135 million worth of wheat. It stated that the contract was ‘potentially overpriced’ by about 11 per cent, and that it was ‘widely rumoured that many of the oil-for-food contracts contained illicit surcharges of 10 to 20 per cent of the contract price’. The story said the extra money ‘was allegedly kicked back to Saddam’s regime’, and it referred to the Defence Contract Audit Agency’s report: ‘The report said “illicit surcharges and/or kickbacks are difficult to identify from solely reviewing the contract” but “former Iraqi ministries have provided information indicating illicit surcharges and/or kickbacks were standard practice for oil-for-food contracts”. ‘The agency advised the UN not to proceed with “overpriced” contracts or with suppliers who refused to adjust their prices.’ It said the Herald ‘has learned that the [wheat] board was asked to re-negotiate one of its wheat contracts after the war, and agreed to drop its price’. I quoted McBride again, who said Australia’s wheat contracts were ‘done under the rules and regulations of the UN oil-for-food program. We were unaware of any money being kicked back. ‘If there is any insinuation that AWB is paying kickbacks to Saddam’s regime, we strenuously deny that.’ I waited for a reaction.


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There was none. The next day, the newspaper suggested I drop it. The US comedy series Friends was coming to an end. The Herald wanted a nice story about that. But, unbeknown to us, somebody was paying attention. At AWB, a memo went out from AWB’s lawyer, Jim Cooper, to AWB’s board members: ‘Media speculation regarding AWB’s contracts with Iraq under the Oil for Food program is increasing’. Directors were told that AWB ‘had commenced a detailed review of the facts’ and had combed through ‘30,000 emails, many files’ and had interviewed AWB management. The process, known as Project Rose, would be managed, for now, by Chris Quennell, a trade and transport lawyer from the Melbourne firm of Blake Dawson Waldron.


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CHAPTER 19

To describe Paul Volcker as intimidating is to somewhat understate it. He stands 6 feet, 8 inches tall and his middle name is Adolf. A graduate of Princeton and Harvard universities, he also studied at the London School of Economics. He chain-smokes cigars. Volcker was chairman of the United States Federal Reserve from 1979 to 1987 (he served under Jimmy Carter and Ronald Reagan). He was almost 70 when he stepped down in 1996, but that was not the end of his career. At 72, he headed an investigation into what became of Jewish money stored in Swiss bank accounts during the Holocaust. At 74, in the wake of the Enron scandal, he conducted an investigation into accounting methods. At 76, the United Nations Secretary General, Kofi Annan, asked Volcker if he would head up an inquiry into the ‘world’s greatest swindle’ – the US$6 billion missing from the oil-for-food program. Volcker agreed, and so the UN’s own inquiry into the matter soon became known as ‘the Volcker inquiry’. The stakes were obviously high. Opponents of the UN, particularly in the US, claimed the wholesale corruption of the oil-for-food program proved the UN was incapable of playing a role in post-war Iraq. Meanwhile, the fact that AWB might be involved was becoming an open secret, especially to people working in Baghdad. Colonel Mike Kelly is an Australian Defence Force officer who, like Trevor Flugge, Michael Long and Darryl Hockey, went to Iraq for the Howard government late in 2003. He was seconded to the Office of the


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General Counsel within the Coalition Provisional Authority, meaning he spent a great deal of time sorting through paperwork. Within weeks, he was aware that the oil-for-food program had been thoroughly rorted, and he quickly formed the opinion that AWB, as the largest supplier of food, was almost certainly directly and knowingly involved. Colonel Kelly did not hide this opinion from Canberra. On the contrary, he was quite open about it, telling DFAT that AWB was likely ‘up to its eyeballs’ in the scam and had a ‘cosy relationship’ with Saddam’s regime. Between March and July 2004, Colonel Kelly had several conversations about corruption in the oil-for-food program with the deputy head of Australia’s mission in Baghdad, Heidi Venamore. On the subject of AWB, he was lyrical. On 19 May 2004, just after Volcker’s inquiry was announced, he said: ‘Looks like the jig is up on AWB’. He told Venamore that nobody involved in the oil-for-food program could possibly have avoided being involved in the corruption. A few weeks later, in July 2004, Colonel Kelly returned to Australia, where he attended a meeting in Canberra with senior DFAT officials. He told them AWB was ‘in the crosshairs’ and ‘things would get ugly sooner or later’. John Quinn – a veteran diplomat who was then head of the Iraq Task Force, although shortly to be spirited away on a posting to Honolulu – took notes at the meeting. Those notes showed that Colonel Kelly mentioned such terms as ‘AWB Ltd’, ‘service fees’, ‘10 per cent’ and ‘exposure’ in the context of the looming investigation into kickbacks to Saddam Hussein’s regime. The notes made it clear that Quinn met Colonel Kelly specifically to discuss corruption in the oil-for-food program. His typed version of the notes confirmed that he was told ‘AWB Ltd – problems’ and that there were ‘25,000 files – damning material’ on the kickbacks. He also noted ‘AWB Ltd – exposure’ and ‘service fees across the board’ and ‘10–30 per cent’. Colonel Kelly gave a second briefing to a different set of bureaucrats at DFAT headquarters on 29 July 2004. Quinn’s notes show that this meeting


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was attended by ‘AGs [the Attorney-General’s Department], PM&C [the Department of Prime Minister and Cabinet], and DFAT legal’. The handwritten notes of the meeting are headed ‘OFF’ (oil-forfood) and they include such phrases as ‘Can’t coach – AWB Ltd have legal advisers’, ‘Media hungry’ and ‘Damage very serious’. What did DFAT do? Nothing. Why not? Because, they would later explain, Colonel Kelly didn’t provide any evidence. This is not merely commentary. This is a fact. Commissioner Terence Cole himself said: ‘By June 2004, DFAT was aware that AWB’s wheat prices had included’ a fee to a Jordanian trucking company. It knew that ‘AWB had conceded that the Jordanian trucking company might of its own volition have provided kickbacks to the regime’. He said DFAT ‘did not itself conduct any investigation in the light of this information’. Indeed, ‘the critical fact that emerges is that DFAT did very little in relation to the allegation or other information it received’. Cole said this may have been because DFAT believed AWB was a company of good repute, or perhaps DFAT simply didn’t know what to do when allegations of corruption came its way. More cynical observers might suggest the government had no desire to learn the truth: not only was Saddam gone, the oil-for-food program had ended. There was a new regime in Iraq. What point looking backwards? AWB was a little more anxious. Its lawyers, including a new QC, Richard Tracey, had told AWB that it was possibly in a touch of trouble, saying: ‘there is reason to suspect that the fee (or part of it) was used as a kickback’. On 10 June 2004, lawyers helped Andrew Lindberg write a letter to Alexander Downer, to formally advise him that ‘inland transport’ fees had been built into AWB’s prices and that this was likely to come out as part of Volcker’s investigation. The letter did not say the trucking fee was hidden in inflated prices. It did not say that the Iraqi Grains Board had nominated the preferred


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trucking company, and it did not say that the trucking company was partowned by Iraq. And, no matter how many times you turn the letter over and hold it up to the light, there is simply no mention of the fact that the trucking fee had rocketed by 400 per cent in less than four years. Nevertheless, the letter should have set the alarm bells ringing. But apparently it did not. The government still did not launch an investigation. The Volcker inquiry, on the other hand, was in full swing. In August 2004, investigators travelled to Baghdad to interview Saddam’s officials in US prisons. One of the first people they encountered was the former Iraqi trade minister – the so-called Six of Hearts in the US pack of ‘most wanted’ Iraqi playing cards – Mohammed Medhi Saleh, who immediately agreed to turn whistleblower, possibly in the hope that he would one day be released. Saleh told investigators that Saddam did not have weapons of mass destruction, only fantasies, delusions of grandeur, a touch of megalomania. And he demolished AWB’s claim that it did not know it was funding Saddam’s regime. He said all Iraq’s suppliers under the oil-forfood program had ‘paid kickbacks to the government of Iraq. AWB made its payments through Alia’. Other sources confirmed that AWB was up to its neck in the corruption. Volcker’s team was stunned by this news. It seemed incredible to them that an Australian company – one of America’s few allies in the Iraq war – had been actively funding Saddam’s regime. Meanwhile, of course, America’s reputation was also crumbling in Iraq. Appalling photographs of prisoner abuse at Abu Ghraib had leaked out of Baghdad. Violence was escalating; the number of American and British dead was climbing; terrorist recruits were flowing across Iraq’s borders; and blood poured down the streets of Baghdad. There was an election looming in the United States, too. President Bush was never in danger of losing – especially not against John Kerry –


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but US farmers were keen to use whatever leverage they had in an election year to demand that some kind of action be taken against AWB. They quickly found an ally in the form of a Republican senator, Norm Coleman, who hails from the wheat state of Minnesota. He promised US wheat farmers that he would take the allegations seriously (particularly if it hurt AWB). The fortunes of the Republican Party had, at the time of writing, taken a bad turn but, in 2004, Senator Coleman was chairman of a powerful Permanent Sub-committee on Investigations (also known as the PSI). He could launch an inquiry into AWB at any time and, unlike the Volcker inquiry (which was a fact-finding mission more than anything), it would pack some punch: witnesses could be subpoenaed and threatened with prison if they lied under oath. AWB was appalled: another investigation? Run by the Americans? It was a nightmare. On 23 June 2004, staff from the PSI visited AWB’s US office in Portland, Oregon, to say that AWB would be a target of their inquiries. A short time later, AWB’s in-house counsel, Jim Cooper, told Lindberg that things might soon get ugly. A joint information session was held to bring the directors of AWB Ltd and AWB (International) up to date. They were told that the PSI inquiry could take up to two years and that it was very political. In the second week of August 2004, a group of AWB executives, including the national grower relations manager, Peter Hargreaves, travelled to Washington DC to meet PSI investigators and the then ambassador Michael Thawley at the Australian embassy. Hargreaves had been employed at AWB Ltd only since May 2002. He was responsible for managing the relationship between growers and the company, and between AWB and government. Before joining AWB, Hargreaves had been a journalist and a ministerial advisor, with a small public relations company in the regional town of Bendigo, 200 kilometres outside Melbourne. He had no formal or tertiary


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qualifications and, as he would later admit, outside his employment with AWB, he had ‘no experience in the international trade of wheat or any other commodities’. Hargreaves knew that AWB’s contracts with Iraq included a trucking fee but believed the payments ‘were not in breach of the UN sanctions’. On one side of the table, there was Hargreaves, Cooper and Scott Chesterman from the law firm Minter Ellison, who had been engaged to assist AWB. On the other, there were four members of the PSI committee, including Ray Shepherd and Mark Greenblatt. It wasn’t a formal meeting; nobody had been subpoenaed (yet). It wasn’t tape-recorded. Hargreaves tried to argue that the PSI had no jurisdiction over an Australian company. He was reminded that AWB had an office in Portland, Oregon. He told the investigators that US Wheat Associates had no evidence to back claims of corruption. He was told that the PSI would be assembling whatever evidence it could find. AWB was left in no doubt about how much trouble it might be in. Upon his return to Australia, Hargreaves told AWB’s senior management that they had better do something or AWB would find itself caught in the PSI investigation, possibly for years. It might mean that AWB executives would be forced into public hearing rooms to testify; if they refused, they could be subpoenaed and possibly arrested. Lindberg immediately wrote to the relevant cabinet ministers, Downer and Vaile. It was a cry for help. ‘Dear Ministers,’ said Lindberg. ‘I am writing to formally request your support.’ AWB desperately did not want to get caught up in an investigation into its wheat sales to Iraq. Lindberg wanted Downer to tell the Australian ambassador Michael Thawley to go to Capitol Hill and remind Senator Coleman that Australia had supported the US in the war on terror, and it was just outrageous that AWB should now be subjected to this kind of scrutiny.


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Lindberg told Downer he would be ‘very grateful’ if Downer would ‘authorise the ambassador’ to try to get Senator Coleman to call off the dogs or, as he put it, ‘have this matter resolved in a way that does not damage the relationship between our two countries’. As it happened, the embassy didn’t really need to be told that things were hotting up. On 16 September 2004, the embassy’s Peter Baxter and Frances Freeman had already met with PSI staff. A record of the conversation, dated 20 September 2004, shows that Baxter told the PSI that ‘the Australian government would be concerned if such a strong ally of the United States is singled out in the investigation’. He said the Howard government ‘rejected the allegations entirely’. Meanwhile a federal election campaign was under way. Labor had a batty but popular new leader, Mark Latham, who had promised to bring troops home from Iraq by Christmas. The government did not need an Iraq scandal. There seemed nothing else for it: Thawley would have to go up to Capitol Hill and somehow get Senator Coleman off AWB’s back. Over the next days and weeks, Hargreaves sent reams of material to Washington to help Thawley prepare for his meeting. He hoped that Thawley ‘might be able to convince them to look elsewhere’ for corruption, and Senator Coleman was to be reminded that ‘Australia has earned its recognition as one of the foremost allies of the United States’. On AWB’s talking points memo, it said ‘Ties between Australia and the US have never been stronger. Prime Minister Howard was an early and active supporter of the Bush administration’s war against global terrorism’. Australia was also a participant in the ‘Coalition of the willing, having dispatched over 850 Australian troops to Iraq’. AWB even suggested that Thawley quote President Bush, who had said in a White House press release on 3 August 2004 (the day the free-trade agreement was signed): ‘The US and Australia have never been closer. We’re allies in the war on terror. We’re partners in the effort to help


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democracy take root in Afghanistan and Iraq’. The subtext was clear. We supported your war. Get off our backs. The meeting between Ambassador Thawley and Senator Coleman took place in Washington DC on 7 October 2004. According to Senator Coleman, Thawley told him the allegations against AWB were absolute rubbish or, more precisely, ‘simply the smear tactics of a rogue journalist’ or ‘perhaps an insidious trick by a US wheat marketing association’. In any case, there was no truth to them: AWB would never have paid kickbacks to Saddam Hussein’s regime. Senator Coleman took Thawley’s word for it. The inquiry into AWB was shelved. Hargreaves was pleased, telling colleagues that ‘we have a very strong and strategically canny support in the embassy in our corner’. On 9 October, John Howard was elected for a record fourth term, with a net gain of four seats. The Coalition won 46.7 per cent of the primary vote – a gain of 3.7 per cent over the 2001 election. Less than a month later, on 2 November 2002, President Bush was also returned to office. Like Howard, he won the election in a canter, easily defeating his main rival, John F. Kerry. The Republican Party increased their majority in both houses of Congress, and Bush won a greater share of the vote than he had won in 2000.


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CHAPTER 20

Unlike the PSI, Volcker’s team was not so easily shaken. In October, they returned to Baghdad to interview officials of Saddam’s regime. In a US prison, they found the former Iraqi oil minister, Amer Rashid. They asked him: ‘Were the “inland transport” fees really for inland transport?’ ‘No,’ he said. ‘The fees were deliberately high. They included a generous profit for the regime … to generate supplemental cash.’ Another former official, Ahmed Murtada Ahmed al-Khalil, confirmed that the ‘trucking fee’ was a simple mechanism for raising hard currency. And, in a second interview, the Six of Hearts, Mohammed Medhi Saleh, confirmed that AWB had paid both a ‘transport fee’ and an ‘after sales service fee’ to Alia, a company that provided no actual services. Yet AWB still wasn’t sure whether it was actually in trouble. Was it illegal to send money to an international pariah – or just, like, problematic in terms of public relations? To a layperson, the answer to these questions was likely, obviously, yes, AWB was in strife. AWB had paid huge amounts of money to a transport company that had no trucks. And yet, curiously, unimaginably, AWB still seemed to think that if it crawled into a defensive ball, the problem might go away. A few days before Christmas 2004, both AWB Ltd and AWB (International) held board meetings in Melbourne, where they received an update on Project Rose – and on the Tigris transaction. Frankly, it left the board members reeling. John Thame – who would later become chairman of St George Bank – applied what he called the ‘smell test’ to the deal: he immediately decided it stank. Thame – and others – could not understand why AWB, a wheat exporter, had gotten itself into the


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debt-collection business for third parties. Diary notes from that meeting would record Thame commenting: ‘We are now tainted’. Another board member, John Simpson, remembers that there was a ‘fairly robust discussion’ at the meeting, especially about Tigris. ‘At first blush, the board was quite uncomfortable with [the idea] that we were out there collecting debts for a third party.’ But Andrew Lindberg apparently told the board that two lawyers had looked at the deal and decided the payment to Tigris could be made. Volcker’s team hadn’t stumbled onto the Tigris deal, but it was determined to catch AWB in the net on kickbacks. In December 2004, investigators wrote to the company, seeking access to personnel for interviews and documents for review. The request was troublingly specific: Volcker wanted copies of all contracts; details of any handling agents or transportation companies; and copies of any bank transfers that might be relevant. But Volcker didn’t want those things only from AWB. His team expected the Howard government to help with the investigation, too. He wanted documents, emails, reports, diplomatic cables and the financial records held by AUSTRAC, the agency that monitors the movement of large sums of money to and from Australia. In other words, they wanted whatever there was. Foreign Minister Alexander Downer considered the request for a moment before saying: well, no, they can’t have those things. He would not allow Australian diplomats to be interviewed, and he certainly wasn’t handing what could be sensitive documents to the UN. He wouldn’t blame AWB if they didn’t cough up documents, either. After all, Australia was still slugging it out with America for control of the Iraqi wheat market. Downer instructed his staff to provide the UN with ‘limited cooperation’. He agreed they could provide Volcker with ‘assistance’ but did not agree ‘to the requests to interview officials’. They could ‘provide material already held by the UN (such as contracts)’ but there would be no access to ‘classified transmissions (such as cables)’.


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Australia’s ambassador to the UN, John Dauth, was told to pass that message to Volcker. He did so in December, saying interviews with officials would not be permitted but ‘any written questions would be answered’. In January, AWB did the same, telling Volcker’s committee that ‘we struggle to see how there would be any benefit’ in cooperating but they might consider ‘questions in writing’. Exasperated, Volcker’s investigators canned a planned trip to Australia. What was the point if they wouldn’t be allowed to interview anybody either from government or from AWB? When AWB was informed, it was thrilled. Maybe the game wasn’t up. But Paul Volcker isn’t the type to quit easily. A short time later, he asked for – and got – a face-to-face meeting with Dauth in New York. In his frank manner, Volcker told Dauth that he had ‘encountered a problem with Australia’s cooperation’. A record of the conversation, by first secretary Ben Milton, shows that Volcker said ‘quite bluntly’ that there was ‘strong evidence’ that AWB had paid kickbacks, through a middleman in Jordan ‘under the pretence of paying transport costs’. He didn’t want Australia to be ‘on the black list’. He had expected Australia to be upfront, honest and helpful. Instead, he found Australia’s attitude to be ‘beyond reticent, even forbidding’. Volcker told Dauth that ‘it would be in the Government’s and AWB’s best interest to co-operate’. And why was that? Because ‘his message was blunt’. On the evidence collected, ‘AWB was involved in illegal surcharges and kickbacks’. Milton’s cable to Canberra said: ‘Volcker’s unhappiness with Australia’s cooperation is apparent’. Milton suggested: ‘We believe that we should reply to his requests for information quickly’. Now, it is worth pausing here to say that Downer would tell parliament in 2005 that he had, in fact, instructed his department ‘to co-operate fully, to pass all documents they could possibly find to the Volcker inquiry’. He


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explained this apparent contradiction – his claim to be ever so helpful and Volcker’s exasperation – by saying he did not believe DFAT should have to provide classified material to the UN ‘as this would be accessible to foreign interests’. ‘I wouldn’t just hand over classified documents,’ he told ABC radio. ‘My department’s view was that I had to be careful handing classified material over to foreigners, which is of course what this inquiry was.’ Prime Minister Howard responded quite differently. He was formally told on 8 February 2005 that Volcker believed there was strong evidence that AWB was involved in illegal kickbacks. On 10 February, just days after Volcker’s testy meeting with Dauth, Howard scribbled a warning to his staff, saying: ‘There must be maximum cooperation and transparency’ [emphasis added]. Dauth got the message. On 10 February, he sent a hurried email back to Canberra: ‘I rang Paul Volcker straight away … I said the Prime Minister and the Minister [Downer] had been disappointed’. He told Volcker that Australia wanted to be an ‘open book’ and would ensure ‘this was the case from now on’. Dauth’s email continued: ‘Volcker reacted immediately and warmly. “That’s great”, he said. He “really appreciated” … a high level response. He spoke very warmly of his previous dealings with Mr Howard [when Howard was Treasurer, and Volcker was head of the Federal Reserve]’. And, it seems, Volcker was very pleased with the new, improved attitude coming from Australia. In February 2005, his team reversed its decision not to visit Australia. It was simply too tempting: AWB was shaping up as the largest single supplier of kickbacks to Iraq’s regime – and Australia was an ally of the US, a partner in the war. If Volcker’s inquiry could nail AWB, it would go a long way towards proving that the UN’s own investigation into the oil-forfood corruption scandal was no whitewash.

*


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Dominic Hogan was at home with his wife, Anisa, and one of his small daughters when AWB’s general counsel, Jim Cooper, called to tell him about the Volcker investigation. ‘Hey, Dom!’ said Cooper. But Dom was in no mood for small talk. What did Cooper want? ‘Well, there’s this investigation looming and you’re going to need help,’ Cooper told him. ‘They are going to be asking questions about our business in Iraq. Do you understand, Dom? We’re going to send a lawyer to speak to you. Are you still there?’ Hogan had hung up the telephone. He went to bed but could not sleep. He felt anxious, upset. He was, by now, clinically depressed, unable to leave the house for long periods and prone to panic attacks. He had been hoping the crazy AWB days were behind him. Now he was haunted again. The next day, he called one of his old bosses, Peter Geary. ‘I can’t do this,’ Hogan said. ‘I’m suffering from depression. I have a stress condition that I’m trying to manage. I can’t get involved in this investigation. I’ll be slaughtered. I haven’t got the strength.’ Geary told him to calm down, saying it was no big deal because everybody was going to be interviewed. ‘I told him, what are the consequences if I refuse to be interviewed?’ said Hogan. ‘He told me, no, there will be no consequences because they can’t force you to be interviewed. So I told them, in that case, leave me alone.’ As a result, when Volcker’s team flew to Australia to interview AWB and government personnel between 26 February and 2 March 2005, Hogan was not on their list. They weren’t too fussed because they had a higher prize: Prime Minister Howard had insisted that officials and bureaucrats make themselves available. Bronte Moules and Zena Armstrong were among the first to be grilled, in face-to-face interviews in Canberra. DFAT didn’t give either Moules or Armstrong much notice. They weren’t given time to pull together documents, nor were they told, precisely, what the interviews were to be about – although, of course, in general terms, they knew it would be about AWB’s trade with Iraq.


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This, in fact, is an old trick, and often effective if one is trying to keep something concealed. For example, if Bronte Moules was suddenly asked a question about something that happened six years earlier – such as a cable she wrote back to Canberra – she would likely protest: ‘But I can’t recall!’ It is hardly unforgivable to forget an event that occurred so long ago, before the September 11 attacks, before the fall of Baghdad, before the re-election of both President Bush and Prime Minister Howard – and, indeed, before Bronte Moules’s own patterns and routines were disrupted as she returned from her post in New York to Canberra. And, so, Moules – who had used the word ‘kickback’ in a cable – told Volcker she had ‘no recollection at all’ of discussing kickbacks with anybody. When she was asked about this, at the Cole inquiry, she said: ‘I had access to very little material’. On 28 February 2005, the investigators travelled to Melbourne for two days’ worth of meetings at AWB’s headquarters in Melbourne. They spoke first to CEO Andrew Lindberg in his office. He was flanked by two lawyers: AWB’s Jim Cooper was there, as was Leonie Thompson, of Melbourne firm Arnold Bloch Leibler. Lindberg – who frankly felt imposed upon – told Volcker’s team that yes, he had visited Iraq in the ‘shadow of war’ in 2002 and he met the trade minister, Mohammed Medhi Saleh, in Baghdad. He said he received a ‘mandatory lecture’ on the evils of the Howard government. But he denied the corruption allegations, saying there was simply a very good relationship between AWB and Iraq. Indeed, he believed Saleh ‘harboured a special place’ for AWB executives. A special place in hell, perhaps – Saleh had been co-operating with investigators for months. Lindberg told investigators that AWB had paid fees to a ‘company that was nominated by Iraq. We had no choice in the selection of the trucking company’. If that company had been channelling money to Iraq, well, it was news to him.


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On 1 March, the team interviewed Michael Long, who likewise scoffed at the idea that Alia was a front for Saddam’s regime. ‘Alia is clearly a transport company,’ he said, according to a record of the interview. ‘It’s based in Jordan. It provides a genuine service. It’s got trucks, and it transports our wheat from the port of Umm Qasr to all silos in Iraq.’ The Volcker investigators probably didn’t know it, but even as they spoke to Long, he was preparing to meet Alia’s representatives again – in Melbourne. Alia’s top managers, including Othman al-Absi, Mahmood Saleh Abdul Nabi and Adaal Khalaf Lafta, were on their way to Australia as guests of AWB, which had arranged tickets to the Formula One Grand Prix at Albert Park, between 3 and 6 March. Ostensibly, the trip was a ‘relationship building’ exercise; in reality, AWB was very interested to know what Alia was going to tell the Volcker inquiry. On 2 March, the Volcker team turned its attention to Trevor Flugge. He was visiting Canberra to deliver a paper to a conference and agreed to meet the UN staff at short notice. ‘Of course I knew that we were paying for inland transport,’ Flugge told them. ‘How else was the wheat supposed to get from the port to the people of Iraq?’ Volcker’s team told Flugge that the money had most likely gone straight to Saddam’s regime; indeed, some of Saddam’s officials admitted it. Flugge scoffed at them. Didn’t the UN know that these Arabs couldn’t speak English properly? Every note that ever came from them was mangled. Besides, didn’t anybody tell them that he – Flugge – had a hearing problem? For the past couple of years, he had hardly been able to hear anything at all. Volcker’s team was sceptical. Was it possible that AWB dealt with Alia and didn’t know the company was a front for the regime? They decided to find out. In May 2005, the team flew to Jordan, where they were introduced to Alia’s founder, the Iraqi sheik Hussein al-Khawam, who had established Alia in partnership with the Iraqis. Al-Khawam happily explained the


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financial structure of the company to them: Alia had been registered with the Jordanian Ministry of Energy and Trade since 1994 and the founders included the Iraqi Transport Ministry. He pulled out the company’s registration papers. Under nationality, it said ‘Iraqi’. Hussein al-Khawam also outlined the service that Alia provided, too. No, no, no, it did not have any trucks in Iraq, no, of course not. It simply collected a ‘transport fee’ for the Iraqi government. He did not believe his company was acting illegally. ‘Such fees are normal,’ he shrugged. ‘This is the Middle East.’ Othman al-Absi was also interviewed – if AWB had thought a trip to Australia to watch the Formula One cars go around would make him an ally, they were wrong. He freely admitted that Alia provided no transportation services at Umm Qasr. ‘We channelled funds to Iraq in exchange for a small commission,’ he shrugged. But, like his boss, he couldn’t actually see anything wrong with that. ‘It’s normal business, all across the world,’ he said. The UN was perplexed. So, if Alia didn’t pay the truck drivers to deliver the wheat, who did? After all, somebody must have done it. ‘The Iraqis did it,’ Othman shrugged. ‘I suppose they hired Iraqis, or maybe guest workers from Africa.’ And were they paid in the coveted US dollars that Alia was sending across the border? ‘US dollars?’ said Othman. ‘No. They were paid in peanuts. The inland transport costs were nothing. The driver got maybe $10. This was a payment to the government of Iraq’ [emphasis added]. No small payment, either. Othman happily cracked open the books for the UN investigators – and they were amazed. Between March 2000 and December 2003, more than US$788 million passed through Alia’s bank account in Jordan to Iraq’s bank accounts in Baghdad.


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‘But there were sanctions on Iraq,’ the investigators said. ‘Money wasn’t supposed to be flowing into Saddam’s coffers.’ Othman delivered one of his winning smiles. ‘Sanctions!’ he said. ‘Did anybody take that seriously?’

