27.1 BHP Limited was incorporated in 1885 to mine zinc, lead and silver deposits in Broken Hill. It subsequently diversified into iron ore, steel making, petroleum, coal, copper and gas. The BHP Billiton group was formed on 29 June 2001 by the dual listed companies' merger of BHP Billiton Limited (Australian listed company, previously know as BHP Limited) and BHP Billiton plc (United Kingdom listed company previously known as Billiton plc). Those two companies and their respective subsidiaries continue to exist separately but operate together as a single economic entity.[669]
27.2 Today, the BHP Billiton group employs 37,000 employees in over 100 operations in more than 20 countries. It is the world's second largest copper producer, second largest exporter of energy coal and a major producer of nickel, uranium, aluminium, oil and gas, and has significant investments in many other mining and industrial ventures.
27.3 BHP Petroleum Pty Ltd, now BHP Billiton Petroleum Pty Ltd (BHPP), is BHP Billiton's petroleum business and has at all times been a wholly owned subsidiary of BHP Limited or BHP Billiton Limited. It explores, develops and produces oil and gas throughout the world, including Algeria, Australia, the United Kingdom, the United States of America, Trinidad and Tobago and Pakistan. Its capital expenditure in 2005 was $962 million.
27.4 Mr Prescott AC was the Managing Director and Chief Executive Officer of BHP Limited (BHP) from May 1991 to March 1998.
27.5 Mr O'Connor was the Chief Executive Officer of BHPP from 1994 until July 1997.[670] Mr O'Connor was succeeded by Mr Aiken, who remained in that position at the date he gave evidence. Mr Aiken first joined BHP in May 1997 as Executive General Manager of Corporate Development, responsible for corporate services other than finance within the BHP group.
27.6 Mr Davidson Kelly was BHPP's General Manager Business Development reporting initially to Mr O'Connor and then to Mr Aiken. He joined BHPP in February 1995.[671] He was responsible for business development in the Middle East and Caspian regions. Mr Davidson Kelly was a member of the executive committee of BHPP and was engaged by BHPP through his company, Davidson Kelly and Co Limited (registered in England). Mr Davidson Kelly's contract terminated on 31 March 2001 and thereafter he was engaged by BHPP on a part-time basis (15 days per quarter). In late 2001 Mr Davidson Kelly's contract with BHPP came to an end.
27.7 Mr Harley moved in 1994 from a position in BHP's Corporate Treasury to the role of Group Manager Financial Structuring in BHPP. Mr Harley's responsibilities as Group Manager Financial Structuring included facilitating project financing in relation to various projects and supporting current and proposed mergers, acquisitions and divestment projects. After Mr Davidson Kelly's appointment in February 1995, Mr Harley, though nominally reporting to Mr Velins, the Group General Manager Planning at BHPP, was in practice directed by Mr O'Connor to report to Mr Davidson Kelly. Mr Harley remains with the BHP Billiton Group. He became President of Corporate Development within BHP Billiton in 2004.[672]
27.8 Mr Lyons was head of the Corporate Legal Department within BHP Limited until March 1995 after which he commenced providing legal support to the BHPP business. From 1995 until 2001 he held the position of Group Manager Legal for BHPP and was responsible for its legal services on a global basis. He reported to Mr Barnes, the General Manager of Finance and Administration who in turn reported to Mr O'Connor. In about December 1999, Mr Fast was appointed General Counsel of BHP Billiton; and Mr Fast reorganised the legal teams that worked with the various businesses of BHP Billiton. As a result of this reorganisation, Mr Lyons became Regional Counsel for Australia and Asia with legal responsibility for all BHP Billiton businesses within that region. Mr Lyons worked part time in that role until his retirement in December 2004.[673]
27.9 Mr Worthington was appointed to the position of Manager, Russia and Middle East Business Development for BHPP in August 1995. He reported to Mr Killion, Vice President of Marketing and Development. In the first quarter of 1996 Mr Worthington was appointed to the position of team leader Iraq and Iran, reporting to Mr Paver, President of BHPP's Europe, Russia, Middle East and Africa regional division. Mr Worthington's team become known as the Business Development Team.[674]
27.10 In March 1996 Mr Stott left the Australian Wheat Board and commenced employment with BHPP as International Business Development Manager[675]. He reported to Mr Davidson Kelly. Prior to joining BHPP, Mr Stott had been employed at the Wheat Board since 1983. Between 1988 and 1996 Mr Stott managed the Middle East, Europe and Africa desk and was responsible for marketing wheat to all non-Asian markets. In July 2000 Mr Stott returned to AWB as General Manager of International Sales and Marketing, reporting to Mr Goodacre.
27.11 The Tigris Petroleum Corporation Limited (Tigris) is a company registered in Gibraltar. Mr Davidson Kelly is its President. The directors of Tigris are lawyers in Gibraltar and the sole shareholder is a foundation, in the nature of a trust, the beneficiaries of which are relatives of Mr Davidson Kelly's wife.[676] The Tigris Petroleum Corporation Pty Limited ACN 094592793 (Tigris Australia) is a company limited by shares incorporated in Australia, and has Mr Davidson Kelly as its sole director and secretary. All shares in Tigris Australia are owned by Maritimo Investments Limited. Maritimo Investments Limited is another Gibraltar registered company and is ultimately owned by Mr Davidson Kelly. Atlantic Oil and Gas Management Limited is another company associated with Mr Davidson Kelly. It is registered in the British Virgin Islands and chaired by Mr Davidson Kelly. The Managing Director is Mr Taylor.
27.12 It is necessary to set out in significant detail the history of the dealings between BHP, AWB, DFAT, IGB and the UN regarding what has become known as the 'Tigris transaction'.
27.13 Following the commencement of UN sanctions against Iraq and the freezing of Iraq's bank accounts in 1991, until 1995 AWB sold wheat to Iraq on cash against documents basis as Iraq's funds permitted. References to AWB in this chapter are to the Australian Wheat Board until 1989 and thereafter to AWB Limited unless otherwise stated.
27.14 On 26 April 1995 Mr Storey, AWB's General Manager of Marketing wrote to Mr Lawrenson, AWB's Managing Director, concerning a proposed visit to Australia by Minister of Trade, Dr Saleh and IGB Director General, Mr Daoud. The memorandum was copied to the Chairman, Mr Flugge, the Middle East desk and the Manager Policy and Marketing Analysis. The memorandum noted that:
This week we will be applying to the UN via DFAT for an approval to ship up to 250,000 tonnes between now and end 1995. This is something of a 'phantom' contract but necessary for the Iraqis to continue their agenda with the UN in their efforts to buy food. (The IGB clearly understand we have no supplies)[677]
The visit was delayed and ultimately did not proceed.
27.15 On 26 April 1995 AWB wrote to DFAT forwarding a Revised Notification and Authorisation Request Form to export goods to Iraq in respect of 250,000 metric tonnes of wheat. The method of payment stated was 'cash against documents'.[678]
27.16 On 1 May 1995 Mr Gomersall of AWB sent a telex to Mr Daoud concerning arrangements for the proposed visit. Mr Gomersall stated:
On other matters, we understand that the MV Probo Bangor has arrived in Umm Qasr and has commenced discharging. Please keep us informed of her progress and we look forward to receiving payment through our friends in Jordan as agreed.[679]
27.17 On 3 May 1995 the Australian mission to the United Nations in New York wrote to DFAT Canberra enclosing a letter from the United Nations dated 27 April 1995 approving the sale of 250,000 tonnes of wheat by AWB to Iraq, noting that in consequence of the notification to the United Nations and Resolution 687:
…prohibitions against the sale or supply of these shipments and financial transactions related thereto contained in resolution 661 (1990) are no longer applicable.
As regards financing, I wish to draw your attention to paragraph 11 of Security Council Resolutions 778 (1992) which stipulates that 'no further Iraqi assets shall be released for purposes set forth in paragraph 20 of resolution 687 (1991) except to the sub-account of the escrow account established pursuant to paragraph 8 of resolution 712 (1991)'. Under that paragraph, payments to exporters through the direct release of Iraqi frozen assets are prohibited. All other relevant Security Council Resolutions relating to financial transactions regarding Iraq must also be complied with in full. [680]
27.18 On 6 May 1995, the IGB sent a telex to AWB advising it had instructed the Iraqi Commercial Office in Amman to arrange payment of US$589,000 as per their telex dated 2 May 1995 in respect of the Probo Bangor shipment.[681]
27.19 On 8 May 1995, Mr Gomersall sent a telex to Mr Daoud noting that AWB had now 'received copies of the tested telex's from Rafidain Bank London, as well as those telexed by IGB. We are therefore hopeful that we will be able to proceed to payment in the next few days. Again thank you for your help.'[682]
27.20 On 12 May 1995, Mr Gomersall sent Mr Daoud a telex advising of UN approval for the export of the 250,000 metric tonnes of wheat.[683]
27.21 On 10 June 1995, IGB sent a telex to AWB on behalf of the Iraqi Ministry of Trade seeking to work with AWB to establish a joint venture company to provide finance for Iraqi food requirements. The telex suggested that payments for wheat, with interest, would be made in crude oil after the embargo was lifted or by cash when available and would be guaranteed by the State Oil Marketing Organisation (SOMO), or Iraqi frozen assets, or the Central Bank of Iraq.[684]
27.22 On 13 June 1995, Mr Stott of AWB sent a telex to Mr Daoud responding to his telex of 10 June 1995. Mr Stott expressed interest in considering any Iraqi proposal and suggested discussion of it during the proposed visit of Minister Saleh and Mr Daoud to Australia.[685]
27.23 Mr Stott gave evidence that the Ministry of Oil in Iraq initiated a proposal for BHP to fund a shipment of wheat to Iraq.[686] He was telephoned by Mr Daoud in 1995 and asked whether he had heard of a company called BHP. He replied that he had. Mr Daoud telephoned him later in the year and told him that BHP was interested in financing a shipment of wheat to Iraq:
The proposal was at that point that they would finance those cargos and there would be a payment mechanism to be agreed with them to enable the shipment of goods to Iraq.[687]
27.24 On 18 June 1995, Mr Davidson Kelly sent a memorandum to Mr O'Connor, copied to Mr Harley.[688] Mr Davidson Kelly was at that time investigating oil projects for BHPP in Iraq. The memorandum concerned meetings between the 5th and 8th June 1995 held by Mr Davidson Kelly with the Iraqi Oil Minister and his officials. Mr Davidson Kelly noted that:
Although hoping for a quick removal of sanctions, the Iraqis are digging in for the long haul and are seeking ways to provide funds for basic foodstuffs, medicine etc …
Foreign participation in the redevelopment of the oil industry…. would play a part in this strategy. It was made clear that payments or loans in advance of the lifting of sanctions 'for humanitarian reasons' would be much appreciated, and might be part and parcel of any deal.[689]
On page four of the memorandum Mr Davidson Kelly wrote:
They are keen to see further contact established with the Wheat Board. They have a requirement for an immediate consignment of 100,000 tons of wheat, to be delivered against future payment, probably from oil sales.[690]
and on page five:
Work should also proceed on the political issues. To obtain the clear support of the Australian government; to investigate the possibility of constructing an imaginative Humanitarian Aid package, and to resolve the issue of the UK's stance in relation to Iraqi activity falling short of actual trading relationships.[691]
27.25 On 19 June 1995, Mr Davidson Kelly sent a memorandum to Mr O'Connor concerning the project in Iraq and noted that Mr Harley would be coordinating the political aspects.[692] Mr Harley recalled that around this time he was asked by Mr Davidson Kelly to 'explore' with the Government and AWB whether it would be possible to progress the wheat shipment concept.[693]
27.26 On 20 June 1995, Mr Davidson Kelly, in an internal note to Messrs Killion and Taylor advised that 'provision of wheat is critical' to BHPP's ambitions in Iraq.[694]
27.27 On about 20 June 1995, Mr Davidson Kelly initialled a document entitled 'Iraq-A hypothetical case'. He noted 'at least three relatively independent sources "confirming" that in order to progress to a privileged position, some form of early humanitarian aid is suggested.' He outlined a proposal for providing aid on credit in order to afford BHP a privileged position in its dealings with Iraq.[695]
27.28 On 23 June 1995, Mr Harley had a meeting with Mr Storey, then General Manager of Marketing at AWB and Mr Geary, then Middle East Manager of AWB, during which a proposal to provide wheat to Iraq funded by BHPP through AWB was discussed.[696] Mr Harley's note of the meeting mentioned a joint venture proposal to receive payment in oil, a prospect which had been the subject of correspondence between Mr Stott and Mr Daoud earlier that month. At this meeting. Mr Harley was given Mr Stott's name as a future contact.[697] Mr Harley thought he may also have spoken with Mr Pinhorn of DFAT that day. He could not recall any details but believed he may have spoken about what was permitted under UN sanctions.[698]
27.29 On 2 August 1995, Mr Stott sent Mr Daoud an offer for 250,000 tonnes of wheat.[699]
27.30 On 3 August 1995, Mr Stott made a handwritten note on a photocopy of the business cards of Mr Harley and Mr McCallum the International Business Affairs Corporate Manager of BHP:
Came to see RJS [Storey] PAG [Geary] as been to Iraq and close to the Iraq's talked about possibility of funding a wheat sale. Contact when Iraqi's due to visit.[700]
27.31 On 4 August 1995, AWB sent a 'Revised Notification and Authorisation Request Form to Export Goods to Iraq' to Mr Feakes of DFAT for submission to the United Nations. It provided that the method of payment would be cash against documents.
