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 Appendix 17 |
 Contents |
 Appendix 19 |
This appendix analyses Mr Stott's evidence concerning his knowledge of the inland trucking arrangements as at late 2000 and early 2001.
Mr Stott's evidence and his six tests
The substance of Mr Stott's evidence was to the following effect:
Mr Stott then performed six tests to satisfy himself that the Iraqis were not benefiting from the trucking fees.
First, Mr Stott told the Iraqis that he proposed writing to DFAT about the use of Alia.[13] He assumed that the Iraqis would have protested if they did not want him to talk about the use of the Jordanian trucking companies.[14] They did not protest.
Second, he wrote to Ms Courtney at DFAT on 30 October 2000, seeking DFAT's approval to enter into discussions with Jordanian trucking companies ostensibly to enable the prompt discharge of Australian wheat.[15] That letter stated:
Dear Jill,
The purpose of writing is to ensure that DFAT is comfortable with AWB proceeding with the approach outlined below. As previously discussed we are currently experiencing problems managing our Iraq business. The first problem concerns United Nations procedural issues, which we will document in a separate note.
The second issue is, vessels discharging at Umm Qasr suffer long delays and as a consequence AWB incurs substantial demurrage bills. Our recent mission identified that the slow discharge of vessels is caused by a lack of trucks at discharge port.
For your guidance, Jordan based trucking companies are responsible for arranging trucks at discharge port. To rectify the problem, we propose entering into discussions with the Jordan trucking companies with a view to agreeing a commercial arrangement in order to ensure that there are enough trucks to enable the prompt discharge of Australian wheat cargoes.
We believe the proposed solution will eloquently solve our problem and look forward to receiving your response.
Thank you in anticipation. [16]
On 2 November 2000, Ms Drake-Brockman, the Assistant Secretary of DFAT's Middle East and African Branch, responded:
Dear Mr Stott,
Thank you for your communication outlining the manner in which you propose to proceed to deal with problems you have encountered in discharging vessels of your wheat exports to Iraq at Umm Qasr port. As you have explained to us the delays in discharge were causing you to incur substantial demurrage costs and affecting the viability of your trade.
We understand that, on your recent visit to Baghdad, you identified the source of the problem as being a lack of trucks at the discharge point. These trucks are supplied by Jordan-based companies. You therefore propose to enter into discussions with the Jordan trucking companies with a view to agreeing to a commercial arrangement in order to ensure that there are enough trucks available to enable the prompt discharge of Australian wheat cargoes when they arrive.
We have examined, at your request, this proposed course of action and can see no reason from an international legal perspective why you should not proceed. That is, this would not contravene the current sanctions regime on Iraq.
International Legal Division has been consulted in the preparation of this response.
I trust this is of assistance to you.[17]
Mr Stott said that Ms Drake-Brockman told him, after she sent the letter, that DFAT was aware of Alia, had looked at it and that Alia was 'okay'.[18]
Third, Mr Stott thought that Australian and friendly intelligence services would have contacted AWB had they detected any irregularities arising from the payments to Alia.[19]
Fourth, he sent an email to the Director General of IGB suggesting that it sell wheat allocated to Russian traders on the basis that IGB forego some or all of the trucking costs.