When Volcker’s team returned to New York, they had clear evidence that AWB was up to its neck in corruption. They were amazed. They had expected to catch out the Jordanians, whose relationship with Saddam had long been pragmatic (they shared a border, many Iraqis in fact live in Jordan and supplies flow back and forth); the Syrians (who never accepted the sanctions regime); and even some French and Russian companies. But AWB was different: this was a systematic, sophisticated and organised kickback scheme that did enormous damage. AWB was cottoning on to the scale of the catastrophe, too. At the end of May, Lindberg and the chairman, Brendan Stewart, decided to fly to Canberra to speak to government officials. A schedule of the meetings, tendered to the Cole inquiry, shows that they met Paul O’Sullivan from the Prime Minister’s office on 31 May. O’Sullivan, who advised the Prime Minister on security matters, would later be appointed ASIO director. On 1 June, they met Foreign Minister Alexander Downer; the then agriculture minister Warren Truss; the new head of DFAT, Michael L’Estrange; and Trade Minister Mark Vaile’s chief of staff, Brad Williams. The topic at these meetings was Project Rose – the codename AWB had given to the kickback scandal. Lindberg explained to L’Estrange that the Volcker report was shaping up to be a disaster for AWB. The UN was going to say that AWB had paid millions to Alia and the money ended up with the Iraq regime. Lindberg believes that he told L’Estrange that Alia was part-owned by the Iraqi regime ‘because that was straight off the back of the matters that were being put before me by the [Volcker] investigators, and I conveyed that at that time. ‘Whether I reiterated that issue with Minister Downer, I’m not sure,


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I may have, but I do recall discussing it with Mr L’Estrange, because we got into a deeper discussion about Alia, and that included what I conveyed to him about what I believed to be the case of its origin and its use since the 80s.’ L’Estrange promised to raise the looming scandal with Downer, saying the Volcker report would contain ‘possible adverse findings’ – but, when he sent that note, he found the minister was both up to date and upbeat. In a handwritten reply, Downer said: ‘Spoke to them myself: have to take it as it comes but I’m more relaxed than they are’. A spokesman for Downer – his now chief of staff, Chris Kenny – would later argue that Downer wasn’t being flippant about such a serious matter. On the contrary, he was ‘eager for Volcker to uncover the truth’. But relaxed ? There was an immense scandal unfolding – and just months earlier, Downer had written ‘This worries me’ on a very similar note from the Iraq Task Force bureaucrat Zena Armstrong. Now he was the opposite of worried. He was relaxed. It’s worth exploring why that might be. Over time, a record of the conversation that Downer had with Lindberg would surface. The notes were written by Cooper and said: ‘Govt knows they are involved in this matter’ and ‘Govt feels untouchable on this. US will not criticize Australian Govt’. These statements were attributed not to Downer but to AWB. But Cooper had recorded Downer saying: ‘you can’t be responsible for what happened to $ [the money] after it was paid to Alia’. Cooper also wrote: ‘They acknowledged that AWB had to use Alia – no choice – would have lost market’. Lindberg said that those words – ‘you can’t be responsible’ – were ‘entirely volunteered’ by Downer. Under oath before Cole, Downer would vigorously dispute it, saying he would never suggest that AWB could not be held responsible for the fact that hundreds of millions of dollars ended up with Saddam’s regime on the eve of war. But Lindberg – a man later described by Cole as a ‘witness of truth’ – said: ‘I say he is mistaken’.


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CHAPTER 21

In September 2005, Paul Volcker handed down an interim report on the oil-for-food program. It confirmed what had already been well reported, particularly in Europe. The program had been thoroughly rorted by officials of Saddam’s regime. The UN’s management of the program was at best, sloppy; at worst, corrupt. Iraq was merrily selling oil to buyers all over the globe; profits moved easily from overseas banks to Baghdad. This was just the beginning. The final report – with its burning case against AWB – would not be released for another four weeks. As he has done almost every year of his prime ministership, Howard flew to New York and Washington in September 2005, to visit the White House and diplomats in New York. By chance, he bumped into Paul Volcker at a private event. The two men – one of them almost 80 years old and enormous, the other small, bespectacled, and riding a huge wave of domestic popularity – chatted briefly about the inquiry. Howard would later tell reporters that they didn’t really discuss the Volcker report, except in ‘chit-chat’. Alexander Downer also flew to New York in September to attend the United Nations General Assembly. He sought a more formal meeting with Volcker. No doubt Downer thought he could charm the old banker, make him see sense. If AWB had been involved in corruption, well, they were unwitting partners. The Iraqis had probably been hiding the kickbacks from AWB, disguising them somehow. Volcker has not yet written his memoirs but, if he does, the pages where he deals with Downer will be devoured. What must he have thought as he sat opposite the Australian foreign minister on 22 September 2005?


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A record of the conversation shows that Downer told Volcker that AWB was ‘worried about being mentioned’ in the report. Volcker agreed that yes, his final report would certainly mention AWB. Downer said that DFAT had ‘conducted a thorough review of its files and found no evidence that AWB had been corrupt’. He tried to argue that AWB had been put in a ‘difficult position. They could either pay the transport charges or not do business under the program’. Volcker immediately corrected him, saying AWB actually had a few, more ethical choices: it could not do business with the corrupt regime, or it could report the matter to the UN. Downer then tried a different tack: he tried to warn Volcker off (or, as the official record of the conversation put it, he ‘cautioned’ Volcker against ‘drawing conclusions from ambiguous or untested evidence’). Volcker surely must have smiled. The evidence would not be ambiguous. It would not be untested. On the contrary, evidence against AWB would be set out in ‘excruciating detail’. Volcker finished speaking. Tragically, there is no record of the look on Downer’s face when he did.

Foreign Minister Alexander Downer returned to Australia late in September and met AWB executives in his office on 4 October 2005. He told Lindberg that, frankly, things did not look good. The new head of the Iraq Task Force, Mark Innes-Brown, drafted a record of the meeting. It shows that Downer told AWB that he’d met Volcker and his investigators in New York and some – in particular, one Canadian – had been ‘aggressive’ about targeting AWB. Lindberg tried to say the ‘so-called evidence did not support the facts’. He complained that AWB had been ‘ignored’ by Volcker. They could demonstrate they ‘paid no kickbacks’. Downer said ‘AWB needed to go to New York’ to try to get a face-


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to-face meeting with Volcker. He would try to set it up but added ‘there is little else the government can do’. He said it was ‘crucial’ for AWB to counter Volcker’s claims, otherwise ‘there would be headlines claiming that AWB paid $200 million in kickbacks to Saddam’. Reading through this record of the conversation, it is easy to detect Downer’s exasperation and his anger. He told AWB the impact on the wheat industry would be ‘considerable’. AWB chairman Brendan Stewart was apparently unconvinced, saying Volcker had not produced a ‘smoking gun’. But Downer said the report would ‘be the smoking gun’ and the allegations ‘would do Australia damage’. Again and again, he told AWB to go to New York and face Volcker, because ‘time was short’. AWB complained that they had written to Volcker and received nothing but a ‘deathly silence’. Once again, Downer told AWB to get on a plane and ‘take a lawyer’. The idea, it seemed, was to make a desperate, last-ditch attempt to get Volcker to accept that AWB had been duped. It was a hopeless mission, in part because other companies that dealt with Saddam had already spilled the beans. Here is one example: the Chaiyaporn Rice Company is a private rice company, founded in 1968 and based in Bangkok, Thailand. It supplied US$686.8 million worth of food – mostly rice, but also sugar, vegetables and ghee – to Iraq under the UN oil-for-food program. Most of its goods arrived through the port of Umm Qasr. It paid ‘transport fees’ to Iraq and they increased sharply over time. Chaiyaporn provided the UN with records of its dealing with Iraq, showing that it paid around $42.8 million to Alia and other front companies over the life of the oil-for-food program. At one point, it was paying fees equivalent to a staggering US$71 per metric tonne, far more than even AWB. In interviews with Volcker, Chaiyaporn’s executives noted that fees had initially been set at US$12 – and this likely reflected the real cost of transporting their goods – but prices ‘subsequently increased significantly and without explanation’.


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‘Greediness is the nature of human beings,’ shrugged a Chaiyaporn executive, Phaiboon Kuonsongtum, in the interview with Volcker’s investigators. Volcker already knew all this when the team from AWB – most of them tall, bald and feigning confidence – strode into his office in New York on 12 October 2005. His final report was all but written and ready to go to the printers. He had long ago made up his mind – based on the evidence – that AWB was up to its neck in kickbacks. But he sat and listened as AWB’s team repeated what had become the company’s mantra: ‘AWB did not view Alia to be a front company’. Also: ‘We did not know – and could not have known – the true relationship between Alia and the Iraqi government’. It was all nonsense, of course. A weary Paul Volcker – who had, by now, seen and heard it all before – nodded and showed them the door.

A month before Lindberg went to New York to see Volcker, AWB’s lawyers had retained Sir Anthony Mason, a former chief justice of Australia, to provide an opinion on the Iraq matter. In October, just as Lindberg returned from New York, it arrived. AWB hadn’t provided Sir Anthony with all the facts. It had skimmed over some details. Even so, he refused to say that AWB was off the hook. ‘So long as the fees were reasonable AWB could reasonably conclude the payment of such fees was consistent with the sanctions,’ he said [emphasis added]. But payment of ‘unreasonable fees’ – something like, say, $290 million perhaps? – well, that ‘might be in breach of sanctions’. Parts of Sir Anthony’s opinion were sent to the Prime Minister and to ministers Downer and Vaile on 26 October.


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Lindberg told the government that Volcker was going to say that the US$220 million paid by AWB to Alia had been channelled back to Saddam’s regime, but he would not say that AWB knew it was funnelling money to Iraq. Hopefully, the matter could be contained. A day later, the top blew off the scandal.


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CHAPTER 22

Paul Volcker’s final report into the UN oil-for-food program was 623 pages long, as thick as two fingers and – as far as Australian journalists were concerned – explosive. Volcker had concluded that Saddam’s regime had extracted or siphoned more than US$1.6 billion in illicit funds from the oil-for-food program – and the largest slice came not from shonky Syrian outfits or dodgy Jordanian firms, but from AWB. In a special section of the report, starting on page 311, Volcker said AWB had sold a total of 6.8 million tonnes of wheat to Saddam’s regime, for which it was paid a massive US$2.3 billion. But it had also paid a total of US$221.7 million (A$290 million) in kickbacks, or trucking fees, or after-sales services fees, to the corrupt government of Iraq. ‘Little doubt remains that AWB made large numbers of payments to Alia … and these payments in turn were channelled to the Iraqi regime,’ the report said. To AWB’s relief, Volcker did not, however, say that AWB had willingly or even knowingly funded the rogue regime. He stopped short – just short – of accusing AWB of wilfully rorting the UN program. Instead, he said some employees ‘knew or should have known that its payments were channelled to the government of Iraq’ [emphasis added]. Under the circumstances, AWB had reason to be ecstatic. It put out a press release, grandly announcing that it ‘welcomes the finding that AWB was not knowingly involved’ in schemes to send kickbacks to Saddam’s regime.


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‘It has not found that AWB knew of the matters now alleged,’ the statement said [emphasis added]. ‘AWB has consistently maintained its position that it did not know and could not know what Alia did with the money AWB paid to it.’ To the great hilarity of journalists, the statement added: ‘We were surprised to learn of the fact that Alia did not provide a trucking service’. As for Volcker’s claim that AWB ‘should have known’ that Alia was a front for the regime, well, AWB said ‘this is, of course, debatable’. Some media organisations were prepared to take AWB at its word, and were indeed quite sympathetic to the wheat exporter. Lindberg was quoted in the Age saying: ‘We were deceived. We do feel let down by the UN because, after all, they were there to supervise the program’. But Robin Pash, a senior reporter at AAP, didn’t buy it. His first report on the scandal was headed: ‘Plenty of signs that AWB money was going to Saddam’. Lindberg was annoyed by this sentiment. ‘If you stood in our shoes at the time,’ he told the Australian Financial Review, you would understand that AWB had been ‘duped by a deception’ rather than being part of it. As had been planned, the Howard government also stepped up quickly to help AWB out of the mess. Prime Minister Howard offered this carefully crafted, deliberately humble analysis: he had always found AWB’s executives to be ‘a very straight up and down group of people’ and he could not ‘on my knowledge and understanding of the people involved, imagine for a moment that they would have knowingly been involved in anything improper’. Trade Minister Mark Vaile told the ABC that the United Nations – not AWB – was to blame for the scandal. ‘The UN had overall responsibility for the program,’ he said. ‘From what I understand of the report, if there’s a lack of attention to detail in this it’s been by the UN.’ At the Australian, where I was now working, most reporters – like


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reporters everywhere – were cynical. The editor-in-chief, Chris Mitchell, frankly didn’t believe that such huge amounts of money could change hands without somebody noticing that something shonky was going on. Mitchell called me into his office on 28 October and asked me what I knew about the scandal. I said I had written about AWB’s payments to a Jordanian trucking company in 2004, when I was based in New York. He asked me if I could refer back to my old notes and my old contacts, and write a detailed piece for the Saturday paper, showing exactly how the payment system worked and how it could only have been done if AWB’s employees were aware. That story – ‘Going with the grain on a dictator’s orders’ – appeared on page one. It said AWB should have known its money was going to Saddam and, if AWB had asked the most basic business questions, it would quickly have found out that things weren’t as they seemed. A second story – ‘Not reading the warning signs deemed stupid instead of evil’ – made the point that AWB must have been completely stupid if it didn’t know about the kickbacks. It said: It is difficult to imagine a corporate situation more damaging than the one engulfing Australia’s wheat exporter, AWB. Over four years, it made payments totalling more than $US220 million to a company that sent the money straight back to the regime of a murderous tyrant, Saddam Hussein. In the absolute best-case scenario, money that should have gone towards feeding Iraqi children was squandered on Saddam’s palaces and his son Uday’s whores. But it gets worse. AWB made these payments at precisely the moment Australian troops were preparing to go to war to overthrow Saddam. There can hardly be doubt that some of the money has also paid for bloody attacks on US and Australian soldiers, who invaded Iraq in 2003 and captured the dictator.


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AWB says it didn’t know it was funding the regime, which it accuses of ‘elaborate deception’. It says Alia – the company to which it made its grubby payments – looked for all the world like a transport company, not a front for Saddam’s regime. It says its employees talked to Alia about such things as the number of trucks it had and the fuel it intended to use.

The Australian made the point that AWB was running around saying it had been cleared of any wrongdoing. ‘That’s not entirely correct,’ the story said. ‘The United Nations chief investigator Paul Volcker certainly said there was no evidence that AWB knew Alia was a front company, or that it was funding the regime. ‘But he also said there were “numerous documentary and circumstantial warning signs” that should have put AWB employees on notice.’ In fact, Volcker could barely believe that Australia’s wheat exporters – who were dealing in contracts worth billions – ‘never bothered to argue with Alia about the price of trucking wheat around Iraq’.


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CHAPTER 23

In December 2006, Kevin Rudd, the son of a Queensland dairy farmer, was elected leader of the Australian Labor Party. Later this year – 2007 – he will fight an election against one of the most popular prime ministers ever, John Howard. There is no doubt that Rudd’s campaign for the leadership of his party, and to be Australia’s alternative prime minister, was energised by the AWB kickback scandal. From the earliest days, Rudd got it. He understood that this was a massive scandal. Money had flowed from AWB to Saddam Hussein’s regime. That was obviously a disaster. It happened in the lead-up to a war that most Australians didn’t want to fight (and, indeed, that may have been avoidable if Saddam hadn’t rorted the sanctions). That made it worse. But the part that really enraged him was this: the Howard government had been repeatedly warned about the corruption and had failed to act. ‘It’s a rolled gold scandal,’ he said, the first time we talked about it. In the weeks that followed, Rudd read everything he could find about the scandal, including the 600-odd page Volcker report. He would soon become among a handful of people who knew exactly how the scandal unfolded – indeed, he knows far more about the scandal than is possibly healthy for any one person. Rudd coined the term ‘the wheat-for-weapons scandal’, arguing that AWB’s money flowed into Saddam’s coffers just as Australian troops were preparing to topple Saddam’s regime. Labor wanted an inquiry into the scandal and on Halloween – 31 October 2005 – Prime Minister John Howard told parliament that he would hold one.


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‘It goes without saying that the fact that money coming from AWB ended up in the pockets of the loathsome Saddam Hussein regime is something that I … find quite unacceptable,’ Howard said. ‘Given the seriousness of the issue, I believe there should be an independent inquiry.’ It is worth asking why Howard walked this path: after all, the Cole inquiry into the kickbacks would rock his government, up to and into an election year. He has always said that he did not know about the kickbacks. It never occurred to him that an Australian company would do something so wrong. Likewise, he has always said he didn’t believe his government was implicated. The reason Howard gave – aside from this being a serious matter – was that the UN Secretary General, Kofi Annan, had asked him to do it. On the face of it, that’s an interesting explanation: Howard had not previously paid the slightest bit of attention to anything the UN said. He does not regard the UN as the ‘world government’ and does not accept that it has great moral authority. He certainly ignored Kofi Annan when the war in Iraq was looming. Annan constantly urged the US (and Australia) to exercise caution, saying the war would be ‘illegal’ if fought without UN sanctions, but Australia went anyway. More likely, Howard probably decided it was best to try to control the flow of information – and create the impression of openness – by holding an inquiry into the matter. He would enjoy being able to say he wasn’t covering up; after all, his government had called the inquiry. His staff had already combed the files. They knew that the Bronte Moules cables and other documents may soon leak, or else journalists would start asking for them under Freedom of Information. The scandal was probably going to explode, whether he held an inquiry or not. Rudd was elated but wary. What kind of inquiry would it be, he wondered? He soon found out: it would be a commission of inquiry (slightly different from a royal commission, although Howard insisted


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that whoever presided over the inquiry would have the powers of a royal commissioner) with terms of reference drawn extremely tightly, to cover only those ‘certain Australian companies’ that had been mentioned in the Volcker report (AWB and two smaller companies, Alkaloids Australia and Rhine Ruhr, that had dealt sporadically with Iraq’s regime). Labor was annoyed. But back in Sydney, the Australian’s editor-inchief, Chris Mitchell, was energised. He believed the story had real ‘legs’ (meaning he thought it would run and run and run). ‘Forget the inquiry,’ he told me. ‘Let’s see what we can find out before they even get started.’ AWB wasn’t keen to speak to the media, however. In a statement on 1 November, Lindberg promised to ‘co-operate fully’ with the inquiry and said that, ‘due to the inquiry being set up, the company is not in a position to comment further’. I told Chris Mitchell: ‘AWB has stopped taking calls’. ‘Not important,’ he said. ‘Just get me up a splash’ (a main story, for the front page). It would not be easy. It was a public holiday in AWB’s hometown of Melbourne – worse, it was Melbourne Cup day, a lazy, hazy, boozy day all around the nation. Worse still, the champion mare Makybe Diva was running; if she won, she would become the first horse to win the Melbourne Cup three times. At Flemington, two AWB executives were deep in conversation as they watched the mare – the diva – being walked across the grass, preparing to make history. Later, one of them told me: ‘we talked about the scandal, and I said to him, if Makybe Diva wins today and we’re still in the paper tomorrow, we’re fucked’. They were on the front page of the Australian the next day. We had located Mark Emons at his property outside Melbourne. He would barely give us anything ‘on the record’ but made it quite clear that other AWB executives knew about the payments to Alia. ‘I was part of a management team at AWB,’ Emons said. ‘I was just


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one person and there were many people involved in this, on all different levels.’ Asked if he ever believed the payments were headed to Saddam, Emons said: ‘It didn’t really matter what I believed. I didn’t do it [make the payments]; it was the company I was working for’. ‘Very good,’ said Mitchell. ‘Now, keep going. Another splash, tomorrow.’ From the way he said it, I knew he meant: and the next day. And the next. And the next. We worked the telephones constantly, talking to AWB’s ex-employees (for some reason, they seemed to all hate each other); a former auditor; a former chairman; and its competitors. Best of all, we found Othman al-Absi at Alia’s headquarters in Jordan and interviewed him over the telephone. Othman – who insists that everybody use his first name and wants all Australians to know that he really enjoyed his time in Australia for the Grand Prix (he even emailed a photograph of himself with a black swan by his side) – was amused by the attention. He couldn’t understand what all the fuss was about. Yes, yes, he said. AWB had paid almost $300 million to his company without ever asking what the money was for or where it was going. ‘The Iraqi government told them to pay it,’ al-Absi said, as if this were the most normal and natural command in the world. ‘The Iraqi government told the AWB in 1999 that it should pay these fees for the wheat it was selling under the oil-for-food program.’ He agreed that there was no real business relationship between Alia and AWB. ‘The contract was not with us, it was between Iraq and the AWB. We were just to collect the fee. We got into contact with AWB and we signed a letter of agreement, and we collected the fee,’ he said. A few days later, the Australian revealed that AWB’s directors, who already shared more than $1 million a year in fees, were planning to ask shareholders to grant them a substantial pay rise before the inquiry into the kickbacks could begin. At the time, AWB chairman Brendan


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Stewart was receiving $203,293 a year in fees and superannuation. Chief executive Andrew Lindberg was receiving $783,293 in salary and $105,159 in superannuation, while other directors received an average of $80,000 a year in fees. The plan to ask for more money was quickly scrapped. Behind the scenes, lawyers were already preparing AWB’s defence. To this end, lawyer Jim Cooper tried once again to contact Dominic Hogan at home. Hogan refused to pick up the telephone, so Cooper left a message, which Hogan recorded and kept. It said: Oh, hi Dom. I’m just calling to co-ordinate some talks about the new Australian inquiry into the Oil for Food deal. It’s kicked off … they called us yesterday. What were are doing is talking to everyone – we have had Mark Emons in, Trevor Flugge has been in – absolutely everyone who have been or are currently at the AWB … and we’re basically walking through all the documents with them and making sure they are comfortable with everything and they understand the process going forward … we are bringing everything in together, inside the tent. So I was just wondering if you can give me a call and what we are suggesting is if you could come in and have a cup of coffee with us … It would be great if you could ring me to arrange to come in … just as everyone has done to date so we can get everything arranged. Once you have done that everything will be a lot more smooth.

Hogan refused to even return the message – let alone go in for a ‘cup of coffee’. A few days later, Cooper tried a second time. Hogan was home but again refused to pick up the telephone. ‘I’m really keen to talk to you,’ Cooper said. ‘I basically just wanted to


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say that we would really like to sit down with you and go through all the documents so you are well prepared … and we wanted to make sure that you were not served with any documents at home … which could be a bit stressful. ‘We could suggest that if you have a lawyer … or we could arrange for someone to be introduced to you … just to get organised and ready so that you were not caught flat-footed.’ And then, with just a touch of desperation: ‘So, could you give me a ring? We would really like to get organised’. Hogan did not respond. Still, Lindberg remained upbeat, telling colleagues that the most AWB could expect was a ‘slap on the wrist’. In an interview with the Australian Financial Review, former chairman Trevor Flugge also described the scandal as a ‘storm in a teacup’. A storm in a teacup? Two days later, on 12 November 2005, Iraq cancelled its trade with Australia, a business worth more than $800 million a year. The Australian carried the story on the front page, after securing an interview with Iraq’s then deputy prime minister, the controversial Ahmed Chalabi. The Howard government was shocked: on 13 November 2005, Downer told the ABC that ‘Mr Chalabi denied emphatically that he said that Iraq had suspended future orders of Australian wheat’. The ABC reporter Liz Foschia wanted to know: ‘But what about those reports [on the front of the Australian]?’ ‘Well, obviously we weren’t party to that conversation,’ said Downer. ‘I mean there was a conversation he apparently had with a journalist …’ ‘He denies making that statement?’ asked Foschia. ‘Well, he does,’ said Downer. ‘But nevertheless let’s not really get into who said what to whom …’ As a matter of fact, the story was absolutely on the money. AWB would not sell another grain of wheat to Iraq for at least another 12 months.


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PART THREE

THE INQUIRY November 2005–November 2006 Sydney, Washington, Melbourne, Katanning


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CHAPTER 24

When Prime Minister Howard went looking for a lawyer to preside over his government’s inquiry into the oil-for-food scandal, he had one idea in mind: he did not want an activist. Howard had already drawn the terms of reference extremely tightly: this was to be an inquiry into those ‘certain Australian companies’ that had been named in the Volcker report. It wasn’t an inquiry into the role played by his government or its departments. It certainly wasn’t an examination of the role played by his hapless cabinet minister Alexander Downer (one of Howard’s staunchest supporters, especially in the leadership struggle with Peter Costello). Howard wanted a commissioner who was ‘black letter law’ – that is, one who would follow the terms of reference closely; do exactly as the government had asked him to do; and not go off on a frolic of his own. He found precisely that person in Terence Rhoderic Hudson Cole QC. Cole was semi-retired into his attractive, northern beaches home when the government called in October to ask him to conduct an inquiry into AWB. Cole was a long-time associate of Howard. They went to the University of Sydney Law School together in 1961 and were both debaters, but they have had only occasional meetings over the years and do not describe themselves as ‘friends’. Cole had previously presided over a royal commission into the building industry for Howard. It turned into a nationwide extravaganza that took more than 18 months to complete. It had been lucrative: Cole received a salary of $660,000, plus an annual pension of $140,000, living expenses during the royal commission totalling $183,599, and $70,158 for his travel.


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He had been educated at Fort Street Boys High School in New South Wales; he graduated in law from the University of Sydney and later practised commercial and common law. He was appointed a Queen’s Counsel in 1976 and rose to become a judge of the New South Wales Supreme Court in 1994. He is an opera and art lover – and he walks. Not to the shops, but long-distance, including an 89-day, 1941-kilometre trek from St Paul’s Cathedral in London to St Peter’s in Rome along a medieval pilgrims’ trail. Cole accepted the new assignment not for the money – although he would obviously be generously compensated – but because he believes that when the Prime Minister asks you to do something, if you can possibly do it, you should. He was concerned about just two matters: first, he had an excursion planned for May 2006 that he didn’t want to cancel; second, the inquiry would have to be held in his hometown, Sydney, and not in Melbourne, where AWB had its headquarters. AWB was enraged by this last proviso. Key executives – and lawyers – would have to fly business class from Melbourne to Sydney every Monday, stay at expensive inner-city hotels, dine on room service, and return every Friday, at great inconvenience and cost to the business (and placing great strain on their families, especially as the inquiry dragged into its seventh, eighth and ninth months). AWB’s lawyers would have to set up the equivalent of a ‘situation room’ in Sydney, with duplicates of many thousands of pages of documents that Cole would want to see. Still, AWB consoled itself: this won’t take long. Cole was asked to preside over the inquiry in October 2005. The first witnesses would not be called until January 2006 and Cole was required by Letters Patent to complete his written report by 31 March 2006 – in other words, he had less than five months. The inquiry would be officially known as the ‘Inquiry into certain Australian companies in relation to the UN Oil-for-Food Programme’, but it would soon become known as the ‘Cole inquiry’ or the ‘Oil for Food inquiry’.


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The weeks leading to the inquiry were marked by on-going debate over the terms of reference. The Opposition said the Letters Patent, as drawn, seemed to preclude a proper examination of the role played by government. Kevin Rudd said the inquiry should have: 1) been a royal commission; and 2) been granted the power to investigate the role of the government and its ministers, and not just the private companies mentioned in the Volcker report. Rudd said the inquiry would be ‘little more than a cover-up’ unless it examined the government’s role, with ‘all the blame to the wheat board, none of the responsibility to the Government’. Back at News Limited’s headquarters in Sydney’s Surry Hills, Chris Mitchell didn’t think the terms of reference should put a brake on the story. He simply wanted to get to the bottom of it, and instructed his reporters to keep digging. By the time the Cole inquiry started, the Australian had found Jane Drake-Brockman (the diplomat who signed the letter that gave AWB the go-ahead to use ‘Jordanian trucking companies’ in Iraq) and Dr Robert Bowker, the diplomat who cleared AWB of wrongdoing when allegations of corruption were first raised by the UN in 2000. For its part, the government continued to insist that it didn’t know about the kickbacks and, in November 2005, Downer went so far as to suggest that there was no way the government could ever have found out. He said on ABC radio: ‘The wheat board says they didn’t know [about kickbacks]; there’s no way that the department would, because its only source of information was the wheat board’. This, then, was the first glimpse of the government’s defence: ‘We didn’t know, basically, because we weren’t told’.


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CHAPTER 25

A few minutes after 10 am on Monday 12 December 2005, the journalists who would be covering the Cole inquiry got their first look at the man who would chair the inquiry into the greatest trade scandal in Australian history. Cole was 67 years old with straight, fine, white hair kept short at the sides and combed neatly over his head. He wore a dark blue suit with a red tie and matching pocket handkerchief, and he wore his small, gold Order of Australia button on his lapel. He entered the room from a side door and, smiling tightly, he took a seat – a large, leather-backed seat on a raised platform – facing the rest of the room. Staff had pinned a tinny coat of arms – kangaroo and emu – to the wall above his head. It did not seem to be a permanent fixture. He wore glasses with fine, gold frames. His habit was to look either towards a slim computer screen set up on his desk to his right (it displayed the transcript as taken by the inquiry staff), or down, through his glasses and over his nose, towards whatever hapless executive was in the witness box (also to Cole’s right, but a good deal lower than his own desk). From time to time, he would suck thoughtfully on the arm of his glasses. Other times, he made short notes on his pad. ‘Mr Associate,’ he said. ‘Would you read the Letters Patent?’ A thrilled young man in a smart, new suit got to his feet and, holding the Letters Patent in both hands in front of his face, he read the terms of reference as though they contained no controversy at all.


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ELIZABETH THE SECOND, by the Grace of God Queen of

Australia and her other Realms and Territories, Head of the Commonwealth: TO the Honourable Terence Rhoderic Hudson Cole AO RFD QC BY these Letters Patent issued in Our name by Our GovernorGeneral of the Commonwealth of Australia on the advice of the Federal Executive Council and pursuant to the Constitution of the Commonwealth of Australia, the Royal Commissions Act 1902 and other enabling powers …

This became public exhibit number 1, the first of more than 1500 documents – many of them multiple pages – to be tendered in the months to come. The senior counsel assisting the inquiry, John Agius SC, was next to his feet. Like Cole, he had perfectly white hair, but instead of being fine and combed it was shaped into mad, snowy curls. His face was gentler, kinder. His glasses were darker. His habit was to stride into the hearing room, with two-inch-thick, white lever-arch files under his arm, looking slightly harried but nodding at people as he passed. Over time, most of the reporters covering the inquiry would come to love him, in a way that it just wasn’t possible to love Terrence Cole. Agius was exactly the showman the media needed: whip-smart, wickedly funny, with a keen eye for the absurd and ridiculous. For days, then weeks and months on end, we watched in awe. Agius was also remarkable for his ability to handle many tasks at once: he would look down at the stack of white binders on the podium in front of him, study something for a moment and then ask a question – a devastating question – of the witness trembling nearby. While the witness flapped about, trying to answer, Agius would slowly turn the pages in his binders. He would take notes, and flip through dozens of files that flapped with Post-it Notes. When the witness was done, he would look up and tear them to shreds.