27.32 On 6 August 1995, IGB sent a telex to Mr Stott as follows:
Refering to telephone conversation with Mr R. Salman would like to know the exact quantity requested as donation your prompt reply is highly appreciated.[701]
A handwritten note on the telex reads:
Verbal, Currently under offer[702]
There is a further handwritten note on a second copy of the same telex as follows:
Confidential we are currently under offer to a very reputable third party for a total 100,000 MT.[703]
The handwriting is Mr Stott's.
27.33 On 8 August 1995, Mr Stott telexed Mr Daoud advising:
Further to yesterdays discussions with Mrs Ahlam we have been advised by the other party that they now only want an offer for 10,000 tonnes rather than 100,000. In addition they have lowered the quality specifications in order to allow wheat from some very unusual places to compete. [704]
27.34 Also on 8 August 1995, Mr Davidson Kelly wrote to Mr Saadalla Al-Fathi of the Ministry of Oil Baghdad. He advised that BHPP were continuing to make progress on the question of possible delivery of wheat to Iraq and that he was meeting with Mr Stott of AWB later that week.[705]
27.35 On 14 August 1995, Mr Davidson Kelly sent a note to Mr Taylor marked 'Strictly Private and Confidential' which was copied to Mr Harley. The note concerned the timetable and progress of commercial negotiations of the proposed oil project but also dealt with the wheat shipment:
We are about to commence detailed discussions with the Wheat Board to start the process going, and it is likely that we will be in a position to start deliveries within the next week or so. We will start with a contribution of 20,000 tons or so, which is quite unconnected with the matter in hand! However, to the extent that we are not in detailed commercial discussions makes me feel quite uncomfortable, especially if we are required to step up our aid .[706]
Mr Harley's recollection was that the proposal was not sufficiently advanced to start deliveries that soon. [707]
27.36 On 17 August 1995, Mr Stott sent a fax to Mr Daoud advising of the receipt of United Nations approval for the shipment of:
a further 250,000 metric tons of Australian wheat into Iraq. This authorisation is in addition to the UN approval of 27 April 1995, and brings total tonnage approved to 500,000 metric tons.
In regard to the 10,000 metric tons discussed earlier this week, the donor involved has contacted us today and has deferred the tender until September. I will continue to keep you informed of this situation. [708]
27.37 Between 1 September 1995 and 5 September 1995, Mr Harley recorded in his notebook a discussion with Mr Stott concerning the possible shipment of 25,000 tonnes of wheat.[709]
27.38 A further note made by Mr Harley in the same period recorded:
Iraqi grain board
Grain sales Contract AWB Iraqis
100,000 tonnes FOB $24,000,000
tranches
$5M worth
Oil repayment contract
Draft of a central bank guarantee
L of C
Industry Minister
Grain Board Representative [710]
Mr Harley's evidence was that he could not recall the conversation or meeting recorded in the note but concluded from the text that it recorded a discussion with Mr Davidson Kelly concerning a conversation Mr Davidson Kelly had had with Mr Stott.[711]
27.39 On 19 September 1995, Mr Davidson Kelly and Mr Harley sent a memorandum to Mr O'Connor, which only Mr Davidson Kelly signed. The memorandum recommended purchasing a letter of credit to be issued or backed by the Central Bank of Iraq in favour of the Australian Wheat Board for US$5 million. The letter of credit was to be redeemable in either oil or cash no later than 2000, bearing an interest rate of 10% per annum. It noted the transaction would equate to approximately 20,000 tonnes of wheat:
The purpose of the transaction is to establish favour with the Government of Iraq in anticipation that sometime prior to 2000, the LOC may be exchanged with the Government of Iraq for a down payment for entry into the HCF concession. However, no certainty exists in this respect.
The transaction complies with the terms of the United Nations embargo on Iraq because the Australian Wheat Board has an exemption for this wheat sale and our arrangement is a back to back financial agreement. The LOC will only be settled in oil if the embargo has been lifted. The most significant risk taken with this proposal is that a new regime takes control in Iraq that will not honour obligations.
The value of the LOC will have to be assessed annually and any diminution will be written off against profits. The worst case is that the US$5 million will have to be written off completely in which case it will be deductible against income .[712]
The 'HCF concession' is a reference to an interest BHPP wished to acquire in the Iraqi Halfayah oil field.
27.40 A note was prepared for the board of AWB marked 'Supplementary Managing Directors Report for verbal presentation'.[713] The note is undated; however, Mr Stott gave evidence that he prepared it in 1995 for Mr Storey, who passed it on to his manager, Mr Lawrenson.[714] The supplementary report contained the following:
BHP is keen to keep the following transaction confidential.
…
Background
BHP have decided to make a USD 5 million humanitarian food donation to Iraq. However, they are concerned that the American Government may apply pressure via their North American interests if they were to become aware of the transaction. Therefore, BHP don't want to be recorded as principal in the contract.
Structure of Transaction
The AWB will negotiate and sell to the IGB wheat to the value of USD 5 million. The IGB will open an L/C in favour of the AWB which provides for payment no later than 5 years from the date of sale. The IGB will either pay cash or deliver oil to the value of the L/C in substitution for cash if UN restrictions on Iraqi oil exports are terminated within the 5 year period. The AWB will assign its payment and oil receipt rights under the L/C to BHP. In return for this assignment BHP will pay the AWB USD 5 million cash on bill of lading date. The AWB will use reasonable endeavours to assist BHP in obtaining recovery but apart from this undertaking the AWB is not exposed to any ongoing risk.
The AWB has approval from the UN to sell wheat to Iraq.[715]
The document noted the author's belief that BHP was making the 'donation' in hope of gaining preferential treatment to obtain oil exploration licences once UN sanctions were lifted. Enclosed were a contract between AWB and BHP, a contract between IGB and AWB, a draft Letter of Credit for the Central Bank of Iraq and an oil supply agreement between IGB, SOMO and AWB.
27.41 On 20 September 1995, BHP Legal Group sent AWB a draft CIF contract between AWB and IGB[716], an oil supply agreement between IGB, SOMO and AWB[717], and a draft Letter of Credit to be issued by Central Bank of Iraq.[718] It also sent a letter to Mr Stott setting out the proposed arrangement between the parties.[719] The letter set out the commercial arrangement according to previous documentation but proposed BHP Development Finance Ltd as the purchaser of the letter of credit.
27.42 Mr Harley produced a document entitled 'Corporate Development Projects Status Report as at 25 September 1995.' It recorded that the next meeting to review the Halfayah project would be in London on 5 October 1995 followed by a meeting in Baghdad on 20 October 1995. It estimated the net present value of that project at more than $400 million and noted that Mr Davidson Kelly and Mr Killion had conduct of the matter. It noted: 'Documentation with Charles Stott sent to Baghdad for approval.'[720]
27.43 On 26 September 1995, Mr Stott telexed Mr Daoud advising:
further to our recent discussions i am pleased to advise that your friends have allocated a total of usd 5 million enabling us to conclude the first shipment subject to somo, igb and cbi agreeing to the contract terms that were faxed to you.
we are also talking to another party about a 10,000 tonne parcel. if these 2 quantities can be combined in the one shipment then we should be able to reduce the freight cost by about usd 4 per tonne.
have you had any luck in confirming if the other party is proceeding with the 10,000? at this stage under this payment arrangement we only have usd 5 million available.
i would be pleased to provide a 100,000 tonne offer for your consideration however would you please confirm what payment mechanism will apply for the extra tonnage.[721]
Before sending this telex, Mr Stott cleared it with Mr Davidson Kelly in the following terms:
Norman, all the doc's went through to Baghdad last night and today received a telex from the IBG requesting we submit a 100 kmt offer. we intend, subject your green light that everything is ready to go, to provide the following offer. I also need to discuss with you the BHP/AWB contract and in particular who signs on BHP's behalf. My No 1 wants it signed by No 1's on both sides. let's discuss .[722]
27.44 On 27 September 1995, a file note from Mr Storey to Mr Stott advised that the BHP contract was acceptable to the AWB Board and that Mr Lawrenson would like to sign off on the contract. It noted Mr Lawrenson was advised it may be some time before the agreement was completed.[723]
27.45 On 27 September 1995, a draft letter was prepared for signature by Mr O'Connor. The reference on the document, 'ndk:cr ndk 412' indicates Mr Davidson Kelly was the author. It read:
LETTER OF CREDIT
This transaction requires approval by BHP Development Finance Ltd.
It is recommended that US $5 million be spent to purchase a Letter of Credit (LOC) to be issued or backed by the Central Bank of Iraq in favour of the Australian Wheat Board. The LOC is redeemable into either oil or cash no later than 2000 and bears an interest rate of 10% per annum.
This transaction will cause the Australian Wheat Board to ship about 20000 tonnes of wheat to Iraq.
The purpose of the transaction is to establish favour with the Government of Iraq in anticipation that sometime prior to 2000, the LOC may be exchanged with the Government of Iraq for a down payment for entry into the HCF concession. However, no certainty exists in this respect.
The transaction complies with the terms of the United Nations embargo on Iraq because the Australian Wheat Board has an exemption for this wheat sale and our arrangement is a back to back financial agreement. The LOC will only be settled in oil if the embargo has been lifted. The most significant risk taken with this proposal is that a new regime takes control in Iraq that will not honour obligations.
The value of the LOC will have to be assessed annually and any diminution will be written off against profit. The worst case is that the US $5 million will have to be written off completely in which case it will be deductible against income.[724]
27.46 On 28 September 1995, IGB telexed AWB accepting either 20,000 tonnes at a certain price per tonne or 30,000 tonnes at a lower price per tonne, on CIF free out terms. The contract was assigned number A2630.[725] Transactional documents bearing that contract number and date and providing for payment by a letter of credit payable in 5 years by cash or oil and attracting 10% interest were prepared by AWB.[726]
27.47 On 29 September 1995, Mr Stott sent an offer to the central tenders committee of Iraq's State Purchasers Department offering to supply 1.5 million tonnes of wheat. The offer contains the special condition (at paragraph 8):
if the tonnage is for destination Iraq, the execution of the contract is 'subject to UN approval'. Please note we already have UN approval in place to ship 1,000,000 tonnes to Iraq. [727]
The same day Mr Stott also wrote to Mr Daoud to finalise details of the type of oil Iraq was to supply under the proposed Oil Supply Agreement. [728] He noted on his copy of the letter that he was to clear the response with 'BHP' when received.
27.48 On 29 September 1995, Mr O'Connor wrote to BHP's Managing Director, Mr Prescott in the following terms:
IRAQ
We have been considering for some time the provision of Humanitarian Aid to Iraq, in an attempt to alleviate the conditions of extreme hardship which have been caused by the application of International Sanctions.
Discussions have taken place with the Australian Wheat Board, which has continued to trade with Iraq under procedures which are in accordance with UN Sanctions, and also with the National Australia Bank. It has been determined that BHP could lawfully finance a cargo of wheat to be delivered to Iraq, by effectively making a loan to the Iraqi Grain Board. The loan, of US$5 million, would finance a cargo of 20,000 tons of wheat which would be delivered in the normal course of business by the Australian Wheat Board. The loan, carrying an interest rate of 10% per annum, and guaranteed by the Iraq Central Bank, which would be repaid in cash after 5 years, or in oil within 3 months of UN Sanctions being lifted. The Australian Wheat Board would enter into the agreement with the Iraqis, and assign its obligations to BHP Development Finance.
The cost would be provided from BHPP's exploration budget for 1995/6, and decisions on the carrying value of the loan would be taken at each year end. BHPP is currently in serious negotiations with the Iraq Oil Ministry for a substantial oilfield development project, and it is believed that this contribution of humanitarian aid would advance our interests in this regard.
However, it must be recognised that there is no guarantee that any concession will be awarded to BHPP, nor is there full confidence that the loan, despite the Government Guarantee, will be repaid in full. Hence the cost of the loan will be treated as high risk exploration expenditure, which may or may not prove fruitful.[729]
27.49 On 4 October 1995, Mr Stott telexed Mr Daoud seeking a response to the fax of 29 September 1995 enquired about a further 10,000 tonnes to be funded by 'your friends'.[730] On 5 October 1995, Mr Daoud replied providing details of oil type requested. He further advised 'with regard to 10,000 mtns we have not got the respond yet will inform you soon' and 'Have you more information about the offer of 1.5 million ton from our friends.'[731] Mr Stott faxed the telex to Mr Harley and noted:
They [IGB] are keen for everything to proceed. Are there any developments your end.[732]
This was sent on 9 October 1995.