Mr Stott's evidence in this regard was as follows:
Dom [Hogan] and I talked about this message, and I said to Dom, 'What I am concerned about, Dom, is there may be some benefit going to'-'the Iraqis may be providing some benefit from these trucking arrangements. If the Iraqi minister comes back and says that he is prepared to forgo those trucking fees, then I am going to be satisfied that he is actually controlling the trucking fees and they may not be trucking fees. If he comes back and says, "No, we can't do that", then I'm going to be satisfied that they are trucking fees that need to be paid.'[20]
On 20 October 2000, Mr Stott wrote to Dr Saleh suggesting:
Your Excellency, we might be able to find a solution if the IGB were prepared to forego the trucking fee, or adjust the contract quality (ie) supply ASW rather than Hard.[21]
According to Mr Stott, he was told that the Iraqis could not forego the trucking fees.[22] When he asked Mr Abdul-Rahman why that was so, he was told:
'Well how else are we going to be able to move the grain around if we don't have the foreign exchange to pay for the trucking fees?'[23]
Fifth, Mr Stott made arrangements to speak to the former Director-General of the IGB, Mr Daoud, because he was sure that Mr Daoud would tell him the details of the trucking arrangements.[24] Mr Daoud died before Mr Stott could speak to him.[25]
Sixth, Mr Stott said he saw written confirmation from the IGB that the trucking fee of US$45 per tonne had been approved by the United Nations. That confirmation took the form of an IGB general contract sent to the United Nations.[26]
Assessment of Mr Stott's evidence
The evidence of Mr Stott concerning his six tests should not be accepted.
Not one of the six tests was intended to generate an unequivocal answer to the question of whether AWB was complying with sanctions.
Mr Stott had access to both internal and external lawyers who could have given advice. He did not suggest that he took up this opportunity.
Mr Stott gave evidence that, following his mission to Iraq, he asked Mr Tuohy of Arthur Andersen to investigate the Iraq trucking arrangements.[27] Mr Tuohy did not recall such request.[28] However it is clear from Arthur Andersen's report that no request was made that that firm investigate AWB's compliance with sanctions.[29]
Further, Mr Stott could have asked DFAT directly about compliance, but did not. The terms of his facsimile of 30 October 2000 expressed no concern that the Iraqis might be benefiting from the trucking fees or that AWB wished to check its compliance with sanctions; rather it was, on its face, directed to the different question of whether AWB could enter into discussions with the Jordanian trucking companies with a view to agreeing a commercial arrangement in order to ensure that there were enough trucks to enable prompt discharge of wheat cargoes.
One would expect a man of Mr Stott's intelligence who was concerned about the lawfulness of his company's activities in an important market to obtain advice directly on the issue and document it. Mr Stott did neither. It can be inferred that Mr Stott refrained from making a direct inquiry because he feared the answer.
Further, it is clear from what is set out in Chapter 20 that Mr Stott settled the facsimile to DFAT to obfuscate rather than clarify the true position. It is concluded in that chapter that:
'the inclusion of the transport fee in the contract [with the IGB] reduced AWB's ability to negotiate rates directly with the [Jordanian] transport company'.[33]
As a result, the reader of Mr Stott's facsimile of 30 October 2000 would not have:
Further, Mr Stott did not tell DFAT anything about how the trucking fee had been negotiated. By this time, moreover, he had been told that all of the trucking fees had been paid to the IGB.[34]
The asserted purpose of the approach to DFAT-to agree upon mechanisms with transport providers[35]-was only tangentially relevant to the question of whether or not the Iraqis were benefiting from the arrangements in breach of sanctions. In any event, however, Mr Stott could never have hoped to have obtained from DFAT an informed response. He asked the Department to comment upon the proposed arrangement without giving it relevant information about that arrangement.
In these circumstances, this exchange of correspondence could not provide comfort to AWB. Mr Stott's amendments indicated that AWB's letter was carefully drawn with a view to obscuring relevant information from DFAT. Mr Stott's motive to write to DFAT was a desire to create what he called a 'paper trail' which would protect AWB in the event that the contracts with Iraq came under scrutiny.[36]
The other matters relied upon by Mr Stott are now considered.
Mr Stott's evidence concerning the assurances he received should not be accepted where the United Nations had not been told of the circumstances in which the trucking fees had been imposed or to whom the fees were in fact paid.[37] Mr Stott did not suggest he was told anything about how the United Nations came to give its approval to the contracts. Moreover it is clear that Mr Stott-on his evidence-harboured concerns about the Iraqis benefiting from the contracts, notwithstanding that all earlier contracts had been approved by the United Nations. Approval by the United Nations simply begged the question of how that approval was forthcoming, and Mr Stott already had reason to be concerned about the inland trucking arrangements generally.
