THE Cole inquiry has revealed that government ministers were warned as early as 2003 that AWB was paying Saddam Hussein kickbacks through the oil-for-food (OFF) program.
In June of that year, just after the invasion of Iraq, cables sent from the Australian Embassy in Baghdad to the Department of Foreign Affairs and Trade (DFAT) in Canberra revealed every OFF contract since December 2000 included a kickback of 10pc-19pc.
That cable was also sent to the offices of Prime Minister John Howard and five other ministers.
Opposition Foreign Affairs spokesman Kevin Rudd said the alarm bells should have been ringing, given that the largest single participant in the OFF program was AWB.
"John Howard's statement to the Australian people in only February of this year was that the government, including government departments, had no knowledge that AWB was paying bribes or kickbacks," Mr Rudd said.
"This cable blows John Howard's credibility right out of the water."
The Cole inquiry has been told that 10 months after the cable was sent, Foreign Affairs Minister Alexander Downer and Trade Minister Mark Vaile received a ministerial submission from DFAT which they both signed as having read detailing that AWB may have been knowingly involved with a Jordanian trucking company that was funnelling funds to Saddam Hussein.
In a handwritten note on the memo dated March 30, 2004, Mr Downer wrote: "This worries me. How were AWB prices set, and who set them? I want to know about this."
Mr Downer said the new evidence vindicated his claim that the first he learned of the scandal was in 2004, and that he acted on the issue immediately.
"It is perfectly clear from this minute that the government wasn't aware that AWB Ltd were paying kickbacks to Saddam Hussein's regime," Mr Downer said.
"When the minute arrived, I have demonstrated, if I may say so, characteristic diligence in ensuring that the department followed up the issue."
But in response to the concerns it appears all the government and DFAT did to investigate was to contact AWB to ask if the claims were true.
AWB denied the allegations.
Mr Rudd said Mr Downer's handwritten note was not followed up by genuine action by the government.
"In June 2003 there is a warning directly from our own people in Baghdad that these kickbacks had been attached to contracts under the oil-for-food program," Mr Rudd said.
"But what did the Howard Government do about this?
"Absolutely nothing, because what we know for a fact is that corrupt contracts continued for a further 16-18 months until the end of the year 2004."