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It was an extraordinary performance. ‘Mr Commissioner,’ Agius said. ‘On my own behalf, and on behalf of my learned friends Gregory Nell, Michael Wigney and Miles Condon, I seek authorisation to appear before this Commission.’ ‘Yes,’ said Cole, making a note on his pad without looking up. ‘That authorisation is granted.’ ‘Are there any other applications for leave to appear?’ Cole inquired. At this point, a Melbourne barrister, James Judd QC, got to his feet for AWB. Judd is tall and broad with a full head of the thick, salt-and-pepper hair that women find so appealing. His wardrobe comprised only pinstriped suits. ‘May it please the Commission,’ he said, lifting both hands slightly so the fingertips gently touched the flaps on his jacket pockets, ‘I appear to make an application on behalf of the AWB for authorisation to appear in relation to so much of the inquiry as touches upon the AWB, its past and present employees.’ ‘Thank you, Mr Judd,’ Cole replied, again making some small notes on a pad in front of him, without looking up. ‘Application is granted.’ Other barristers then stood to make their applications to appear, and their presence was duly noted. Once all the marking of the pad in front of him was done, it was Cole’s turn. He read from a short prepared statement. ‘The purpose and function of this inquiry is to inquire into and report on [whether the three companies mentioned in the Volcker report have broken] any law of the Commonwealth, a State or Territory,’ he said, without looking up. ‘It is my intention to hold the hearings in public … Public hearings will commence on Monday, 16 January 2006 at hearing rooms on the fifth floor, 55 Market Street, Sydney.’ He noted that it was important to determine, even before the inquiry started, whether UN resolutions and sanctions had any status


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under Australian law. In other words, was it even a crime to breach a UN sanction? If so, what was the penalty? Cole had sought a legal opinion from ‘two respected international lawyers’ and it seemed that yes, it’s not right to breach a UN sanction. Those matters dealt with, Cole looked directly into the TV camera set up at the back of the room, for just this moment, and he made a direct appeal to people who would later be watching from home. ‘I invite those who believe they have relevant information or knowledge to contact … the inquiry,’ he said. This, it seemed, was Cole’s way of saying: don’t fight this out in the media. Bring your grievances to me. He also tackled head-on the Opposition’s claim that he was not bestowed of sufficient power to investigate the government’s role, because the terms of reference were ‘rorted’. ‘There have been statements in the parliament and in the media declaring that this inquiry is a judicial inquiry,’ he said. ‘That is not so. This inquiry has the powers conferred by the Royal Commissions Act 1902. These powers are far wider than … the powers conferred upon a judicial officer.’ Cole could not make findings of guilt, but that was normal in an inquiry. If he found that laws may have been broken, he would refer the matter to the relevant agency (such as the Australian Federal Police) for further action. As for whether AWB or its employees could possibly get a fair hearing after all the publicity, he said: ‘Persons who may be subject to adverse findings are entitled to natural justice. It will be afforded to them. As a former judge, I will exercise the wide powers conferred upon me with judicial objectivity and impartiality.’ With that, he adjourned the hearing, stood and left through the side door, without stopping to glance around. Lawyers in the front row, who got to their feet when Cole rose, turned to look at each other. Smiles were exchanged. The first day of a public


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inquiry is always good fun. Many of them knew each other from the first Cole inquiry into the building industry and from the Victorian bar. They agreed that the weeks ahead would be interesting. In the back of the room, in the media seats, journalists flipped shut their notebooks, raised their eyebrows and shrugged at each other. Where from here? Nobody really had a clue.


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CHAPTER 26

If AWB believed that Cole would take a break between the day of that first hearing and the next one in January it was wrong. On 19 December, just six days before Christmas, a secret hearing was held in the same inquiry room at 55 Market Street. Mark Emons had decided to roll over and tell the Cole inquiry everything he knew about the kickback scam. Cole opened the hearing at noon, by saying: ‘I direct that the evidence given by Mr Mark Emons this day not be published beyond the confines of this hearing room’. Emons was represented by his lawyer, Edwin Hume. A second lawyer, Miles Condon, asked the questions. Emons began by describing himself as a ‘product merchant’ employed by Farmhand, before quickly launching into an explanation of recent events: about ten days earlier, after being contacted by the Australian, he had asked one of AWB’s lawyers, Leonie Thompson, to send him all documents relevant to the kickbacks scandal … but then the hearing was interrupted, just ten minutes after it started, when Cole realised that the witness hadn’t been sworn in. They were all so unrehearsed. A Bible was procured, Emons swore to his testimony, and off they went again. Emons said he had started at AWB in September 1991 and was promoted to manager, Middle East division, in June 1995, responsible for Pakistan, Iraq, Iran, all the Gulf countries, Yemen, Oman, Egypt, Lebanon, Turkey, Libya and even the West Coast of Africa. He sketched the scene at AWB for Cole: they had all worked in a very large office, with 40–50 people, in LaTrobe Street in Melbourne that was


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almost like a trading room. The Middle East desk was actually four desks, all facing each other. He agreed that Iraq insisted that a trucking fee be built into the price on the wheat contracts, and that was a problem for AWB. Condon asked him to ‘tell the Commissioner, please, what the problem was, as far as you were concerned?’ ‘The problem was, as far as I was concerned, paying US dollars,’ he replied. ‘Was it also a problem that the payments would be made to … the Iraqi government?’ ‘Yes,’ he replied. Emons also agreed that yes, he and others at AWB had always known that ‘some part of the fee would be passed on to the Iraqi government’. Emons continued to sing like this all afternoon, providing the inquiry with the kind of information it would need to tear AWB’s defence – that it did not know and could not have known that the money was going to Iraq – to shreds. Meanwhile, however, AWB’s reputation was being shredded in the nation’s newspapers – especially the Australian – every single day. The Cole inquiry was a story that just wouldn’t go away. In part, that was because of the strong effort of a formidable group of West Australian farmers – led by Leon Bradley and Rick Wilson – and the seven or 12 or 15 Brooks brothers (people have lost count) who have grown wheat in New South Wales since 1958. These farmers – some of whom have the biggest crops in the land – had long campaigned against the single desk. They did not believe that AWB should be allowed to hold a monopoly over wheat exports. They want competition and transparency in trade. Brooks said flatly: ‘I believe that AWB knew and they didn’t care [about the kickbacks]. I think it’s just totally offensive and I’m just absolutely, I can’t believe that we get people like Mark Vaile on the radio protecting these people’. For his part, Rick Wilson is a classic free-marketeer: he wants to sell


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his wheat, his barley, and anything else he grows to the highest bidder. He resented having to deal only with AWB. Farmers like these saw an opportunity in the scandal to cripple the single-desk regime. AWB’s media manager, Peter McBride, urged the company to get on the front foot, to get out from under the deluge of bad press, but Lindberg’s instinct – the advice from his lawyers – was not to concede, but defend. It could not possibly succeed. Finally, after weeks of damaging press, an AWB board member, Peter Polson, managed to convince Lindberg to talk to an American who might be able to help. Dr Peter Sandman is a crisis-management expert. Based in New Jersey, he has a BA from Princeton and an MA from Stanford. A few days before Christmas 2005, AWB executive Jill Gillingham called him at home to ask if he could help manage the crisis engulfing the AWB. As it happened, Sandman had visited Australia in late October. He told AWB: ‘I have some sense of what AWB has been going through … I’d be delighted to work with you. Obviously, I would be coming in awfully late! Public and media impressions have already been formed’. The scandal had been a lead story on the news every night and on the front pages of the newspapers every day, and it wasn’t doing AWB’s reputation any good. He urged AWB to check out his website, which outlined his philosophy: he believes that corporations guilty of wrongdoing should forget about trying to cover it up. They should step up and apologise because the public are much more forgiving of people who admit they are wrong. He likes to tell people: ‘It’s much the same with parents. They will forgive a child who admits they have done something wrong but they don’t like it when their children tell lies’. Sandman told AWB he was prepared to come to Australia to nut out a new strategy that would involve admitting that yes, AWB had provided Saddam’s regime with hundreds of millions of dollars in the lead-up to the war.


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For this, he would charge around $650 an hour, or a total of $100,000, which covered all his first-class travelling time and time in the transit lounge, plus all the time it took to read the 600-page Volcker report and all the newspaper articles that had already been published. To be fair, even Sandman thought this price was ridiculous. ‘I think that’s crazy for a day and a half of strategic thinking together,’ he said. ‘I would guess it’s also a political liability.’ He could see the headlines already: ‘AWB paid $100,000 [Australian] to bring an American image expert to Melbourne for two days’. Under the circumstances, he recommended working by teleconference. The first one took place on 16 December. Others on the line included AWB’s lawyer Jim Cooper; government liaison officer Peter Hargreaves; company secretary Richard Fuller; two external lawyers, Leon Zwier and Leonie Thompson; AWB’s barrister James Judd; and one of Australia’s leading corporate communications specialists, Ian Smith, of Gavin Anderson. Sandman told Lindberg he would have to be upfront, honest and contrite. He would have to speak of ‘failings of imagination’ and ‘failings of courage or moral purpose’. He was supposed to say: ‘I mishandled this part of my job’. And: ‘We simply should have done better’. And: ‘I am deeply sorry we didn’t’. And: ‘We deeply regret this failure. We apologise for our neglect of our ethical duties’. Sandman also suggested that AWB come clean about the dodgy Tigris transaction, which had not been mentioned in the Volcker report but was also about to explode into the open. But Lindberg took one look at Sandman’s advice and said: no way. I cannot say that we were bad, wrong, that we should have done better, that we cocked up, that we feel an incredible shame. It was not, he said, a fair reading of events. Instead, AWB drafted its own version of the apology: a simpering version – later described by Cole as a ‘contrition statement without the contrition’ – in which it continued to play the victim, and complained about how it had been misled by Iraq and let down by the United Nations.


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Sandman shot back: ‘I assume you all knew I would hate this draft?’ He added: ‘It reads to me like a one-sided effort to look as innocent as you can without actually lying. You are entitled to do that. It is the lawyerly thing to do’. But, he said: ‘It is a terrible way to begin if you are seeking forgiveness for ethical misconduct. ‘It was you guys who told me that you think most of all of the inland trucking was handled by government employees paid $10 a day. You told me that many at AWB thought and still think it was no big deal that Iraq’s money got back to Saddam.’ AWB was shocked. This Sandman guy was apparently serious. He actually expected AWB to stand up and apologise for things that had actually been done. Incredible. The apology went through at least nine drafts – but it was no use. Lindberg wasn’t going to say anything like what Sandman wanted him to say. He did not believe it was an accurate record of what had actually happened. Instead, he told the AWB board that the crisis would soon blow over. Christopher Moffet – the West Australian wheat farmer who replaced Trevor Flugge on the board in the hotly contested 2002 election – would later tell the Cole inquiry that Lindberg admitted at a board meeting in December that AWB had paid fees on its contracts with Iraq. When asked if the admission seemed ‘potent’, Moffet replied: ‘Explosive would be a word I would have chosen. ‘We [were] being told something that had been a subject of denial for some years,’ Moffet recalled. ‘I think they [other board members] were all as thunderstruck as I was.’ But Lindberg seemed not to share their concern. ‘He was very upbeat,’ said Moffet. He said it was ‘unlikely’ that AWB would be found in breach of any laws.


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CHAPTER 27

One of the first journalists to try and find the room in Pitt Street where the Cole inquiry was being held was a young reporter from the Australian, the delightfully British Dan Box. When he first strode into the building (he has an officer’s bearing), he was frankly stunned. ‘Caroline,’ he said to me later. ‘Why is the Cole inquiry being held in a room that looks like my year 11 school room?’ I could see what he meant. The hearing room was on the fifth floor of an office block across the road from Sydney’s busy Pitt Street Mall. There was no security on the front door. The public, the press and the witnesses – including, when the moment came, Prime Minister Howard – could simply walk in off the street. ‘I thought I must have been in the wrong place,’ said Dan, when he first came upon this scene. ‘There was no security, no grand hall, just a room with some school chairs.’ He had looked around, wondering if he was lost. Then he saw a piece of A4 paper stuck with Blu-Tak to the wall, saying: ‘Oil for Food Inquiry’. ‘Now, if this were London,’ said Dan, ‘and there was an inquiry under way into bribes that were paid to a dictator on the eve of war … well, there would be wigs. At the very least, there would be people wearing robes, and perhaps some stained glass.’ But no, it was Formica chairs and the Copperart coat of arms. The only hint as to the seriousness of the matter in those early days was the calibre of the reporters sent by the main media organisations. The Sydney Morning Herald had three Walkley Award winners in attendance


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on the first day: former Washington correspondent Marion Wilkinson; youthful David Marr (who would go on to produce some of the best, laugh-out-loud copy ever written about a commission of inquiry into wheat sales); and former Jakarta correspondent Matthew Moore. The news agency AAP had Robin Pash, who had so cleanly cut through AWB’s crap when the Volcker report was released. As the inquiry dragged on, Pash would return to Canberra to be replaced in Sydney by Belinda – or Bel – Tasker, who amazed all and sundry by managing to somehow organise a wedding while staying to the end of proceedings every day (other reporters regularly skipped out early, citing deadlines), filing an average of four stories a day. The ABC put its best people on the story, too. Catherine Clifford was there; so, too, Nonee Walsh, Nick Grimm, David Spicer, Brendan Trembath, Jonathon Holmes and Michael Vincent (between them, too many Walkleys to count). Other talent included Dan Silkstone (the Age); Gerard McManus (Herald Sun); Lucy Skuthorpe (Rural Press); Paul Bongiorno (Channel Ten); Tracey Lee (Australian Financial Review); Byron Kaye (Daily Telegraph); and Peter Harvey (Channel Nine). The Australian had sent senior reporter and Walkley Award nominee, Jennifer Sexton, known around the office as ‘Scoop’ – and me. Professional and spiritual guidance would be provided by the ancient, weary, brilliant 63-year-old Errol Simper. Known throughout Australian journalism simply as the ‘the Scribe’, he had previously covered the Lindy Chamberlain trial; was first among reporters to report on the indigenous calamity in the Top End; and had covered the hanging of Barlow and Chambers. He came in a 35-year-old suit with stove-pipe pants, three packs of cigarettes in his old brown briefcase, and leather-bound diary from the Lillehammer Olympics, which he used as his notebook. In short, this was clearly going to be an event that got some coverage. To manage the pack – it’s a bit like herding blind cats – the inquiry appointed Rick Willis, of the public relations firm Hintons, who had also handled the press at the first Cole inquiry into the building industry.


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The court officer was Sheila Butler, who also worked at the first Cole inquiry and had ‘sort of retired’ when asked to work at the AWB hearings. ‘I thought, why not, and dusted off my suits,’ she said. Among other things, Butler had the arduous task of preventing journalists from sneaking coffee into the room. It was hardly an onerous condition of entry: the hearings started at 10 am, there was a break for coffee around 11 am, lunch at 1 pm, resume at 2 pm, with the aim of finishing at 4 pm (although 5 pm was not uncommon). Surely, with all the breaks, there seemed no need for journalists to smuggle in disposable cups of coffee, to spill all over their shirts. But, still they – we – tried to get around the rules. Butler never lost her patience but she never wavered, either. I’m not sure that a single cup ever got past her. At the tables for lawyers was James Judd QC, rocking gently in his leather chair. Now, there are people who complain that lawyers earn a lot of money and it’s true, they do – millions in Judd’s case. But they are impressive: Judd worked between 15 and 20 hours a day, seven days a week, pouring over material that was so old it had to be dredged from the equivalent of a software swamp. He had a peculiar way of touching the pockets of his jacket repeatedly as he spoke, and he was prone to temper, getting quite cross with Cole on several occasions, but also to humour. I thought him quite aloof, until he surprised me one day in an elevator. I was talking to a fellow journalist about, of all things, a new blue-tongue lizard I had purchased for my six-year-old son. ‘It’s around 30 centimetres long, very blue-green in colour,’ I explained. ‘My son is just thrilled. He carries it everywhere.’ A deep voice came from the back of the lift. ‘When it gets out, you must check behind the fridge.’ I turned, and it was Judd wearing, as normal, a dark suit and serious expression, but with smiling eyes under the mop of grey hair. ‘The fridge?’ I queried. ‘We have a lizard,’ he said, meaning, I suppose, his family, not his chambers. ‘When it escapes – and they do – it was always located behind the refrigerator. I suppose they like the heat.’


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He exited the lift and disappeared into the hearing room. A couple of times after that, I sought Judd’s counsel on the lizard. ‘It shed its entire skin,’ I said one morning. ‘Do you think that’s normal?’ ‘Are you seeking my diagnosis?’ he asked, apparently amused. ‘It sounds quite normal.’ Judd was always polite to reporters who regularly attacked his client in the media, but if forced to share a lift with them, he would not speak, at least, not of AWB. It was impossible to know what he thought of proceedings, especially as they dragged on. Once I slipped him a note asking if he would be interviewed for this book. I wanted to know why he’d taken AWB’s case. What would possess a man to allow his life to become so consumed by an inquiry as complicated as Cole’s? Judd was travelling back and forward between Sydney and Melbourne, never getting a moment’s peace, handling a case that was so enormous that multiple rooms were required just to hold the documents. It was not always thrilling. He was away from his family (a wife and two adolescent daughters) and he had to run the gauntlet through a media scrum every morning before his breakfast had settled. Of course, there were obvious compensations. He was earning something in the order of $10,000 a day. But Judd would earn that amount whatever he was doing, so surely money couldn’t be the motivation. Judd took my note between his index and his forefinger, the way a man normally holds a cigarette. He did not say yes. He did not say no. He simply took the note, smiled and put it in his pocket. The next day, presumably having read it, he came over to where I was sitting and politely turned me down. ‘I’m sorry,’ he said. ‘But it wouldn’t be appropriate.’ Judd – and his colleague Phillip Corbett – was deeply uninterested in the drama of the inquiry. As AWB’s barrister, he could easily have requested permission to cross-examine the Foreign Minister Alexander


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Downer, or even the Prime Minister, just for sport, just so he could put it on his résumé or tell his kids about it. But he resisted. There were other lawyers: Nicholas Green QC was there for AWB’s former managing director Murray Rogers and for former chief operating officer Michael Tighe. The cheerful, dishevelled Terry Forrest QC had clients including Nigel Edmonds Wilson, Peter Geary, Michael Long, Tim Snowball and Sarah Scales. Others at the bar table included Paul Lacava QC for Charles Stott; and the punchy Lachlan Carter, who soon developed a reputation as the terrier of the bar table, with his reputation for hard work, his suit pants puddling around his ankles and a laptop with a picture of his young children on the screen. There was Michael Abbott QC for six AWB clients: Terry Aucher, Robyn Beaumount, Richard Fuller, Paul Ingleby, Graham (the ‘Slug’) Owen and the most senior woman at AWB, Jill Gillingham. Andrew Lindberg would be represented by Duncan Allen SC. Neil Clelland SC was there for Jim Cooper, Peter Hargreaves, David Johnson, David Johnstone, Jessica Lyons and Rosemary Peavey. Add to these, lawyers – not all of them present on the fi rst day – such as Alan Robertson SC and Ian Neil SC for the Commonwealth, for Prime Minister Howard and for ministers Downer and Vaile; Robert Orr QC for the spy agencies; lawyers for AWB and its directors, the Commonwealth and its officers, DFAT and its officers, BHP and Tigris; lawyers for the whistleblowers, Mark Emons and Dominic Hogan (who was represented, without any guarantee that the fee would be paid, by the former Victorian attorney-general Jim Kennan and Gary Taylor, of Clark and Toop Lawyers); and lawyers for Phil Hughes, Andrew McConville, Nigel Officer and Michael Watson. There were the lawyers for the lawyers – Chris Quennell had his own representative (Phillip Priest QC), for example. Jane Drake-Brockman, who would truly be in the hot seat, had her own lawyer, too. Best of all, we would be blessed by the presence of the doyen, Ian Barker QC, with his dead-pan charm and his extraordinary mind. Barker


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is a giant among Australian lawyers and he arguably had the best client. He was there for the punchy, half-deaf, gun-toting Trevor Flugge. Over the course of the hearings, Barker would provide some small highlights in the form of gentle mockery of witnesses who dared suggest that Flugge might have been involved in the kickbacks. When Nigel Officer tried to suggest that the ex-chairman knew about the plan to funnel money to Iraq, Barker wanted to know what ‘shred of a memory’ he relied upon. ‘I have many shreds of memory with respect to discussing trucking fees with the chairman,’ Officer replied. ‘Well, why didn’t you talk about them in your first [statutory] declaration?’ Barker asked. ‘At the time of the first declaration, matters relating to this inquiry weren’t fully at the front of my mind.’ However, Officer insisted, he had now ‘dredged the memory’. ‘You seem to have dredged a remarkable number of memories, do you not?’ said Barker. ‘And we are, are we, to take them all seriously?’ Unlike the barristers, Barker never wore a tie. Once, when David Marr asked him why, he replied: ‘I don’t spill my food’. Another time, he requested a copy of a tape of some evidence. Agius told him: ‘We will do our best to get them out as soon as we can. We won’t be able to get them put on a disk tonight. It will have to occur during the course of the day tomorrow.’ Barker replied: ‘I am by nature a Luddite and I don’t understand what that’s all about.’ ‘You put a disk in a machine and press the play button,’ said Agius, amazed. ‘I don’t approve of that sort of thing,’ Barker replied, before taking his seat.

Terence Cole entered the room on this first day of the second hearing shortly after 10am. The gallery stood and we bowed our heads a little. Cole lowered his head and took his seat on the podium. There was a sense of


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excitement about what might unfold and some documents were passed back and forth. It was otherwise quiet. Outside the inquiry, AWB had been telling anybody who would listen that it was innocent; that it had not willingly paid kickbacks; that it did not know that money funnelled to Alia had ended up with Saddam Hussein’s regime, but now the day of reckoning was here. Would AWB’s defence – ignorance – hold? Not even for a moment. John Agius QC got to his feet, put his forearms on the pile of white lever-arch binders in front of him, and proceeded to read an opening statement that was absolutely devastating for AWB. Not for a moment was he impressed by AWB’s spin. He opened the Cole inquiry by saying he would prove that AWB executives knew that the company was paying illegal kickbacks to Saddam’s regime. They had discussed hiding the cash in a ‘very large suitcase’. They had been prepared to deceive the United Nations – and the federal government. He said AWB had never had a written contract with Alia to provide any services, nor was there evidence to suggest it ever sought one, and there was no correspondence between AWB and Alia concerning any details of a trucking service. ‘The only available conclusion,’ he said, was that AWB had been lying about the scam, from 1999 until that very day. It was a superb performance: a series of devastating blows, landed repeatedly upon AWB. Shortly after Agius finished his opening statements, several AWB executives got to their feet and fled the room, mobiles in hand. This was not going to plan. This was a disaster. Journalists were hot on their heels. This was breaking news. The first witness forced to face Agius was the former AWB chairman Murray Rogers. He told the inquiry that he had ‘no recollection of [the


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decision by the Iraqis to add a trucking fee to their prices] at this stage; … I have racked my brains. I have listened to you this morning talking about it. I can’t remember specifically that issue.’ Pressed, he said he had a ‘vague recollection that [a new trucking fee] was discussed … with DFAT in Canberra … before we proceeded.’ Agius didn’t buy it. What evidence, if any, did Rogers have, to prove that DFAT knew about the transport fee? None at all? Well, then, let’s move on. On day two – and for days afterward – Agius went after Andrew Lindberg, pummelling him with questions about AWB’s Iraq deals. Lindberg at times appeared upset and exasperated by the aggressive questions being put to him, and he repeatedly answered ‘I don’t know’ and ‘I don’t recall’, prompting gales of laughter from the public gallery. When he was shown documents that were prepared for him by members of his own staff, he said he had not seen them, did not understand them or could not recall having read them. Lindberg defended himself by saying that much of what was being put to him – a blizzard of documents – was years old. Besides, he had been busy, he couldn’t be expected to pay attention to such fine detail; he actually knew very little about the Iraq wheat deals. Agius sighed and said: ‘I don’t want to paint you as a person who was standing in your office looking out whilst the AWB burned, Mr Lindberg, but did you not take a personal interest in these matters?’ Lindberg looked anguished: ‘I was brand new to the company,’ he said. ‘I had a million things to deal with.’ Over the months to come, Agius would show remarkable energy for the task of unravelling the kickback scam, but he was particularly energised by the Tigris deal, needling Lindberg about it, even in those early days, trying to force him to admit that prices on the wheat contracts had been secretly inflated to cover the old debt, and that the fraudulent contracts went to the UN for payment. But it was only when Lindberg was shown documents relating to the deal that he finally admitted that yes,


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‘it appears that amounts were added to future wheat contracts to recover the debt’. Commissioner Cole interjected from his podium: ‘A hidden amount?’ ‘I don’t know,’ Lindberg said. ‘… I assume you are correct.’ Asked what he did when it was revealed that the UN had been deceived, Lindberg said: ‘Well, the oil-for-food program had ceased.’ In other words, he didn’t do anything. He didn’t sack anybody; he didn’t order any inquiry; he didn’t report the matter. Agius produced an AWB memo outlining the plan to pay a $2 million ‘cleaning fee’ to Iraq at the behest of the Six of Hearts just months before Australian troops went to war in Iraq. Lindberg was asked 12 times whether he agreed to pay this money to Iraq. The first 11 times he said ‘I don’t know’ and ‘I don’t recall’ and ‘I can’t remember’ before conceding the point, saying: ‘We had no, we had no, we had no option.’ But Agius was curious: why had the money been paid? Was it to make the contamination issue ‘go away’? Lindberg was adamant. ‘No,’ he said, several times. ‘Nobody suggested a monetary settlement?’ said Agius. ‘No, none at all.’ Agius then produced documents that strongly suggested otherwise until, finally, Lindberg conceded: ‘I think there was an agreement, yes.’ ‘By you?’ Agius asked. ‘By the company, yes.’ ‘Goodness me …’ ‘Yes, yes.’ ‘Was it made by you?’ ‘Yes.’ ‘In the presence of [international sales manager Michael] Long?’ ‘Yes.’ ‘And [former chairman] Trevor Flugge?’ ‘Yes.’ By his third day in the witness box, Lindberg had said ‘I don’t know’


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or ‘I don’t recall’ or ‘I can’t recall’ or ‘I have no recollection’ or ‘I can’t precisely recall’ more than 250 times. ‘Is it that you don’t want to recall?’ asked Agius, waving yet another document. Lindberg: ‘I can’t recall.’ Finally, Agius was prompted to ask: ‘Are you a complete fool, Mr Lindberg?’ ‘I am not a complete fool,’ Lindberg replied. It was as painful as a public humiliation gets. By Saturday of the first week of the public hearings, Lindberg’s reign as managing director of AWB was essentially over (it wouldn’t be much longer before he finally, predictably, resigned) and AWB’s monopoly over wheat exports was under threat, with Prime Minister Howard saying the arrangement was ‘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,’ Howard said. ‘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.’ AWB shares immediately crashed 31 cents to $5.21, taking the loss for the first week of the Cole inquiry to 18 per cent – or $400 million in stock market value. Six days later, Lindberg bowed to the inevitable and became the wheat scandal’s first casualty when he resigned as managing director. The board thanked him for ‘making this decision, believing it to be in the best interests of the company’. It was a painful personal blow, but the financial cost was huge, too. Lindberg had earned more than $6 million from AWB in the six years he had been at the helm. He earned a total of $1,847,983 for the year ending September 2005; that figure was more than three times greater than the $560,000 he received in 2001. The size of his bonus had also been increasing. Lindberg also owned 73,000 shares in AWB, then worth around


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$380,000. On the day he stepped down, lawyers representing a group of AWB shareholders announced a class action against the company, which had suffered a 33 per cent fall in its share price since the Cole inquiry started. If AWB thought things couldn’t get worse – well, they could. On 13 February, Iraq confirmed the Australian’s story of the previous November: it had scrapped wheat deals worth $800 million a year and would no longer deal with AWB. The lucrative market, the cash cow they all coveted, was gone.


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CHAPTER 28

Michael Long’s mates call him ‘Longy’. He’s that kind of guy. Nobody at AWB has a bad word to say about Longy. When he went to Baghdad for the federal government after the war in 2003, he charmed everybody he met along the way, and he left with a kind reference from the US military. There’s a reason why Long is popular: he’s incredibly confident. He’s 6 feet, 6 inches tall, has a completely shaven head and he oozes a strange kind of charisma. Long did not fear the press that crammed around the doorway of the inquiry every morning. Other witnesses cringed in the face of all the lights and cameras; Michael Long strode forward, straight into the scrum, smiling. He went into the witness box on 31 January with his arms open wide, his palms out, as if to say: ‘Please! What are we doing here?’ It was clear that he was in a punchy mood and outraged by the media coverage to date. One of the first things Long wanted to do when he took the stand was take charge of proceedings. He told Cole he wanted to read aloud his statement. Cole was surprised, saying: ‘No, no, we can all read it’. But Long didn’t want to take no for an answer, saying he wanted the whole thing on the public record, so it might be ‘reported accurately’. With this, he glared at the media. Agius assured Long that the statement would be made public, and posted on the inquiry website.