Further, it is objectively unlikely that any assurance Mr Stott received was so straight-forward. It is clear that those involved in considering IGB's demand that a trucking fee be paid understood that:
These people included Messrs Emons, Watson and Hogan.
There is no reason to believe that these people would have withheld what they knew from Mr Stott. Mr Watson, for example, had fully co-operated with Arthur Andersen when describing the Ronly transaction. Mr Hogan, in February 2001 was blunt in assessing that the Iraqis were enriching themselves through the service charge.[38]
Further, Mr Stott's evidence on this issue was unsatisfactory:
Q: So how did you draw any comfort from a statement 'to be delivered to all governates in Iraq' on the question of whether or not the payment of this trucking fee had been approved by the UN?
A: I was told by my colleagues, when I arrived at the AWB, to start-on 1 July, that these arrangements had been put in place in 1999, and they had been thoroughly investigated and I was given comfort by those there at that time that it was fully approved by the United Nations.[39]
However, it became apparent that no one had in fact assured Mr Stott that the issue had been 'thoroughly investigated':
Q: Who told you they had been thoroughly investigated?
A: Mr Hogan, Mr Hughes, Mr Lister said that he was aware of them, and Mr Watson had said that he was paying them and it had been-it was going through that mechanism.
Q: Did anybody use the words 'thoroughly investigated'?
A: They may not have used the words 'thoroughly investigated'.
Q: Did anybody use the word 'investigated'?.
A: They may not have used the word 'investigated'.
Q: Were you told anything other than that the trucking fee had been approved by the UN?
A: I was told that the trucking fee was approved by the UN and was being paid through Ronly.[40]
Mr Stott's evidence that he had been told of a 'thorough investigation' was false. It had no foundation whatsoever.
Further still, any comfort he might have drawn from his staff could only have been dispelled by Mr Hogan's February 2001 trip report which unequivocally asserted that the increase pointed to Iraqi exploitation of the escrow account.
Finally, Mr Stott acknowledged to AWB's solicitors in September 2004 that in effect he did not receive any adequate assurance that the contracts were, indeed, approved by the United Nations. In paragraph 10.1 of a draft statement prepared in his name Mr Stott asserted:
whilst an email that I received from Dominic Hogan dated 2 November 2000 states that [the phase 9 fee] would be approved in writing… by the UN it would have been my responsibility to obtain this approval. I do not recall ever receiving such a written approval.[41]
Mr Stott's evidence was generally unreliable. Instances set out in this appendix and Chapter 20 provide a proper basis for this conclusion. His evidence should not be accepted unless corroborated.
There is no corroboration here. No other witness stated that the approach occurred. There is no written record of it. Mr Stott did not suggest that he sent a draft of his letter to DFAT to IGB.
In any event, any communications with IGB in terms as oblique as his letter to DFAT of 30 October 2000 could hardly be expected to generate a strong reaction from IGB.
Finally, there is no mention of this approach in Mr Stott's statement of evidence to this Inquiry.[42] Mr Stott referred in that document to the drafting of his letter to DFAT and discussions with DFAT officers about the letter, both before and after it was written.[43] It would have been easy and natural for Mr Stott to refer in this context to any discussion with IGB. He did not. His failure to do so is evidence that this exchange did not occur.
Mr Stott could have no legitimate expectation that intelligence agencies would contact AWB. They might have good reasons-such as preserving the confidentiality of their sources-for not contacting AWB. In any event, it is not the function of intelligence agencies to safeguard the interests of commercial entities or to warn them that they might be in breach of the criminal law.