27.50 On 6 October 1995, IGB telexed AWB advising it had the full authority from the Iraqi Government, SOMO and the Central Bank of Iraq to sign the contract and noted:
… we are ready at your convience to receive your delegation to sign the full agreeement for the whole operation that covers the value of 100,000 mt of a wheat.
As for the first cargo and inspit we could not receive a reaction from the friends about the 10,000 mt.
Lpppls proceed with the shipma of the quantity that covers only the value of U.S 5m.[733]
27.51 In an undated telex to Mr Stott, Mr Daoud referred to the telex of 6 October 1995 and advised receipt of 'approval of 10.000 mt wheat from our friends' please 'act accordingly to increase the agreed wheat cargo'.[734] Handwritten on the bottom was 'Norman Davidson Kelly to Baghdad?'[735]
27.52 On 9 October 1995 Mr Harley wrote to Mr O'Connor:
Graham Evans + I are jointly testing an Australian Govt. angle to the Iraq project.
I tested my idea on Graham who is researching some aspects for me. John Prescott had separately consulted Graham on the project last Friday.
I have fully briefed Graham who may raise aspects of it with you in Canberra on Tuesday.
When his tests are [d]one we may make an informal approach to the Government on Wednesday via a contact of mine. This will depend on our research.
TSH[736]
Mr Evans was BHP's Director of Government and External Affairs. Mr Harley could not recall the content of the briefing, the proposal or how or on whom it was tested. He did not recall any discussion with Mr Prescott. [737]
27.53 In an undated note from Mr Harley to Mr O'Connor he discussed what he discerned to be Mr Prescott's objection to the proposal, namely that the 'goodwill' payment was akin to a bribe, or that BHP was aiding an international pariah.[738] He noted that 'If his objection is that it is a bribe then I think there are some good arguments that can be mounted that it is an ethically justifiable payment albeit unusual.'[739] Mr Harley noted there was no point in either officially or unofficially approaching the Australian Government before BHP was clear on what it would countenance. The note was followed by a draft press release and a series of discussion points in the event that the proposal became public.[740] Mr Harley took the date of the note to be 9 October 1995.
27.54 On 12 October 1995, Mr Davidson Kelly sent a memorandum marked 'Private and Confidential' and 'URGENT' to Mr O'Connor, copied to Mr Harley.[741] The memorandum was entitled 'Project Italy' which was the BHPP code name for Iraq.[742] Mr Davidson Kelly noted that delays in providing the wheat may prejudice negotiations to secure access to a major oil field. He advised:
The form of the documentation, the purchase of an Italian Letter of Credit in support of a 5 year loan to the AWB, was made to ensure the distancing of BHP from the transaction, with the benefit of managing any potential write off over time and at our discretion. In the event of the award of a project this obligation from the Italians could have been regarded as the prepayment of part of a normal signature bonus. Hence we would have our cake and, hopefully, eat it too.
In the event that further 'distance' from the aid package is required, and/or further comfort from the Government is required, this will result in an increase in the cost to us of the package (the possibility of recovery will be more remote). Also, more time will be required to complete the necessary discussions.[743]
Mr Davidson Kelly advised that the Iraqi oil project negotiator was seeking some assurance that the wheat deal would proceed. He wrote:
Although it has been clearly understood by all parties that there can be no connection between the Aid Package and our deal, the absence of performance on the former is unquestionably going to impact unfavourably on our ability to negotiate the latter.[744]
He later wrote: 'Cancellation of the Aid Package would, I believe, prove to be a major and possibly fatal setback.'[745] He sought confirmation that BHP intended to proceed with the wheat transaction. [746] It is clear that the statements asserting the wheat transaction and the oil arrangement are not related, were cosmetic. It was known and accepted that the two transactions were inter-related.
27.55 On 16 October 1995, Mr Davidson Kelly sent a memorandum to Mr O'Connor marked 'Private and Confidential', copied to Mr Harley.[747] Mr Davidson Kelly argued the benefits of the proposed transaction and noted:
The proposed mechanism for making the contribution has been to work directly with the AWB, who have negotiated the shipment directly with the Italians in the normal course of their business, and under normal procedures, save that credit terms acceptable to ourselves, and the NAB, have been agreed.
Quite apart from the financial advantages of this route, which provides a sporting chance that our contribution will be repaid within the next five years in cash or, more likely, oil, there is one other major advantage. No other party is aware of the transaction. Knowledge is limited to the AWB, the Italians and ourselves.
Although other mechanisms might be found to distance ourselves from the transaction they will involve us in introducing third parties to the deal, with an increase in the potential for unwelcome leaks in what is clearly a sensitive commercial transaction.[748][emphasis in original].
The memorandum attached a note from Mr Harley of seven pages on public relations issues arising from the proposed dealing with Iraq.[749]
27.56 Mr Harley produced a further project status report concerning the Halfayah project as at 18 October 1995. It recorded: 'Documentation with Charles Stott approved. Awaiting instructions' and that Messrs Harley and O'Connor were the staff responsible for that aspect.[750] Mr Harley thought the pending instructions were likely to be those of BHPP.[751]
27.57 On 23 October 1995, the Tokyo office of AWB faxed Messrs Officer, Stott and Storey concerning a proposal that Mitsubishi acquire wheat for Iraq. It noted that IGB was to be the principal to the contract and that Mitsubishi would not be lifting oil or gas in return but that its incentive was 'longer term friendship'.[752]
27.58 On 24 October 1995, Mr Prescott endorsed on the 16 October 1995 memo from Mr Davidson Kelly to Mr O'Connor, 'Mr O'Connor I would agree provided we proceed via Dept of Foreign Affairs and gain UN Sanctions Cttee approval'.[753]
27.59 On about 25 October 1995, Mr Harley made a record of his conversation with Mr Feakes of DFAT. He noted Mr Feakes had told him it was lawful to sell wheat but that Iraq must pay in cash and was not allowed to pay by way of frozen assets. He believed he informed Mr Stott of the negative response of DFAT.[754]
27.60 On 26 October 1995, Mr Stott wrote to Mr Feakes advising the following overview of the proposed transaction:
The AWB will negotiate and sell to the IGB wheat to the value of USD 5million. The IGB will open an L/C in favour of the AWB which provides for payment no later than 5 years from date of sale. The IGB will either pay cash or deliver oil to the value of the L/C in substitution for cash if UN restrictions on Iraqi oil exports are terminated within the 5 year period. The AWB will assign its payment and oil receipt rights under the L/C to Ex Co.
In return for this assignment Ex Co will pay the AWB US 5 million cash on bill of lading date. The AWB will use reasonable endeavours to assist Ex Co in obtaining recovery but apart from this undertaking the AWB is not exposed to any ongoing risk.
The AWB has approval from the UN to sell wheat to Iraq. [755]
27.61 On 27 October 1995, Mr Feakes prepared a minute for Mr Laurie, acting Deputy Secretary of DFAT, through Mr Bowker, acting Assistant Secretary Middle East and Africa Branch of DFAT.[756] The minute concerned the proposed wheat sale and associated financial transactions. Mr Feakes recorded that he had been present during a conversation between the Secretary and BHP and that the proposal outlined by BHP was that it would pay AWB to supply an amount of wheat to Iraq as a gift. He noted his subsequent contact with Mr Stott and receipt of the proposal referred to above. He noted Mr Stott proposed to use a previous approval of the United Nations on the basis that the BHP arrangement could be described as a 'cash against documents transaction',[757] the only difference being that the cash was coming from a source other than the purchaser. Mr Feakes and DFAT Legal Office took the view that the proposal could not come within the previous UN approval and that a new authorisation request setting out the actual method of payment would be required. Mr Feakes noted there was little prospect the Sanctions Committee would approve such a proposal.
27.62 On 27 October 1995, Mr Harley recorded speaking with Mr Stott who advised the transaction involving payment via a third party was 'not on'. He then spoke with Mr Bowker who he believed confirmed that a third party payment was 'not on'. It was noted that humanitarian gifts and cash donations were consistent with sanctions.[758] Mr Harley recalled it was 'likely' he told Mr Davidson Kelly of DFAT's view. He had a specific recollection of telling Mr O'Connor at about that time that DFAT would not approve a credit based wheat shipment but would approve a gift based shipment, and of Mr O'Connor approving proceeding with the shipment as a gift.[759]
27.63 On 27 October 1995, Mr Feakes again wrote to Mr Laurie noting the Secretary had spoken with him about other means of BHP funding a wheat purchase.[760] It was noted a gift could be made through Care Australia and that this would not require the involvement of the Australian Government. Mr Feakes raised the concern that assisting BHP, whose motives were commercial rather than humanitarian, might adversely affect the Commonwealth.[761]
27.64 On 30 October 1995, IGB wrote to AWB urging it to progress the transaction.[762]
27.65 An undated file note of Mr Stott's recorded a discussion with Mr Feakes and Mr Bowker noting:
27.66 On 30 October 1995, Mr Bowker wrote to the DFAT Secretary, Mr Costello, copied to Mr Laurie and Mr Skelly.[764] He advised that BHP could make a gift for humanitarian purposes and that DFAT was not obliged to scrutinise the 'activity or motives of the company'. He noted that customs and the Reserve Bank would both need to satisfy themselves as to the purpose of the shipment, and that the United Nations would have to be advised, and approve, a proposed gift and that if disclosure of BHP's involvement was a risk, but an unacceptable one, then the donation could be made through Care Australia or the Iraqi Red Crescent. The Secretary noted on the minute: 'noted - please advise Senator Evans. Tell BHP I am available to discuss it this week'.[765]
27.67 Later on 30 October 1995, Mr Bowker sent a further minute to the Secretary advising that the proposal for a wheat shipment on credit terms had been extensively discussed with Mr Stott, Mr Harley and Mr Engel of AusAid.[766] He advised his belief that there was no prospect of UN approval of the arrangement as it would 'make a nonsense of sanctions'. Mr Bowker advised that Mr Stott had claimed to DFAT, and led BHP to believe, that DFAT had previously allowed such proposals to go forward where AWB deals with Iraq had been financed by third parties including Libya, Japan and Korea. He noted Mr Stott had claimed that such third party arrangements had been approved by the United Nations but that DFAT could find no evidence to support that contention either on file or from the recollection of officers concerned. He stated: 'Frankly, we do not believe him'. Mr Bowker stated that the United Nations had approved sales to Iraq on the basis of cash against documents and that DFAT was unaware that AWB was being paid using the funds of third parties in earlier transactions. He noted this had not been made known to the UN Sanctions Committee. He noted Mr Harley had been attracted to providing wheat because the amount loaned might be recoverable, but that BHP was prepared to make a donation if it had sufficient commercial reason.[767]
27.68 On 31 October 1995, a cable was sent to the Foreign Minister, Senator Evans, to update him on the matter.[768] It advised that it was proposed to advise BHP that a gift of wheat to Iraq for humanitarian purposes, arranged through a reputable charitable institution, would be consistent with sanctions. It noted AWB had argued that the proposal was not an extension of credit, even though a Letter of Credit redeemable in 5 years or after the lifting of sanctions was involved. It noted BHP and AWB had been advised that the method of payment proposed would contravene sanctions. It reiterated the advice in the above minute to the Secretary.[769]
27.69 On 1 November 1995, AWB faxed to Mr Skelly, following a discussion with Mr Stott that day, a copy of the telex of 30 October 1995 from the IGB.[770]
27.70 On 6 November 1995, Mr Skelly, acting Assistant Secretary Middle East and Africa Branch of DFAT, wrote to Mr Stott and advised that there were three ways Iraq could pay for humanitarian goods.[771] These were by payment in cash, by Iraq agreeing to transfer its frozen assets into the escrow account, or by Iraq agreeing to accept UN Council Resolutions 706, 712 and 986 which are the oil-for-food resolutions. He stated:
Proposals whereby Iraq agrees to repay debts against the promise of future oil sales are not acceptable to the Sanctions Committee nor are transactions involving the payment for humanitarian goods by third parties. Neither of these payment methods would be compatible with the underlying policy of the sanctions regime, namely, to pressure Iraq into using the oil-for-food resolutions and thereby to use its wealth to approved ends.[772]
He noted that permission to export could be denied if the Minister or his delegate was of the view that the method of payment, including the sourcing of the funds to be received in payment, would involve a breach of sanctions. [773]
27.71 On 9 November 1995, Mr Stott endorsed on the letter of 6 November 1995 a note to Mr Lawrenson and Mr Storey stating:
Prescott BHP raised the BHP/AWB transaction with Gareth Evans. Whilst he was supportive he suggested BHP discuss the transaction with his department. The AWB outlined the structure of the transaction to DFAT. DFAT have subsequently said that the transaction as proposed is in their interpretation a breach of UN sanctions. This decision has far reaching ramifications for our Iraqi business. All our payments for Iraq shipments are received via third parties and DFAT was aware of this (although DFAT officials claim now they were not aware of this). The bottom line is that we will not be able to do any more business to Iraq. BHP are concerned that they may have destroyed our Iraqi business and have therefore offered to provide the AWB every assistance, including international legal help, to turn the decision around. We have kept the Iraqis fully informed and have asked the IGB for approval to ask the UN via our government, the following question: 'Can the AWB sell wheat to Iraq for humanitarian purposes and receive cash payment for the goods via a third party?' If the answer to the above is positive then our problems are solved. However, if negative then we will need to rethink our strategy. In the meantime the AWB/BHP are trying to rework the transaction using AusAid/WFP as the clearing mechanism' .[774]
27.72 On 9 November 1995, Mr Stott telexed Mr Daoud seeking his permission to ask the UN the question raised in his file note above.[775] The telex was resent on 10 November 1995.[776]
27.73 On 16 November 1995, DFAT sent a cable to its New York mission, copied to the embassy in Amman, reiterating advice given to AWB and asking the mission to raise with the Sanctions Committee their views as to:
(1) whether food stuffs for humanitarian purposes can be purchased by a third party and provided as a gift to Iraq?