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‘So the answer is no?’ said Long. The answer was no. But, said Long, ‘I’m particularly affronted by the suggestion that there was $300 million paid in bribes. Under my watch, no monies were ever remitted to the government of Iraq.’ No, it was ‘clearly not my state of mind’ that ‘we were bribing anyone’. ‘Clearly my state of mind was that we were paying for a genuine service,’ he said, about the trucking fee. Besides, he said – and many people agreed – AWB was simply trying to do its best for the Australian farmer. ‘The farmer wasn’t disadvantaged in any way,’ he said. ‘We achieved … a reasonable return for the Australian farmer … Furthermore, I satisfied myself that money was not being paid directly to any entity in Iraq. We were paying a Jordanian company. I hope that puts some perspective on my mindset at the time and now, Mr Commissioner.’ Later, Long was shown a series of emails, some sent directly to him, others he was copied in on, all of which said something about trucking fees going to Iraq (not to Jordan). One was dated 10 September 2001; another was dated 13 September 2001; a third was dated 16 September 2001 (all around the dates of the terrorist attacks, when Iraq was most testy about getting its money). Long said he couldn’t really remember whether he’d ever seen any of the emails. Commissioner Cole noted: ‘The problem is that none of these three emails speak of [money going to] Alia; they speak of Iraq?’ ‘I absolutely concur, Mr Commissioner, and, as I said earlier if I had have read the intimate detail of every email, which I probably didn’t – I got the thrust of the risk situation at the time – I would have called Mr Hogan in and said, “What do you mean by payments to Iraq? Aren’t we paying Alia?” … So maybe I assumed that Mr Hogan had got a little bit confused, in terms of saying, “Well, it is trucking for Iraq”.’ ‘He told you three times in 20 days,’ said Cole, incredulous. ‘Well, he cc-ed me three times in 10 days’ [emphasis added], Long corrected him.


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Exasperated, Cole said: ‘The point I was making is this: it is a little unlikely he was confused if he told you the same thing three times in a row.’ ‘I would say his confusion – perhaps his confusion was consistent,’ Long countered. Agius jumped in, saying: ‘Mr Hogan, on three occasions, seems to be of the view that these are payments which are actually due to the Iraqis?’ ‘You are correct, Mr Agius. Mr Hogan does seem to be of that view,’ said Long. ‘He doesn’t make any secret of it in the emails, does he?’ ‘On the face of it, he doesn’t make any secret of it in the emails,’ Long agreed. ‘Mr Long, I suggest to you that your evidence that you are not aware that this money was in fact being paid to the Iraqi regime is false?’ ‘Well, I reject your assertion, Mr Agius,’ Long replied. Long did not deny that he had agreed to the dodgiest deal of all, the plan to secretly inflate prices on the last, lucrative contracts signed with Iraq to cover the Tigris debt. ‘It was going to be added on to the contract price; I knew that,’ he agreed. ‘I’m not denying the fact that that Tigris debt was going to be added on to the contract price … I wasn’t hiding any facts that this was going to be added on to the contract.’ ‘You were not hiding any facts from whom?’ asked Agius. ‘From anyone,’ said Long. ‘From the UN?’ said Agius, his eyebrows arched. ‘From anyone internally’ [emphasis added], said Long, correcting himself. ‘You were not hiding any facts from the executive?’ said Agius. ‘That’s right.’ Well, that was intriguing. As Agius put it: ‘What kind of culture was there, then, at the AWB that would have permitted you to feel free to write to the executive about the planned loading up of a contract to cover the Tigris debt?’


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‘Well, I think it is a good question, Mr Agius,’ said Long. ‘I think there was an open culture at AWB … There was a culture that you could feel free to go and discuss problems like this.’ ‘Was the culture of performance the dominant culture?’ asked Agius. ‘Was it a culture of doing business and making money no matter what the ethical cost?’ ‘Absolutely not,’ said Long. No. It did not even enter Long’s mind ‘to go, how can I rip off the UN?’ His mind was always on trying to ‘feed the starving Iraqis’. ‘What about the starving Iraqis that might have had that $8.8m available to them if it had not gone to pay the Tigris debt? Did you think about them?’ asked Agius. ‘I was always thinking of the starving Iraqis’ [emphasis added], said Long. Over time, Agius wore him down, until he snapped. ‘I’ve lost my train of thought,’ Long said, irritated after one too many questions. ‘Could we break for lunch?’ Agius was not amused. He kept Long in the box for quite a bit past 1 pm. When permission to eat was finally granted, Long strode to the front of the building, smoothed his tie down over his shirt buttons, and said to the woman by his side: ‘How do I look? Am I looking cool for school?’ And with that, he walked straight out the front of the building, stood in front of the wall of cameras and let them snap away. ‘You done?’ he said, when the shutters finally fell silent. The photographers, amazed to find somebody just standing there, not trying to run away, lowered their cameras, and nodded. ‘Right then,’ said Long. And away he strode. The press caucused: never mind whether he had done the wrong thing in Iraq or not – that was for the Federal Police and ultimately the courts to decide – but here and now, was he arrogant or extremely attractive? Nobody could agree. ‘But he’ll lose his job,’ said one reporter. ‘He’s got to be unemployable after that performance.’


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Actually, Michael Long was first among the AWB executives to be rehired, after he left the wheat exporter (indeed, he had a new job before Cole even handed down his report).


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CHAPTER 29

Every inquiry has its share of reluctant ‘rollovers’ or ‘whistleblowers’ who opt to tell the truth. On 2 February, a sad and sorry Mark Emons came into the inquiry room and publicly agreed that he had set up a scheme to pay trucking fees to Iraq. Under oath, he told Cole that the Iraqi Grains Board had told him to tack trucking fees onto the wheat contracts; that the payment of fees was well known to AWB executives; and that he didn’t doubt that the money ended up with Iraq. After Emons came Michael Watson, who had already appeared in a secret hearing, where he – like Emons – had rolled over. Miles Condon asked the questions, which amounted to a run down of the facts as they had already been established. ‘Is it your position that you knew that the trucking fee was going to be received in some form or another by an Iraqi organisation?’ Condon queried. ‘Yes,’ Watson replied. ‘Is it your position that means of payment were discussed so that the payments would not be obvious to the United Nations?’ ‘Yes.’ ‘Were you aware at the time of the existence of sanctions imposed by the United Nations?’ ‘I was aware of the sanctions, but not the detail.’ ‘Were you aware, nonetheless, that those sanctions prevented


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payments being made to or from an Iraqi entity without the approval of the United Nations?’ ‘Yes.’ In other words, yes, he had helped set up a mechanism to funnel money to Iraq. The question, really, was how much did AWB as a company, and senior management in particular, know about it? Agius soon got a chance to find out. Former AWB chairman Trevor Flugge made his much-anticipated appearance at the Cole inquiry on 27 February 2006. A few weeks earlier, the Sydney Morning Herald and Melbourne’s Age had published the now famous photographs of him bare-bellied, with a gun. The headline shrieked: ‘Taking care of business in Baghdad’. So Flugge, when he appeared before Cole, was already firmly on the back foot. Still, he put up a fight. Agius started by saying: ‘A long time ago, you were appointed to the board of the statutory body known as the Australian Wheat Board?’ ‘Mmm-hmm,’ he replied. Later, he became chairman. As such, surely he must have had a close relationship with Zuhair Daoud, head of the Iraqi Grains Board? Flugge said no. ‘I only recall seeing Mr Zuhair on two occasions. Now, there may have been three. But the only real recollection I have of Zuhair was probably the first time that I met him, I believe that was 1998, when I met him in the hotel lobby – an elderly but quite a stately gentleman, very impressive, extremely well spoken … I believe that I have met him again since then, but I really can’t recall.’ Flugge said Zuhair had never asked him to funnel money to Iraq. He was ‘aware that we [AWB] had an inland trucking component. I was aware that we were paying a trucking fee’. But, ‘my understanding was that it was approved by the UN’.


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He could not remember attending any meetings where the kickbacks or trucking fees were actually discussed; he could not check his diary to see if the meetings took place because he had lost it. Besides, he told Cole, he was almost deaf in one ear, and things often passed him by. ‘At restaurants, in very crowded places, unless people speak to me directly, then I won’t necessarily pick up casual comments,’ Flugge said.


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CHAPTER 30

The Cole inquiry was on the front page of the Australian and other metropolitan daily newspapers almost every day in February and March 2006. In that context, it is important to say that some people thought the Australian in particular was blowing the scandal out of all proportion. But the public was paying attention. An ACNielson poll taken in February, after a month of hearings, showed that 80 per cent of respondents were aware of the scandal. In some very bad news for the government, when those people were asked whether they believed the government had long known about the kickbacks, 70 per cent said: Yes. Obviously. No doubt about it. The letters pages were full of commentary from readers. Some believed AWB probably had paid money to Saddam’s regime, and had no problem with that. Some believed the government knew about it, and had no problem with that either. Others were disgusted, embarrassed, and thought the responsible ministers should ‘resign as a matter of principle’. Outside the inquiry, debate continued to rage about the terms of reference: it was all very well to get stuck into AWB, but would the government also be held accountable? Diplomatic cables from Bronte Moules and from Alistair Nicholas at Austrade had been tendered into evidence, and splashed all over the front pages. There was no longer any doubt that the Howard government had known for years about the allegations of corruption. But did anybody within government have actual knowledge of the kickbacks, or did the scam just pass them by? Cole had to find out. There was no way he could say that AWB had deceived the Commonwealth, not if the Commonwealth already knew


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about the kickbacks. And so, in a televised address on 21 February, Commissioner Cole announced that his inquiry would soon turn its attention to the ‘actual or constructive knowledge of the Commonwealth’. Immediately, there was speculation that Downer, Vaile and perhaps even Howard would have to be called, to explain what they knew. Downer, who was then in London, told reporters that he would be prepared to testify before Cole, to prove that his government was clean. ‘I think anybody should be happy to appear,’ Downer said. ‘I’m absolutely relaxed about it.’ But if ministers were called, the inquiry clearly would have to be extended, and so it was. On 10 March, Commissioner Cole was forced to ask the Attorney-General for an extension of time, saying he could not report by 30 March but perhaps by 30 June (that date would soon blow out to 29 September and, ultimately, to 24 November 2006). A short time later the first batch of what would become hundreds of statements from bureaucrats and diplomats arrived – and with them, the Department of Foreign Affairs and Trade defence. It was going to argue that it only ever acted as a ‘post box’ for AWB. In other words, it had passed the AWB contracts to the United Nations without scrutiny. Nobody checked for inflated prices; nobody noticed the corruption. Several DFAT officers would admit they had no idea how to read the contracts, or what any of the contract terms meant. Also, while some government officials had heard allegations of corruption, only one would say she had heard about Alia. None would say they knew about the kickbacks. DFAT’s first witness – Bronte Moules – confirmed this. She approached the hearing room flanked on all sides by lawyers, appearing tiny in their midst.With her little hands fluttering like butterflies, she told the inquiry she had worked at the Australian mission in New York between 1999 and 2001. Agius asked: ‘You described yourself … in your first statement as performing a post box function. By that, you mean, I take it, that you were a link person between DFAT and Canberra and the United Nations?’


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‘That’s correct,’ she replied. Moules was shown the cables she had sent back to Canberra in 2000 that contained allegations of corruption. She was asked: ‘Were you aware of any information or intelligence that suggested that AWB was in fact paying money to any Iraqi entity in connection with its contracts for the sale of wheat to Iraq under the Oil-for-Food Program?’ ‘No, I was not,’ she replied. ‘Were you at any time aware that AWB was paying money to a company known as Alia, or Alia for Transportation and General Trade?’ ‘No, I was not.’ ‘Were you aware of the existence of a company called Alia for Transportation and General Trade?’ ‘No.’ A short time later, Dr Robert Bowker strode into the witness box and immediately launched into a long, loud, passionate defence of his role in the scandal, explaining to all and sundry that he was an expert on the Middle East and conscious of the fact that corruption flourished in international markets. He had heard ‘extraordinary tales’ about corruption in the region including a ‘famous’ story about an official who threw a dead rat into a wheat pile and then demanded compensation for the contamination. Journalist Mark Colvin, commentating for ABC radio, would later dryly tell his audience: ‘But he [Bowker] didn’t appear to smell a rat’ when first warned about the kickbacks in 2000. Bowker told the inquiry that he knew about corruption in the livesheep, dead-sheep and cheese trades, but he considered the Australian wheat trade to be clean. He recalled the conversation he had with AWB in March 2000, and he agreed that yes, he had decided the allegations were ‘bullshit’ because an AWB employee told him: ‘This is bullshit’. Agius asked why Bowker – a senior diplomat – had accepted a threeword answer from a relatively junior AWB employee. ‘His reply was more than the three words,’ said Bowker, somewhat


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affronted. ‘It was to reassure me and my department that AWB was aware of, and upholding, its responsibilities.’ ‘But did you really believe that [he would say]: “Oh, well, yes, actually, now that you ask me … I’d better tell you that we are [paying kickbacks]”?’ Agius said. Well, of course not. He just believed AWB was clean, so didn’t bother to chase the matter further.

A parade of government witnesses followed Moules and Bowker into the witness box. All said basically the same thing: they saw nothing, they heard nothing and, if they did, it was meaningless to them. Many admitted that they had no real idea how to handle AWB. They looked at contracts to sell wheat to Iraq but did not scrutinise them. They heard allegations of corruption but did not investigate. They received cables but did not read them. They heard rumours but never took any of them seriously. They dismissed out of hand anything that might have been bad news for Australia. Given that the whole world had known for years that Saddam had corrupted the oil-for-food program, it seemed impossible that nobody within the government knew about it – and it was. Australia’s main intelligence agencies – the Australian Security Intelligence Organisation (ASIO), the Australian Secret Intelligence Service (ASIS), the Office of National Assessments (ONA) and the Defence Intelligence Organisation (DIO) – all received ‘notices to produce’ from the Cole inquiry on 17 February, meaning that they would be required to say all they knew about Iraq’s attempts to corrupt the oil-for-food program. The spies duly delivered the material to the inquiry – and promptly declared it classified for reasons of national security. Cole, who had promised to have as much of the inquiry conducted in public as possible, then ordered that a ‘distillation’ of the material – removing all information that might identify the spies or how the material was collected – be made public.


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When produced, it showed that spies had known since September 2001 that Iraq was demanding commissions of 10 per cent be applied to all humanitarian goods delivered to the Iraqi port of Umm Qasr and that the arrangement was ‘rigidly enforced’. The spies also admitted they had held intelligence since 1998 – that is, for eight long years – that Alia was part-owned by Saddam Hussein’s regime. Of course, they passed this information on to government. Of course, nobody did anything with it. It seemed worth asking: what, exactly, was the point of having intelligence about Iraq’s efforts to corrupt the oil-for-food program sent to government if those people who actually dealt with the oil-for-food program never saw it? (In fact, one DFAT official, Jill Courtney, who acted as head of the Department of Foreign Affairs and Trade’s Middle East branch in 2000, told Cole that she heard the name ‘Alia’ when she worked for DFAT but her evidence would later be described as anomalous, since she was the only one of dozens of DFAT officials who remembered this.) Zena Armstrong provides the best example of how the system failed so desperately. She appeared before Cole on 20 March. Her mood – how to put this? – was not good. Indeed, she seemed rather annoyed to be there, as if the public (and certainly the media) had no real business asking her anything about the job she’d been doing for the public while Australian troops were at war in Iraq. In 2003 and 2004, Armstrong had held in her hands AWB contracts that were groaning with kickbacks. The price was astronomical. She also held in her hands a memo from a keen young US army captain, Blake Puckett, who had warned that ‘every contract’ with Saddam’s regime had a kickback built into the price. She had also heard the US Wheat Associates wailing to Colin Powell and US congress members about the sky-high prices on Australia’s wheat deals with Iraq. She knew AWB had been accused of building kickbacks into the prices and funnelling money back to Saddam’s regime. And what did she do? Not all that much, actually.


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Armstrong – whose speech is distinguished by the repeated use of the phrase ‘very much’ – conceded to Cole that yes, she had ‘very much’ discussed inland transport with AWB executives in 2003 and yes, they had told her that trucking, or an inland transport fee, was ‘very much’ a feature of their trade with Iraq. ‘It was very much a strength that they played on generally,’ she said. Agius: ‘Before the invasion?’ Armstrong: ‘Yes.’ She also conceded that AWB had told her that ‘suppliers had no choice’ other than to use those trucking companies approved by Saddam’s regime. Agius: ‘That was a statement made to you by AWB personnel?’ Armstrong: ‘Yes.’ The public gallery did its best not to blurt out the obvious: so why on God’s green earth didn’t somebody say, hey, maybe these ‘inland transport fees’ were, in fact, payments to Iraq’s regime? But Armstrong had no patience with anybody who suggested she might have failed in her duty to the Australian people. ‘I believe, as Australian public servants, we have obligations under the Australian Commonwealth Code of Conduct,’ she said. ‘If there was any suggestion … of improper activity in regard to United Nations … I would have had a duty to pursue it, follow it up and to report it.’ She clearly couldn’t see the problem with that answer – there was a suggestion of improper activity, there was a suggestion that UN resolutions had been breached. So, where was the follow up? Where was the report? Well, Armstrong said she might have taken the allegations more seriously if they came from somebody more senior than Blake Puckett. He was considered too lowly ranking to take seriously. Also, she wasn’t that interested in ‘generic’ advice about Iraq. She wanted specific allegations. In other words, if a warning didn’t specifically mention AWB – the largest supplier under the UN oil-for-food program – Armstrong figured it didn’t count.

*


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Deep in DFAT’s files, however, a bomb was waiting to explode. It was the 2 November letter to AWB that referred specifically to ‘trucking companies’ and to wheat sales to Iraq. DFAT was aware that AWB had some kind of arrangement with the Jordanian trucking companies. DFAT officials were in open conflict over who received the letter, who wrote it and why. In a classic case of ‘he said, she said’, Jane Drake-Brockman told the Cole inquiry that she found the 2 November letter in her ‘urgent outbox’ waiting for her signature. She said a DFAT official, Don Cuddihy, had ‘explained the background’ and asked her to sign it. But Cuddihy denied ever having seen the letter, let alone having a hand in drafting it. Paul Lacava SC asked Cuddihy whether he was directly contradicting his former boss. ‘You disagree with her?’ Lacava asked. ‘Well, I have no recollection of that happening,’ Cuddihy replied. Cuddihy also stuck close to the DFAT line, saying the department was like a ‘post box’ for AWB, passing its wheat contracts to the UN with only ‘rudimentary’ scrutiny. ‘Like a lot of jobs at DFAT, you just learn as you go,’ he said. ‘It was never explained to me that was our role.’ Asked if he conducted any scrutiny at all, he said: ‘I was looking for anything obvious … something that really stood out.’ Perhaps he imagined a flashing sign? Words like: Kickback Hidden Here? The longer the questioning of DFAT officials went on, the more obvious it became that ministers would have to take the stand, to explain how on earth the scandal could have slipped by so many staff – and, indeed, by the ministers themselves. And so, on 30 March, Alexander Downer and Mark Vaile were asked to provide written statements to the Cole inquiry.


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Senior counsel John Agius assured the public gallery that the ministers would not be treated any differently to other witnesses. ‘We have written to them and asked for statements,’ he said. ‘If I need to call them, I will.’ Terry Forrest QC – who had also been barrister for bouncer Zdravko Micevic, cleared over the death of cricketer David Hookes – immediately got to his feet, to request permission to cross-examine the ministers if they were, indeed, called to appear. Of Downer, he said: ‘He doesn’t deserve protection from scrutiny any more than any other witness in the commission. There ought to be no protective shield around the government.’ Cole seemed exasperated. ‘This commission is not putting a protective shield around anyone,’ he said, ‘let alone government.’ Not everybody agreed. There was, in fact, furious debate over whether government witnesses were treated more gently than AWB executives. The conclusion must be: yes.

From time to time, journalists from Canberra, who were reading about Cole on the front page every day, would travel to Sydney to see the action unfolding live. Invariably, they were asleep within an hour of arriving. None could believe how much time could pass between publishable quotes, how much trauma journalists sitting there every day had to suffer through to get just one small story. The gifted columnist Matt Price, normally based in Canberra, is a case in point. He was lucky enough to be in the room when a DFAT bureaucrat by the name of David Stuart gave evidence. Stuart had the monumental task of explaining how Canberra bureaucrats deal with intelligence – that is, with information collected by spies and diplomats around the globe. A delighted Price reported: ‘He produced a sensational gobbledegook


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reply’. Apparently, most of the intelligence is ‘unassessed’; there is so much of it that people in Canberra find it simply impossible to read it all. So, what if a diplomat came across some intelligence that was troubling – for example, a report by spies that Iraq was corrupting the UN oil-forfood program? Could he or she ask for a more detailed briefing? ‘If that sounds complicated, here, word for word, is Stuart’s answer,’ wrote Price, before launching into the following: You’re assuming that whatever number of people, probably no more than a handful, possibly one or two, who this has come to their attention have this in front of them, and then saying can they then ask for an unassessed report because that assumption – I think in the first place it isn’t clear that, just going on that, that that would have been, if you like – would have registered. If it had, would they ask for an assessment, could they ask for an assessment? We could, through a mechanism at a monthly meeting, say we would like more attention in this area. We can’t dictate that there be an assessment made. It’s a collective decision. We could have an influence, but there’s an assumption in your question which I think, as I was explaining before, you’re assuming that – held unassessed intelligence. Well, in what form? Was it … (blah, blah, blah).

And so it was, for many hours, on many, many, many days of the week, which is why the queue for coffee at the café downstairs at 55 Market Street was always very long, and double espresso was the norm.


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CHAPTER 31

Outside the inquiry, pressure on the government was building. On 24 March, the Prime Minister had agreed to a radio interview with Melbourne’s Neil Mitchell, who asked him: ‘Prime Minister, the AWB bribery scandal. Do you think people care about it?’ ‘Well, I care about it,’ the Prime Minister replied. ‘I want to get to the bottom of it. That’s why I established the Cole inquiry.’ Labor cared about the scandal, too. It used every question in parliament’s question time – that is, more than 100 questions – in January, February and March 2006 to hammer the government about its knowledge of the scandal. Kevin Rudd led the charge. He campaigned pretty much constantly for cabinet ministers to be called to the stand, to explain how such a massive scandal had passed beneath their noses. Shortly after 3 pm on 7 April, Agius granted Rudd his wish. He was rifling through a sheaf of papers when he said, almost absent-mindedly, that Vaile would be called as a witness the following Monday and Downer the following Tuesday because ‘there are one or two matters I wish to take up with them’. Every journalist who had been sitting in the room got up and bolted for the door, keen to be the first to pass the news back to the nation. It would be the first time in at least a decade that senior cabinet ministers had been called to explain themselves before a royal commissioner. And it seemed incredible: how would Downer cope in the witness box, where he would not be allowed to shout and abuse people as he does in parliament; where he would not be permitted to swing into rhetoric, to mock or to deride?


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Agius had so far been brilliant. AWB personnel were terrified of him. The press turned up most days just to see what he might do. How would the ministers cope? Trade Minister Mark Vaile would be first on the grill. He was called before Cole on 10 April 2006, and it was generally agreed by political commentators in the audience, and by wide-eyed members of the public who made it into the packed gallery, that his performance was woeful. During a tense 87 minutes in the witness stand, Vaile was forced to admit he put Australia’s good name at risk to defend AWB, without ever trying to find out whether it was true that AWB was paying kickbacks to Saddam Hussein’s Iraqi regime. During his testimony – and in his written statement – Vaile used the terms ‘I don’t know’ and ‘I have no recollection’ more than 20 times. The lowest moment was probably when Vaile conceded he did not even know why the government never investigated allegations against AWB. ‘Might you have been inclined to pick up the phone and speak to somebody at AWB about the allegations?’ Agius asked. ‘I was pretty well snowed under,’ Vaile replied. Pretty well snowed under? Hey, this was $300 million we were talking about. This was a regime troops were soon going to tackle on the battlefield. Vaile tried to blame his hapless department for the oversights, saying: ‘I was working on the basis of advice that was given to me by my department.’ Agius didn’t let him get away with it, saying: ‘Which in turn, really, was material the department obtained from AWB?’ Vaile (glumly): ‘I now understand that to be correct.’ Vaile could not recall seeing any of the 21 top-secret cables that referred to allegations of kickbacks and surcharges in oil-for-food contracts. However, he did admit to being aware ‘in a general sense’ of allegations being made against AWB.


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Vaile repeatedly tried to shift the blame for the scandal on to his cabinet colleague Alexander Downer, or else to the UN. Repeatedly, he said he did not have ‘ministerial responsibility’ for issues involving the United Nations. At one point, he said: ‘Bear in mind that is relevant to the UN mission and a UN program’. Later, he added: ‘Bear in mind that I didn’t have ministerial responsibility’. Vaile agreed that he had not asked any hard questions of anyone in his department, nor had he exercised any real ministerial oversight. Agius – a brilliant man – asked whether there was any reason why Vaile had continued to accept AWB’s word when there were so many allegations about corruption. Well, said Vaile, with a straight face, it was because AWB was ‘a highly respected major Australian corporation’. Agius wanted to know: ‘At what point did you, if you ever did, draw a line and decide you wouldn’t believe anymore what AWB told you?’ Well, not until well after he had received at least 15 separate warnings from his own officials and diplomats. Not, in fact, until after the Volcker report was released.

The following day, 11 April, it was Alexander Downer’s turn. The crowd outside the Cole inquiry was larger than for Vaile, because many more people loathe Downer and couldn’t care less about the leader of the National Party. Surveying the scene, it occurred to me that it was going to be very tough for the foreign minister just to get in the door. Photographers were shoulder to shoulder, lined up across the footpath, and there were police on horses. Traffic was at a virtual standstill. The public had spilled onto Market Street and into the Pitt Street Mall. The sound of horns, from cars stuck in traffic many blocks away, was everywhere. Now, Downer is many things, but not insane. He didn’t even try to approach the front door. Instead, he glided into the building aboard the


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monorail, alighting at a station that put him on the first floor, without having to see members of the public. Later, he would muse that he thought the trip – $3 – was a little expensive. Sadly for the gallery – in particular, for those people who attended on no other day and therefore missed being dazzled by his brilliance – Agius was labouring under a terrible cold – not just a stuffed nose, but a serious infection that would have kept anybody in bed, unless, of course, one had to attend to the important business of questioning the foreign minister about the kickback scandal. There were hundreds of media outside the inquiry, more again inside; the appearance of Downer was the lead story in every newspaper and on every news program. You could hear the pain in Agius: his head was like cottonwool, his nose stuffed, his eyes leaking, his ears aching, but he had to soldier on. ‘Thank you, minister,’ he said, as Downer took the stand and an oath. ‘Might we have your full name for the record, please?’ ‘Alexander John Gosse Downer,’ the minister replied. And so it began. Downer’s sad duty, like that of DFAT, was to plead ignorance. He had to convincingly argue that he didn’t really have a grip on things that were happening in Australia, or overseas, in the years leading up to the 2003 invasion. He had to admit that he, as foreign minister, didn’t know what was happening in Iraq, a country that by 2002 his leader, John Howard, was thinking of invading. He had to say he hadn’t seen, or couldn’t recall seeing, the top-secret diplomatic cables alleging that Australia’s wheat exporter, AWB, was corrupting the UN’s oil-for-food program for Iraq set up after the 1991 Gulf War, and that Iraq therefore had access to hard currency that it might use to build a weapons program. Agius seemed bewildered, saying: ‘And it was the Australian Government’s position, was it not, that Iraq should comply with sanctions and that there ought not to be a breach of those sanctions by anybody – not just Australian companies …?’


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‘Certainly. We very strongly held that view,’ said Downer. So, then, why exactly was there no investigation into whether AWB was breaching sanctions? Downer couldn’t explain. Now, it’s important to say that if Agius felt constrained by the terms of reference, it did not show. He asked precisely the questions that those people in the gallery wanted answered. He showed the foreign minister all the cables and warnings that both he and his department had seen over the years, and said: ‘Can you see the pattern? We have all read about it in the press. There is a complaint in January of 2000 … then in 2003 we have the US Wheat Associates’ complaint. We have the fact that the CPA has evidently identified that every contract under the Oil-for-Food Program after a particular point in time had a kickback of 10 per cent included in it – that is, had an inflated price of 10 per cent – and now, in October of 2003, there is another complaint that there were artificially high prices for wheat – Australian wheat. ‘It seems somewhat strange that nobody at DFAT ever put all of these things together and went to AWB and said, “Give us a firm breakdown of your pricing. Are you paying any money into bank accounts at the behest of the Iraqis? Is there any fat in this pricing that can’t be explained in commercial terms?” Do you understand why there might be disquiet that nobody has put those matters together?’ Downer fudged it. ‘Well, I understand that DFAT certainly had, during the life of the sanctions … had discussions with AWB Limited about this matter,’ he said. But, he said, these were ‘allegations, allegations often without – well, allegations without evidence were being made, including against AWB Limited in the United States, effectively allegations made by their most – well, their most enthusiastic competitor, if I could put it politely. So I think obviously people in the department would have taken that into account’. Agius: ‘But it does appear that nobody … did any more than accept denials from AWB?’