This evidence was not corroborated in any way. Mr Stott's alleged conversation with the Director General of the IGB was important; however, no file note of that conversation has been produced and the substance of what he said is not recorded in any other AWB document. It was not referred to in Mr Stott's witness statement.[44]
Mr Hogan's evidence does not support Mr Stott's account. He stated that the request to remove the trucking fee represented merely a proposal by which AWB tried to reduce the price to match the same price as the Russian traders had agreed.[45]
Further, the letters sent were not suitable for the task suggested by Mr Stott, in that each suggested another option to satisfy IGB's requirements. The facsimile sent on 20 October 2000 suggested the offer of ASW rather than hard wheat.[46] On 5 December 2000, Mr Hogan sent an email suggesting another option-an alternative port of discharge was identified.[47]
The letters left open the possibility that the Iraqis might accept one of these alternatives without commenting one way or the other about the trucking fees. They are consistent with AWB engaging in normal commercial discussions.
For these reasons, the evidence of Mr Hogan should be accepted in preference to Mr Stott's.
Mr Stott said that in February 2001 he asked to be shown proof that the United Nations had approved the trucking fees.[48] His evidence was that he saw a document which disclosed a trucking fee of US$44.50[49], and that this document looked like the 'normal approval note that went … to the UN from the Iraqis.'[50] This document set out the contractual arrangements between buyer and seller.[51] Mr Stott suggested that someone within AWB had created two sets of Iraqi contractual documents for the purpose of deceiving management.[52]
For the reasons set out elsewhere, Mr Stott's evidence must be rejected. The document referred to did not exist.[53]
Mr Stott was interviewed by Mr Quennell in approximately April 2004 on which occasion Mr Quennell took notes.[54] The notes refer to Mr Stott's letter to DFAT and this entry is considered elsewhere. Otherwise the notes do not suggest that Mr Stott implemented any process of testing the propriety of the inland trucking fees. There is not the slightest relevant reference in them to:
Mr Stott's draft witness statement, dated 12 September 2004[55] likewise makes no relevant reference to these matters. Indeed it refers to the dispute which arose after AWB decided not to fill the Russian contracts in late 2000, without however referring to Mr Stott's alleged attempt to test the motives of IGB and his purported communication with Mr Abdul-Rahman.
There is no reason why Mr Stott would have withheld from AWB's solicitors any exculpatory material. It is evident that Mr Stott had an opportunity to say what he knew from at least approximately April 2004 to September 2004. His failure to refer to his alleged tests corroborates the conclusion that he never deployed them.
Further, there is other evidence that indicates that Mr Stott actually knew that the trucking fees were, at least in part, being received by the Iraqi government.
On 25 February 2005, Mr Stott sent an email to Mr Hargreaves commenting on a position paper prepared by AWB's solicitors[56]:
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The fourth dot point addressed the question recorded in the position paper as to whether AWB knew that the Government of Iraq was a majority shareholder in Alia
Mr Stott denied that he always assumed that Alia was part owned by the Iraqi government, and said his choice of words was poor.[57] That evidence was false. The contents of the first paragraph of his email and the repeated use of the word 'always' point to his knowing at all times after he resumed employment in mid-2000 that the Iraqi government was a part owner of Alia.
It is thus clear that, at all times Mr Stott knew of facts that indicated that, through its shareholding in Alia, the Iraqi government stood to benefit from the trucking fees. In addition, it can hardly be said that Mr Stott was candid with his inquiry in circumstances where he did not disclose what he knew-as recorded in this email-either in his written statement or in his oral evidence.
For the reasons given, Mr Stott did not engage in the analysis he described in his evidence.
Furthermore, his preparedness to give evidence that was false permits an inference to be drawn that Mr Stott knew that the trucking arrangements:
Mr Stott asserted that, after he had seen the IGB's written confirmation[58], he told Mr Goodacre that he had received the documentary evidence that he had requested to show that the United Nations had been advised of the increase in the inland transportation fees.[59] Mr Goodacre denied being told that by Mr Stott.[60] Mr Stott's unsupported evidence that he told Mr Goodacre about the imposition of the 10 per cent must be rejected. Mr Stott is a witness of such poor credit that his evidence cannot be accepted in the absence of corroboration.
[1] Ex 198, WST.0001.0137 at 0144, para. 28.