(2) whether food stuffs for humanitarian purposes can be purchased by Iraq entering into a credit arrangement with the supplier or third party with Iraq agreeing to pay for the food stuffs some time in the future?
(3) could such a credit arrangement be legitimised if it is made conditional upon the debt being realisable only after sanctions have been lifted. [777]
27.74 On 16 November 1995, Mr Stott faxed Mr Skelly a notification form for the export of 100,000 metric tonnes of wheat to Iraq for submission to the UN. The attached form stated the method of payment to be 'cash payment to be received through third parties'.[778] DFAT requested Mr Stott wait until their cable had been answered before submitting the notification.
27.75 On 20 November 1995, Mr Stott telexed Mr Daoud advising: 'I understand that our usd 5 million friends may have discussed with their Baghdad contact, the mechanism that we explored last week.'[779] Mr Stott advised that he was awaiting a response to DFAT's request of the United Nations in relation to the arrangements they had been discussing.
27.76 On 22 November 1995, Mr Stott advised Mr Daoud that following further discussions with DFAT it had now been decided to proceed with a 100,000 tonne application on the basis of 'cash payment to be received through third parties.'[780]
27.77 On 1 December 1995, Mr Feakes faxed Mr Stott advising that the United Nations had approved the 100,000 tonne application and enclosing a copy of that approval dated 28 November 1995.[781] It approved the notification to the United Nations which stated: 'cash payment to be received through third parties.'[782] Mr Stott forwarded the fax to Mr Harley on 4 December 1995 and noted: 'Looks like all systems go.'[783]
Mr Harley recorded in his notebook sometime in the period 23 November to 5 December 1995 a conversation with Mr Feakes.[784] He noted that DFAT were reluctant to write but that BHP was 'free to do it'. Mr Harley's evidence was that this was a reference to the donation proposal.[785]
27.78 On 5 December 1995, Mr Stott telexed Mr Daoud advising 'we expect to receive the green light from our 5 mill friends soon.'[786] Mr Stott proposed a new price for the cargo.
27.79 On 5 December 1995, Mr O'Connor wrote to Mr Prescott a memorandum advising that DFAT had stated BHP was free to pay the AWB for the supply of wheat to Iraq and proposing that BHP proceed as soon as possible on a 'straight forward grant basis'.[787] Mr Harley believed he may have drafted the memorandum, at least in part.[788] Mr Prescott noted 'okay to proceed' on the memorandum on 9 December 1995.[789] Mr Prescott gave evidence the shipment was intended to be a gift.[790] He said:
I did not believe or understand that the grant approved by me was a loan to Iraq. There was no obligation on Iraq to repay any amount to BHP. I did not approve any loan by BHPP to Iraq. My understanding at the time was that BHP had agreed to make the payment to build relationships with Iraq in order to seek to position itself favourably for possible access to oil projects, upon the lifting of the UN sanctions. I did not understand that the payment created any obligation on the Iraqis.[791]
27.80 On 5 December 1995, Mr Stott advised Messrs Lawrenson and Storey that UN approval on the basis of 'cash payment to be received through third parties' had been received.[792] He advised:
… the BHP transaction structured slightly differently, is now able to proceed…
… Under the old mechanism the IGB was to open a 5 year deferred payment L/C in favour of the AWB. The IGB was to pay cash or deliver oil in substitution for cash if UN restriction on oil exports were terminated. The AWB was to assign its payment and oil receipt rights to BHP and in return the AWB would receive cash from BHP on bill of lading date.
The new mechanism, which is still to be negotiated with BHP, should simply be COD. BHP will then be left to make its own arrangements with the Iraq's.[793]
27.81 Mr Stott proceeded to negotiate delivery and terms with Mr Daoud, who on 14 December 1995 forwarded a contract, number A2741, to AWB for execution.[794] The contract did not note or specify the involvement of BHP, and recorded a direct sale from AWB to the IGB. That contract was executed by IGB. Mr Stott completed an export sales note on 15 December 1995 again showing the buyer to be IGB.[795]
27.82 On 20 December 1995, Mr Stott wrote to Mr Harley advising that AWB had fixed the Ikan Sepat to carry the wheat. He proposed that BHP confirm payment to be by cash against their invoice which was to be presented after the bill of lading date.[796]
27.83 On 21 December 1995, Mr Stott wrote to DFAT seeking the appropriate customs permission for export of the wheat.[797] That permission was forwarded to AWB, executed by Mr Feakes as delegate of the Minister, on 21 December 1995.[798]
27.84 Thus, as at December 1995:
27.85 On 3 January 1996, Mr Davidson Kelly prepared a note of meetings that he and Mr Saadalla Al-Fathi had participated in with officials of the Oil Ministry and the Trade Ministry.[800] Mr Al-Fathi was an Oil Ministry official, but also sometimes assisted BHPP. He noted that the meetings had been called at the Iraqis request to discuss progress on the completion of the oil field discussions and to consider the implications of the recent commitment to a grain shipment by BHP. He noted:
The Aid programme, although being discussed separately from the [oil field] contract negotiations is regarded by the Government as crucial to BHPP's success, and hence there is a high degree of eventual linkage between the two. The Iraqis expressed deep thanks for the first cargo (due to be discharged on 14 February) but of course are looking for further progress towards the target of 100,000 tons (about US$25 million).[801]
The meeting with the Trade Ministry officials included Dr Saleh, Minister of Trade, Mr Daoud and Mr Farouk Al Obaidi, Director General External Relations. Mr Davidson Kelly recorded that the Iraqis had expressed gratitude for the cargo and were enthusiastic for further shipments. He said:
The Minister restated their position that the supply of Aid in the form of Wheat and the [oil field] contract discussions were closely interlinked in the mind of the Iraqi Government.[802]
It was further noted:
The position which has been reached is not what had been originally proposed as being the optimal position from the point of view of the Iraqi Government and BHP.
Therefore the first shipment was effectively a gift from BHP to the people of Iraq, permitted by the UN Sanctions Committee. After it had been landed we would resume our discussions with the Australian authorities to try to persuade them that their interpretation was too severe. The IGB offered to provide any information on other precedents which would assist us. This is important as it is clearly understood by the Iraqis that BHPP's permitted budget for donations of this nature is more limited than its ability to finance trade on sound commercial terms. Also the Iraqis are keen to purchase grain, but on deferred payment terms, rather than accept gifts.[803]
There is accordingly no doubt Mr Davidson Kelly knew the transaction was a gift.
27.86 On 15 January 1996, Mr Davidson Kelly wrote to Dr Saleh advising that he was looking forward to the successful landing of the first cargo and that he would be taking up with Australian authorities 'their interpretation of the Sanctions legislation.'[804] He advised he would keep the Minister and the IGB fully informed.
27.87 On 25 January 1996, Mr Skelly wrote to Mr Stott.[805] He advised that the UN Sanctions Committee was prepared to accept export to Iraq of foodstuffs for humanitarian purposes under credit arrangements in light of the worsening humanitarian situation. This was on the condition the debt be realised only after sanctions were lifted and that it did not involve unfreezing Iraq's frozen assets. He advised gifts or donations were considered to be consistent with the sanctions regime and approved on that basis. Mr Skelly advised that the issue concerning payment by third parties required consideration of whether the activities of the third party complied with the relevant Security Council resolutions and whether the government lodging the notification was sponsoring the activities of the third parties.
27.88 Mr Skelly noted that the Sanctions Committee stressed it was 'the responsibility of the state submitting the notification request form to satisfy itself that the proposed transaction would not involve the use of frozen Iraqi assets or the realisation of a debt before sanctions are lifted.'[806] Mr Skelly advised that DFAT considered that the existence of third party payments should be explicitly advised to the United Nations.[807] He made clear that the Minister or his delegate would not grant a permission to export until satisfied in respect of applications by a commercial entity to export humanitarian goods to Iraq that such transactions did not involve the unfreezing of Iraqi assets, or the repayment of debt before the lifting of sanctions.
27.89 On 26 January 1996, 20,833 tonnes of wheat was loaded on the Ikan Sepat and a bill of lading completed.[808]
27.90 Within the AWB documents produced to the Inquiry is a letter to the IGB dated 29 January 1996 enclosing three original copies of the bill of lading, three copies of the bill of lading, the original and six copies of the export invoice, the original and four copies of the AWB certificate of origin, the original and four copies of the Government phytosanitary certificate, the original and four copies of the certificate of weight quality and condition, and a copy of the certificate concerning the vessels age.[809] As the documents said to be enclosed were retained by AWB and later sent to BHPP[810], it is clear this letter was not sent.
27.91 On 30 January 1996, Mr Owen (AWB) sent a fax to Mr Moore (BHP) in Melbourne.[811] In the fax, he referred to settlement of invoice number 01865 and instructed:
Due to the present sensitivity involved with this Country we ask that no mention be made in this regard, in your request to payment to your Bankers.[812]
27.92 Invoice 01865 related to the 20,833 shipment to be paid for by BHPP. The invoice was for an amount of $4,999,920.[813] BHPP replied on 31 January 1996 acknowledging receipt of the invoice and supporting documentation. It advised payment would be made on February 2, 1996.[814] BHPP's payment was credited to AWB's account on 5 February 1996.[815]
27.93 On 13 February 1996, AWB issued a Letter of Indemnity to the owners, managers, master and agents of Ikan Sepat requesting them to deliver the wheat to the IGB without production of bills of lading and indemnifying them against doing so.[816] This makes it clear the bills were not sent to IGB by the letter of 29 January 1996.
27.94 On about 14 February 1996 the Ikan Sepat commenced unloading at Um Qasr.
27.95 It will be observed that the shipment was approved by BHPP, DFAT and the United Nations as a gift or grant and was delivered as such. It follows that neither BHPP nor AWB have misled either the United Nations or DFAT in respect of this transaction.
27.96 On 1 February 1996, IGB telexed AWB accepting an offer for a further 30,000 tonnes to be shipped in February 1996.[817]
27.97 On 2 February 1996, Mr Stott faxed Mr Bowker replying to Mr Skelly's letter of 25 January 1996.[818] Mr Stott enquired whether the proposal for supply on 5 year credit previously raised but rejected by DFAT would be permissible in light of the United Nations advice.[819]
27.98 On 2 February 1996, Mr Harvey (AWB) telexed Mr Daoud confirming the order for 30,000 tonnes and advised:
We would intend to implement a payment mechanism as per the old system, and would be most appreciative for your advice on whether this payment mechanism is ready to proceed.[820]
27.99 On 4 February 1996, Mr Daoud replied:
We confirm payment per the previous manner (i.e. payment effected after vessel arrival to Um Quser) and we need to know your bank name and account number in Australia in order to act accordingly.[821]
Mr Harvey provided these details on 5 February 1996.[822]
27.100 On 8 February 1996, AWB advised it had chartered the Tiger Island to carry the 30,000 tonnes and that the contract was A2803.[823]
27.101 On 11 February 1996, Mr Worthington of BHPP sent a memorandum to Mr Davidson Kelly and Mr Paver advising that he had had an 'off the record meeting' with Mr Al-Fathi the previous evening.[824] He said Mr Al-Fathi had advised that the Chinese National Oil Company and a Korean consortium lead by Samsung were both seeking the same project as BHPP and that the Korean consortium had offered an immediate loan facility to Iraq, on an undefined basis, of US$150-200 million. The loan was available for the purchase of food and other needs. Mr Al-Fathi advised that BHP must, if it was to meet this competition, 'urgently progress the US$25 million wheat transaction which was the subject of discussion with Norman at the last meeting(s) (?)'[825], and arrange a proposal providing for the legal sale on commercial terms of 1 million tonnes of Australian wheat to Iraq regardless of the position on UN sanctions. Mr Worthington also reported that Mr Al-Fathi had told him that the Korean and Chinese offers had the 'overt or covert' support of their respective governments.