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Downer: ‘Well, with the greatest of respect, the department doesn’t have any legal authority to – and it is important to make this point: the department doesn’t have the legal authority to go into AWB Limited and access all of their files and information. ‘The only scope that would have been available to the department would be to refer the matter to the Federal Police, and to refer the matter to the Federal Police requires substantial evidence.’ Agius: ‘But long before referring the matter, or even considering referring the matter to the Federal Police, the department might have asked [AWB] for a breakdown of all of the additional charges …?’ Downer: ‘Well, I’m not sure of the exact detail of what information the department sought from AWB Limited, but they had a lot of contact with AWB Limited and they obviously were able to ask for information. I get the impression that AWB Limited wouldn’t have thrown a great deal of light on this question.’ In other words, AWB probably would have lied about it, so what would it matter if we had asked? In what must have seemed like a very long afternoon in the witness box, Downer also had to admit that yes, on the one hand, he, as foreign minister, had an interest in ensuring that Australian companies did not funnel money to Saddam Hussein’s regime, yet, on the other hand, he didn’t bother to set up any mechanism to ensure this didn’t happen. And worse, over and again, in three tense hours, Downer had to claim to be something he absolutely is not: an ignorant boss who pays no attention to detail and has no control over his staff. It must have been galling, but what choice did he have? His only other option was to say that the government knew about the giant wheat scandal, the $290 million funnelled to Saddam under the guise of trucking payments, and turned a blind eye to keep the wheat flowing and Nationals voters happy. All of the government’s witnesses insist this didn’t happen. He agreed that he’d heard allegations that AWB was engaged in


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corrupt business practices and may have been funnelling money to Saddam’s regime, but he said: ‘In my line of business, you hear allegations the whole time’. Downer was under strict instructions from his lawyers to behave in a serious and sober manner but he’s a natural wag and, at times, he forgot that this wasn’t a press briefing or parliamentary question time; this was a judicial hearing. His face broke into an impish grin when he was asked why he hadn’t taken the information in poor Bronte Moules’s cables seriously, saying: ‘I don’t read [cable] summaries unless I have a good deal of time, I’m stuck on a plane, I’ve run out of everything else to read’. It looked dreadful in the headlines. Asked about Captain Blake Puckett’s advice – that every contract contained a kickback of between 10 and 19 per cent – Downer revealed himself a snob. ‘This was information provided by a captain in the US Army,’ he said. ‘A junior officer in the US Army’ [emphasis added]. Never mind that Captain Puckett’s advice was also dead right. Late in the afternoon, lawyers for AWB’s executives announced their desire to cross-examine Downer. It seemed to many people in the press that Cole wasn’t happy about it. Here is an example of the exchange that took place between Cole and Terry Forrest. Cole: ‘Do you have any questions, Mr Forrest?’ Forrest: ‘I do, sir.’ Cole: ‘In relation to what?’ Forrest: ‘I would like to examine the minister in relation to a number of the cables, only within the period of before March 2003. I want to go to the first cable of Bronte Moules, 13 January …’. Cole: ‘Mr Agius has covered that.’ Forrest persisted. Cole remained unimpressed. Forrest pressed the point, saying he would hardly need 20 minutes. Finally, Cole said: ‘I’ll allow half an hour.’


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Forrest: ‘Half an hour?’ Cole: ‘You said 20 minutes to start with – 15 minutes, then 20, and then a maximum of half an hour. So I’ll hold you to it.’ Forrest: ‘I’ll try to beat that.’ As it turned out, those 30 minutes were among the most revealing of the whole nine months of the inquiry. Forrest asked Downer about the cables. Weren’t they all important? ‘They’re not all important. You obviously haven’t been through the DFAT cable system,’ Downer joshed. But Forrest wasn’t joking. ‘I think you accepted that Bronte Moules’s cable contained – perhaps with a slight advantage of hindsight – some very important things?’ he persisted. Downer: ‘It contained some allegations. I’ve re-read the cable obviously, in recent times. It contains an allegation’ [emphasis added]. ‘And the allegation is, as Mr Agius observed, an allegation of sanctions breaching, not just by Australia but by Iraq as well?’ Downer: ‘Yes.’ Forrest: ‘Yes. And there are serious consequences if the sums involved are very substantial – in that sense, it gives the Hussein regime access to moneys that the world community does not want him to have access to?’ Downer: ‘Yes.’ Well, finally, something of an admission from Downer that this was no small matter. Forrest asked about intelligence, which suggested that spies knew that Iraq was breaching sanctions. Downer rebuffed him. ‘There is so much intelligence. You have to establish whether the intelligence is potentially accurate, whether the intelligence isn’t, whether it’s relevant, whether it isn’t. It’s a very major challenge to deal with intelligence.’ So intelligence – it costs around $1 billion a year to collect – is routinely ignored by the Howard government? Forrest was amused.


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‘What’s the point in sending your department a piece of unassessed intelligence if no-one is going to read it?’ he wanted to know. ‘They read a lot of it – of intelligence. They don’t read all of it. It’s simply physically impossible for them to read all of it.’ Forrest also wanted to know: ‘Is there a single criticism that you would make of [DFAT] during that entire period?’ ‘A general criticism?’ said Downer. ‘Yes.’ ‘Of any kind?’ ‘Relating to their performance and discharge of their duties in relation to the Iraq sanctions?’ Well, no, there was not. ‘I think they fulfilled their duty,’ said Downer. ‘I have faith in their professionalism and their commitment. I think they strongly believed in the sanctions regime.’ Forrest seemed perplexed: ‘Have you read the evidence of Mr Bowker, who made inquiries of a Mr McConville … about the allegations?’ Downer: ‘I’m familiar with it.’ Forrest: ‘The evidence, as I understand it, is that the inquiry extended to reading to him or conveying to him the contents of the Moules cable and receiving a response, “This is bullshit” … Do you regard that as satisfactory conduct?’ But, before Downer could answer, Agius leapt to his feet, in what must be described as an attempt to shield the foreign minister from the question, saying that ‘the problem with all of this examination is … that all through this time AWB was denying that it had done anything wrong’. Agius said: ‘It sets the bar too high to say and to suggest … the Commonwealth ought to have rejected the denial, and now be criticised for not conducting a different inquiry.’ It was the clearest indication of the argument Agius would finally make, when he prepared his final submission for Cole: he was going to


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say that the Howard government did not know – and did very little to find out – what AWB was doing. James Judd, who was there, as ever, as an advocate for AWB, leapt to his feet: ‘On behalf of AWB, that is rejected as a proposition,’ he said, somewhat hotly. ‘Had specific questions been asked, there may have been specific answers,’ Judd said. ‘It’s not right, in our submission, to draw, as our friend does, the conclusion that, had the questions been asked, nothing would have been said to enlighten the questioner. That is unfair and wrong.’ Then Cole himself interjected, saying: ‘I had thought, maybe wrongly, that up until at least 4 October 2005 and possibly later, AWB maintained that it had done nothing wrong.’ ‘It did make general denials of wrongdoing, but if one looks carefully …’ said Judd. ‘Not just general denials, specific denials,’ said Cole. Agius stepped back in, again to essentially argue the government’s position: ‘It’s ridiculous to suggest that AWB was in the same position as the government. I’m not here to defend the government,’ he said, to some twittering from the gallery, ‘but I’m certainly not going to sit here and hear misrepresentations put as submissions. ‘AWB was denying that it had done anything wrong right up until at least October … To suggest that … it would have suddenly decided to tell the truth is preposterous, in my submission.’ Then Cole again: ‘In any event, we’ve had enough of that. That can be the subject of submissions in due course. Your question is rejected, Mr Forrest.’ ‘It was so long ago, Mr Commissioner, I don’t have a particular recall,’ said Forrest, cheerfully. ‘I think you’ve run out of time as well,’ said Cole. ‘I’m indebted to you,’ said Forrest, before smiling, bowing and happily resuming his seat.


12/4/07 10:50:22 AM

CHAPTER 32

On 13 April 2006 – the day before Good Friday and the long Easter break – John Howard became the first prime minister in 23 years to give evidence at a judicial inquiry. The timing was fortuitous. Howard’s appearance came just as the news cycle was winding down for Easter. The public was focused on the extra long weekend. Many people were already on the road, heading for the beach, when Howard took the stand. The Australian would have to wait a day before it could report on the event because it did not publish on Good Friday. Cynics wondered whether it was good planning more than good luck but, in truth, Howard probably wanted to appear before Cole and to have his evidence taken seriously. He wanted to return to parliament after the Easter break in May and trumpet that the Cole inquiry was so fiercely independent that even he, who held the nation’s highest political office, was called to appear. He would be able to repeat what had become his mantra: that no stone was left unturned; no witness went unexamined; and the process was entirely open and transparent. Cole was likewise keen to establish transparency. He takes his reputation seriously: he didn’t like the criticism of his inquiry that had been appearing in the media. Calling Howard to give evidence was a way of demonstrating even-handedness. As with Downer’s appearance, the streets outside 55 Market Street filled with photographers and cameramen before dawn broke. It seemed that every photographer in Sydney – including sports and wedding photographers – had been employed to take pictures of this historic moment. The air was thick with fluffy microphones. A small number of


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protestors turned up, mostly to make noise about the Iraq war. Police buzzed around, in cars and on horseback, trying to at least keep the entrance to the building clear. Journalists who had been covering the inquiry since the opening day were able to reserve their seats before they were over-run by reporters from interstate. We were pleased: we had suffered through long, tedious days of interminable legal argument, sometimes scratching around for just one useable paragraph (or ‘grab’) of information to put in the papers the next day. We had spent many afternoons reading each other’s newspapers cover to cover; fetching coffee; filling in crossword puzzles. In between, there had been great stories, even great scoops – the Sydney Morning Herald’s Flugge pictures; the ABC’s interview with Felicity Johnston of the UN; Nick Grimm’s revealing chat with Othman al-Absi; Michael Gawenda’s scoop from DC on the aborted Senator Coleman investigation – and we had written thousands and thousands of words, in news stories, features, commentary and columns, trying to drive home the point that this story, although complicated, was important. Now came the moment we dared not dream about: the Prime Minister was on the way. It wasn’t that we hoped to see him crucified. Very few dispassionate observers believed that Howard had told AWB to funnel money to Saddam’s regime. It was simply that journalists love news, and the Prime Minister in the witness stand, under oath – well, that was news. For the first time since the inquiry began, we were not allowed to wander at leisure into the hearing room. We were held back in the small area where the lift doors opened and closed, while security chiefs put up ropes and tables to check our bags. Two glorious golden retrievers were led through on leashes, to happily sniff at briefcases and laptops, and wag their tails. Most of the senior political correspondents, including the Australian’s Steve Lewis and the specialist writer Matt Price, and the Age doyen Michelle Grattan, had flown to Sydney for the event. The radio host Mike Carlton sat on the window sill. So, too, did Bob Ellis, and the multi-


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award winner, Russell Skelton, and Paul Bongiorno. Female reporters wore their best, darkest skirts. Men kept on their jackets and ties. In the interests of democracy, there would have to be space kept aside for the public, too. Every seat was full. Lawyers came into the room, pushing racks of lever-arch folders on trolleys with wheels, and carrying briefcases with heavy combination locks. There were too few seats for them, too. They were knee to knee at their own curved table. There were arguments at the door, as more and more people tried to squeeze in. Sheila Butler and Rick Willis were sympathetic but firm: they would have to take a seat in the ante-room, where there would be video and audio. Already, the temperature inside was rising. People felt crushed. Howard strode confidently past the cameras, cruised up to the fifth floor – only to find himself early. Everybody else was seated. His space was in the witness box but he could not sit there, not before Cole had arrived and he was formally called as a witness. So he stood, a little awkwardly, by the door, until Cole swept in. Everybody stood and bowed respectfully. Cole bowed back and took his seat under the now-familiar coat of arms. It was a truly astounding moment: here was Cole, appointed by Howard to be head of an inquiry that had been created by Howard, with the rules and the terms of reference and the timetable drawn up by Howard, looking down at Howard, a man he had known practically all his life, who was taking his seat and preparing to take an oath. David Marr, writing in the Sydney Morning Herald, captured the moment perfectly. He noted that more than 30 witnesses had, upon entering the witness box, faced the same levelling question from Agius: ‘May we have your full name for the record?’ ‘It’s only a little thing, but Agius spared the Prime Minister this formal humiliation,’ wrote Marr. ‘He asked: “Your full name is John Winston Howard?” It was.’ Howard told the inquiry that yes, his government had long been interested in whether Iraq had managed to ‘manipulate the system’ and rort the oil-for-food program.


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‘It was public knowledge that Iraq was rorting the oil-for-food program,’ Howard explained. Indeed, in a speech to the National Press Club in Canberra on 13 March 2003 – that is, just days before the bombing of Baghdad began – Howard told reporters that Saddam’s regime was ‘cruelly and cynically manipulating the UN oil-for-food program. He’s rorted it to buy weapons at the expense of his people’. Agius – normally so terrifying – politely asked Howard where that information had come from, if not from Bronte Moules’s cables? Howard said his speech had been based on ‘open-source’ intelligence. In other words, he read it in the newspapers, or saw it on TV. ‘Well, in that connection, did you ever have any suspicion that any Australian company, including AWB, one of the largest exporters to Iraq, might have been involved in that rorting?’ Howard: ‘No, I didn’t.’ Agius: ‘Are you able to say why it was that you never had any such suspicion?’ Howard: ‘Well, because I’d never been presented with any hard evidence. And I had always believed the best of that company [AWB]. It had been associated with the Australian wheat industry since the 1930s, and it hadn’t crossed my mind that it would have behaved corruptly.’ Had Howard been a witness for AWB, Agius would, at this point, have mauled him. He would have leaned on the pile of level-arch files on his lectern, looked over his glasses, and said something like: ‘Are you a complete fool, Mr Howard?’ But Agius’s next words were: ‘Thank you. That’s the examination of the Prime Minister, Mr Commissioner.’ Marr, sitting thoughtfully throughout, was among those who were critical. ‘Agius worked him [Howard] very, very gently. There were jokes and chuckles from the commissioner, Terence Cole QC. The failings of the Prime Minister were revealed, but only in sketch. Agius pulled back from


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the forensic exploration that makes him such a formidable advocate. Instead of growling, he purred.’ The game Terry Forrest QC would have to take up the slack. He put up his hand to cross-examine the Prime Minister, but Cole appeared to have already decided it was not going to happen. Forrest tried to protest but Cole shut him down. Instead, he turned to Howard and – after just 48 minutes – he brought the examination of the Member for Bennelong to an end, saying: ‘Thank you, Prime Minister. You are excused’.

While Howard’s appearance in the witness box would have made an excellent final day of the inquiry, it was not to be. After Easter, the inquiry resumed so that Agius could call more witnesses. Not everybody agreed with the list of people he decided to call: why, for example, didn’t he take testimony from one of the only Australians who went to Baghdad after the war, Colonel Mike Kelly, who had told DFAT that AWB was ‘up to its eyeballs’ in the corruption? Why did he settle for a statement from both Kelly and the Iraq-based diplomat Heidi Venamore, who were in fierce disagreement over who said what to whom about the kickbacks? In his statement, Colonel Kelly, the army lawyer, reminded the inquiry he told the Howard government ‘the jig is up’ on AWB because it was obvious to anyone that the wheat exporter was up to its neck in the corruption. In her statement, Venamore admitted that she ignored the advice and the emails from Colonel Kelly because he ‘was expressing a personal opinion’. This was surely a matter to be explored – but perhaps not by this inquiry, since it was focused mainly on whether UN sanctions had been breached and, of course, by 2004, the sanctions regime had been dismantled. Debate about the terms of reference had continued during the Easter break. There seemed to be consensus, at least among a group of


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senior lawyers and academics, that Cole’s hands were tied by the terms of reference. They wrote to the Attorney-General Philip Ruddock imploring him to ask the Prime Minister to empower the Commissioner to ‘determine possible unlawful conduct by the Australian Government’. Among the signatories were emeritus professor A.R. Blackshield of Macquarie University; professor David Kinley, chair of human rights law at the University of Sydney Law School; and barrister Phillip Boulten SC. Most of the signatures were collected by Ben Saul, of the University of New South Wales. ‘Cole has been taking evidence, but he is not looking for evidence of wrongdoing,’ Dr Saul said, in an interview with the Australian, published the day that Howard appeared. ‘The inquiry should go the whole way. It should be a full scrutiny of Australia’s role.’ But lawyers were not the only people dismayed by the inquiry. During the Easter break, Vaile had travelled to the West Australian wheat town of Cunderdin, to address 550 of the sunburnt, weary wheat farmers. Throughout the Cole inquiry, AWB had maintained the support of the vast majority of growers. Many couldn’t understand what on earth the fuss was about. They thought AWB had simply done whatever was necessary to sell their wheat at a good price; and if AWB hadn’t done it, somebody else would have done it. Paige Taylor, reporting in the Australian, noted a ‘spirited and angry’ display at Cunderdin. Farmers sat with arms folded and faces grim. One placard, depicting a rifle, said: ‘Single desk not for sale at any cost’. Another said: ‘Gutless Howard Sells Out Farmers. AWB Cole inquiry a farce. Yanks just want our markets. Wake up! Howard and Vaile!’ The farmers passed a motion of support of AWB. Farmer Robert Peacock from Quairading, 160 kilometres east of Perth, told the Australian: ‘We’ve had enough of this free market bullshit. Nobody else in Australia works in a free market. When you do business with someone like Saddam, you do business the way he tells you … you’re talking about someone who puts his family in a shredder’.


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There was at least one more important witness to come, however. Felicity Johnston of the UN had already given her side of the story in an exclusive scoop to Jonathon Holmes of the ABC’s Four Corners. Holmes got the interview with Johnston long before the British Foreign Office had released her to testify before Cole. But that permission had since been granted. Johnston was asked whether she wanted to fly to Australia to appear in the witness box in person; she did not so the Cole inquiry organised a special video link. She would give her evidence from Washington DC, in the company of two lawyers on Friday 12 May. In a scratchy, jumpy, sometimes inaudible video link, Johnston told the inquiry she did not pursue claims of corruption against AWB because she feared a diplomatic incident. Asked to expand on this, she made the point that AWB – unlike some of the dodgy Syrian oil-brokers – was a wellestablished, Western company, and so it was treated with respect by staff at the UN’s Office of the Iraq Program in New York, who did not suspect malfeasance. She agreed that AWB was seen as a ‘very reputable company’ and she would not have believed AWB would ‘behave in a manner that deliberately flouted sanctions’. Johnston agreed that she should have spotted the clause in the first four contracts from 1999 that included the $12 fee but said she was new to the game at that point, and had very little training. She clearly remembered that Canada had complained in 1999 that it was missing out on wheat contracts because it refused to make illegal payments to the regime of Saddam Hussein. She had a little spat with Bronte Moules over whether she had described the kickbacks as ‘transport payments’ or not. She was clearly quite upset – bewildered, in fact – that Australia never took her complaints seriously.


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CHAPTER 33

The debate over Cole’s terms of reference raged into June and July, but another dispute was simmering, too. In April 2006, AWB’s lawyers had gone to the Federal Court to prevent Cole examining more than 900 documents that James Judd QC argued were private communications between lawyer and client, and therefore covered by the doctrine of legal professional privilege. On 18 September 2006, Justice Neil Young – an ever-smiling, Icelandic-speaker who studied at Harvard and is obsessed with the Essendon Football Club – ruled on the matter. In the process, he entirely blew the wind out of Cole’s sails. Justice Young said some of AWB’s deals with Iraq were obviously ‘improper’ and ‘dishonest’ and he said evidence established that at least one of AWB’s transactions – the Tigris transaction – was ‘deliberately and dishonestly structured’ to ‘work a trickery on the United Nations’. He said AWB had, until January 2006, been ‘openly claiming that its legal advice showed there had been no evidence’ of corruption. ‘AWB made those claims to advance its commercial interests,’ Justice Young said. But Justice Young said ‘communications between a lawyer and a client which facilitate a crime or fraud are not protected by legal professional privilege. This principle extends to trickery and shams’. The verdict, it seemed, was in: AWB had funnelled money to Saddam’s regime, and the Howard government had been duped. AWB seemed to have accepted this, too. It had shed most of the staff that had been in any way connected to the era of the kickbacks: Emons,


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Hogan, Watson and Flugge were long-gone; Lindberg, Stott, Long, Geary, Whitwell, Cooper and others soon followed. The company had a new chairman – Ian Donges – and a new managing director – Gordon Davis. It also had a new share price: around $2.50 in October 2006, down from a high of $6.40 in January 2006. The damage to the share price was partly due to Cole’s inquiry and uncertainly over AWB’s future but there was also a drought (Australian farmers would produce a five-million-tonne export harvest in 2006, compared with 16 million tonnes in 2005). Competitors – including the West Australian co-operative bulk handlers CBH and Americans such as Cargill – were circling, eyeing the prized single desk for wheat exports. Liberal backbenchers were urging the Howard government to scrap the single desk; the National Party was threatening mutiny. AWB must be forgiven for thinking: come on, Terence Cole, get it over with already. Just do your worst. And so he did.


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CHAPTER 34

The final public hearing of the Cole inquiry was held on 29 September 2006, and it ended as it began, with appearances by two of the star witnesses, Trevor Flugge and Andrew Lindberg. Agius – still with his snowy hair and his folders under his arm – settled himself into position over his lever-arch binders and ran through events one more time. David Marr, writing for the Sydney Morning Herald, again captured it perfectly. ‘With his memory now completely shot, the former AWB chairman endured two hours of cross-examination without a trace of embarrassment,’ Marr wrote. ‘“I do not remember … I don’t have a recollection … I’ve looked at that evidence and it doesn’t bring back any particular memories … I couldn’t be sure it didn’t happen … all I can say … I’m trying in a very open and honest way to suggest … I have searched my records and don’t have that recollection.” ‘Lawyers sat in silent awe. This was a witness!’ As Marr noted, Flugge was no longer the man he was when he first appeared before Cole. He still had the AO in his buttonhole but he was no longer chairman of Australian Wool Services; no longer on the boards of Automotive Holdings Group, ZBB Energy Corporation and Wesfarmers. But spare time hadn’t helped his condition. ‘You have no improved recollection?’ asked Agius. ‘Improved?’ asked Flugge. ‘To what extent?’ As Marr reported: ‘Amnesia has not totally shut down the mind


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that privatised the old Wheat Board and chaired … AWB for a few years. Imprinted early and not forgotten is the knowledge that he knows nothing that implicates him in any way in the kickback scandal that began on his watch’. Shortly after I read this account of proceedings, I picked up the telephone and called Trevor Flugge. I was, I admit, a little nervous about doing it. Very early in the scandal, I had received a letter from his lawyers, warning me that he did not want to speak to me. Our own lawyers at News Ltd told me that if I called Flugge too often, or tried to track him down at airports or at home, he could very easily take out an AVO, or apprehended violence order, against me, which would prevent me from covering the Cole inquiry while he was in the stand. I didn’t want to risk it so, for months, I stayed away from him. My hands shook a little as I pressed the numbers. ‘Hello,’ I said. ‘Mr Flugge?’ ‘Who is this?’ he replied. ‘It’s Caroline Overington, from the Australian.’ ‘Caroline Overington,’ he sighed. ‘And what might you want?’ I told him I wanted to talk about his evidence. He said it wasn’t allowed. ‘I’m not going to perjure myself,’ he said. ‘And I’ve got nothing to say to you.’ In fact, we talked for 20 minutes after that. Flugge is a gregarious fellow. He likes to talk to people, especially about wheat. He was aware that an adverse finding was soon to be made against him; the Federal Police would, in January 2007, re-examine the evidence to ascertain whether criminal charges should be laid. Off the record, sources had told me that he was absolutely terrified of going to prison. On the record, Flugge told me that he had not done anything wrong. In the course of the gently warming conversation, I asked him what he was doing with his time, now that he no longer had any board positions


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or any role with the government. He sounded like a man who had fought hard to hang on to his old life, lost it anyway, and then, to his complete surprise, discovered that it was the best thing that ever happened to him. ‘My public life is obviously over,’ he said. ‘And I can’t honestly say that I miss it.’ He still had a large farming property in Western Australia and his family had a restaurant in Busselton, ‘and yes, it’s called the Goose, and no, I’m not a goose, and yes, I’ve heard all the jokes’. I asked if he missed being chairman of a massive agribusiness. He snorted. ‘People think the wheat trade is glamorous,’ he said. ‘I can assure you, it’s not glamorous. Iraq is a shit-hole, obviously, but the people are very sophisticated, very intelligent. But no, I don’t miss it.’ ‘Oh, come on,’ I chided him. ‘What about the first-class travel? The meetings with the Prime Minister?’ What about being showered with gifts, such as the carpet presented to him by the Iraqis during one of his visits? He paused. ‘The carpet?’ he asked. ‘Do you mean the carpet I got from the Iraqis last time we were there? Let me tell you something. That carpet was a mat. I never got a chance to tell the inquiry this, but it was a mat with a picture of a mosque on it, with some staircase on the side, going up to heaven. It was made by the Iraqi State Company for Carpets or something, and I tell you, if I’d known how much trouble I’d get into for accepting that mat, I would have told them to keep it.’ What became of it? ‘Oh, I think it’s in the shed out back,’ he said. ‘I tried to sell it at a garage sale a few years back and I couldn’t get anyone to buy it.’

Trevor Flugge did not have the final word, however. Agius kept Andrew Lindberg for last. In the final minutes of the final day, Agius once again set out the facts


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as he now understood them: AWB had funnelled money to Saddam, and surely that was known to be a breach of sanctions? Lindberg sighed heavily and said, yes, obviously, he understood one of the reasons UN sanctions had been in place against Iraq was to stop Saddam’s regime getting hold of foreign currency to buy weapons. ‘But there was no policy in place at AWB to ensure that what was occurring was appropriate, was there?’ Agius asked. Lindberg replied: ‘I think there was a policy and the policy has always been that we abide by laws, rules and regulations and ethical behaviour.’ Agius: ‘I suggest to you that the policy that was in place was a policy of doing whatever it took to get the business done?’ Lindberg: ‘I disagree.’ Agius shuffled some papers, looked up and said: ‘That completes my examination of Mr Lindberg.’ But Cole was not finished. He looked down at the former chief executive – a huge man with a sad, red face and white hair – and said: ‘Mr Lindberg, it does appear that large amounts of money did go from AWB to Iraq through Alia. ‘You’ve said to me that it happened and it shouldn’t have happened. It’s obviously been a disaster for AWB and no doubt for you personally. Are you able to give me any understanding as to how you think this came about, how it happened in a company like AWB?’ It was a gesture of some kindness, and Lindberg saw that. ‘It would appear that it was set up before I arrived by former employees,’ he agreed. ‘It continued under my stewardship and it shouldn’t have.’ ‘Yes,’ said Cole. ‘Thank you.’ Unexpectedly, Lindberg’s face tipped forwards. He was in tears, in the witness box. His wife, Leigh, who had been sitting in the public gallery, rushed to comfort him. Cole, sitting up on the bench before him, looked down and quietly said: ‘I think we’ll just adjourn for a moment.’ And with that, the inquiry was all but done.


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CHAPTER 35

Shortly after 2 pm on 24 November 2006, Commissioner Terence Cole stepped out of a car and onto the driveway of Admiralty House in Sydney. In his hands, he had five tan-coloured volumes, each with a photograph of wheat waving in the sun on the cover. It was the Cole report. You could see the strain – and the relief – on Cole’s face as he handed the pile to the Governor-General, Michael Jeffery. The Howard government kept the report to itself for some days before finally tabling the report in parliament the following Monday. By then, of course, most of the details had leaked onto the front page of the Australian. Cole had cleared Howard, Vaile, Downer and all of DFAT. But he found that 11 former executives of wheat exporter AWB and Norman Davidson Kelly, of Tigris – a ‘dirty dozen’ – may have broken Australian laws. His 2065-page report said former AWB chairman Trevor Flugge; former executives Mark Emons, Peter Geary, Dominic Hogan, Paul Ingleby, Michael Long, Nigel Officer, Murray Rogers, Charles Stott and Michael Watson; and AWB lawyer Jim Cooper may have broken domestic law. Not a single government official, bureaucrat or minister came in for criticism. Cole did not let the government entirely off the hook, however. He said the Department of Foreign Affairs and Trade did not have in place ‘any systems or procedures in relation to how its staff should proceed’ when allegations of corruption were made.


