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Government role in AWB scandal will come way or another

I move:

That the following matter be referred to the Foreign Affairs, Defence and Trade References Committee for inquiry and report by 30 March 2006:

The involvement of the Australian Wheat Board (AWB) in the Iraq Oil-for-Food Programme between 1999 and 2003, and consequent revelations that such involvement led to payments that were directed towards the Iraqi Government, with particular reference to the conduct of Commonwealth regulators including the Department of Foreign Affairs and Trade, the Wheat Export Authority and any other relevant agencies.

The AWB is the exclusive manager and marketer of all Australian bulk wheat exports, through what is known as the single desk system. It is not my purpose here to attack the structure or the make-up of the AWB. While some have taken the opportunity to call for the abolition of the single desk in response to the revelations about the oil for food program, I make it clear that this is not my intention. Over nearly seven years of the oil for food program, the Australian Wheat Board supplied nearly 12 million tonnes of wheat over 41 contracts and 285 shipments. Contracts worth $US2.3 billion were signed between 1997 and 2003 and were paid out of an escrow account operated by the United Nations from Iraqi oil revenues.

Two years on, the corruption surrounding the Iraq oil for food program is a matter of record. It has tainted the United Nations at the highest level, a situation laid bare by the independent inquiry committee into the Iraq oil for food program, chaired by Paul Volcker. The Volcker committee established that the government of Iraq sold $US64.2 billion worth of oil to 248 companies and, in turn, 3,614 companies sold $34.5 billion worth of humanitarian goods to Iraq. Along the way, Volcker estimates the Iraqi government raked off around $US1.8 billion in illegal surcharges, after sales service fees and inland transportation fees.

The AWB's part in this epidemic of corruption, knowingly or unknowingly, was a large one. The AWB was the single largest supplier of humanitarian goods under the program. As of 1999, the Iraqi Grain Board began to demand the company pay internal transportation fees to Alia, a Jordanian trucking outfit which, it transpires, was a front company with no trucking fleet and which was partly owned by the Iraqi transport ministry. Between 1999 and 2003, without signing a contract or performing any due diligence on Alia's background, the AWB paid Alia $US221.7 million out of the UN escrow account for trucking fees and after sales service. Ten months after this deal commenced, the AWB contacted the Department of Foreign Affairs and Trade to check whether what it was doing was legal.

Apparently, the word back from DFAT was 'No problem'. Why did DFAT not check with the UN?

It has now been revealed-in fact, it was in today's paper-that DFAT officials accompanied AWB officers to Iraq to help negotiate the wheat contracts which are now under investigation. This morning the Australian reported that the then Minister for Agriculture, Fisheries and Forestry, Warren Truss, was being given confidential briefings on the incentives that the AWB was offering to its buyers in Iraq and elsewhere. How did it happen that DFAT or the government did not start to worry about what was going on? By this time, the UN had already concluded that deals with Alia would be a breach of sanctions, but we are told that this information was not passed on to the Australian government.

As far back as January 2000, a UN customs expert warned Australian diplomats that the Iraqi government was demanding $US700,000 from the Canadian Wheat Board to cover transport costs in Iraq. The Canadians raised this a number of times, but no-one seems to have found it odd that the AWB was up to its neck in a similar arrangement. The so-called shipping costs began at around $12 per metric tonne in 1999 and were hiked to $56 per metric tonne by 2003.

At a time when the Australian government was being drawn deeper into an invasion of this troubled country, Alia was transferring nearly a quarter of a billion US dollars back to the Hussein regime on behalf of an Australian company.

The AWB has been at pains to point out that the Volcker report could not conclude that the AWB was knowingly involved in this colossal scam. Nevertheless, his report provides a worrying paper trail that exposes some extreme irregularities in the deal. In a nutshell, he found that if the AWB did not know what was going on, it certainly should have. By extension, government officials surely should have been aware of what was happening. My question, which this motion goes to the heart of, is: where were the regulators?
The United Nations has submitted itself to an embarrassing but long-overdue review of the program. According to a media statement by the UN Secretary-General on 27 October 2005:

... thorough reform of the management structures and practices of the United Nations, especially those that relate to oversight, transparency and accountability, is vital.

The Attorney-General duly announced an inquiry into certain Australian companies on 10 November, following calls from the Australian Greens and the Australian Labor Party for an immediate investigation. According to the Attorney-General's media release of the same date, the inquiry will have the powers and immunities of a royal commission. If the UN is getting its house in order and the government's inquiry into the AWB is under way, that only leaves one stone unturned: the regulatory bodies charged with preventing this sort of behaviour.