27.102 On 12 February 1996, Mr Stott wrote to Mr Bowker advising of the Tiger Island sale stating:
…In line with the UN approval dated the 28 November 1995, we wish to advise that we have chartered a vessel to perform this shipment.[826]
Ms Jorgenson (DFAT) replied on 13 February 1996 that the proposal was under consideration by the DFAT legal area and the UN New York.[827]
27.103 On 14 February 1996, Mr Bowker issued permission to export in respect of the Tiger Island shipment[828]; however, on 19 February 1996, Ms Jorgenson (DFAT) wrote to Mr Stott at AWB advising she had an interim response from the DFAT legal area, was awaiting advice from New York, and hoped to reply to the request that week. Mr Stott faxed a copy of the DFAT advice to Mr Harley and endorsed thereon:
Tom, I spoke to Sue and we appear to again be stuck in the bureaucracy. We need to rethink our strategy i.e. do we wait or do we scale up. Appreciate your thoughts/comments. Charles[829]
Mr Harley said that he did not know what the second sentence meant.[830]
27.104 On 28 February 1996, AWB sent Mr Daoud an offer for 20,000 tonnes of wheat for delivery in March/April 1996.[831]
27.105 On 29 February 1996, Mr Hunter (AWB), who had replaced Mr Stott who had left AWB for BHPP, telexed Mr Daoud in response to a counter offer and wrote:
The Qatar option as previously discussed with Charles Stott may have resurfaced and we would appreciate your advice if this is a possibility. If this is the case this may assist in reducing the overall freight value i.e. the total tonnage 30,000 tonnes, rather than 20,000 tonnes.
We look forward to your advice.[832]
27.106 On 29 February 1996, Ms Carayanides of DFAT's New York mission, sent a cable to Canberra concerning methods of payment under sanctions.[833] She advised that, having consulted with the US mission that the United States would not support terms involving a Letter of Credit repayable in five years as this would involve extending credit to Iraq beyond normal commercial practice. She noted however, that the United States also advised that if the application merely said payment by 'Letter of Credit' it may be that the application would not be blocked by the Sanctions Committee because it did not scrutinise applications as it lacked the resources to do so. The US position was that 'the onus is on the country submitting a notification to be satisfied that the export does not breach UN sanctions', but that if a five year payment term were specified the United States 'would need to ask more questions.'
Ms Carayanides also advised that the position of the United Kingdom mission was similar in that it would be likely to oppose a five year Letter of Credit, but if the time for payment were not disclosed it may well not be questioned. This was stated to be an unofficial position. Like the United States, the UK position was that if the delayed payment terms were stated then it was likely one of the committee members would query it. Ms Carayanides advised other countries took less stringent approaches, but it was clear that the United States and the United Kingdom would not support the 5 year delayed payment if disclosed. She noted a sustained US objection would be sufficient to block the application. She noted: 'the practice, whereby countries stipulate 'letter of credit' (without elaboration) is also convenient for committee members as it avoids them having to carefully consider the legitimacy of the transaction and provides them with cover for not blocking humanitarian exports'.[834]
27.107 On 8 March 1996, Mr Worthington emailed Mr Davidson Kelly (copied to Mr Taylor of BHP) seeking to discuss his recent meetings in Iraq.[835] He noted that BHP must table an offer on its next trip to compete with the Korean consortium. He noted Iraq required a 'loan' of about US$100 million outside of any production sharing agreement and that:
a solution must be found. It obviously will require provision of humanitarian aid and I think we should discuss with the AWB. Perhaps the solution is to let the Koreans (or substitute) attend to this aspect and keep clear of it.[836]
27.108 Mr Stott commenced employment with BHPP on 13 March 1996, reporting to Mr Davidson Kelly.[837]
27.109 On 21 March 1996, Messrs Harley and Lyons attended a day long BHPP Strategy Review of the Middle East, chaired by Mr Davidson Kelly and Mr Samson.[838] At this review Messrs Skelly and Pierce gave a briefing regarding DFAT's view on Iran and Iraq.[839]
The minutes of the Strategy Review records:
Mr Lyons recorded DFAT advising that Mr Saddam was likely to 'be there for the foreseeable future, despite sanctions', because 'the Iraqis were getting around the sanctions in many ways'.[841] He recorded their view that the sanctions were likely to remain unchanged 'due to US views',[842] and advised that 'pushing the envelope' on sanctions was very difficult.[843] He recorded their view that 'Australia has to guarantee to the UN that any transactions we have are within the UN sanctions'.[844] He noted that there was 'not a positive reaction from New York' to BHPP's 'type of proposal'.[845]
27.110 On 26 March 1996, Mr O'Connor wrote to the Iraq Minister for Oil, Mr Amir Mohammed Rasheed, noting that the 'first cargo of grain had arrived safely last month' and trusting 'that this shipment will prove to be the cornerstone of the relationship between BHP Petroleum and the Government of Iraq'.[846] Mr O'Connor also noted BHPP was continuing discussions with DFAT and the sanctions committee to arrange procedures under which additional shipments of humanitarian aid could be undertaken. This letter was drafted by Mr Davidson Kelly. On 28 March 1996, Mr Davidson Kelly faxed the letter to Mr Al-Fathi, noting the original was in the post.[847]
27.111 On 2 April 1996, Mr Stott emailed Mr Harley, Mr Davidson Kelly and Mr Lyons advising that, following a review of the sanctions regime and Australian domestic legislation with Mr Lyons, they spoke to DFAT legal advisers on 1 April 1996 and again put forward the position that sanctions allowed sale of wheat on a letter of credit providing for payment five years from the date of sale or payment of cash or oil earlier if UN sanctions are lifted. Mr Stott also advised that the Iraqis had been unable to pay for the 30,000 tonne shipment recently discharged at Umm Qasr (the Tiger Island shipment). He noted this was a significant event as since the end of the Gulf war all AWB trade with Iraq had been conducted on the basis that if Iraq said they had the funds then the cargo would be discharged without a formal payment arrangement being in place. Mr Stott noted that this 'gentlemen's agreement' had worked well for the past five years.[848]
27.112 On 11 April 1996, Mr Pierce wrote to Mr Officer, then General Manager (International) of AWB, advising that DFAT would in future require written notification from AWB that 'shipments authorised had been dispatched, delivered and paid for according to the terms specified in our notification to the UN Sanctions Committee' and that it would be a condition of the permission to export that 'the terms of payment for the wheat (be) as previously agreed and as previously notified to the UN Sanctions Committee.'[849]
Mr Pierce continued:
The second issue concerns your colleagues' discussions this week in Amman. For the shipment in question, our notification to the UN sanctions committee specified 'cash payment to be received through third parties' and 'cash against documents'. It is hypothetically possible that the Iraqi authorities might seek to vary those terms (perhaps by suggesting partial payment, payment in kind, a letter of credit, or delivery of part of the shipment as a gift against guarantees of further sales). If there were to be any variation proposed we would need your earliest advice in order to consider the implications for our adherence to the sanctions regime generally and our notification of the 'Tiger Island' shipment particularly.[850]
27.113 There is a note of a meeting between Mr Daoud and Messrs Harvey, Long and Owen of AWB on 14 April 1996.[851] The note recorded payment discussion including a proposal that Iraq's bankers make payment to Union Bank of Switzerland (UBS) who would then make the transfer to the AWB account in Melbourne. It mentioned AWB's acceptance of 'the other option' involving ANZ. AWB also agreed to examine options of putting in place a US dollar account in Europe, and noted that AWB would accompany IGB to a meeting with its bankers on 15 April. It was further noted that AWB would arrange for a further shipment of wheat arriving between 10 and 15 May at Umm Qasr and that the parties would meet again to discuss on 15 April.
27.114 On 17 April 1996, Mr Harvey faxed Mr Officer and Mr Hunter to advise the outcomes of the meetings. He noted that options for future payments, 'because of security problems' would each be given a number so that they could freely be discussed in telexes and telephone discussions.[852]
27.115 On 22 April 1996 and 23 April 1996, Mr Harvey produced detailed notes of the meetings in Amman with Mr Daoud and himself, Mr Long and Mr Owen. The payment options were:
Option 1: AWB has USD account in UBS Switzerland;
Option 2: AWB has two accounts in UBS Switzerland,
(a) AUD currency
(b) USD currency
Option 3: AWB Bank has USD account in UBS Switzerland
Option 4: Union Bank Jordan have correspondent bank in Australia with USD account;
Option 5: per 'Tiger Island' payment.[853]
27.116 In the report of 23 April 1996, Mr Harvey noted that the Tiger Island problem, namely, how IGB was to pay AWB for the shipment, arose from a refusal of IGB's Jordanian bankers to accept US dollars in cash for payment of the shipment.[854] This was suspected to be because of the deteriorating political relationship between Iraq and Jordan. It appeared IGB had physically transferred the cash to Jordan and offered to give the cash to AWB representatives. Ultimately, the money was deposited with a new bank in Jordan (the Union Bank) which transferred the money to a correspondent bank in Europe, which converted the money into Australian dollars, and transferred it to AWB's Commonwealth Bank account in Melbourne. The Iraqis agreed to consider an interest claim for delayed payment. The note also recorded that when Iraq adopted UN resolution 986, Iraq would return as a wheat buyer with a demand of approximately 160,000 tonnes per month.[855]
27.117 On 22 April 1996, the Iraqi Deputy Minister of Oil wrote to Mr O'Connor thanking him for his letter of 26 March 1996.[856] The Deputy Minister expressed his hope that additional shipments of grain could be made in the near future. He wrote that he expected more progress on the oil field development could be expected to be made on BHP's next visit.[857]
27.118 An undated confidential file note of BHPP, recorded a visit from 18 to 25 April 1996 of BHPP representatives to Iraq during which they met with officials of the Ministry of Oil, the Ministry of Trade and the Ministry of Industry.[858] The note recorded the Minister of Trade advising BHPP that 'Australia's excellent reputation was currently being tarnished by our government's non preparedness to support/submit the proposed payment mechanism which according to their [Iraq's] interpretation is totally in accordance with UN sanctions' and other countries were shipping grain to Iraq on credit terms. The Minister was not prepared to advise details. The BHPP team advised the Minister that before BHPP could contemplate any further shipments, some progress had to be made with their oil field discussions. The note also recorded a private discussion between Mr Stott and Mr Daoud in which Mr Daoud said that, whilst Iraq was actively pursuing the same deferred payment mechanism with other persons interested in the oil development, the only one which had fulfilled a grain delivery commitment was BHPP. It noted Mr Daoud was keen to have a formal payment mechanism in place 'along the lines previously discussed.'
27.119 It also recorded that BHPP commissioned Mr Al-Fathi, a senior Iraqi official, to inform Mr Richardson (DFAT) of the Iraqi Minister's concerns about deferred payment. The note recorded that the BHPP delegation successfully tied the possibility of future grain shipments to a commitment on the oil project. It noted Mr Al-Fathi lobbied for a commitment on the loan for wheat purchases and that, in his opinion, this would be the catalyst for 'project capture'. The note recorded follow up actions to include Mr Stott raising with DFAT the oil field competitor's ability to gain governmental support for credit terms and to unblock 'the current payment arrangement'. He was also to contact AWB to reaffirm its support of the proposed payment mechanism.[859]
27.120 On 30 April 1996, Mr Harvey replied to the fax of 11 April 1996 from Mr Pierce to Mr Officer.[860] AWB confirmed that the Tiger Island shipment had been dispatched, delivered and paid for according to terms specified in the notification to the United Nations. The letter also noted AWB was awaiting a formal response to its proposal to accept payment by way of five year Letter of Credit.
27.121 On 1 May 1996, Mr Harvey wrote to Mr Daoud and advised that the interest claim for the Tiger Island was US$45,430.23 and that, if accepted it would be written off against despatch owed to IGB.[861] The telex also noted that option 4, as discussed on 22 and 23 April 1996 in Amman, was AWB's preference.
27.122 On 2 May 1996, Ms Jorgensen (DFAT) prepared a minute to Messrs Pierce and Skelly in respect of a proposed meeting with Messrs Stott and Lyons later that day.[862] Her notes of the points for the meeting included:
3. Methods of Payment
The Australian Government, through the Reserve Bank of Australia, facilitated the sale in 1992 of 900,000 tonnes of wheat to Iraq with payment in gold. Sales since that time have been made with payment in cash i.e. cash against documents. The submission by Mr Stott of the proposal to involve third parties and a five-year letter of credit led us to seek advice from UN New York about acceptable methods of payment. We were advised that the Sanctions Committee routinely accepts credit arrangements for the provision of humanitarian goods to Iraq provided that frozen Iraqi assets are not used, and provided that the debt is realised only after the sanctions regime has been lifted. Committee members also apparently 'understand' that a letter of credit can include cases where Iraq undertakes to repay debts against the promise of future oil sales once sanctions are lifted. Member states must be satisfied that third party arrangements do not contravene the sanctions regime and do not involve illegal methods of payment. A government which submits a third party notification would be seen to be sponsoring the activities of the third party. (NB the Sanctions Committee operates on an evolving practice basis without detailed operational guidelines and relies to a great extent on the good faith of member states).