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‘No specific officer was given responsibility’ for responding to allegations of corruption. Therefore, when allegations were made against AWB, nobody had any idea what to do. ‘It does not appear that there was in place any protocol … for referring matters to other agencies, such as the Australian Federal Police,’ said Cole. He noted that DFAT had done ‘very little in relation to the allegations [of corruption] it received over the years’ and that ‘DFAT’s response to the information and allegations was limited to seeking AWB’s assurance that it was doing nothing wrong’. But he said there was ‘no direct evidence that DFAT obtained’ knowledge about the kickbacks, from AWB or other sources. Of Dr Bowker, he said he had ‘conducted no independent inquiries. He did not endeavour to ascertain whether DFAT or the Australian intelligence communities held any relevant intelligence’. But Cole said DFAT’s lack of action was ‘explicable’ for a number of reasons: it regarded AWB as a ‘company of the utmost integrity’ and it saw its role as ‘supporting Australian economic interests and Australian companies’. He said it was ‘difficult, if not impossible, to see what possible motive DFAT would have for turning a blind eye, or how DFAT could conceivably see that turning a blind eye would advance either AWB’s or Australia’s interests’. Journalist wanted to know if this meant the Howard government could have done more to uncover the scandal. But Prime Minister Howard dismissed the idea. ‘I don’t believe when you are dealing with people who behave like this it is right to say that we should have done more,’ he said. ‘We didn’t have anything to hide and the commissioner has found that there was no wrongdoing on the part of any of my ministers.’ Foreign Minister Alexander Downer also rejected suggestions he should have acted earlier. He said AWB had practised a ‘deliberate policy of deceit’, hiding key information from the government and the UN.


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In a statement that sounded like it might have been crafted by President Bush or by the White House poet, Donald Rumsfeld, Downer said: ‘What you don’t know, you don’t know – and you can’t get to the heart of what you don’t know’. The then Opposition leader Kim Beazley – just weeks from being replaced by Kevin Rudd – was appalled, saying: ‘This is the Government defence. They’re incompetent, not criminal’. There had been a dereliction of duty – obviously – but that was not a crime. There were some surprises in the report. Dominic Hogan, who was the only AWB executive who ever tried to tell his bosses at AWB about the Iraq kickbacks, found himself facing possible criminal charges – and perhaps a jail term – for coming clean to the Cole inquiry. His lawyer, Jim Kennan, said Hogan was too distraught to speak, but read a statement down the phone. ‘I was the only employee who both raised concerns about the Iraqi fee in writing and verbally with management,’ Hogan said. ‘I was told to get on with my job.’ Cole accepted this evidence, saying: ‘Ultimately, he felt obliged to resign due to the ill health caused by the pressure of acting improperly’. He also said Hogan had ‘voluntarily and willingly assisted the inquiry by providing a great deal of information which was of assistance, and which, on one view, was against his interest’. But he suggested that Hogan nevertheless might have committed offences under sections 29D, 29A and 29B of the Crimes Act and the Criminal Code, and under the Corporations Act 2001. Hogan – a stay-at-home dad to two little girls – was distraught at the findings, saying he did not accept ‘that I was engaged in any wrongdoing at any time. I’ve always been a conscientious person … I told the truth about the situation both to management in 2001 and to the inquiry in 2006’. He had gone along to the inquiry, up to the neck in anti-depressants, only for this to happen.


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On the other hand, there was Andrew Lindberg. He was the man who wept in the witness box, who was ridiculed for using the term ‘I don’t recall’ more than 250 times and who had to give up a job that paid him $6 million. Then, suddenly, stunningly, with the release of the Cole report, his nightmare was over. Lindberg was described in the final report as ‘a witness of truth’. Cole said Lindberg had relied on his employees and on legal advice, and had a right to do so. ‘Mr Lindberg is not a lawyer,’ he said. ‘Mr Lindberg was not wellserved by some of those who reported to him, and on whom he relied. I wish to make it clear that on the material before me, he has not been guilty of any criminal conduct.’ Instead of years of legal turmoil, Lindberg would walk free. The relief was obvious as Lindberg faced the media the day after the report was released, using what was likely to be his last moment in the hot spotlight of fame to say he did not believe anybody at AWB was evil – they simply made mistakes. ‘Mistakes were made, misjudgments were made, but I don’t believe they did it with any evil intent,’ Lindberg said, before his wife chased the media off the lawn. Lindberg’s lawyer, the jubilant Duncan Allen, was more forthcoming, reminding reporters that Lindberg had suffered through a horrific year. He noted that Cole had ‘taken an unusual step, if I may say so, and made a positive finding in relation to Mr Lindberg’. Cole did indeed praise Lindberg for ‘having accepted corporate responsibility’. But in a bold move, Cole all but recommended AWB be stripped of its monopoly over wheat exports. ‘It is not my function to comment on the grant of monopoly power,’ he said, in the prologue to his report. ‘I do not do so.’ But, he said, ‘in my report, I describe the conduct of AWB in its


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dealings with Iraq. It is for others to determine whether, as a matter of public policy, it is appropriate for the law to require persons to deal with a group that behaved in the manner I describe’. AWB tried hard to save itself. In a press conference at the Telstra Dome in Melbourne, new managing director Gordon Davis said AWB regretted its involvement in the Iraq kickbacks scandal and the damage it had done to the company and Australia’s international reputation. Chairman Brendan Stewart said AWB had been ‘shattered’ by the events and reminded reporters that the vast majority of AWB’s 2800 employees had nothing to do with the scandal, but they had seen their company ‘embarrassed and humiliated’ in the media, ‘day in and day out’. ‘It has been a very long and painful process for all involved,’ he said. ‘The board ultimately accepts responsibility for what happened. What has occurred in the past cannot be changed, but we will learn from the past.’ Stewart also announced a plan to ‘de-merge’ AWB, or split the company into two separate entities: a grower-owned single-desk manager, to be known as AWB (International), and a commercial agribusiness, known as AWB Ltd. This, he hoped, would save the single desk. But Prime Minister Howard appeared determined to strip AWB of its monopoly over wheat exports. ‘The world cannot remain the same as a result of the Cole inquiry,’ Howard told reporters. A few days later, he put his new agriculture minister, Peter McGauran, in charge of the precious veto. On 4 December, Samantha Maiden in the Australian reported that AWB would be stripped of the single desk, and that new players – in particular, the co-operative bulk handler CBH in Western Australia – would be allowed to export wheat. It was the end of an era. Some farmers, particularly in Western Australia, celebrated. For the time being at least, they would not have to deal with AWB. They could sell their wheat to anybody, for any price, not at the price they were told to accept. If they were smart and sensible,


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and had a good crop as a result, they could demand a premium. They campaigned anew for an end to the outdated, corrupt monopoly. For other farmers, especially those on smaller parcels of land, who adored AWB, because it always took their wheat and helped them sell to large clients in foreign-speaking markets, it was a painful, frightening blow.


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CHAPTER 36

A couple of days after the Cole report was released, the Australian’s foreign editor, Greg Sheridan, wrote a cheeky piece for the opinion pages, titled: ‘AWB is no scandal’. Sheridan began by saying: ‘WHAT a load of nonsense this whole non-scandal about AWB is’. He said the Howard government had made just one mistake: ‘Setting up the Cole inquiry’. Sheridan, who is conservative, humble, friendly and fine, had me in fits, saying the kickbacks were a ‘minor matter’ that became ‘conflated into the greatest scandal in human history’. ‘Let’s get a few basic facts clear,’ he said. ‘… 2250 companies from 66 countries paid commissions to Saddam Hussein’s government. ‘Not one other country of the 66 named has set up a full, open, judicial inquiry. ‘At one level, as The Wall Street Journal editorial page has pointed out, this reflects well on the Howard Government.’ Sheridan argued that the UN set up the oil-for-food program ‘in the full knowledge that the Iraqi government would cream off some money’. He also said: ‘If we didn’t sell the wheat someone else would, therefore our wheat farmers might as well participate in the market as anyone else. This was an entirely pragmatic, sensible approach, utterly characteristic of the Australian people and not remotely anything to be ashamed of’. Now, it must be said that, while I disagree with Sheridan, a great many people think he’s right on the money.


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Countless times while I was covering the story, people said to me: what’s the problem here? Kickbacks to Saddam? Big deal! It’s ethically dodgy, certainly unsavoury – but kickbacks are part of the trade in the Middle East. You cannot do business there without paying kickbacks. Bribes, payola, graft, baksheesh, kickbacks or shakedowns – whatever you call it – are simply an unofficial tax. Corruption provides the grease to keep the wheels of commerce turning. To which I say: exactly. That’s precisely the point. The cogs in Iraq’s economic machinery weren’t supposed to be turning. The economy wasn’t supposed to be booming. The UN sanctions – endorsed by the Coalition and Labor in Australia – were designed to bring the Iraqi economy to a halt … and to bring Saddam to his knees. AWB should not have funnelled money to Iraq, not even to secure the sale of all the wheat on the grand plains of Western Australia. AWB’s Gordon Davis conceded this when he told the post-report press conference: ‘It’s not how business is done. You have to do business within the law’. His predecessor, Andrew Lindberg, says the same: ‘Mistakes were made’. There is no doubt that the journalists covering the Cole inquiry made mistakes, too. The Australian published a story in the days after the Volcker report was first released, claiming that AWB had helped set up Alia and may in fact have been profiting from the kickbacks. The information was entirely wrong. Twice during the public hearings, I had to ask the editor of the Australian to run a correction because I published information that was not true. Once I got the date of an email wrong (no small matter, because it involved the Prime Minister); another time, I put Mark Vaile at a meeting he never attended. I got a few other things wrong, too, and I hated knowing that I had damaged the reputation of the newspaper by stuffing it up. AWB’s Peter McBride, good-natured until the end, told me that he kept a ‘fuck up’ file of my errors, which he promised to give me one day when he ‘can find a box big enough to stuff it in’. McBride said he could hardly believe some of the things that got


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into print: he objected most vehemently to the idea that two witnesses – Hogan and Emons – were ‘whistleblowers’. ‘They are rollovers, Caroline,’ he would say to me, patiently, day after day. ‘You are making out like these guys are heroes because they’ve gone to the Cole inquiry and said, yep, we set this up.’ I had to let him win the point. I also accepted, over time, McBride’s argument that ‘99.9 per cent of people at AWB knew nothing about this, had nothing to do with it, and how do you think they feel, when you keep going on about the corrupt culture, the culture of evil bastards, at the company they work for?’ So yes, mistakes were made, by AWB and by the media. But mistakes were made by the government, too, and one of the most galling aspects of the wash-up to the Cole inquiry was the bloody-minded unwillingness of any Howard government officials to take responsibility for what journalist Matt Price had presciently described as a ‘cock-up, not a conspiracy’. Throughout the year of the Cole inquiry, an indignant Alexander Downer radiated the clear impression that he regarded as outrageous the suggestion that he might owe the Australian public a proper explanation of his role and, perhaps, incredibly, an apology. But on some level, Downer surely knows that he shares the blame. He did not treat the allegations surrounding AWB with the seriousness they deserved, and that’s unforgivable because the lives of Australian troops were on the line. Why didn’t he take them seriously? In interviews and press conferences throughout 2006, Downer said he didn’t act on allegations because he simply didn’t believe AWB would do anything so morally corrupt, so blindingly, obviously wrong, as fund the Iraqi regime to the tune of $290 million just as Australian troops were heading to Baghdad to topple the dictator. But in June 2003 – to use just one example – Downer received a top-secret cable from his own staff in newly liberated Baghdad that said:


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‘Every contract [signed under the UN’s oil-for-food program] included a kickback to the regime’. How many ways are there, really, to read a sentence like that? It doesn’t say that ‘some contracts’ contained a kickback to the regime, or that ‘most contracts’ or even ‘all contracts except Australia’s wheat contracts’ contained a kickback to the regime. It says ‘every contract’ contained a kickback to the regime. Yet Downer insisted in the witness box that he did not know Australia’s wheat contracts with Iraq contained kickbacks to Saddam Hussein’s regime. If Downer had seriously challenged AWB about the payments it was making, AWB would probably have had to stop paying kickbacks. It might then have been forced to abandon the Iraq market. Deals worth $800 million may have been lost, on the eve of the war with Iraq. The National Party and its supporters – including tens of thousands of wheat farmers – would have been furious. In cities across Australia, millions of people who were already marching against war would have had another stick with which to beat the government. There was no upside for the government in inquiring too deeply into AWB’s business practices – none except that it was the right thing to do. So, the upshot: hundreds of millions of dollars were paid to Iraq in breach of UN sanctions. Numerous warnings went to the government and it repeatedly failed to act. Funds illegally paid to Saddam were used, directly or by substitution, to fight the allies, including Australia. Some of the money was spent on palaces built in the traditional style of dictatorial monsters (acres of marble; garish bathrooms; bedroom suites with silky bed sheets, mirrored ceilings, albums by Celine Dion and Tina Turner, and copious pornography), but there was plenty left to fund the bloody insurgency that continues to this day to kill American and British soldiers (it is only by the grace of God that Australian soldiers are not, at the time of writing, among the enemy-fire casualties). The wheat trade with Iraq has been lost, captured by US farmers. There is damage elsewhere, too. In an essay in the Weekend Australian


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on 8–9 April 2006, former diplomat turned investigative reporter Rebecca Weisser made the compelling argument that the scandal had damaged Australia’s relationship with friendly nations. ‘It diminishes our influence at the UN, particularly in the crucial area of UN reform,’ she added. ‘It besmirches our reputation as a good international citizen.’ Yes, it does. And yet, to this day, Downer has never uttered these words: ‘I’m sorry’. He has never said: ‘We messed up. This slipped through the net. It went on under our noses. It’s a catastrophe, and we’ve put in place new systems to make sure it never happens again’. On the contrary, Downer has stayed furious with the media. On the night of the 2006 Walkley awards in Melbourne, his chief of staff, Chris Kenny, sent me a text message. I was sitting with a glass of iced water in my hand, not yet knowing whether the Australian’s role in uncovering the AWB scandal would be recognised by the judges, when I heard a little beep, flipped up my phone, and saw the word ‘Laughable’, meaning, I suppose, laughable that the Australian had been given a prize for investigative reporting (Kenny had read news of the prize on the Walkleys website, before it was officially announced). A few days earlier – just after Cole’s report was released – he’d sent another text message: ‘I suppose we have to keep waiting for your apology?’ But actually, it was Downer who owed the nation an apology. He had performed poorly as foreign minister at precisely the moment that Australia needed him to be on fire. When Australians needed to know whether anything more could be done to keep Saddam in his box, short of shooting up Baghdad, Downer failed them. He was focused on getting troops into battle; he should have been focused on the reasons why those troops had to go. It is possible that Downer feels no responsibility for the scandal because he thinks it has nothing to do with him: he is the minister, or the chief, and this was all about the indians in his department. But the Foundations of Governance in the Australian Public Service,


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produced by the Australian Public Service Commission, sets out his responsibility precisely. It says, ‘Under the Australian system of responsible government, ministers are responsible to parliament for the overall administration of their portfolios’ [emphasis added]. Under the normal – or, at least, the historical – rules of ministerial accountability, Downer would have been booted off the front bench. It was Howard – not Cole – who decided he could keep his job. Downer was pleased: he loves being the foreign minister. He travels about the world, visiting Paris, London, New York, travelling first-class and in town cars, meeting important people, smoking fine cigars. But in failing to accept responsibility for the scandal, Downer acted without honour. He shredded his own legacy. Commentator Mike Carlton, writing in the Sydney Morning Herald on 2 December, was among those who were appalled. ‘All week we have suffered the indecent spectacle of the Howard Government indulging in an orgy of mutual back-slapping because commissioner Cole found it had been clueless about AWB’s $290 million contribution to Saddam Hussein’s war effort,’ Carlton wrote. ‘Never was ignorance more blissful … But let us be clear about what happened.’ Carlton noted that the government was under a legal obligation to obey the UN oil-for-food sanctions against the Saddam regime. It willingly accepted that obligation and went further: ‘Ever eager to strut the world stage, John Howard dispatched warships to the Persian Gulf to enforce those sanctions upon lesser breeds without the law. ‘Yet … it never once occurred to Howard or his relevant ministers to check that Australia, too, was compliant. ‘AWB, they thought, was run by chaps like us, and that was enough. ‘If there was any shred of honour left in this bunch, Downer and the former trade minister, the hopeless Mark Vaile, would resign. The arrogance is jaw-dropping.’


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In any case, it made no difference at all to the public’s view of things. On 4 December, an ACNielson poll found that seven in ten Australians aware of the Cole inquiry still believed the government knew about AWB’s kickbacks to Iraq, even after Cole cleared the government. This was true of an overwhelming majority of Labor voters – 88 per cent – who believe the government lied about how much it knew, but 46 per cent of Coalition voters also rejected the government’s explanation. Almost nobody believed there was nothing the government could have done to uncover the truth. But that’s absurd. People have to get to the bottom of things all the time. To use a simple example: criminals lie to the police, especially when they have committed a crime. Police do not say: well, there has been a bank robbery, but there was nothing we could have done to prevent the robbery because the fellow here in the dock always seemed like such a straight-up-and-down kind of fellow and, when we asked him whether he was stealing things, he said no. Witnesses lie in court – and, it seems, to judicial inquiries. Some of the AWB executives at the Cole inquiry lied to John Agius. He didn’t take it lying down. He came out swinging. Agius told Cole it was ‘preposterous’ to suggest that AWB would ever have told the truth. But was it really the case that every single employee at AWB was corrupted by the Iraq wheat trade? That nobody, if pressed by government or by the Australian Federal Police, would have told the truth? Was the place so infected by the ‘whatever it takes’ culture that no employee – not even an ex-employee – would have dared to stand up and say: ‘I’m sorry, but this is wrong’? In other words, that nobody at AWB was better than the worst sanctions-busting scoundrel? That the Federal Police, if alerted, would not have been able to track down an ailing Dominic Hogan in his kitchen in suburban Melbourne, put a few gentle questions to him, and see the whole thing crack open? Is it really true that there was absolutely nothing that Downer or his department could have done to prevent AWB from breaching UN


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sanctions on the eve of war? Because, if that’s true, then why did Australia sign up for the sanctions? And what will happen in the future? Is Australia to say to North Korea, look, we understand that you are planning to build a nuclear bomb and we’d like to choke your economy of funds but, in all likelihood, some Australian company is going to send a few hundred million your way, and there isn’t much we can do about it? That is what the government told Cole: they didn’t know about the kickbacks. What’s more, they couldn’t possibly have found out. No amount of inquiry would have uncovered it. Part way through the Cole inquiry, Alexander Downer held a press conference in which he begged the public not to read the Australian, not to read Caroline Overington, or David Marr, or Marian Wilkinson in the Sydney Morning Herald but to listen only to him. It’s actually not bad advice: if you want the final word on the Iraq kickback scandal, please don’t feel like you have to take it from newspaper journalists or indeed from the Opposition. Take it from Mr Downer. He was the relevant minister. He was running Foreign Affairs when AWB was trading with Saddam’s regime – and when troops were preparing for war in Iraq. By his own admission, he was ignorant – really, totally clueless – about Australia’s role in the scandal. That’s what he wants you to know.


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POSTSCRIPT

The Iraq kickback story did not end with the release, in November, of the hefty and expensive Cole report. On the contrary, as 2006 rolled into 2007, there were new developments: some shocking, some shameful and, as ever with this scandal, some so surreal as to be hilarious. On 19 December 2006, for example, AWB learned that its kickbacks – such a dirty word – were actually a legitimate tax deduction. The Australian Tax Office, which had been watching the show from the sidelines, said the money that AWB had paid to Saddam’s regime could not properly be considered bribes because AWB made the payments directly to the Iraqi government, not to corrupt officials. Therefore, AWB was well within its rights to declare the $290 million as a tax deduction. It was simply a cost of doing business in Baghdad. What AWB did wasn’t illegal – at least, not in Iraq. On the contrary, it was just as James Judd QC had said in the very early days of the Cole inquiry: the payments were a kind of tax or fee that companies had to pay to Iraq if they wanted to do business under the oil-for-food program. Therefore, they weren’t bribes. And if they weren’t bribes, well, they must have been a cost of doing business with Iraq. In which case, they were tax deductible. Treasurer Peter Costello was none too happy but what could he do? The Tax Office had made its decision. A day later there was more good news, this time for AWB’s former chairman, Trevor Flugge. So long described as a villain of the piece, he became a hero.


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At least that’s what it said on page one of Melbourne’s Age. US Lieutenant Colonel Paul Tracey Wright, of the 308th Civil Affairs Brigade, who had worked alongside Flugge and Michael Long in Baghdad, wrote to the editors of major Australian daily newspapers saying he had been in the room when the infamous photographs of Flugge with a pistol had been taken, and he was nearby when Long was snapped standing alongside bags of cash. He said he had provided firearms training to both men; they needed guns for self-protection because Iraq was so dangerous. He said the men were a ‘credit to their country’ but had been lampooned as ‘some kind of crude profiteers’. ‘Nothing could be less accurate and more unjust,’ he said, indignant. ‘These men are a credit to their country. They deserve thanks, not ridicule. ‘Both Mr Flugge and Mr Long used their considerable skills and experience to help a struggling country back on its feet after decades of despair.’ He said the photographs of the men playing with guns had been ‘completely misconstrued’. The Age put the story on page one, under a headline that said: ‘Wheat pair heroes, not villains: US officer’. It was too delicious. I immediately telephoned Michael Long. He had not seen the paper. I read it out, and he started laughing. ‘That’s fantastic,’ he said. ‘Isn’t that fantastic?’ ‘It’s on page one,’ I told him. ‘Under a headline that says you are a hero.’ Well, he was just stoked. I said: ‘But where, oh where was this guy when you really needed him?’ He paused. ‘No, you don’t get it,’ Long said, serious for a moment. ‘What you guys in the press have never really understood is that those of us who went to Baghdad, we believed we were doing a good thing. We were trying


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to help those people. We didn’t think we would ever be treated the way we were. ‘I’ve had people emailing me and phoning me for months, ever since this started really, saying, hang in there, Michael, because we know the truth. We know that what you guys did was amazing.’ He paused again, then said: ‘You should put it in your book. Make sure you get both sides in your book.’ I promised to do that. It should be said that there were people at AWB who would have preferred that no book on AWB ever be written, but Long was not among them. On the contrary, he toyed with the idea of writing his own book, from his own perspective, with himself as hero, just as it said in the Age. ‘Because it’s a great story, isn’t it?’ he said. ‘It is,’ I agreed, although it was clear that we thought so for different reasons. ‘We’ve gone from the villains, to heroes!’ he laughed, referring again to the Age headline. ‘Now, what you should do,’ he continued, his voice high and happy, ‘is send your book to your boss. You should send it to Twentieth Century Fox. We should go to Hollywood. We should make a movie. This could be a blockbuster.’ Amused, I said, ‘But who would play you, Michael?’ ‘Me! I’ll play me! I could be the star of my own movie. That would be something, wouldn’t it?’ There was good news for free-marketeers in the aftermath of the Cole report, too. In the dying days of 2006, Agriculture Minister Peter McGauran gave Western Australia’s Co-operative Bulk Handling (or CBH) a licence to export 500,000 tonnes of wheat to its own mills in Indonesia, and a consortium known as Wheat Australia got a licence to export another 300,000 tonnes of wheat to Iraq. The federal government announced that it had formed a task force, headed by a retired federal police officer, Peter Donaldson, to investigate the possible breaches of law.


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Attorney-General Philip Ruddock said this was proof of the government’s ‘continued commitment to get to the bottom of this’. A second committee, headed by businessman John Ralph, was likewise established to investigate the future of wheat marketing in Australia. The hopes of all reasonable men were on the principle that they would no longer have to deal with the AWB; like businessmen everywhere, they should be able to sell their produce to whomever they choose. And then, at dawn in Baghdad on 29 December, Saddam Hussein, 69, was led from his cell to the gallows and hanged for atrocities he committed when he was Iraqi dictator. The event – ghastly to some, celebrated by many – was filmed on mobile phones and posted on the Internet. A witness to the execution could be heard mocking Saddam. Another explained to him in Arabic that a thick black cloth wrapped around his neck would prevent the rope from cutting through his Adam’s apple when he hanged. He nodded, thankful. Later, pictures of his head at a grotesque angle were shown on Iraqi TV. Early in 2007, President Bush accepted responsibility for America’s failure to secure Iraq after the invasion, and for the ongoing turmoil and carnage. Three thousand US troops were dead. ‘Where mistakes have been made,’ Bush said, ‘the responsibility rests with me.’ And Downer? Well, he never did take responsibility for the kickback scandal. He never did apologise – and, of course, he did not resign. For a while after the Cole report was handed down, he smirked. When that failed to impress, he sat in place, sulking like a spoiled child, complaining that ongoing criticism of him wasn’t fair. Hadn’t anybody read Cole? Didn’t anyone believe that it all had nothing to do with him? Well, no, actually, not very many people did believe it. So, at year’s end, Downer swept his wounded pride up into a suitcase, and took off for the United States, courtesy of the taxpayer. In his wake, questions remained. If the buck didn’t stop with Downer, where did it stop? Why didn’t he resign?


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There’s only one possible answer: Downer cared more about his own job than he cared about the the integrity of his office. He somehow managed to convince himself that the doctrine of ministerial responsibility did not apply. And so, in January 2007, almost a year to the day after the Cole inquiry began, there he was in Manhattan. Photographs captured the moment: he was wearing a tux and grinning like a loon, hamming it up with the Wiggles.


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ENDNOTES

ABBREVIATIONS

CIT: Inquiry into Certain Australian Companies in Relation to the UN Oilfor-Food Programme transcript, known as the Cole inquiry transcript CIE: Cole inquiry exhibit CO: Caroline Overington CR: Report of the Inquiry into Certain Australian Companies in Relation

to the UN Oil-for-Food Programme , known as the Cole report DH: Dominic Hogan interview with CO, July 2006 DH/ZD: Comments attributed to the late Zuhair Daoud are third-hand, based on the recollection of Dominic Hogan during interviews with the author in July 2006 ML: Michael Long interview with CO, October 2006 TF: Trevor Flugge interview with CO, October 2006 VR: United Nations Independent Inquiry Committee Report on the Manipulation of the Oil-for-Food Programme, known as the Volcker report VR2: United Nations Independent Inquiry Committee Report on the Management of the Oil-for-Food Programme, known as the second Volcker report


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PART ONE CHAPTER 1

Page 3: Information on wheat export sales taken from CR, Vol. 2, p. 1 Page 4: ‘don’t tell me … don’t they’, DH Page 4: Information about the 1990 UN requisites for banning funds to Iraq (UN Security Council resolution 661) can be found at www.un.org/Docs/scres/1990/scres90.htm Page 5: ‘They were blending … you cry’, Clinton Condon interview with Jonathon Holmes, Four Corners, ABC, 17 April 2006 Page 5: Information about the UN Security Council’s resolution 986 (‘oil for food’ program) can be found at www.un.org/Docs/scres/ 1990/scres90.htm Page 6: ‘What do … this time’, DH Page 6: Information about the 1999 IGB wheat tender obtained from CR, Vol. 2, p. 96 Page 7: Information about 1999 meeting between Zuhair and Emon obtained from CIT, p. 21–2 Page 8: ‘and that’s when … fee to Iraq’, ibid. Page 9: ‘The wallpaper … extra for towels’, quote from interview with author, August 2006 (source requests anonymity) Page 10: ‘of the 1970s … the garden below’, ZD/DH Page 11: ‘In the next phase … tonnes of wheat’ – note that for accounting purposes, the UN oil-for-food program was divided into six-month phases. Phase VI ran from June to December 1999 CHAPTER 2

Page 14: Email circulation information obtained from CR, Vol. 2, p. 99 Page 15: ‘they had a true … an issue’, CIT, p. 2010–11 Page 15: ‘Iraq wanted … to use US dollars’, CIT, p. 2011–12 Page 15: ‘Correct … understanding of it’, ibid. Page 15: Contents of Hogan’s email sent 24 June 1999 from CIE 995


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Page 16: ‘You were … been frozen’, CIT, p. 2005 Page 16: ‘We knew … $1 to Iraq’, ibid. Page 16: ‘Not really, no’, CIT, p. 2010 Page 16: ‘Clearly … trucking fee’, CIT, p. 3405 Page 16 : ‘I would have to say yes’, ibid. Page 16: ‘There was no … made very clear’, CIT, p. 2318 Page 17: Comments attributed to the late Zuhair Daoud, ZD/DH Page 17: ‘There were a lot … paying the fee.’ CIT, p. 48 Page 17: ‘The cargo will … by the Sellers.’ CIE 995 Page 18: ‘postbox for AWB’, CIT, p. 4438 Page 19: Information about Flugge’s appointment to AWB’s board of directors from CIE 0452 Page 19: ‘people would … the chairperson’, CIE 98 Page 20: ‘Thanks for stepping … [ Murray Rogers]’, ibid. Page 21: Flugge’s response to enquiry about trucking fee discussions obtained from CIT, p. 3481 Page 22: ‘buy a very large suitcase’, CIE 009 Page 22: Hogan’s suggestion to pay money directly into a Jordanian bank account, CIE 009, 010 Page 22: ‘This is Saddam’s order … somewhere else’, ZD/DH Page 22: Information about paying funds into possible third party account obtained from CIE 108 Page 23: ‘They [the Iraquis] … USD $11 million’, ibid. Page 23: ‘Mark … constructive’, ibid. Page 23 ‘the UN is an … finance costs’, ibid. Page 23: ‘we have to … method to AWB’, ibid. Page 23: ‘two … three hours’, CIT, p. 3640 Page 23: ‘and he [Emons] … gone for a walk’, ibid. Page 23: Information about fax from Alia, CIE 12 Page 24: ‘Dear Sir … freight transportation’, quote from fax. ibid. Page 24: ‘ We have informed … of transport’, quote from fax. ibid. Page 24: Information about Alia shareholders from VR, p. 203


