AWB Limited - Oil For Food Scandal

Oil For Food Scandal

Previously a low profile organisation, the AWB made headlines in late 2005 when it was alleged that it had knowingly paid kickbacks to the Iraq Government, in violation of United Nations sanctions and Australian law. Following the Iraqi invasion of Kuwait in 1990, the United Nations had imposed a financial and trade embargo on Iraq. However, after facing criticism over the humanitarian impacts of the sanctions, the UN from 1995 until late 2003 allowed Iraq to trade oil on the world market in exchange for food, medicine and other humanitarian needs (see Oil-for-Food Programme).

Despite this, at the insistence of the Iraq government of dictator Saddam Hussein, the AWB agreed to pay 'transportation fees' of around $A$290 million. This money was paid to a Jordanian transportation company, Alia. Alia kept a small percentage of the fees, and paid the remainder onto Saddam's government. This breached the sanctions placed on the Iraqi regime.

The government-sanctioned Cole Inquiry into the company's role in the scandal has been completed and was tabled by Attorney-General Philip Ruddock on 27 November 2006. The report found that from mid-1999, AWB had knowingly entered into an arrangement that involved paying kickbacks to the Iraqi government, in order to retain its business. The Inquiry recommended that 12 people be investigated for possible criminal and corporations offences over the scandal.

At the height of the investigation, the single-desk arrangement from which AWB benefits came under criticism. In 2006, the Australian Grain Exporters Association asked the Government to remove AWB's monopoly export powers. The Oil-for-Food scandal cast doubt among some grain exporters over the trust placed in the company, especially as they lost the ability to export to Iraq during the length of the Cole Inquiry, losing one of their biggest markets.

The scandal resulted in international condemnation and litigation. On 11 July 2006, North American farmers claimed $1 billion in damages from AWB at Washington DC, alleging the Australian wheat exporter used bribery and other corrupt activities to corner grain markets. The growers claimed that AWB used the same techniques to secure grain sales in other markets in Asia and other countries in the Middle East. The lawsuit was dismissed in March 2007.

In August 2009, the Australian Federal Police dropped their investigation into any criminal actions undertaken by AWB and others in this matter. This decision came after Paul Hastings QC declared the prospect of convictions was limited and "not in the public interest". The Australian Securities and Investments Commission then proceeded with several civil cases against six former directors and officers of AWB. Two have been against Andrew Lindberg, AWB's former head. Both are is still in progress. Another civil case was bought by shareholders of AWB, and was settled out of court for $39.5 million in February 2010.

Australia's government has distanced itself from the payments to Saddam Hussein's regime, given Australia's contribution to military action against Hussein in the 2003 invasion of Iraq. Andrew Lindberg resigned as managing director on 9 February 2006 and from the board of directors on 22 February 2006 under intense public and media pressure.