Determined to seek UN approval for a third party arrangement, Mr Stott through DFAT, submitted an application to the Sanctions Committee with payment details of 'cash payment to be received through third parties/cash against documents' which was subsequently approved. Two shipments of wheat have proceeded under this approval, apparently without third party involvement. A further 46,000 metric tonnes of wheat can be exported to Iraq using this approval.
However, when we put the actual AWB/BHP proposal to the UN New York for comment from their Sanctions Committee contacts, the response was that the US and UK had 'difficulties' with it. The US was most negative and saw the promise of present or future oil sales as breaching UNSCR 661, and that letters of credit should assume 'normal commercial practice' (but admitting that the Committee did not have the resources to look behind every 'letter of credit' application). The UK was also likely to look negatively upon such a proposal. NAM contacts were more flexible. A sustained US objection to the proposal would be enough to block it. Questions would then be raised with the Australian Government and details would need to be revealed.
The legal opinion of the IOL to the proposal is that the credit arrangement should have a condition that the letter of credit is only realisable after the sanctions regime has been lifted. This would avoid any breach of para 11 of UNSCR 778. In addition, the application form sent to the Sanctions Committee should clearly state that it is a credit arrangement with a third party purchasing the letter of credit from AWB.[863]
27.123 Ms Grant-Thomson, a lawyer with DFAT, gave evidence that, from about April 1996, she dealt with Messrs Stott and Harley concerning various proposals they advanced for Iraq to pay for wheat shipments.[864] She recalled dealing principally with Mr Stott, mostly by telephone, but recalled Mr Harley attending her meetings with Mr Stott for relatively short periods. Her evidence was that:
The main contact that I had was with Mr Charles Stott from BHP Petroleum who was attempting to alter an arrangement that had previously been approved by the UN Sanctions Committee. Under that arrangement, BHP Petroleum had gifted 20,833 tonnes of wheat to Iraq. Approval was granted by the UN Sanctions Committee on 16 November 1995 for this shipment of wheat. Mr Stott, ostensibly acting on behalf of BHP Petroleum, was attempting to change this gift arrangement into a credit arrangement so that the Iraq Government would pay for this payment of wheat under a credit arrangement. I remember advising on this proposal by BHP Petroleum in the course of our meetings in Melbourne and in numerous telephone conversations with Mr Stott. Mr Stott was constantly and intensely proposing alternative ways of overcoming the fact that BHP had made a gift of wheat to Iraq and was attempting to change this to a credit arrangement whilst maintaining UN Sanctions approval. My advice was that it was unacceptable to change a gift arrangement that had been approved by the UN Sanctions Committee into a credit arrangement.
My recollection is that Mr Stott did not like being told that it was not possible to change the gift arrangement into a credit arrangement. He put pressure on the Department to revise this advice. By 'pressure', I mean that in conversation and meetings in which I was involved, Mr Stott would be forceful in promoting his view and constantly challenged the validity of the legal advice that I was providing on behalf of the Department.[865]
27.124 Mr Stott was not asked about this meeting and did not give evidence about it. Mr Lyons, who took notes of the meeting, said even after looking at his notes, he could not be certain what was said by whom at the meeting.[866] Mr Lyons said in his statement that discussion flowed freely at the meeting about ways in which BHPP might achieve their objective to secure long term letters of credit. One such idea discussed was 'careful and limited wording' of the application to the UN.[867] Mr Lyons could not recall who that suggestion emanated from but said it was discussed openly between BHPP and DFAT.[868]
27.125 On 3 May 1996, Mr Storey emailed Messrs Lawrenson, Officer, Hunter, Harvey and Geary concerning his meeting with Mr Rowe, Deputy Permanent Representative and Ms Carayanides, First Secretary, of the Australian mission to the United Nations in New York, on that day.[869] At item 5 of that note, he recorded:
RE: AWB Approaches to Sanctions Committee
In regard to the apparent increase of bureaucratic involvement from Canberra with our applications, there is no pressure from the UN quarter except that the U.S. and UK hold very strong on their position regarding the Sanction rules. For example, an application stipulating payment by a 'Letter of Credit with up to five-year terms' (a la BHP) would be flatly blocked by the U.S. and UK. An application, however, which stated payment to be by 'Letter of Credit' with no details as to the terms, would probably be approved.
We were advised that other nations clearly provide limited information in their applications to avoid the potential embarrassment of an application being rejected. There is political risk, of course, that should one go down the minimal information route and being subsequently found out, of being branded as a Sanction buster.
The Australian Government will obviously not sanction such an approach.[870]
Mr Storey further noted, at paragraph 9, that the advice of Mr Rowe and Ms Carayanides was pragmatic and that they recognised 'that other nations do deals (e.g., the L/C example above)'. He noted they also mentioned:
… Iran have been pretty accommodating in helping Iraq bust sanctions-strange alliance which the Iraqis don't like but beggars can't be choosers! Cash is flowing for 'black' oil through Jordan, Turkey, etc.[871]
27.126 On 6 May 1996, Mr Pierce wrote to Mr Harvey noting his confirmation concerning the Tiger Island.[872] Mr Pierce advised that DFAT had that day put a submission to Ministers on the issue of AWB's proposed alternative payment mechanism.
27.127 On 6 May 1996, Mr Harvey provided a position paper on Iraq to Mr Officer which was copied to Mr Hunter.[873] He noted that Ms Martin, Mr Goodacre and himself were meeting with DFAT in Canberra on 10 May 1996 to discuss the issues. Mr Harvey noted in the overview that AWB had aimed to position itself as preferred supplier of wheat to Iraq by understanding and accommodating the Iraqis difficulties as much as possible. He noted that the Iraqis were purchasing wheat from elsewhere and that they had alternative payment options offered to them by other countries.
Mr Harvey recited the five year letter of credit proposal for AWB to sell wheat on a five year letter of credit which would then be assigned. He stated in relation to the Ikan Sepat shipment that:
While all parties agreed to the proposal, DFAT then raised concerns about the role of third parties in transactions with Iraq. Given the time restrictions on making a shipment to Iraq, it was decided that the deal would progress with BHP making cash payment to the AWB as agreed without an L/C from the IGB. The risk carried by BHP was an issue between them and the IGB. From the AWB's view, the transaction was cash against documents through a third party.[874] [emphasis in original]
Mr Harvey recommended AWB implement the proposal, lobby DFAT to accept the proposal and work jointly with BHPP and IGB to achieve this.
27.128 On 7 May 1996, AWB received a telex from IGB advising that they were unable to pay interest on the Tiger Island.[875]
27.129 On 13 May 1996, Mr Stott emailed Messrs Harley, Lyons, Davidson Kelly, Taylor and Worthington that DFAT was working on the basis that Iraq would accept resolution 986, and that agreement with Iraq on it was imminent.[876] He noted DFAT was still considering its position on the 'payment/legal issue'.
27.130 On 21 May 1996, Mr O'Connor wrote to the Iraqi Minister of Oil noting that agreement had been reached by Iraq with the UN on resolution 986.[877] On 22 May 1996, Ms Grant-Thompson of the International Legal Division of DFAT and Mr Pierce, met with Ms Martin and Messrs Goodacre and Harvey of AWB, and Messrs Stott and Lyons of BHP, concerning the plans to sell wheat to Iraq against a five year letter of credit after the implementation of resolution 986. Mr Pierce noted that:
…
5. BHP was also prepared (with qualifications) to walk away from the deal, provided they could say to the Iraqis that we have been prepared to entertain the possibility (before 986 intervened) and that we were doing everything possible to develop the trade. BHP would also try to derive some advantage from the fact that, since 986 had been agreed, none of its competitors had done anything comparable to the 20,000 tonnes 'gift'. (Mr Downer's response to the submission stated clearly that we were not prepared to entertain the possibility.) We stated emphatically that no retrospective approvals for the shipments already sent could be permitted.
6. Stott did, however, suggest that he could obtain from the Iraqis some form of side-letter to cover the 20,000 tonnes already shipped. That is, the Iraqis would promise some form of payment in kind (oil, good will) at some unspecified date. Stott asked if we would be prepared formally to be made aware of that proposal, on the basis that BHP might, at some later stage, need some future Ambassador in Baghdad to argue that it should be redeemed, or, if the side-letter were publicised, BHP would need us to fend off a hostile American reaction.
7. In my judgement (and Ms Grant-Thompson's), there is nothing at all for us in giving any form of tacit approval to any such deal. If the deal were publicised, we would be accused of aiding and abetting sanctions busting. The absence of a paper trail, and the lack of any arrangements for payment in kind for the shipment, are not our problem. They are BHP's. The 20,000 tonnes deal is now a closed one, as far as we are concerned, and should remain closed.[878]
27.131 Thus, within two months of commencing with BHPP, Mr Stott was seeking DFAT's approval to convert the Ikan Sepat shipment, approved as a gift, to a commercial loan.
27.132 On 23 May 1996, Mr Pierce wrote to Ms Martin advising that, following their discussions of 22 May 1996, the Ministers for Trade and Foreign Affairs had decided that DFAT could not proceed to put to the sanctions committee the proposal for shipment of wheat against the five year letter of credit.[879]
27.133 On 27 May 1996, Mr Pierce wrote to Mr Harley concerning the meeting of 22 May 1996 with Messrs Stott and Lyons.[880] He advised the Ministers had decided not to endorse the proposal that some wheat be shipped against payment by a five year letter of credit and that no submission containing any such proposal should be put to the Sanctions Committee. On 16 May 1996, Mr Downer had indicated to his department that there was 'not a chance' of him agreeing to the letter of credit proposal.[881] He told his department that it was Australia's policy: 'to support sanctions against Iraq, and that we were going to do just that. The Iraqi regime was demonstrably a bad one, sanctions were-in this instance-having a tangible effect on the regime, and our job was to implement those sanctions thoroughly', and that 'it was no part of his responsibility to help Australian businesses to circumvent either tax obligations or UNSC resolutions'.[882]
Mr Pierce raised the question of the export on the Ikan Sepat and noted that DFAT 'now understood' BHP was the third party referred to in the notification which indicated payment would be 'cash payment to be received through third parties'. Mr Pierce wrote:
I understand from your colleagues that there is some thought being given to ways in which BHP's gift of wheat to Iraq might be re-formulated as a credit arrangement (whether on a five year term or different terms), or in a way which otherwise (possibly by payment in kind or in political goodwill) give BHP 'value' for the gift.[883]
Mr Pierce went on to advise that to change the arrangements from a gift arrangement to a credit arrangement would change the nature of the transaction so that it no longer came within the category notified to the Sanctions Committee. He further advised that if the gift arrangement were reformulated into a credit arrangement, the requirement of notification and disclosure to the Sanctions Committee would not have been met. He said:
As far as the department is concerned, the sale in January is a closed matter and must remain closed, with the shipment having been sent and received in the terms notified to the UNSC.[884]
27.134 Mr Pierce's letter was apparently copied to Mr Stott who discussed it with Mr Lyons that day.[885] Later that day, Mr Stott wrote to Mr Owen requesting that he forward all the original shipping documents for the Ikan Sepat marked for his attention.[886] Clearly, Mr Stott knew AWB still held these documents.
27.135 In the accounts of BHPP for the year ending 31 May 1996, the wheat purchase was noted within item 96 as: 'donations-non-deductible-$6,680,005'.[887] The payment was again listed under an annexure as a non-deductible Donation for Grain Purchase.
