'Bribes in Iraq' probe focuses on Canberra

By Sundeep Tucker
January 18, 2006
The Financial Times
Original Source: http://news.ft.com/cms/s/b5a0fb6a-87c6-11da-8762-0000779e2340.html

The official inquiry into whether three Australian companies paid huge bribes to former Iraqi president Saddam Hussein's regime could yet prove embarrassing for Canberra after it emerged that investigators are scrutinising the government's role in the affair.
The commission of inquiry, which began in Sydney this week, was set 
up by John Howard, Australia's prime minister, following last November's report by Paul Volcker into the United Nations' discredited 1996-2003 oil-for-food programme. The report alleged that AWB, Australia's national wheat exporter, paid US$220m (¬ 182m, £125m) in kickbacks to Iraq's government, the largest amount of any of the 2,200 companies worldwide that dealt with the Iraqi regime.
Mr Howard restricted the inquiry's terms of reference to the conduct of AWB and two otherAustralian companies, a move criti
cised as an attempt to distance the government from the scandal. However, John Agius, senior counsel to the inquiry, disclosed yesterday his team had been examining the role played by the Department of Foreign Affairs and Trade and that evidence in relation to those investigations will be called in the course of the hearings. The inquiry is expected to last at least four weeks.
AWB claims the department approved its use of Jordanian-registered trucking companies to distribute its wheat in Iraq.
However, the payments ended up being made to a phantom trucking company and were funnelled to Mr Hussein's regime.
The government has resisted calls made by Australia's opposition Labor party for Mr Howard, Alexander Downer, foreign minister, and Mark Vaile, trade minister, to be cross-examined at the inquiry. Mr Vaile yesterday told a radio interviewer that the government had no idea that AWB was paying kickbacks to Mr Hussein's regime.
The inquiry yesterday cross-examined Andrew Lindberg, AWB chief executive, over a 10 per cent after sales service fee levied on AWB in 2000 by the Iraqi government to extract more revenue from the UN's oil-for-food escrow fund. Mr Lindberg denied any knowledge of the fee when questioned by the UN last year and repeated his assertion in a preliminary statement to the inquiry last month.
But in a supplement to his statement given to the commission last Friday, he admitted he had recently become aware of the fee. Mr Agius and Terence Cole, the presiding judge, criticised Mr Lindberg's U-turn and his apparent failure to investigate the matter earlier.
Yesterday's events came as the Paris-based Organisation for Economic Co-operation and Development called on Canberra to tighten its bribery laws and to stop Australian companies claiming tax deductions on small bribes paid to overseas officials to clinch deals.
In a review of the country's anti-bribery sanctions, the OECD said Australia had improved its approach since 1999 but should close off a tax break for facilitation payments.

It also called for higher fines for those involved in bribing foreign officials and recommended that companies caught out should be banned for bidding for government contracts.