For all we know, there may be perfectly good reasons why government officials in DFAT, the Wheat Export Authority, and the former cabinet minister did not know about this and why concerns were not raised, but we will not get to find out under the terms of reference of the government's inquiry, because they have exempted themselves from this scrutiny. AWB executives and former officials have said that they welcome this inquiry, which is in stark contrast to the deafening silence coming from the government. Yesterday in the House of Representatives, Minister Mark Vaile noted:

... the government has announced and established a commission of inquiry with significant powers as far as this issue is concerned, and that is about to begin. We should leave it to that commission of inquiry to seek out the information and the evidence...

The minister knows full well that this commission of inquiry has no power to investigate the role played by government officials. There may be nothing to hide, but the government are certainly giving us the opposite impression.

I attempted to put these questions to the Chairman of the Wheat Export Authority and his officials during supplementary estimates hearings last month, but was told at the time by the chair of the estimates committee Senator Bill Heffernan that the proper time for such questions would be through the government's inquiry. I am not having a go at the chair, because he obviously genuinely believed at the time that the inquiry, when called, would be a full inquiry. Unfortunately, that is not so. The government has specifically excluded questions about the role of Commonwealth regulators; it is strictly concerned with investigating what the AWB knew.

The points I did get to make during estimates raised more questions than answers. The WEA is in an interesting position. When the Australian Wheat Board was privatised in 1999, the WEA was hived off as its regulating body, with responsibilities under the Wheat Marketing Act of 1989 to, amongst other things, 'monitor, examine and report on the performance of AWB'. It has a role in monitoring compliance with the conditions of export consents issued, including pricing performance, supply chain and the operating environment. I do not accept the argument that, because the Wheat Board was privatised in 1999, all government responsibility ends there. The AWB holds a unique position, entrusted in large part with the welfare of nearly all Australian wheat growers as a consequence of its collective nature. This is why it has a regulatory body solely devoted to its activities.

Somehow, a quarter of a billion US dollars flew under this supposed regulatory radar, not into the pockets of AWB or Australian wheat growers but into the bank vaults of Saddam Hussein, who was being accused at the time by our government of being on the verge of blowing up the world. During estimates hearings, Senator Heffernan, the chair of the committee, assured me that we would leave no stone unturned to get to the bottom of this scandal. In moving this motion, I direct the question to the coalition and the members opposite: why have we only half an inquiry? What role did government officers and regulators play? Why weren't gigantic warning signals rung when it is quite obvious that DFAT officials were in Iraq at the time that these contracts were being negotiated? This motion provides the Senate and the people of Australia with an opportunity to hear the other half of the story. This motion, as amended, does not cover the ground of the inquiry about to commence under the leadership of Mr Cole; it looks at the other side of the issue that the government refused to examine in this inquiry. I commend this motion to the Senate.


Foreign Affairs, Defence and Trade References Committee

Senator SIEWERT (Western Australia) (5.31 p.m.)-

I wish to make a few comments to wrap up. Senator O'Brien and Senator Stott Despoja were right: I moved this motion on 8 November, which was before the government called its inquiry on 10 November. I left it on the Notice Paper because the government's inquiry is not satisfactory. It does not fully investigate all the things that need to be investigated in this circumstance.

A very senior ex-government official, who probably would not want me to name him, once said to me-and he used vernacular which is not appropriate in this chamber, so I will try and substitute a word- 'if it ever comes to deciding whether something was a stuff-up or a conspiracy, go for the stuff-up'. Even if I went for the stuff-up in this process, shouldn't the government be deeply concerned that the regulation and the regulatory process have failed? They failed-$US221.7 million flew to the Iraqi regime.

That is a failure in regulation. Don't the government want to get this right? Don't they want to see where the process failed? The Cole commission will not do that. It will not look at the government regulators involved. So why don't they want to get it right? Even that question has to be asked: why don't they want to see where the problems are and fix them?

The point was also made that we got a chance in estimates. We did not. In estimates Senator Milne, Senator O'Brien and I were asked to stop questioning because we were told this would come out in any government inquiry. So we only got to ask a limited number of questions to the Wheat Export Authority.

Senator McGauran-It went on for hours.

Senator SIEWERT- I am sorry: I was there. I know what I was told and I was told that this would come out in the inquiry, and it did not. We stopped asking questions. We respected the fact that we were asked to stop asking questions because it would come out in the inquiry. It will not, and that is why we need this Senate inquiry to fully investigate this side of what happened. As I said, let us look at what stuff-ups occurred. Let us try and fix it because we never want this to happen again-I am not even going to speculate on the circumstances in which this could happen again. We want to know why regulation failed. If the WEA processes are not adequate to pick this sort of thing up, it needs to be fixed. If DFAT's processes are not adequate to fix this up, it needs to be fixed. That is why we need this inquiry, and nothing that I heard from the other side of the chamber convinced me at all that this inquiry is not needed.

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