27.136 In a Director's Questionnaire to Management for the year ending 31 May 1996, in answer to the question:
Are there any material matters other than those discussed in this questionnaire on which management should advise the Board?[888]
The Board was advised:
Yes. A donation of $6.7 million sanctioned by the Australian Government and the United Nations, was made to the Australian Wheat Board to fund a shipment of wheat to Iraq for humanitarian purposes.[889] (Declaration made 12 July 1996)
27.137 On 4 June 1996, Mr Hunter replied to Mr Stott advising that AWB would release the original documents for the Ikan Sepat to BHPP provided BHPP would provide it with an indemnity in similar terms to that provided by AWB to the vessel owners.[890] On 5 June 1996, Mrs Sachak of AWB's legal section sent a further draft indemnity to Mr Stott.[891]
27.138 On 5 June 1996, Mr Stott sent a note to Mr Davidson Kelly and Mr Worthington concerning their proposed meeting with the Oil Minister of Iraq. Mr Stott noted:
BHP has also assisted Iraq throughout this difficult period. For example, in January 1996 we provided a USD 5 million pre-sanction financing arrangement which enabled 20,833 tonnes of humanitarian goods (wheat) to be delivered in February 1996.[892]
Mr Stott listed, under 'Other Important Leverage Points', 'Oil/Wheat/Debt trading opportunities. BHP's resources can be made available to assist Iraq in selling oil or buying humanitarian goods under 986'.[893]
27.139 On 6 June 1996, Mr Worthington prepared a note to Mr Davidson Kelly and others which was copied to Messrs Harley, Stott and Taylor concerning the approach proposed to be adopted at an imminent meeting of Messrs Paver and Davidson Kelly of BHPP with the Minister for Oil in Vienna.[894] One of the messages Mr Worthington wished to be conveyed to Iraq was that:
3. Australia has a long stable and flexible trade relationship with Iraq, one which had continued through the most difficult circumstances of the past decade …[895]
One of the examples cited by Mr Worthington was:
BHP's recent A $5million wheat loan at a time of need, a gesture perhaps unmatched by any other company/country.[896]
Mr Worthington's evidence was that Mr Stott told him about the 1996 shipment[897] and was probably the only source of his information.[898] He was told that BHPP's Chief Financial Officer had 'written off' the 'wheat debt'.[899] He believed Mr Stott told him this.[900] He was never told the shipment was a gift or donation[901] or of the terms on which the shipment was made.[902]
27.140 On 7 June 1996, Mr Stott signed a Letter of Indemnity in favour of AWB in respect of the Ikan Sepat shipment confirming that BHPP had requested AWB to deliver or arrange delivery of the wheat to the IGB without production of the bills of lading.[903] There is no other evidence that BHPP made such a request. On 11 June 1996, Mr Stott copied the Letter of Indemnity to Mrs Sachak and requested receipt of the original documents.[904]
27.141 On 11 June 1996, under cover of a letter dated 7 June 1996, Mr Hunter sent Mr Stott the original documents for the Ikan Sepat.[905] Mr Lyons noted on 11 June 1996 on the coversheet that the original documents were to be kept in safe custody indefinitely. BHP has produced to the Inquiry the complete set of shipping documents, including export invoices for the account of the IGB. Mr Lyons' evidence was that he directed that they be held in safe custody because they were the originals.[906]
27.142 On 21 June 1996, Mr Stott drafted a letter addressed to Mr Daoud:
For several months we have been discussing how we should proceed in terms of establishing a suitable payment mechanism for USD5million (20,833 metric tonnes) of grain we financed in January 1996 on the MV Ikan Sepat.
You no doubt recall that originally it was proposed that the IGB open an L/C in favour of the AWB which provided for payment no later than 5 years from the date of sale. Under the terms of the L/C the IGB was to pay cash or deliver oil to the value of the L/C in substitution for cash if U.N. restrictions on Iraqi oil exports were terminated within the 5 year period. The AWB would assign its payment and oil receipt rights under the L/C to BHP. In return for this assignment BHP would pay the AWB USD5 million cash on bill of lading date.
…
Rather than delay the shipment of urgently needed foodstuffs, in good faith, BHP decided to proceed on a basis that was acceptable to the U.N. i.e. 'cash payment to be received through third parties'.
BHP's intention was to ship the goods and then work with the U.N. and the Australian government post shipment to establish a payment procedure that was mutually acceptable. In this regard we have been lobbying our officials and frankly we were optimistic that a breakthrough was imminent. However, now that 986 has been finalised (and once again congratulations) the environment has again changed.
…
In the circumstances, I suggest we proceed on the following basis:
1. Accept, in light of 986, that there is now no value in pursuing a mechanism with the U.N.
2. BHP continue to hold the original shipping documents for the MV Ikan Sepat.
3. At a later stage in accordance with the original understanding, BHP to receive value by presenting the original documents to the IGB/CBI.
Zuhair, I look forward to receiving your reaction comments/suggestions and to exploring this or some other proposal with you in more detail.[907]
BHPP's copy of the letter bears a handwritten notation by Mr Stott[908] 'cleared with Jim Lyons'.[909] A copy of the letter was faxed by Mr Davidson Kelly to AWB and was produced by it.[910]
27.143 By this letter, Mr Stott thus raised, on behalf of BHP and BHPP, a categorisation of the transaction as a loan. That was contrary to the basis upon which Mr Prescott had approved the transaction, and contrary to the basis upon which both DFAT and the United Nations had approved the contract for the shipment to Iraq and DFAT had granted export permission. What Mr Stott wrote was plainly untrue. Mr Prescott approved the transaction as a gift and it was noted in BHPP accounts as a non-deductible donation. It had never been 'BHP's intention to ship the goods and then work with the UN and the Australian Government post shipment to establish a payment procedure that was mutually acceptable.'[911] Neither Mr Lyons nor Mr Stott could recall whether the letter was actually sent.[912] It seems unlikely that it was as Messrs Davidson Kelly and Stott were part of a delegation that met with Minister Saleh in Iraq on 22 June 1996. It seems improbable a letter would be sent to Mr Daoud the preceding day. Further, the evidence suggests that on receiving the draft Mr Davidson Kelly told Mr Stott he didn't 'need to worry about it' and that it was 'all under control'.[913]
27.144 On 22 June 1996, a meeting was held between the Minister for Trade, Mr Saleh, the Director General of Foreign Economic Relations, Ministry of Trade, Mr Al Obaidi and Messrs Davidson Kelly, Worthington, Stott of BHPP and Mr Richardson of DFAT. Mr Richardson made both a file note of the meeting[914] and sent a cable to Canberra concerning it.[915] Mr Richardson recorded there were two matters Mr Davidson Kelly wished to raise: ongoing oil field negotiations and the arrangements for the further delivery of wheat. Mr Davidson Kelly said:
… BHP's wish to arrange further shipments under a deferred payment method was facing difficulty in being accepted by the UN in New York and that now resolution 986 had been accepted, the situation had changed again.[916]
Minister Saleh said, in relation to the problem of payment terms for future shipments of Australian wheat by BHP that:
He believed a major part of the problem was in presentation and that BHP should not approach the UN with a request for deferred payment, rather they should notify of the shipment and not specify a payment mechanism. This he believed was 'an internal matter' for the Australian authorities, the AWB and BHP, which would be covered by BHP's agreement to accept payment at a later date against future oil sales. This was allowable under the terms of the UN resolutions, according to the Iraqis' interpretation.[917]
Minister Saleh further noted that the wheat supply had been appreciated 'even if only the original partial shipment had been supplied'.[918]
27.145 At the end of the meeting Minister Saleh returned to the issue of payment terms for future wheat shipments and said:
… it was up to BHP to find a way. He commented that it was an internal matter for the Australian authorities/parties. He expressed confidence that Mr Stott would be able to find a mechanism to address the problem of finding an acceptable way of implementing a deferred payment system for further wheat shipments.[919]
Mr Richardson noted that Minister Saleh expressed a 'definite connection (ie implied threat)'[920] between BHP fulfilling its wheat 'contract'[921] and 'finding a way around deferred payments and a positive outcome in oil dealings.'[922] Mr Richardson recorded that Mr Davidson Kelly knew the issue of deferred payment was a 'dead issue.'
27.146 A BHPP note apparently prepared for the meeting recorded:
A special feature of our long term trading relationship with Iraq has been our ability to maintain business by working together openly during very difficult circumstances. Throughout sanctions Australia has supplied the majority of Iraq's wheat requirements. BHP helped in this process by facilitating a shipment of approximately 21,000 tonnes of Australian grain.[923]
In an undated BHPP document titled 'HFD Mission Notes 19-29 June 1996', it was recorded that the Iraq Minister of Trade had advised that:
… - BHP's recent assistance has been discussed at the highest political level. He emphasised that those companies/countries that provide support now will be looked after favourably post sanctions; - He is keen for additional assistance and suggested that the UN pre sanction loan issue was a subject that could easily be innovatively resolved internally within Australia; …[924]
27.147 These records give a strong indication that the Iraqi Minister understood the wheat previously supplied to have been supplied on deferred payment terms. The Minister is not recorded as making reference to a gift. For the future, he contemplated not specifying payment terms to the United Nations, and by that means, obtaining approval of transactions which were in fact on deferred payment terms.
27.148 On 27 June 1996, the audit committee of BHP noted that the auditors had raised the matter of the payment to the Australian Wheat Board for a shipment of wheat to Iraq in December 1995. It noted that:
This matter had been raised with Management as the payment appeared to be in the nature of a donation and was not otherwise authorised.
The Chairman confirmed that this matter had been considered by the Board.[925]
27.149 On 6 February 1997, Messrs Worthington and Taylor sent a memorandum to the Business Development Team, which included Mr Stott and Mr Davidson Kelly.[926] The memorandum referred to the 1996 wheat shipment as a 'gift', and also noted Iraq's request that BHP 'commit to provision of 'humanitarian aid' of the order of US$100M via a loan facility mechanism outside of the production sharing agreement.' A proposal for the loan facility was described as follows:
The AWB is already owed some US$500 plus for wheat delivered over the past decade. The Ministry for Industry is creditor and is guaranteed by the Iraqi Central Bank. The debt is presumably saleable in the international market for a percentage of face value.
BHP could lend the AWB US$100 million in return for (a)US$100million face value of the Iraqi debt, which could then be either discounted into the international market for cash to reduce the debt or retained on its balance sheet in readiness for transfer back to the AWB upon repayment of the BHP loan; and (b) supply to Iraq of US$100 million of wheat supplied on the AWB's usual credit terms. The AWB has reduced its net debt; BHP has obtained either security for or some reduction in its debt exposure; and Iraq has received the US$100 million 'loan' outside the ambit of UN resolution 986.
In due course, the Iraqis will repay their debt to the AWB, which in turn would repay BHP either the full US$100 million plus interest (and BHP would transfer back the Iraqi sovereign debt) or if BHP had discounted the Iraqi debt into the market, the US$100 million plus interest less the amount raised by BHP on the sale of the debt.
UN Sanctions Committee approval for the AWB wheat sale transaction outside Resolution 986 would be required. The Australian Government would need to present the request for approval; it would also need to support BHP's overall business strategy in Iraq.[927]
BHP produced a similar memorandum dated 11 February 1997 containing essentially the same terms.[928]
27.150 On 25 February 1997, Mr Worthington emailed Messrs Stott, Harley, Davidson Kelly and Taylor concerning the proposal to loan Iraq US$100 million.[929] The proposal noted that:
Whilst our earlier 'loan' will stand us in good stead, we cannot be assured it will underwrite a project capture.[930]
27.151 Mr Stott in a reply to all recipients the next day noted: 'Basically we are going to run up against the same problems that we experienced last time.'[931] He wrote:
Turning specifically to the proposal, the problem that we ran up against last time, with the loan, is that, under 661 governments must prevent their nationals and any person from providing funds or any other financial or economic resources to Iraq. Our governments interpretation of this, is that the fundamental requirement of sanctions is absolutely no credit. Jim and I spent some time in Canberra, last year, trying to convince/encourage/persuade the Govt to test this interpretation by submitting an application to the U.N. based on a credit payment arrangement for humanitarian goods. However, at that time bureaucrats responded, that Ministers would not endorse our proposal and therefore the Govt was not prepared to make a submission to the UN. Submissions to the U.N. can only be made through a government. The Govt sought advice from their U.N. colleagues and were adamant that their interpretation was correct. They also claim that they have a responsibility to the U.N. to police applications and not clog up the system with applications that they know would not be acceptable. They were therefore not prepared to jeopardise their credibility.
From discussions with DFAT today nothing appears to have changed. We pushed them pretty hard last time round and it got us nowhere. Tom even worked on a few Minister's. We can certainly try again, but unless we can get Minister's to direct officials, despite their advice to the contrary, to submit an application, then again I don't think we will get anywhere. This approach will consume a lot of BHP brownie points in Canberra and is certainly still not guaranteed to succeed. Frankly, I think officials, even in the unlikely event we got past first base, would ensure that it was scuttled in the U.N.[932]
27.152 In a further email of 27 February 1997, Mr Stott advised Messrs Harley, Lyons, Davidson Kelly, Taylor and Worthington that:
Given we are running up against a brick wall in Australia is there any value in trying to test the UK Govt on their attitude towards extending credit to Iraq? This could be approached on the basis of supplying humanitarian goods from Europe. Peter, we need a new angle if we are going to have any chance of being able to sway DFAT. Lets discuss.[933]
27.153 BHPP has provided multiple copies of a memorandum to Mr Aiken from Mr Davidson Kelly dated 6 October 1997 for proposed presentation to the board, and seeking its approval to proceed. The subject matter was 'Iraq Negotiations' and addressed oil field development. Included was a request by Iraq for a loan as a condition of agreeing to the oil development project. The proposed loan facility was between US $50 million and US $100 million. The paper noted no commitments would be entered into without the express approval of the Australian Government and compliance with the UN Sanctions Regime. This was noted on other occasions throughout the document. It was also noted that drawdown of the loan would only occur after Iraq's compliance with UNSCOM, or the lifting of sanctions.