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Page 25: ‘It was probably … each day’, CIT, p. 596 Page 25: ‘May never have … writer was’, ibid. Page 25: ‘where are we … ASAP’, contents of email sent to Emons on 4 November, CIE 114 Page 25: ‘We are not responsible … when I have more’, ibid. Page 26: ‘We must be … correctly’, ibid., p.1895 Page 26: ‘You don’t … of words’, ibid., p. 1896 Page 26: ‘Correct’, ibid. Page 26: ‘I am … some problems’, contents of email from Emons, 19 November 1999, CIT, p. 482 Page 26: ‘He understands … all operate’, ibid., p.483 Page 26: ‘but, as I said … money is received’, ibid. Page 27: Contents of fax from Alia, ibid. CHAPTER 3

Page 30: ‘to cover the … to Iraq’, VR2, 7 September 2005, p. 73 Page 30: Almstrom’s directive to the Canadians about payments to Iraq from CIE 546 Page 30: Details of Almstrom’s instigating the investigation from CIE 965 Page 31: ‘That’s what we … already doing it’, CIE 547 Page 31: ‘bring me …review it’, CIT, p. 6723 Page 31: Information about ‘clean’ contract being handed to investigator, CIE 542 Page 31: ‘Wheat [ was ] … important contracts’, CIT, p. 6738 Page 32: Details of conversation between Johnston and Moules, CIE 965 Page 32: ‘money should … account’, CIE 547 Page 33: Details of UN chief Sevan’s corruption charges from article titled ‘Oil-for-food plan chief criticized’, Financial Times, 31 January 2005 Page 33: Details of Moules’s first cable to Canberra, CIE 456 Page 34: ‘discreet, high level’, CIE 456 Page 35: Bowker’s response to Moules’s allegations, CIE 565


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Page 35: ‘involved …regime’, ibid. Page 35: ‘You were … personal opinion’, CIT, p. 4576 Page 35: ‘unlikely to …reputation’, ibid. Page 36: ‘This is bullshit’, CIE 565 CHAPTER 4

Page 37: ‘something of a … throw him,’ interview with author in July 2006 (source requests anonymity) Page 38: ‘particularly get on very well’, CIT, p. 71 Page 38: ‘What did he … the $15?’ibid., p. 72 Page 38: ‘The trucking … $15.’ ibid., p. 71 Page 38: ‘I believe …$15’, ibid. Page 38: ‘to the people who were … and Graham Owen.’ ibid., p. 73 Page 38: ‘AWB Ltd … tonnes each’, CIE 128 Page 38: ‘We may have … sanctions evasion’, CIE 548 Page 39: ‘Did it appear … Yes’, CIT p. 5789–90 Page 39: Information about Johnston giving Nicholas a copy of AWB form, CIT, p. 6727 Page 39: ‘clauses within … to the UN’, ibid., p. 6727 Page 40: ‘urgently wanting … of the meeting’, CIE 1345 Page 40: ‘Alistair [ Nicholas ] … some exposure’, ibid. Page 40: ‘We had eight … [ Australian ]embassy’, CIT, p. 7578 Page 40: ‘The next day … meeting with me’, ibid. Page 41: ‘climactic … harvest’, interview with author, September 2006 (source requires anonymity) Page 41: ‘It would … of that nature’, CIT, p. 7579 Page 41: ‘irregularities … contracts’, CR, Vol. 2, p. 205 Page 41: ‘possible irregularities … program’, CIE 458 Page 41: ‘recently noticed … to the UN’, ibid. Page 42: ‘ if for some … some assurance.’ ibid. Page 42: Details of Nicholas’s cable to Canberra, CIE 701 Page 42: ‘Alistair mentioned … for discharge/trucking’, CIE 121


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Page 42: ‘We played down … UN request’, ibid. Page 42: ‘If all UN wants … to worry about’, ibid. Page 43: ‘to provide … they contact you’, ibid. Page 43: ‘I deal solely with … causing us problems’, ibid. Page 43: ‘Why did you say … really don’t know’, CIT, p. 3037 Page 43: ‘We wish to advise … Jordanian trucking company’, CIE 122 Page 43: Emons warning to Yousif, ibid. Page 43: Details of fax from Iraq, ibid. Page 44: ‘the trucking fee … $15’, CIE 434 Page 44: ‘AWB was … Oil for Food system’, CIT, p. 6731 Page 44: ‘I did’, ibid., p. 6732 Page 44: ‘clarifies the matter’, CIE 488 Page 44: ‘UN has now confirmed … there is no issue’, CIE 130 Page 44: ‘We didn’t want … a kickback ]’, CIT, p. 97 Page 45: ‘That would make sense’, ibid. Page 45: ‘handle the freight … disguise the fee’, CIE 1347 Page 45: Details of Emons’s email to Watson about trucking fee, CIE 127 Page 45: ‘He is happy … come under threat’, ibid. Page 46: Details of interview between Chris Quennel and Flugge, CIE 1334 Page 46: ‘You will be … halt further payments’, CIE 133 Page 46: ‘We were getting … fairly threatening’, ibid. Page 46: Emons claims AWB threatened to dob Iraq into the UN, ibid. Page 47: ‘Canada …good books’, CIE 247 Page 48: Details of Emons’ conversation with Zuhair, CIE 678 Page 48: ‘We could not … to the phone’, ibid. CHAPTER 5

Page 49: ‘a lifestyle … blush’, from ‘Lindberg’s rocky road at WorkCover’, The Age, 20 January 2006 Page 49: Details of Lindberg’s resignation as WorkCover chief, ibid. Page 50: Details of Lindberg’s management shake-up at AWB, CIE 230 Page 50: Emons’ support of Stott, CIT p. 1963


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Page 53: ‘international pariah’, CIE 1170 Page 53: Details of ‘Project Italy’ and mock press releases within BHPP, CIE 1171 Page 53: ‘Norman … happy to discuss’, CIE 274 Page 54: ‘I don’t know … six months’ time’, CIE 275 Page 54: Aiken’s reply to Davidson Kelly’s email from CIE 1157 Page 54: Davidson Kelly’s offer to BHPP, ibid. Page 54: ‘Oh, it’s fantastic … to pay the bills.’ DH CHAPTER 6

Page 55: Details of Saddam’s demands for more money obtained from VR, p. 276 Page 56: ‘all rights … in 1996’, CIE 210 Page 56: ‘glanced … to do it’, CIE 527 Page 56: Details of Davidson Kelly email to Stott, CIE 211 Page 56: ‘Zuhair had a unique car’, CIT, p. 2293 Page 57: ‘No conspiracy … did their executions’, DH Page 58: ‘No, … no exceptions’, ibid. Page 58: 150 per cent increase in trucking fee, CR, Vol. 2, p. 373 Page 58: Email from Stott to Davidson Kelly on 16 October 2000, CIE 224 Page 59: ‘on reflection … going to be tough’, ibid. Page 59: ‘I had some concerns … those trucking fees’, CIT p. 2290 Page 59: ‘it had been approved by the UN’, ibid. CHAPTER 7

Page 61: First unsigned letter to DFAT official from Stott, CIE 297 Page 61: ‘seeking approval … trucking companies’, CIT, p. 2291 Page 62: ‘Why not simply … to do that’, ibid., p. 2295 Page 62: ‘more likely … I can’t be certain’, CIT, p. 2631 Page 62: ‘dealing with Alia …okay’, CIT, p. 2296 Page 63: Second letter from to DFAT from Stott, CIR, Appendix 20, Figure 20.3


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Page 64: ‘There is no evidence … cannot be accepted’, CIR, Vol. 2, p. 408 Page 65: DFAT’s reply to Stott’s second letter, CIE 650 Page 65: ‘thanked Jane for her letter’, CIT, p. 2296 Page 65: Drake-Brockman’s denial that she actually wrote the response, CR, Vol. 2, p. 410 Page 66: ‘unable to locate or produce … explanation for this’, CR, Vol. 2, p. 412 CHAPTER 8

Page 67: ’10 per cent … in writing’, CIE 407 CHAPTER 9

Page 69: ‘this type … money laundering’, CIE1565 Page 70: ‘It bowled me over … incredible’, Leon Bradley interview with CO, 30 October 2005 Page 70: ‘But they felt … to be honest’, ibid. Page 72: ‘The trucking fee … from the escrow account’, from CIE 381 Page 72: ‘I’ve seen the fee …suspicions’, CIT, p. 2996 Page 72: ‘100 litre …border’, ibid., p. 3002 Page 72–3: ‘cement … flooring’, CIE 1367 Page 73: ‘Just continue …doing it’, CR, Vol. 3, p. 9 Page 73: ‘following …of the issue’, DH Page 74: ‘start raising …where I stopped it, CIT, p. 2074 CHAPTER 10

Page 75: ‘Iraq has … supplies’, CIE 913 Page 75–6: ‘left, right and centre … attention’, VR2, 7 September 2005, p. 93–108 Page 76: ‘Port fees … by AWB’, CIE 176 Page 76: ‘Re: the 50 cent … inform us’, CIE 177 Page 77: ‘the issue of port fees …from suppliers’, CIE 394


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Page 77: ‘said nothing …blind eye’, CIT, p. 3103 Page 77–8: ‘While waiting … the matter’, CIE 394 Page 78: ‘to circumvent … Food program’, CIE 394 Page 78: ‘well known … known about it’, CIT, p. 3357 Page 79: AWB stock prices, ‘Listing marks an historical day for AWB’, PM program, ABC Radio, 22 August 2001 Page 79: ‘the question …of sanctions’, CR, Vol. 1, p. xii Page 79: ‘Saddam told me … fixed’, CIE 192 CHAPTER 11

Page 81: Presidential State of the Union speech, 29 January 2002 Page 82: Hogan’s state of mind, DH Page 82–3: ‘showed me … at DFAT’, CIT, p. 1816 Page 83: ‘fairly convincing evidence’, CIT, p. 1591 Page 83: Long’s responses to Agius, CIT, p. 1592 Page 84: ‘I have a … with it’, ML Page 84: ‘I do recall … asleep’, CIT, p. 1795 Page 85: ‘in and out … possible’, DH Page 85: Statements attributed to Saleh are third-hand, based on the recollection of Dominic Hogan during interviews with CO in July 2006 Page 86: ‘We only secured … Australian wheat’, CIE 1242 Page 87: ‘Saddam … high price’, Alexander Downer press conference, Melbourne, 16 July 2002 Page 87: ‘Iraq is a significant …strength’, Alexander Downer doorstop interview, 26 July 2002 Page 87: Lindberg letter to Howard, CIE 542 Page 87: ‘I fully share …resolutions’, CR, Vol. 3, p. 59 Page 88: ‘We won’t be …dead rat’, CR, Vol. 3, p. 198 Page 88: ‘iron language’, Inter Press Service, 29 March 2003 Page 89: ‘I was pleased …control of this’, TF


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Page 89: ‘things are hotting up …progress’, CIE 1142 Page 89: ‘I expect …wheat’, CIT, p. 4300 Page 89: ‘Norman …recover’, CIT, p. 4305 Page 90: Letter to Stott, CIE 260 Page 92: Lindberg press release, CIE 1533 Page 92: Mark Vaile press release, 18 August 2002 Page 92: Prime Minister Howard press conference, Kirribilli House, 18 August 2002

PART TWO CHAPTER 12

Page 96: President Bush at UN General Assembly, 12 September 2002 Page 97: ‘Iraqis …take into consideration’, Alexander Downer doorstop press conference, New York City, 12 September 2002 Page 97–8: ‘We face … to the world’, Alexander Downer statement to the 57th session of the UN General Assembly, New York City, 13 September 2002 Page 98: The ten Australians who died in New York were Kevin Dennis, Alberto Dominquez, Elisa Ferraina, Craig Gibson, Peter Gyulavary, Yvonne Kennedy, Andrew Knox, Lesley Thomas, Stephen Tompsett and Leanne Whiteside Page 99: ‘mostly a reprint …destruction’, Hans Blix, ‘An update on inspection’, presentation to the UN, 17 January 2003 Page 99: ‘failed the test …opportunity’, John Negroponte, US ambassador to the UN, address to the Senate Foreign Relations Committee, Washington DC, 30 January 2003 Page 100: ‘Iraq: Failing to Disarm’, US Secretary of State Colin Powell, address to the UN Security Council, 5 February 2003 Page 100: Prime Minister John Howard appeared on the Today show, 30 January 2003


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279

ENDNOTES

CHAPTER 13

Page 102: ‘You just can’t have …1441’, Alexander Downer doorstop interview, 19 February 2003 Page 103: ‘USD$8.8 million … plus interest’, CIE 410 Page 103: ‘Iraqi Grains Board … debt’, CIE 23 Page 103: ‘We [Tigris] … the debt’, CIE 410 Page 103–4: Whitwell’s memo, CIE 1534 Page 104: Cole’s findings re Lindberg, CR, Vol. 3, p. 242 Page 104: Whitwell’s memo, CIE 1534 Page 104: Detail about contracts, CR, Vol. 3, p. 78 CHAPTER 14

Page 106: President Bush address to the nation, 17 March 2003 CHAPTER 15

Page 109: Ship details, CR, Vol. 3, p. 83 Page 109: ‘this is a substantial … going to last’, Alexander Downer doorstop interview, Parliament House, 20 March 2003 Page 110: Details of meeting at Parliament House 24 March 2003, CIE 0771 Page 110: AusAID change, CR, Vol. 3, p. 91 Page 111: ‘Flugge’s first priority … for Australia’, quoted in US Wheat Associates newsletter, 25 April 2003 Page 112: ‘We flew in …secure’, from ‘Cash crop, real money’, Daily Telegraph, 26 March 2004, p. 18 Page 112: Long’s meeting with American general, ML Page 113: ‘It’s not a very big … back to work’, from ‘Cash crop, real money’, Daily Telegraph, 26 March 2004, p. 18 Page 114: ‘Was I happy …believe it’, ML Page 114–5: Michael Long cable to DFAT, 8 June 2003 Page 115: ‘because …our markets’, from ‘Which master was Trevor Flugge serving in Iraq?’, The Age, 9 March 2006, p. 8


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280

Page 117: ‘Commander in chief lands on USS Lincoln’, CNN, 2 May 2003 Page 118: ‘there is something … on here’, Alan Tracy interview with CO, May 2006 Page 119: Tracy’s open letter, CIE 1021 Page 119: ‘contact in Washington … negotiated with Iraq’, CIE 542 Page 120: media release, CIE 610 Page 120: ‘In Australia …in general’, CIE 0845 Page 120: ‘complete rubbish …revolting’, from ‘Iraq’s Aussie farm chief denies bias’, Courier Mail, 9 June 2003, p. 10 Page 120: ‘the allegation … first Gulf War’, from ‘Iraqi wheat furore’, Herald Sun, 6 June 2003, p. 37 Page 121: ‘There are three possible answers …’ – note that Cole never examined why the government didn’t investigate; he found only that it didn’t. Page 121–2: ‘kickbacks … to tell you, CIE 295 Page 122: ‘please advise AWB’, CIE 542 Page 122: ‘concise situation … ministers’, DFAT annual report 2002/2003 Page 122: ‘every contract …19 per cent’, CIE 611 Page 122–3: transcript of Armstrong at Cole inquiry, CIT, p. 4954 Page 123: ‘My work … an investigation’, CIT, p. 5008 Page 124: Whitwell to Armstrong, CIE 542 Page 124: Hockey note to Freeman, CIE 845 Page 125: Ramiro Lopez da Silva press conference transcript, UN headquarters, 24 June 2003 Page 125: ‘the two contracts …for Australia’, Mark Vaile press release, 7 September 2003 Page 125: Information on prices, AWB contracts, obtained by CO Page 126: US senators to Bush, CIE 542 Page 126: President Bush’s remarks, visit to Australia, 22 October 2003


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281

ENDNOTES

Page 127: ‘strenuously rebutted … reprehensible’, CIE 815 Page 127: ‘baseless …were paid’, CIE 542 Page 128: ‘preposterous’, CR, Vol. 3, p. 320 Page 128: ‘only been reduced … amount’, CIE 600 Page 128: Agius and Armstrong exchange, CIT, p. 5007 Page 128: US Wheat Associates newsletter, CIE 1377 Page 129: Baxter to Armstrong, CIT, p. 4993 Page 129: ‘AWB has confirmed … slanging match’, CIE 617 Page 129: ‘I thought …cooperatively’, CIT, p. 4947 CHAPTER 17

Page 130: Details of finding Saddam Hussein, ‘Inside Saddam’s hideout’, CNN transcript, 16 December 2003 Page 131: ‘Straight as arrows … was beautiful’, Darryl Hockey interview with author, July 2006 Page 133: ‘You guys … dirty tactics, CIT, p. 5873 Page 133: ‘world’s greatest swindle’, from ‘Annan should quit over Iraq fraud’, Sydney Morning Herald, 2 December 2004 Page 133: Implications for Kojo, ibid. Page 134: Hockey on AWB not escaping scrutiny, CIE 602 Page 134: ‘He spoke …didn’t happen’, CIT, p. 4968 Page 134: ‘I take … Mr Agius’, CIT, p. 4941 Page 134: ‘AWB paid … own volition’, CIE 600 Page 135: ‘unlikely to escape scrutiny’, CIE 618 Page 135: ‘the Jordanian company … to the regime’, ibid. Page 136: ‘this worries me … about this’, CIE 619 CHAPTER 18

Page 138: reports of UN corruption in the Congo, ‘UN moves to answer child sex allegations’, The Age, 18 February 2005 Page 139: ‘all contracts … United Nations’, CIE 542


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KICKBACK

282

Page 141: ‘We’ve been wondering …story’, Dawn Forsythe telephone interview with CO, April 2004 Page 142–4: Alan Tracy quotes from interview with CO, April 2004 Page 146–7: Fairfax stories, ‘Probe on wheat sales to Iraq’, The Age, 29 April 2004, p. 1 and ‘Iraq sales probe’, Sydney Morning Herald, 29 April 2004, p. 3 Page 148: ‘UN diplomats … a politician’, from ‘Kidman unites nations’, Sydney Morning Herald, 27 April 2004 Page 149–50: CO’s second story, ‘Wheat deal was overpriced, says US’, Sydney Morning Herald, 30 April 2004 Page 150: memo from AWB’s lawyers, CIE 1354 CHAPTER 19 Page 151–2: Colonel Mike Kelly, CR, Vol. 4, p. 74 Page 152: ‘up to its eyeballs’; ‘cosy relationship’; ‘Looks like … on AWB’, CIE 862 Page 152: Kelly to Venamore, CIE 934 Page 152: ‘in the crosshairs …later’, CIE 862 Page 152: Notes from meeting, ‘Notes blow lid on AWB’, The Australian, 30 August 2006, p. 1 Page 152–3: Handwritten notes from meeting, CIE 862 Page 153: Kelly’s lack of evidence, CR, Vol. 4, p. 75 Page 153: Cole’s words, CR, Vol. 4, p. 83 Page 153: ‘there is no reason … a kickback’, CIE 749 Page 153: ‘inland transport’, CIE 85 Page 154: ‘paid kickbacks … through Alia’, VR, p. 259 Page 156: ‘no experience … UN sanctions’, CIE 698 Page 156: ‘Dear Ministers … your support’, CIE 542 Page 157: ‘very grateful … two countries’, CIE 542 Page 157: record of conversation between Baxter and Freeman and PSI staff, CIE 815


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283

ENDNOTES

Page 158: ‘simply smear … association’, from ‘They backed the scam to the bitter end’, Sydney Morning Herald, 2 February 2006, p. 1 Page 158: ‘we have … our corner’, CIE 542 Page 158: Results 2004 federal election, Australian Bureau of Statistics Page 158: Bush returned to office, CNN.com, Election 2004 CHAPTER 20

Page 159: ‘Were the … supplemental cash’, VR, p. 268 Page 159: ‘trucking fee’, VR, interviews with Ahmed Murtada Ahmed AlHalil on 5 November 2005 Page 159: ‘transport fee’; ‘after sales service fee’, VR, second interview with Mohammed Medhi Saleh, 18 November 2005 Page 160: ‘We are now tainted’, CIT, p. 4234 Page 160: ‘fairly robust … third party’, CIT p. 4212 Page 160: The two lawyers gave advice on the basis of the information they were given, CIT, p. 4136 Page 160: Volcker seeking information for review, CIE 956 Page 160: Downer’s response to Volcker’s request, CIE 698 Page 160: Details of government’s assistance, CIE 639 Page 161: ‘any written questions would be answered’, CIE 639 Page 161: ‘we struggle …in writing’, CIE 956 Page 161: ‘encountered a problem … even forbidding’, CIE 771 Page 161: ‘it would be … illegal surcharges and kickbacks’, CIE 771 Page 161: Milton’s cable to Canberra, CIE 771 Page 161: ‘to cooperate fully … inquiry’, Alexander Downer, Parliament House, 7 November 2005 Page 162: ‘as this would be … this inquiry was’, Alexander Downer, transcript, AM program, ABC Radio, 24 March 2006 Page 162: Howard’s response, CIE 771 Page 162: ‘There must be … transparency’, CIE 771 Page 162: Dauth email, CIE 759


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KICKBACK

284

Page 163: Quotes from Hogan, DH Page 163: Volcker’s team visiting Australia, CIE 1377 Page 164: ‘no recollection at all … little material’, CIE 4516 Page 164: ‘harboured a special place’; ‘a company … company’, CIE 4516 Page 165: ‘alia is … silos in Iraq’, CIE 93 Page 165: Quotes from Flugge, TF Page 166: Quotes from Othman al-Absi, interview with CO, October 2005 Page 166: ‘US dollars … of Iraq’, VR, p. 304 Page 167: Quotes from Othman al-Absi, interview with CO, October 2005 Page 167: Schedule of meetings, CIE 500 Page 167–8: ‘Whether I reiterated … the 80s’, CIT, p. 6525 Page 168: communication between L’Estrange and Downer, CIE 510 Page 168: Quotes from Chris Kenny, interview with CO, April 2006 Page 168: ‘you can’t be … to Alia’, CIT, p. 6521 Page 168: ‘They acknowledged … lost market’, CIT, p. 6518 Page 168: ‘entirely volunteered’, CIT, p. 6521 Page 168: ‘I say he is mistaken’, CIT, p. 6522 CHAPTER 21

Page 169: ‘chit-chat’, from ‘Cole inquiry continues’, The 7:30 Report transcript, 21 February 2006 Page 170: Downer and Volcker conversation, CIE 760 Page 170–1: Innes-Brown’s record of meeting, CIE 761 Page 172: ‘Greediness … human beings’, VR, p. 325 Page 172: ‘AWB did not … Iraqi government’, CR, Vol. 4, p. 402 Page 172: ‘unreasonable fees … breach of sanctions’, CIE 504 CHAPTER 22

Page 174: Volcker’s conclusions, VR, p. 311–25 Page 175: ‘this is, of course, debatable’, AWB press release, 28 October 2005


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285

ENDNOTES

Page 175: ‘We were deceived … the program’, from ‘Grain deals with Iraq defended’, The Age, 29 October 2005, p. 6 Page 175: Robin Pash’s article, ‘Plenty of signs that AWB money was going to Saddam’, AAP, 29 October 2005 Page 175: Lindberg’s response, ‘Howard rallies behind AWB’, Australian Financial Review, 29 October 2005 Page 175: Howard and Vaile on AWB, ‘The world today’, ABC radio transcript, 28 October 2005 Page 176: CO’s article, ‘Going with the grain on a dictator’s orders’, The Australian, 29 October 2005, p. 1 Page 176–7: CO’s second story, ‘Not reading the warning signs deemed stupid instead of evil’, The Australian, 29 October 2005, p. 1 CHAPTER 23

Page 178: Quotes from Kevin Rudd, interview with CO, 31 October 2005 Page 179: ‘It goes without saying … unacceptable’, Prime Minister John Howard statement to parliament, 20 October 2005 Page 180: ‘cooperate fully …comment further’, AWB media statement, 1 November 2005 Page 180: ‘we talked about … we’re fucked’, interview with CO, July 2006 (source requests anonymity) Page 180–1: ‘I was part … working for’, from ‘All in the loop on AWB deal’, The Australian, 3 November 2005, p. 1 Page 181: Othman quotes, ‘No questions asked as wheat exporter paid $290 million transport fees’, The Australian, 4 November 2005, p. 1 Page 182–3: ‘Oh hi Dom … more smooth’, Dominic Hogan transcript of calls from Jim Cooper, supplied to CO Page 183: ‘storm in a teacup’, from ‘Flugge back in war zone’, Australian Financial Review, 11 November 2005 Page 183: Interview with Ahmed Chalabi, ‘Iraq halts trade over AWB deals’, The Australian, 12 November 2005, p. 1 Page 183: Foschia interview with Downer, ABC, 13 November 2006


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286

PART THREE CHAPTER 24

Page 186: Cole’s financial position, ‘Lawyers to soak up $19 million of inquiry budget’, The Age, 16 May 2003, p. 15 Page 188: ‘little more than a cover-up … Government’, from ‘Call to widen wheat probe’, The Age, 7 December 2005, p. 5 Page 188: ‘the wheat board … the wheat board’, Alexander Downer transcript of ABC interview, 13 November 2005 CHAPTER 25

Page 189: ‘Mr Associate … Patent’, CIT, p. 2 Page 191: ‘Mr Commissioner … Commission’, CIT, p. 3 Page 191: ‘May it please … a State or Territory’, CIT, p. 4 Page 192: ‘two respected international lawyers’, CIE 3 Page 192: ‘I invite … the inquiry’, CIT, p. 7 CHAPTER 26

Page 194: ‘I direct that …room’, CIT, p. 9 Page 195: ‘tell the Commissioner … Yes’, CIT, p. 29 Page 195: ‘some part … Iraqi government’, CIT, p. 37 Page 195: ‘I believe … protecting these people’, from ‘Grain trader calls for royal commission’, PM program, ABC Radio, 28 October 2005 Page 196–8: Quotes from Sandman, ‘I think that’s crazy … two days’, CIE 1020 Page 198: Lindberg on Sandman, CIT, p. 7613 Page 198: ‘Explosive … I was’, CIT, p. 4166 Page 198: ‘unlikely’, CIT, p. 4190 CHAPTER 27

Page 199: Quote from Dan Box, interview with CO, January 2006


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287

ENDNOTES

Page 199: ‘Copperart coat of arms’, first used by David Marr in the Sydney Morning Herald, 30 September 2006 Page 204: Barker and Officer, CIT, p. 6081 Page 204: Barker and Agius, CIT, p. 579 Page 205: ‘very large suitcase’, CIT, p. 558 Page 206: ‘no recollection … proceeded’, CIT, p. 553–4 Page 206: ‘I don’t want to … deal with, CIT, p. 946 Page 207: ‘A hidden amount … correct’, CIT, p. 693 Page 207: ‘Well … had ceased’, CIT, p. 694 Page 207: ‘We had no … option’, CIT, p. 721 Page 207: ‘No … none at all’, CIT, p. 737 Page 207–8: Lindberg and Agius, CIT, p. 746 Page 208: ‘Is it that … recall’, CIT, p. 847 Page 208: ‘I am not a complete fool’, CIT, p. 848 Page 208: Quotes from Howard, press conference, Phillip Street, 20 January 2006 Page 208: ‘making this … company’, from ‘AWB “fool” is first head to roll’, The Australian, 10 February 2006, p. 1 Page 208: Lindberg’s earning, ibid. Page 209: class action against AWB, ibid. CHAPTER 28

Page 210: ‘reported accurately’, CIT, p. 1577 Page 211: ‘So the answer is no’, CIT, p. 1578 Page 211: ‘I’m particularly … Iraq’, CIT, pp. 1595 and 1619 Page 211: ‘clearly not … anyone’, CIT, p. 1595 Page 211 ‘Clearly … service’, ibid. Page 211: ‘The farmer …Mr Commissioner’, CIT, p. 1596 Page 211: Series of emails, CIT, p. 1628 Page 211–2: Cole and Long, CIT, p. 1628 Page 212: ‘On the face of it … emails’, CIT, p. 1629


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KICKBACK

288

Page 212: ‘Mr Long, I suggest … is false’, CIT, p. 1643 Page 212: Long’s acceptance of inflating price, CIT, p. 1648 Page 213: ‘I was … starving Iraqis’, CIT, p. 1658 Page 213: ‘I’ve lost … for lunch’, CIT, p. 1824 CHAPTER 29

Page 215: Emons agreement that he’d set up a scheme, CIT, p. 1885 Page 215: ‘Is it your position … organisation’, CIT, p. 3400 Page 215–6: ‘Were you aware …Yes’, CIT, p. 3402 Page 216: ‘Taking care of business in Baghdad’, Sydney Morning Herald, 3 February 2006, p. 1 Page 216: ‘A long time ago … Wheat Board’, CIT, p. 3473 Page 216: ‘aware that … by the UN’, CIT, p. 3502 Page 217: Flugge’s deafness, CIT, p. 3558 CHAPTER 30

Page 218: ACNielson poll, Sydney Morning Herald, 28 February 2006, p. 4 Page 218: LettersPage, Sydney Morning Herald, 4 February 2006 Page 219: ‘actual or … the commonwealth’, CIT, p. 3052 Page 219: ‘I think anybody … relaxed about it’, Alexander Downer doorstop press conference, London, 31 January 2006 Page 219: ‘post box’, CIT, p. 4438 Page 220: ‘You described … United Nations’, CIT, p. 4512 Page 220: ‘Were you aware … Program’, CIT, p. 4482 Page 220: ‘extraordinary tales … famous’, CIT, p. 4581 Page 220: ‘But he … smell a rat’, Mark Colvin, PM program, ABC Radio, 15 March 2006 Page 221: ‘This is bullshit’, CIT, p. 4587 Page 221: ‘His reply … its responsibilities’, CIT, p. 4590 Page 221: ‘But did you … [paying kickbacks]’, CIT, p. 4591 Page 222: ‘rigidly enforced’, CIE 584 Page 222: Courtney’s evidence anomalous , CIE 587


