Paul McIntyre: PM fights moves to drag Canberra into wheat scandal

Who would want to be an Australian wheat farmer? Yes, there's the tantalising prospect of driving a John Deere tractor bigger than Saddam Hussein's old palace bedroom, but then you've got to deal with the fallout of flicking the former Iraqi dictator secret kickbacks for buying your crop.

Allegations have been flying thick and fast for the past three weeks in Australia as Commissioner Terence Cole, QC, presides over an inquiry into the nature of secret payments made to Hussein's regime by the former statutory authority, the Australian Wheat Board - a public company since 1999 owned primarily by Australian wheat growers.

For a couple of weeks the inference and angling at the Cole inquiry has been that the AWB paid Iraqi officials up to A$300 million in kickbacks during the United Nations-controlled oil-for-food program after the first Gulf War via a Jordanian trucking company partly owned by the Iraqi regime.

Indeed, the Cole inquiry follows a UN report last October which accused the AWB of funnelling about $A290 million to Hussein's regime through the UN's oil-for-food program and allegations in 2003 from the US that funds from Australian wheat contracts were being redirected back to Iraq (the then Australian ambassador to the US successfully blocked attempts for a US congressional inquiry, claiming the allegations were part of a "smear campaign" by US commercial interests).

Until this week there was not a lot to pin on senior AWB executives or government officials about the scandal. Certainly, there were a few small firecrackers going off but no smoking gun.

Then along comes Mark Emons, AWB's former head of the Middle East desk in 1999 who triggered all kinds of headlines after signalling that the AWB's then chairman, Trevor Flugge, managing director Murray Rogers and chief financial officer Paul Ingleby, were aware of the dodgy arrangements.

Emons told the inquiry he had discussed the payment with Flugge of an imposed US$12-per-tonne trucking fee that could have been a kickback. "This fee was set by the Iraqi Grains Board," he said. "There was no doubt in my mind that somehow or other it [the trucking fee] was going to end up with an Iraqi." Despite his concerns, Emons said Flugge told him: "As long as it is not costing AWB any money, you have to find a method of paying it."

The AWB has admitted to the Australian Government inquiry that it inflated wheat prices to cover extra payments - called trucking and service fees - but said the Iraqi grain board told AWB the payments were UN-approved

The inquiry also heard this week of an email sent from an AWB executive to Zena Armstrong of the Australian Department of Foreign Affairs and Trade's Iraq taskforce on June 10, 2003. The email contained a memorandum from the Iraq provisional government to all ministry advisers saying oil-for-food contracts had been artificially inflated by 10 per cent as a mechanism of diverting funds to the Hussein regime. The instructions in the email were to review such contracts with a view to reducing their total value by 10 per cent and allow others that had already been approved by the UN to be refunded from a UN escrow account.

"We need to know what percentage kickback or after-sales service was involved under the extra fees category," the email said.

Opposition foreign affairs spokesman Kevin Rudd said on Thursday the memorandum was proof of a cover-up by the Howard Government. "John Howard's attempted cover up of this A$300 million wheat-for-weapons scandal collapsed in a heap today," he said.

"How could Howard in October 2004 have instructed our ambassador in Washington to go and block a US congressional investigation into the AWB when more than a year before it had received clear information of massive kickbacks from wheat sales in Iraq going straight to the Hussein regime?"

Opposition Leader Kim Beasley said Labor would hold a Royal Commission into the affair if it won office.

Despite all the huff and puff, however, Prime Minister Howard was yesterday boldly challenging those trying to draw the Government into the scandal, and particularly the 2003 email sent to DFAT from the AWB's global head of sales and marketing, Michael Long.

"I did not know, my ministers did not know and on the information that I have been provided and the advice I have received from the Department of Foreign Affairs and Trade I do not believe that the department knew that AWB was involved in the payment of bribes," Howard said yesterday.

Although there were expectations the Cole inquiry would seek to expand its terms of reference to include Government officials, Howard said it was unlikely based on conversations he had in the past two days with Commissoner Cole. Rather, it was likely the terms of reference would expand to investigate BHP Billiton's activities in Iraq in the same period.

So, the only conclusion one can make at this stage of the inquiry is that earning a buck from wheat has little to do with driving dirty big tractors.

* Paul McIntyre is a Sydney journalist