Australian inquiry into oil-for-food scandal stretches to Pakistan

SYDNEY (AFP) - The Australian wheat exporter caught up in the
Iraq oil-for-food scandal could potentially also have made illegal payments to agents in Pakistan to ensure contracts, an inquiry heard.

The commission of inquiry into the AWB (Australian Wheat Board) heard that the company granted legal indemnity to two employees because they were worried that payments made to two agents in Islamabad and Karachi could amount to bribing foreign officials.

The company's internal documents reveal that the Pakistani agents received unusually high payments -- with one apparently paid four million US dollars after extracting 4.00 US dollars per tonne for a one million tonne shipment of wheat.

An internal audit report noted that the major risk with such large transactions was they could enable the agents to make payments to Pakistani officials.

The report also revealed that one Pakistani agent told AWB officials that "payments of outstanding receivables" from the Pakistan government would not proceed if AWB's deal with him was terminated.

The two former AWB employees, who cannot be named, insisted on legal indemnity when they left the company.

The audit report noted that one of the employees "stated that if he did not obtain an indemnity he would go to lawyers" in relation to the Pakistan payments.

The release documents for the two employees were signed by AWB chief executive officer Andrew Lindberg.

They contain the clause: "AWB acknowledges that it (by its board and chief executive officer) authorised agency payments during the period 15 December 1999 to 28 June 2000 to overseas agents for sales."

Asked about the Pakistan payments during Friday's hearing, Lindberg said he did not recall whether he had been advised that the payments were illegal.

"I was advised that agency payments had been made; I acted on the advice I received," he said.

"I believe that advice was that this release ... didn't protect them to the extent that they did things that weren't within the approved policies or were unlawful," he told the inquiry.

Australian Prime Minister John Howard called for an inquiry into AWB last year after it was named as one 2,200 companies involved in paying kickbacks to the former Iraqi government under the UN oil-for-food programme.

The 1996-2003 UN programme was designed to allow Iraq to export a limited amount of oil, with the proceeds being used to purchase food and medicine to lessen the impact of sanctions on civilians.

But a UN report into corruption of the system named AWB as paying the biggest kickbacks to the Iraqi government, with some 220 million dollars funnelled through a Jordanian front company.

While the report found that while AWB did not directly pay the bribes, it said some of its officers probably realised that the inflated transport fees they were being charged would be siphoned off by Baghdad.

Speaking in Sydney, Howard said that the question of AWB's monopoly, which allows it to veto which companies can export bulk quantities of wheat, should be examined.

"Well, that is something that should be looked at," he told reporters.

"If we were to change that policy, then we would need to take account of matters of policy and impact on the industry, separate and apart from the matters that are being dealt with before the... commission (of inquiry)."

The government is due to review the monopoly system by 2010 but calls for the removal of AWB's monopoly powers have grown since the Iraq scandal.

AWB shares dropped 0.31 dollars or 5.62 percent to close at 5.21 dollars Friday. The stock has slumped by about 18 percent since the inquiry began Monday.