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289

ENDNOTES

Page 223: ‘It was very much … generally’, CIT, p. 4932 Page 223: ‘suppliers had no choice’, CIT, p. 4933 Page 223: ‘I believe … report it’, CIT, p. 4940 Page 224: Letter, CIE 578 Page 224: ‘explained the background’, ibid. Page 224: ‘You disagree with her’, ibid. Page 224: ‘Like a lot … our role’, CIT, p. 4642 Page 224: ‘I was looking … stood out’, CIT, p. 4649 Page 225: ‘We have written … I will’, CIT, p. 6311 Page 225: ‘He doesn’t … the government’, CIT, p. 6312 Page 225: ‘This commission … government’, ibid. Page 226: Matt Price, ‘PM ensures the blame will fall on AWB’, Sunday Telegraph, 16 April 2006, p. 34 CHAPTER 31

Page 227: Prime Minister John Howard, interview with Neil Mitchell, 3AW, 24 March 2006 Page 227: ‘there are one … with them’, CIT, p. 6308 Page 228: ‘I was pretty well snowed under’, CIT, p. 6440 Page 228: ‘I was working … department’, CIT, p. 6444 Page 228: ‘which in turn … from AWB’, ibid. Page 229: ‘ministerial responsibility’ CIT, p. 6445 Page 229: ‘Bear in mind … responsibility’, ibid. Page 229: ‘a highly respected major Australian corporation’, ibid., p. 6450 Page 230: Downer takes stand, CIT, p. 6529 Page 230: ‘And it was … companies’, CIT, p. 6531 Page 231–2: Downer and Agius, CIT, p. 6541 Page 233: ‘I don’t read … to read’, CIT, p. 6564 Page 233: ‘This was … US army’, CIT, p. 6537 Page 233–5: Cole and Frost, CIT, pp. 6582, 6588, 6592, 6593, 6597 Page 235: ‘the problem … wrong’, CIT, p. 6598


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KICKBACK

290

Page 236: ‘On behalf of AWB … proposition’, ibid. Page 236: ‘I had thought … wrong’, ibid. Page 236: ‘AWB was denying … my submission’, CIT, p. 6599 CHAPTER 32

Page 239: David Marr, ‘Ready for a fist but he only gets a feather’, Sydney Morning Herald, 14 April 2006, p. 1 Page 239: ‘It was public … his people’, CIT, p. 6636–8 Page 239: ‘open source’, CIT, p. 6636 Page 239: ‘Well, because … corruptly’, CIT, p. 6645 Page 240–1: David Marr, ‘Ready for a fist but he only gets a feather’, Sydney Morning Herald, 14 April 2006, p. 1 Page 241: ‘Thank you … excused’, CIT, p. 6647 Page 241: ‘the jig is up’, CIE 862 Page 241: ‘expressing a personal opinion’, CIE 933 Page 242: ‘determine … Government’; ‘The inquiry … role’, from ‘Push on Cole as Howard fronts up’, The Australian, 13 April 2006, p. 1 Page 242: Paige Taylor, ‘Grim farmers face off with Vaile’, The Australian, 28 April 2006, p. 2 Page 243: Interview with Felicity Johnston, Four Corners, ABC, 17 April 2006 Page 243: ‘very reputable company’, CIT, p. 6758 CHAPTER 33

Page 244: Quotes from Justice Young ‘AWB tricked the UN – judge’, The Australian, 19 September 2006, p. 1 CHAPTER 34

Page 246: David Marr, ‘Flugge fluent in denial until the end’, Sydney Morning Herald, 30 September 2006, p. 4 Page 247: Quotes from Flugge, TF


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291

ENDNOTES

CHAPTER 35

Page 250–1: ‘breach of domestic law’, CR, Vol. 4, p.201-319 Page 251: ‘I don’t believe … my ministers’, from ‘Cole’s dirty dozen face jail’, The Australian, 28 November 2006, p. 1 Page 252: ‘What you don’t know … you don’t know’, ibid. Page 252: Beazley, ibid. Page 252: Jim Kennan statement on behalf of Dominic Hogan, supplied to CO, 28 November 2006 Page 253: ‘Mr Lindberg is not a lawyer … criminal conduct’, CR, Vol. 4, p. 262 Page 253: Andrew Lindberg statement to reporters, 28 November 2006 Page 254: AWB press conference, Telstra Dome, Melbourne, 28 November 2006 Page 254: ‘the world cannot … Cole inquiry’, from ‘Split is unlikely to avert shake-up’, The Australian, 30 November 2006, p. 7 CHAPTER 36

Page 256: Sheridan, ‘AWB is no scandal’, The Australian, 30 November 2006, p. 10 Page 257: Andrew Lindberg statement to reporters, 28 November 2006 Page 258: Price, ‘PM ensures blame falls on AWB’, Sunday Telegraph, 16 April 2006, p. 34 Page 260: Rebecca Weisser, ‘Don’t blame me, it’s them’, The Weekend Australian, 8–9 April 2006, p. 21 Page 261: Note that Cole did not make findings about Downer, except that he did not know. He did not inquire into whether he could or should have found out. Page 261: Carlton, ‘Stupidity set to poetry’, Sydney Morning Herald, 2 December 2006, p. 38 Page 262: ACNielsen poll, ‘Most think government lied on AWB’, Sydney Morning Herald, Monday 4 December 2006, p. 6


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292

POSTSCRIPT

Page 265: ‘Wheat pair heroes, not villains: US officer’, The Age, 22 December 2006, p. 1 Page 267: ‘Saddam Hussein hanged in Baghdad’, New York Times, 30 December 2006, p. 1 Page 267: Bush, ‘The struggle for Iraq’, New York Times, 30 December 2006, p. 1


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ACKNOWLEDGEMENTS

It would be easy to look at my colleague at the Australian, Errol Simper, and think, oh yes, just another pretty face. I know better. Simper is certainly handsome, but he’s also the master. He sat beside me at the Cole inquiry for almost 10 months, snoring only occasionally. The rest of time, he contemplated the characters in the play before us and I believe he produced the finest copy that has ever been written on the subject of wheat. He also improved almost everything I wrote. Similar things could be said of Jennifer Sexton, who not for nothing is called ‘the Scoop’. There is no possible way that I could have written this book without Sexton’s wit, and Simper’s wisdom. I also don’t believe I could have done it without the full force of News Limited behind me. My editor-in-chief, Chris Mitchell, took a very dim view of the AWB scandal. He had no agenda; he simply wanted to know what had happened, how and why, and in the process, he worked me harder than I’ve ever worked in my life. For some reason, I enjoyed that about him. My chief-of-staff during the Cole inquiry was former Japan correspondent Stephen Lunn. He drove me absolutely nuts, calling me 20 times a day when I was trying to write for the paper, and write this book. In frustration, I sometimes put my mobile phone on vibrate but then I’d have to watch it tremble and wriggle across my desk at the Cole inquiry as he kept trying to get through. Sometimes, I’d get cross with Lunn. ‘Do you have to call me so often?’ I’d say. But really, where would I have been, without his passion for the story?


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294

There were others in the wheat club, among them Nick Cater, Clive Mathieson, Helen McCabe, Michelle Gunn, Paul Whittaker, Nick Leys, Brad Norington, Dan Box, Jane Summerhayes, the backbenchers and the sub-editors who corrected my mistakes too many times to count. Bill Leak’s cartoons were superb. Every photographer on the paper at some stage worked on the story, and they were magnificent. I would truly have been lost without Belinda Tasker (AAP), Catherine Clifford (ABC), David Marr and Marian Wilkinson (SMH), Nick Grimm and David Spicer (ABC TV), Rick Willis, and, strangely enough, Peter McBride of AWB, who loved to point out my mistakes. Cathy Gallagher is the dear friend who encouraged me to join the Australian in the first place, and who assures me it is possible to raise kids, write books, be a correspondent and make it to the ballet concerts, and I can’t thank her enough for her encouragement. My children, Michael and Chloe, inspired me by being so completely perfect. Rick Wilson and Leon Bradley are WA farmers who are absolutely right when they say they should be able to sell wheat to whomever they choose. Fiona Inglis took care of so many matters; Sue Hines and Andrea McNamara from Allen and Unwin and Alexandra Payne were skilled, patient, professional and kind. And then, as ever, there are the people I want to name but cannot: the wholly innocent grain growers, none of whom had anything at all to do with this scandal, but who suffered as it unfolded. They called from their tractors, shouting over the sound of the equipment as it roared across the landscape. There were also calls from bureaucrats, diplomats and officials, both here and overseas, who perhaps should not have talked, but who did. AWB employees, past and present, were invaluable, as were lawyers, who helped me in ways I won’t soon forget.


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295

ACKNOWLEDGEMENTS

And then there is my husband, Martin Whelan. I clearly remember one afternoon in April 2004, when my family was living in New York. I came up from my office in the basement and said to Martin: ‘You’ll never guess what. Somebody just called and told me that our own wheat board – the Australian Wheat Board – has been sending money to Saddam Hussein’s regime.’ He didn’t even blink. ‘I’m sure they were,’ he said. ‘Martin, come on,’ I said. ‘We’re at war with Iraq. Why would we send them money?’ ‘Why wouldn’t we?’ he said. ‘Saddam is corrupt. Probably everybody who deals with him has to be corrupt.’ I was sceptical, but he encouraged me. ‘Why don’t you chase it up?’ he suggested. ‘I bet you find I’m right.’ Martin? You were right.


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INDEX

A

Abbott QC, Michael 203 Abdel-Aziz Abdullah, Shaker 24 Abdel-Majeed No’man, Fawzia 24 Abdul Rahman, Yousif 37, 43, 46, 66–7, 91 Agius SC, John 190–1, 204, 228– 32, 262 calls extra witnesses 241 final submission 235–6 opening statements 205 and Tigris deal 206–7, 212 Aiken, Philip 54, 56, 89 Al-Absi, Othman 25, 26, 46, 79, 165, 166, 181, 238 Alia transportation company 23, 25, 26–7, 68–9 AWB resists port fee demands 76 costs not questioned by AWB 78 Hogan to sort out delays 79–80 Iraq part owner 24 Long denies it an Iraqi front 165


not mentioned to DFAT 61–3 paid in hard currency 67 payments direct to 56 Volcker inquiry 165–6 Zuhair suggests payment through 22–3, 26 al-Khawam, Hussein 24, 165–6 Allen SC, Duncan 203, 253 Almstrom, John 30, 32, 38–9 Amstutz, Dan 111–12 Anderson, John 130 Annan, Kofi 133, 137, 151, 179 Annan, Kojo 133 Armstrong, Zena 122, 123–4, 127–9, 134, 135, 163, 222–4 Aucher, Terry 38, 203 AusAID 109–10 Austrade 39–43, 75, 76–7 Australian Wheat Board (AWB) 35–6, 207, 125, 139 advantages of scam 79 Alia and Ronly payments 27, 43, 55–6, 67, 68–9, 154 answers US allegations 127–8 culture encouraged scam 78–9

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KICKBACK

and farmers 70, 155, 195–6, 242, 255 Iraq pays in gold 51–2 and ‘iron filings compensation’ 89–92, 104 kickback clause dropped 44 kickbacks a tax deduction 264 knowledge of scam 45–6, 71–3 letters to DFAT 64–6 to lose wheat monopoly 254–5 Project Rose 123, 150, 159 PSI investigation (US) 155–7 Saleh cuts deals in half 86–8 staff from kickback era dismissed 245–6 on Stock Exchange 3, 14, 69, 83, 208, 245 and Tigris transaction 58–9, 160 trucking fees increased 28, 37–8, 58 Volcker inquiry 161, 163–5, 169, 174–5 and war in Iraq 85–8, 100, 108–9 Australian Wheat Board and Cole inquiry anger at location 187 advised to come clean 196–8 legal team 191, 194, 197–8, 203


298

outcome 250, 254–5 plays the victim 197, 205 see also particular people B

Bali bombing 98 Barker QC, Ian 203–4 Barton, Rod 99 Baxter, Peter 119, 127, 129, 157 Beaumont, Robyn 203 Beazley, Kim 252 Blackshield, A.R. 242 Blix, Hans 99, 105 Bongiorno, Paul 200, 238–9 Borlase, Daryl 21, 71–3, 253 Boulten SC, Phillip 242 Bowker, Dr Robert 34–6, 188, 219–21, 235, 251 Box, Dan 199 Bracks, Steve 49 Bradley, Leon 70, 195 Bush, George H.W. 9, 68 Bush, George W. 10, 67, 81, 96–7, 105, 106, 107, 117, 126, 139, 154–5, 157–8 Butler, Sheila 201, 239 C

Calvert, Ashton 34, 76–7, 122 Canada complains to UN 2, 43 looks to undercut Australians 28

12/4/07 10:50:39 AM

299

near-exposure of scam 29–32, 42, 43 refuse to make illegal payments 243 Carlton, Mike 238, 261 Carter, Lachlan 203 Chalabi, Ahmed 118, 183 Chesterman, Scott 156 Chirac, Jacques 105 Clelland SC, Neil 203 Clifford, Catherine 200 Clinton, Bill 5, 99, 105 Cole QC, Terence R.H. 2, 64, 153, 189, 249 background 186–7 chosen by Howard 186 transparency essential 237 Cole inquiry Cole QC to lead 186–7 govt defence 188 govt knowledge of kickbacks 218–19 inquiry extended 219 opening statements 205 press 195, 196, 199–201, 218, 237–8, 243, 257 public reaction to 218 terms of reference 188, 189– 92, 218, 241–2, 244 treatment of witnesses 225 venue 187, 199 see also particular people


INDEX

Cole Report 250–1 Coleman, Norm 155, 159, 238 Colvin, Mark 220 Condon, Clinton 5 Condon, Miles 191, 194, 195, 214, 215–16 Cooper, Dr Jim 123, 150, 156, 163, 164, 182, 197, 203, 245, 250 Corbett, Phillip 202 Cosgrove, General Peter 122 Courtney, Jill 61–2, 222 Cracknell, Bob 89, 91 Cuddihy, Don 224 D

Daoud, Zuhair 46–7 arranges payment in gold 51–2 background 6, 12 dealing with Canadians 30 death 10, 48, 56–7 director-general of IGB 6 and Flugge 216 friend of Stott 50–1 prefers Australian wheat 7 replaced on IGB 37 suggests payment through Alia 22–3, 26 timeline for first deal 16–17 and transport costs 7–8, 11–13, 15, 21, 22

12/4/07 10:50:39 AM

KICKBACK

Daschle, Tom 126, 127 Dauth, John 34, 77, 139, 161, 162 Davis, Gordon 245, 254, 257 Department of Foreign Affairs and Trade (DFAT) 60 claims trucking fees not discussed 63–5 Cole inquiry defence 219, 222, 224–5 Cole report on 250–1 first deal not questioned 18 reference to trucking companies 224 reply to Stott on demurrage 64–6 Stott wants approval for trucking fee 59, 61–3 warnings about kickbacks 75, 76–7, 122 Donaldson, Peter 266 Donges, Ian 245 Downer, Alexander 2, 86–7, 156–7 Armstrong informs of kickbacks 135–6 and AusAID payment for wheat 109–110 Cole inquiry 203, 219, 225, 229–35 comments before Cole inquiry 188 culpability 258–62, 267–8


300

Lindberg letter about fees as kickbacks 153–4 Moules warns of UN rumours 76–7 no wrongdoing if information hidden 251–2 and US takeover of markets 110–11 and Volcker inquiry 160–1, 167, 168, 169–71, 172 on war against Iraq 97–8, 102 Drake-Brockman, Jane 62, 65, 66, 188, 203, 224 E

ElBaradei, Mohamed 99 Ellis, Bob 238 el-Obedy, Kahlid 91 Emons, Mark 3, 6, 7, 42, 50, 136, 180–1 agrees to increased trucking fee 37–8 authorises payment to Alia 25, 26–7 and breach of UN sanctions 25–6 Cole inquiry 17, 194–5, 203, 215, 250 dismissed by AWB 244–5 on dropping kickback clause from contracts 44–5

12/4/07 10:50:39 AM

301

first discusses transport costs 3–4, 7–13 new deal with Saleh 47, 48 problem of payment 16, 17, 18, 20, 22, 23 relationship with Yousif 38 rollover/whistleblower 194–5, 215 tells UN all above board 43–4 warns Yousif payments must stop 46 Evans, Gareth 51 F

Faleh, Khawaji 146–7 farmers and AWB 70, 155, 195–6, 242, 255 Fawzy Qatishat, Mo’tasset 24 Fayle, Pamela 77 Flugge, Felicity 45 Flugge, Trevor 208 background 19 becomes a hero 265, 266 chairman AWB 19, 83, 216 Cole inquiry 203–4, 216–18, 246–7, 250 Cole inquiry ‘a storm in a teacup’ 183 consultant to AWB 83 dismissed by AWB 198, 245 first visit to Iraq for AWB 20 gift of mat 21, 248


INDEX

Nicholas raises allegations with 39–41 Overington talks to 247–8 photo with pistol 113–14, 216, 265 to protect market from US 111–15 to try to save deal 88–92 on US allegations of kickbacks 120 Volcker inquiry 165 and Zuhair 216 Forrest QC, Terry 203, 225, 233–6, 241 Forsyth, Dawn 141, 143 Foschia, Liz 183 Fraser, Bernie 51, 52 Freeman, Frances 119, 124, 157 Fuller, Dr Richard 50, 197, 203, 253 G

Gauthier, Jean Benoit 30 Gawenda, Michael 238 Geary, Peter 14, 163, 203, 245, 250 Gillingham, Jill 50, 196, 203 Goodacre, Tim 53, 254 Gordon, Miles 38 Grattan, Michelle 238 Green QC, Nicholas 203 Greenblatt, Mark 156 Grimm, Nick 200, 238

12/4/07 10:50:39 AM

KICKBACK

H

Hagstrom, Jerry 124, 126, 143 Hargreaves, Peter 155–6, 197, 203 Harkin, Tom 126 Harvey, Peter 200 Hewitt, Joanna 34 Hill, Robert 90, 122 Hockey, Darryl 119, 120, 124, 130–4 Hogan, Anisa 3, 23, 66, 163 Hogan, Dominic 2, 54, 56, 82, 136, 263 Cole inquiry 16, 182–3, 203, 250, 252 concerns at demurrage 59 dealing with inflated kickback 84 dealing with Yousif over handling fee 67–8 and delays with Alia 79–80 dismissed by AWB 245 first discusses trucking costs 3–4, 6, 8–13 with Long to meet Saleh 84–6 meeting with Stott over kickback 73 and money owed to Tigris 58 and payment details 14, 15, 16, 20, 21–2 relationship with Stott 71 report from Iraq identifies kickback 71–3


302

scam ‘no skin off our nose’ 79 stress leave 88 Volcker investigation 163 Holmes, Jonathon 243 Howard, John 158, 169 announces inquiry 178–9, 186 Cole inquiry 203, 219, 236, 238–41 keeping market from US 115 Moules cables 75, 76–7 no wrongdoing by ministers 251 pressure on 227 public perception of involvement 218 stripping AWB of monopoly 254–5 Volcker inquiry 162, 175–6 and war against Iraq 81–2 Hughes, Phil 203 Hulls, Rob 49 Hume, Edwin 194 Hussein, Ouday 106, 197 Hussein, Qusay 106 Hussein, Saddam 4, 55, 105, 106–7, 108, 130 I

Ingleby, Paul 38, 203, 250 Innes-Brown, Mark 170 intelligence agencies 221–2

12/4/07 10:50:40 AM

303

Iraq oil for food program 5, 10–11, 17, 75, 121 part owner of Alia 24 wants payment through Alia 22–4 UN sanctions 4–5 UN weapons inspections 98–9, 105, 137 war in 81–2, 85–8, 97–8, 100, 101, 102, 108–9 Iraq Task Force 122 Iraqi Grains Board (IGB) claims wheat contaminated 89–92 to cover Tigris debt 102–3 transport costs first raised 2, 6 Zuhair replaced 37 ‘iron filings compensation’ 89– 92, 103, 104 J

Jamieson, Charles 42 Johnson, David 203 Johnston, Felicity 30–1, 66, 238 assured no kickbacks 44 evidence Iraq corrupting program 75 finds irregular contract 38–40, 42 video link to Cole inquiry 243 Johnstone, David 203


INDEX

Judd QC, James 264 represents AWB 191, 197, 202–3, 236 K

Kaye, Byron 200 Keating, Paul 51 Kelly, Mike 151–3, 241 Kelly, Norman Davidson 53–4, 59, 89–90, 103, 250 Kennan, Jim 203, 252 Kennett, Jeff 49 Kenny, Chris 168, 260 Kerry, John 158 Khalaf Lafta, Adaal 165 kickbacks anxiety of Hogan and Borlase 71–3 AWB culture encouraged scam 77–8 Canadians learn of 29–32, 42, 43 ‘iron filings compensation’ 89–92, 103, 104 mechanism set up 14–28 Moules alerts Canberra 32–4 part of trading in the Middle East 256–7 Project Rose 123, 150, 159 US investigate (PSI) 155–7 see also Volcker inquiry; Volcker report

12/4/07 10:50:40 AM

KICKBACK

Kinley, David 242 Kupa, Miles 34 L

Lacava QC, Paul 203, 224 Langhorne, Peter 42 Latham, Mark 157 Lee, Tracey 200 L’Estrange, Michael 167, 168 Lewis, Steve 238 Liebmann, Steve 100 Lindberg, Andrew 83, 167, 175 admits mistakes made 157 background 49 asks for help against PSI 156–8 Cole inquiry 203, 206–8, 246, 247–9, 253 defends pricing of AWB contracts 120 discusses reduced wheat deals with Downer 86–7 dismissed by AWB 245 earnings as managing director 208–9 and ‘iron filings compensation’ 104 letter to Downer about fees as kickbacks 153–4 lists AWB on stock exchange 69 no comment about allegations 145


304

resigns as AWB managing director 208 to try to save deal 88–92 Volcker inquiry 164 Long, Michael 103, 207 becomes a hero 265–6 Cole inquiry 83, 203, 210–13, 250 concludes trucking arrangements in order 82–3 and Davidson Kelly 89–92 dismissed by AWB 245 with Hogan to meet Saleh 84–6 initiates Project Rose 123 and ‘iron filings compensation’ 104 photographed with gun 113–14 gets Puckett memo 121–2 rehired by AWB 214 replaced in Iraq 130–1 to secure market from US 112–15 takes over from Stott 82–3 tries to save deal 88–92 Volcker inquiry 165 Lyons, Jessica 203, 253 M

McBride, Peter 120, 140–1, 145, 149, 196, 247–8

12/4/07 10:50:40 AM

305

McConville, Andrew 36, 235 McGauran, Peter 254, 266 McManus, Gerard 200 Maiden, Samantha 255 Marr, David 200, 204, 239, 240–1, 246–7, 263 Mason, Sir Anthony 172 Medhi Saleh, Mohammed 20–1, 47, 57–8, 84–8, 91, 116, 154, 159, 164 Milton, Ben 161 Mitchell, Chris 176, 180, 188 Mitchell, Neil 227 Moffet, Christopher 83, 198 Moore, Matthew 200 Moules, Bronte 32–4, 44, 243 cables 41–2, 66–7, 75 Cole inquiry 218, 219–20 Volcker inquiry 163, 164 Murtada Ahmed al-Khalil, Ahmed 159 N

Neil SC, Ian 203 Nell, Gregory 191 Nicholas, Alistair 39–42, 218

INDEX

compromised by Alia payments 27 UN administration 133 UN report on 74, 75 US report on 118, 138 Orr QC, Robert 203 O’Sullivan, Paul 167 Overington, Caroline 146–8, 149, 176, 263 Owen, Graeme (‘Slug’) 14, 18, 20, 22–3, 26, 38, 203 P

Pash, Robin 175, 200 Peacock, Robert 242 Peavey, Rosemary 203, 253 Polson, Peter 196 Powell, Colin 100, 106, 108, 119, 139 Prescott, Bob 53 press at Cole inquiry 195, 196, 199–201, 218, 237–8, 243, 257 Price, Matt 225–6, 238, 258 Priest QC, Phillip 203 Project Italy 52–4 Project Rose 123, 150, 159 Puckett, Captain Blake 121, 123, 222–3, 233

O

Officer, Nigel 14, 16, 25, 38, 50, 82, 203, 204, 250 oil-for-food program 5, 10–11, 17, 121


Q

Quennell, Chris 46, 150, 203, 253–4 Quinn, John 135, 152

12/4/07 10:50:41 AM

KICKBACK

R

Ralph, John 267 Rashid, Amer 159 Rifkind, Malcolm 90 Robertson SC, Alan 77, 203 Rogers, Murray (‘Muzz’) 16, 18–19, 50 Cole inquiry 203, 206, 250 first letter from Alia 25 Ronly Holdings 55, 68–9 Rudd, Kevin 178, 179–80, 188, 227, 252 Ruddock, Philip 122, 242, 267 S

Sadallah 58–9 Saleh Abdul Nabi, Mahmood 165 Sandman, Dr Peter 196–8 Saul, Ben 242 Saunders, Lieutenant Colonel Berne 30–1 Scales, Sarah 14, 203, 254 September 11 attack 81–2, 98 Sevan, Benon 32–3, 76 Sexton, Jennifer 200 Shepherd, Ray 156 Sheridan, Greg 256 Silkstone, Dan 200 Simper, Errol 200 Skelton, Russell 238–9 Skuthorpe, Lucy 200 Smith, Ian 197


306

Snowball, Tim 14, 40, 42–4, 76 Cole inquiry 43, 77, 203, 254 Spencer, David 34, 77 Spicer, David 200 Spratt, Charles 110 Stewart, Brendan 83, 167, 171, 181–2, 254 Stott, Charles Eric 11, 50, 53, 79 Alia not mentioned to DFAT 62 changes role at AWB 82 Cole inquiry 62, 203, 250 and demurrage bills 55–6, 57–8, 59 and DFAT approval for trucking fee 59, 61–5 and direct payments to Alia 56 dismissed by AWB 245 friend of Zuhair 56–7 and Hogan 71, 73–4 and Iraq gold payment 51–2 and Project Italy 52–4 recouping Tigris money 56, 58–9 Stuart, David 226 T

Tasker, Belinda 200 Taylor, Gary 203 Taylor, Paige 242 Thame, John 159–60

12/4/07 10:50:41 AM

307

Thatcher, Margaret 10 Thawley, Michael 119, 156, 157–9 Thomas, Alan 77 Thompson, Leonie 164, 194 Tighe, Michael 203 Tigris Petroleum 54, 160 IGB to cover 102–3 Iraq acknowledges deal 102–3 no mention in Volcker report 197 recovery of debt to 89–90 set up by Davidson Kelly 54 Stott’s help to recoup 56, 58–9 to take over BHPP’s debt for wheat 54, 56 Tracey QC, Richard 153 Tracy, Alan 111, 119, 124, 126, 142 Trembath, Brendan 200 Truss, Warren 40–1, 76, 127, 167 U

United Nations (UN) administration of oil-for-food program 133 Canadians told deal forbidden 30, 32 Iraqis ask why Australia talking to 77–8 Johnston examines AWB contract 30, 31, 38–9


INDEX

report on oil-for-food program abuse 75 restarts program after war 118 role questioned after war 137 Volcker inquiry 151, 154 weapons inspections 98–9, 105, 137 United States (US) and corruption of oil-forfood program 118, 138 distrusts AWB 132–3 PSI investigation 155–7 questions AWB contract pricing 119–20 senators take fight to Bush 126 tactics to steal wheat trade 133, 260 US Wheat Associates 141, 142–4 V

Vaile, Mark 91, 127, 139, 156–7, 195, 242 blames UN not AWB 175 Cole inquiry 203, 219, 227, 228–9 culpability 262 informed of kickbacks 135 Moules cable of UN rumours 75, 76–7 on US allegations 120–1 warnings about kickbacks 122

12/4/07 10:50:41 AM

KICKBACK

Venamore, Heidi 122, 152, 241 Vincent, Michael 200 Volcker, Paul 34, 151 Volcker inquiry 151, 155, 156, 159, 160, 163–9 Volcker report 75–6, 169, 172, 174, 197 W

Wallbanks, Michael 78 Walsh, Nonee 200 war in Iraq 81–2, 85–8, 97–8, 100, 101, 102, 108–9 Watson, Michael 14, 26, 44, 45–8, 200 Cole inquiry 16, 214, 250 dismissed by AWB 245 rollover/whistleblower 215–16


308

Weisser, Rebecca 260 Wensley, Penny 32, 76 Whitwell, Chris 103, 123, 124, 125, 128, 134, 254 Wigney, Michael 191 Wilkinson, Marian 200, 263 Williams, Brad 167 Willis, Rick 200, 239 Wilson, Nigel Edmonds 203, 253 Wilson, Rick 195–6 Wright, Colonel Paul Tracey 265 Y

Young, Neil 244 Z

Zwier, Leon 197

12/4/07 10:50:41 AM

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