[2] Ex 198, WST.0001.0137 at 0144, para. 28. He said he also spoke to Mr Lister and Mr Hughes.
[3] T 2262.30-32.
[4] T 2262.38-47.
[5] T 2264.23-25.
[6] T 2264.47.
[7] T 2265.4-6.
[8] T 2534.23-25.
[9] T 2534.26-31.
[10] T 2288.47-T 2289.3.
[11] T 2289.9-11.
[12] T 2289.37-42.
[13] T 2290.30-31.
[14] T 2290.31-34.
[15] Ex 77, WST.0004.0003; Ex 198, WST.0001.0137 at 0145, para. 30.
[16] Ex 77, WST.0004.0003.
[17] Ex 650, AWB.0002.0200.
[18] T 2296.35-39; Ex 198, WST.0001.0137 at 0145, para. 30.
[19] T 2290.39-T 2291.35.
[20] T 2292.31-40.
[21] Ex 158, AWB.0146.0206.
[22] T 2292.44-45.
[23] T 2293.47-T 2294.2.
[24] T 2293.6-28.
[25] T 2293.12.
[26] T 2585.38-T 2587.1.
[27] T 2655.23-34.
[28] T 6136.4-42.
[29] So much is made apparent from the examination of Mr Tuohy by Mr Stott's own counsel (T 6128.38-T 6129.7):
Q: If I can take you to the very last sentence [Ex 69C, AWB.0182.0106 at 0110], it reads:
'Our review focused on identifying any integrity risks that may be relevant to AWB personnel and, in particular, to the three identified above.'
A: Yes.
Q: Now, is the reason for those comments and the structure of the report that the review and the focus of the review was on individuals?
A: That's correct.
Q: You were not asked, for example, to look at whether there had been a breach of UN sanctions?
A: Not specifically, no.'
[30] See Chapter 20.
[31] See Chapter 20.
[32] See Chapter 20.
[33] Ex 159, AWB.0106.0107_R at 0108_R; See also Chapter 20..
[34] Ex 299, AWB.5010.0009, Mr Watson's email to Mr Hogan and on-sent to Mr Stott, which said: 'Trucking company has also confirmed they have received 100pct trucking fees and have paid IGB'.
[35] T 2614.2-34.
[36] Ex 1329, AWB.9000.0195 at 0196, AWB.0468.0005 at 0006, Mr Quennell's notes of his interview with Mr Stott.
[37] T 2263.27.
[38] Ex 381, AWB.0084.0046_R at 0049_R.
[39] T 2263.29-37.
[40] T 2263.39-T 2264.7.
[41] Ex 1337, AWB.9001.0212 at 0218. Mr Stott did not adopt the statement as representing his position (T 7513.16).
[42] Ex 198, WST.0001.0137-0147.
[43] Ex 198, WST.0001.0137 at 0145, para. 30.
[44] Ex 198, WST.0001.0137-0147.
[45] Ex 142, WST.0005.0001 at 0027, para. 91; T 2048.5-12.
[46] Ex 158, AWB.0146.0206.
[47] Ex 167, AWB.0141.0477.
[48] T 2583.23-47.
[49] T 2586.01-04.
[50] T 2586.19-20.
[51] T 2586.45-T 2587.1.
[52] T 2589.37.
[53] Mr Stott said that both AWB and the IGB sought approval from the United Nations. This is inconsistent with the documentary evidence, which shows that approval was sought by the seller submitting applications with AWB short form and IGB long form contracts. See Chapter 11.
[54] Ex 1329, AWB.9000.0195-0197, AWB.0468.0005-0007.
[55] Ex 1337, AWB.9001.0212-0222.
[56] Ex 1356, AWB.9005.0274_R; Ex 1357, AWB.9005.0363-0368.
[57] T 7520.8-26.
[58] T 2663.29.
[59] T 2663.40.
[60] T 3350.42-46; T 3358.30-45; T 3391.47-T 3392.6.
