A FORMER chairman of the Australian Wheat Board failed to blow the whistle on the exporter's contributions of $300 million in cash to the Saddam Hussein regime in Iraq, a trial has been told.
Trevor Flugge was obliged to report AWB was making secret payments under the guise of trucking and service fees between 1999 and 2003, when he knew the money was going straight to the Iraqi regime, but failed to do so, the Supreme Court heard on Monday.
Mr Flugge, AWB's chairman between 1995 and 2002, and Peter Geary, the company's former general manager for trading, are alleged to have breached their respective duties in allowing the payments to occur at a time when Iraq was one of Australia's biggest export markets for wheat.
The Australian Securities and Investments Commission has brought the civil case against both men, who face massive fines if found guilty and can also be banned from acting as company directors.
Norman O'Bryan, SC, for ASIC, said AWB and the Iraqi Grain Board agreed to inflate the price of Australian wheat by 25 per cent to disguise the secret transport and service fees, which were paid to a Jordanian trucking company.
ASIC alleges the transport company sent that money straight to Iraq's coffers at a time when Iraq was an international pariah for the 1990 invasion of Kuwait and desperately needed international currency. Australia was part of a coalition of nations that invaded Iraq in 2003 and toppled the Hussein regime.
The price AWB accepted for its wheat was lower than that of what its international competitors wanted, the court heard, which helped AWB maintain its lucrative contracts. The trucking and service fees it paid were a direct contravention of United Nations sanctions.
"The AWB became an exporter of two commodities from Australia - wheat and cash," Mr O'Bryan said in his opening.
He said Mr Flugge was a "hands on" chairman who regularly visited Iraq and who regularly spoke of the importance of the Iraqi market to successive federal trade ministers Tim Fischer and Mark Vaile.
Mr Flugge should have raised the alarm about what was happening, but did nothing, Mr O'Bryan said. At the very least, he failed to seek more answers.
"His obligation was to stand up and say to those in authority in the company, 'We must not do this, this must stop. It is wrong, it is evil, it is improper and most importantly...there is a serious risk we will get caught'," Mr O'Bryan said.
Mr O'Bryan said at one point, the transport company raised its trucking fees from $US12 per metric tonne of wheat to $US51 a metric tonne, yet AWB sought no explanation or justification.
"It simply closed its eyes and paid," he said.
American and Canadian companies held suspicions about Australia's wheat contracts with Iraq, the court heard.
Mr Flugge said in a statement issued by his lawyers "that I fervently believe now, as I did from day one, that I have done nothing wrong".
"My family and I have had to live with untested allegations, rumours and innuendo levelled over the years. For the sake of my family I trust that these will finally be put to rest," he said.
The trial, before Justice Ross Robson, is expected to run for up to 10 weeks.