27.154 BHPP also produced a number of emails which commented on the draft proposal. On 7 October 1997, Mr Knott, Chief Financial Officer, noted that the proposal should also 'incorporate the fact that we have already loaned US$5M to Iraq and explain how this is accommodated in the proposal.'[934] This email was copied to Messrs Harley, Stott, Taylor, Davidson Kelly and Worthington. Mr Stott sent a reply copied to Messrs Davidson Kelly, Harley, Taylor and Worthington on 7 October 1997 suggesting that Mr Davidson Kelly 'canvas the possibility of providing the loan facility through a third party, ie. the AWB, thus further enhancing the prospect of repayment if it is piggy backed onto a strategic commodity import ie wheat.'[935] Mr Stott also incorporated drafting comments from Mr Harley.
27.155 On 10 October 1997, Mr Knott emailed Messrs Davidson Kelly and Aiken noting that:
You will appreciate that our CEO and the Managing Director will need to be convinced that the loan would be repaid, if required, and that a guarantee from an Iraqi institution is unlikely to provide that level of comfort.[936]
Mr Davidson Kelly copied this comment together with his reply, to Messrs Worthington, Harley, Stott, Taylor and Aiken.[937] He suggested possible methods of security were to obtain an Australian Government guarantee, or the support of the Wheat Board, or other Australian agencies. Mr Davidson Kelly noted that Messrs Harley and Stott were working with the Australian Government on the proposal.
27.156 On 20 October 1997, Mr Davidson Kelly sent a note to Mr Knott, copied to Mr Stott and Mr Harley, in which he suggested changes to his note to Mr Aiken.[938] He suggested including:
The loan is supported by the Australian Government and approved by the United Nations Sanctions Committee.
The loan will finance the supply of Australian sourced humanitarian goods (wheat, rice etc.).[939]
There was no advice to BHPP senior management that suggested proceeding without Australian government and UN knowledge and approval of the proposed arrangement. There is no evidence of whether the proposal went to the BHPP board. The proposed loan to Iraq of US$100 million in return for rights in the Halfayah field ultimately did not proceed.
27.157 In a note of 13 May 1998 to Mr Davidson Kelly, Mr Worthington noted, in connection with the status of BHP's competition for the oil project that he had been informed by Mr Al-Fathi that the 'wheat gift was the 'only such transaction' by a foreign E & P company and will not be forgotten'.[940]
27.158 On 2 May 2000, Mr Stott, who was about to leave BHPP and rejoin AWB, emailed Mr Davidson Kelly:
Norman ,
In January 2001, it is 5 years since BHP supplied the grain and payment of US Dollars 8,052,550 becomes due. We need to start thinking about what we want to do as the system will need to be appropriately warmed up, starting at least 6 months in advance if we want to recover the debt.
Happy to discuss.[941]
27.159 Mr Davidson Kelly replied that day and copied Mr Stott's email and his reply to Mr Harley. He asked that the matter be discussed. On 6 May 2000, Mr Harley replied to Mr Davidson Kelly and proposed meeting at 'the canteen' Thursday [11 May 2000] to discuss the matter.[942] Mr Stott was in Melbourne, Mr Davidson Kelly in London, and Mr Harley in Houston.[943] Mr Harley did not have lunch as planned as he was detained in Houston.
27.160 On 9 May 2000, Mr Davidson Kelly emailed Mr Aiken, and copied the email to Mr Harley. He wrote:
I don't know how familiar you are with the details, but there is a strong possibility that the Iraqi's will owe BHPP a total of around US$8 million under a debt which crystalises in 6 months time.
I would prefer to fill you in in person, or Tom can easily do that. I think it would be a good idea for Tom and me to work through the issues with Jim Lyons and Charles Stott, who were involved in the original transaction. It is quite complex as there are DFAT and UN issues to address. We could then discuss with you a recommendation either to proceed to attempt recovery, with draft plan of action, or a recommendation that we drop the whole thing. I would be reluctant to recommend the latter course of action without at least an internal review, as there is a lot of potential cash at stake. No hurry, and Jim is on leave until early June in any event.[944]
27.161 Mr Aiken replied that day: 'I never cease to be amazed. Will be fascinated to hear this one.'[945] Mr Harley received this email. He said he told Mr Aiken at about this time that there was no debt[946] although Mr Aiken did not recall this. Some few days later, Mr Aiken initiated inquiries to determine whether the 'debt' had been written off in BHPP's books.[947] Mr Aiken gave evidence he had never been told the shipment was a gift.[948]
27.162 On 19 May 2000, Mr Davidson Kelly emailed Mr Aiken and put a proposal to him concerning transfer of BHPP's rights and interests in Iraq to a new company of his, Atlantic Oil and Gas Management, in return for offering BHPP a 'back-in' right to take a 25 to 30 per cent stake in any project captured by him in Iraq, and the same proportion of any return from the 1996 shipment of grain:
I would like to have a chat to you about your favourite country, because I think I have a proposition which should be attractive to you. If it is of interest I will submit it formally to you in the next day or so, so please let me have your reaction to the following:
As you know I believe BHPP should try to keep its foot in Iraq, not only for future oil opportunities but also for the possibility (as yet unquantified but probably remote) of getting some money back re the cargo of grain we financed or gave them in 1996. But I quite appreciate that you would prefer to be shot of the whole issue, and have clean break with the country to focus on other more promising areas.
I am associated with a new company (Atlantic Oil and Gas Management) which has recently been set up to do business in that part of the world and would be prepared to take the whole of BHPP's position in the country such as it is, (ie data, the potential receivable and relationships), subject to local Government approval. Atlantic would continue to work in the country at its sole risk and expense.
If you thought it attractive, Atlantic would grant BHPP a back-in right to a pre-agreed percentage of specific projects (like HFD) if captured within a specified period of time. Say 25-30%. Alternatively some form of potential Royalty interest could be created in BHPP's favour (as we did for Prirazlomnoye). In the event that any cash was recovered from the 'receivable' the pre-agreed percentage would be paid to BHPP as received; or if traded into a project, BHPP could back into that opportunity. ie Atlantic would act as debt collector for you.
Atlantic has good connections in the region and is approved by the United Nations to do business in the country. Hence I think they have a good chance of salvaging something for you from our previous investment, although it will not be easy. Or it will provide you with an elegant exit.
I really think this might work for you. I will give you a call.[949]
27.163 On 2 June 2000, Mr Davidson Kelly emailed Mr Aiken a draft of the proposed agreement noting the principal terms were:
Effective 1 July 00, Atlantic steps into BHPP's shoes and for a period of three years will grant BHPP a back in right to take up to 25% of any project 'captured'. Atlantic would also pursue the repayment of the Iraqi 'loan' on a similar basis. From 1 July all costs, other than those specifically agreed, would be for Atlantic's account.[950]
27.164 Mr Aiken forwarded that email to Mr Lyons and others on 6 June 2000, and wrote:
As you are aware Norman now works for us on a part time basis and is involved in Atlantic, guaranteeing to advise me of any potential conflict of interest. I have canned all work on Iraq and Norman wants to take over and run through Atlantic. Jim Lyons knows of the history-would appreciate your views.[951]
27.165 Mr Lyons noted on a copy of the email:
I spoke NDK 14/6- I will markup + give to NDK tomorrow + discuss with him.[952]
A copy of the proposed agreement was hand annotated by Mr Lyons on 14 June 2000. A typed version with the changes marked up as drafted by Mr Lyons is dated 16 June 2000 .[953]
27.166 The 16 June draft contained the following clause 3 dealing with the 'Grain Board receivable':
Atlantic will pursue the recovery in cash or in kind of amounts possibly owing to BHPP by the Government of Iraq for earlier assistance with the purchase of wheat. BHPP will provide all reasonable information and reasonable assistance to Atlantic in the pursuit of the claim. BHP makes no representations and gives no warranties as to the validity of this claim.
Atlantic will pay to BHPP 25% of all cash or cash equivalent recovered, net of expenses incurred after the Effective Date, on an as received basis.
Atlantic may compromise, exchange for assets or otherwise settle the debt at its sole discretion, subject only to permitting BHPP to participate in any non-cash asset acquired in the terms mutatis mutandis as set forth in clause 2 hereof.
BHPP shall enter into the Grain Board Receivable Assignment Letter Agreement, annexed hereto as ScheduleScedule D hereof.
Atlantic will not do or allow anything to be done which could lead to publicity regarding the Grain Board Receivable.[954]
27.167 Changes to the agreement were negotiated between Mr Lyons and Mr Davidson Kelly. Mr Davidson Kelly and Mr Lyons both had discussions with Mr Aiken concerning the redrafting. During negotiations, Mr Davidson Kelly substituted Maritimo Investments Limited, a Gibraltar registered company, for Atlantic Oil and Gas Management Limited which was Isle of Man registered. By September 2000, Mr Davidson Kelly had substituted The Tigris Petroleum Corporation Limited (Tigris), a Gibraltar registered company, as the proposed party.
27.168 In June 2000, Mr Stott left BHPP and returned to AWB as General Manager, International Sales and Marketing.[955]
27.169 On 13 September 2000, Mr Aiken and Mr Davidson Kelly executed an agreement between BHPP and Tigris.[956] The agreement was to operate from 1 September 2000. The recitals provided that:
Whereas
BHPP has been active in Iraq for a number of years and wishes to restructure its commercial relationships relating to its activites in the country; and
Tigris wishes to assume BHPP's position on the terms and conditions set forth below[957]
Clause 1 transferred to Tigris:
… all, if any, rights it may have to recover consideration due from the Iraqi Government relating to a cargo of grain delivered to the Iraqi Grain Board in January 1996 ('The Grain Board Receivable').[958]
Clause 3 provided:
3.1 Tigris will pursue the recovery, in cash or in kind, of amounts owing to BHPP by the Government of Iraq in relation to BHPP's earlier assistance with the purchase of wheat. BHPP will provide all reasonable information and reasonable assistance to Tigris in pursuit of the claim. BHPP makes no representations and gives no warranties as to the validity of this claim.
3.2 Tigris will pay BHPP 25% (twenty-five per cent) of all cash or cash equivalent recovered, net of expenses incurred after the Effective Date, on an as-received basis.
3.3 Tigris may compromise, exchange for assets or otherwise settle the debt at its sole discretion, subject only to permitting BHPP to participate in any non-cash asset acquired in the terms mutatis mutandis as set forth in Clause 2 hereof.
3.4 BHPP shall provide the Grain Board Receivable Assignment Letter, annexed hereto as Schedule C.
3.5 Tigris will not do or allow anything to be done that could lead to publicity regarding the Grain Board Receivable.[959]
Thus, the 'debt' referred to by Mr Davidson Kelly on 9 May 2000, which his email of 19 May 2000 described as being for a 'cargo of grain we financed or gave them in 1996', had by 13 September 2000 become 'consideration due from the Iraqi Grain Board relating to a cargo of grain delivered to the Iraqi Grain Board in January 1996.'
27.170 Pursuant to that agreement, on 13 September 2000 Mr Aiken signed a letter to the Iraqi Minister of Oil, Mr Al-Rashid.[960] The letter advised that Tigris would in future handle responsibility for continuing discussions in relation to oil and gas development projects in Iraq. It also stated:
As you will recall, BHPP also made a major contribution to the alleviation of suffering of the Iraqi people with the cargo of grain delivered on the MV Ikan Sepat in January 1996 prior to the institution of the United Nations 'Oil for Food' programme.[961]
27.171 Mr Aiken signed the letter annexed to the contract as Schedule C. The letter was on BHPP letter head:
To Whom It May Concern
BHP Petroleum has agreed to restructure its commercial interest in Iraq by transferring to The Tigris Petroleum Corporation Limited, ('Tigris') 57/63 Line Wall Road, Gibraltar (Registered in Gibraltar number 76644) with effect from 1 September 2000 all its right title and interest relating to all Iraqi Assets and Liabilities.
In particular BHP Petroleum has assigned to Tigris all its rights to receive value from the Grain Board of Iraq, or its assignee, in relation to the cargo of grain delivered by the Australian Wheat Board to the Iraq Grain Board in January 1996 on the MV Ikan Sepat, which cargo was financed by BHP Petroleum at a cost of US5 million (US Dollars five million), which rights are hereinafter referred to as 'Grain Board Receivable'.
Tigris is hereby authorised to discuss the Grain Board Receivable with the appropriate parties and to negotiate details and terms of payment as Tigris in its sole discretion shall deem appropriate, without further BHP Petroleum involvement. Payments made in relation to the Grain Board Receivable should be made as directed by Tigris.[962]
27.172 Mr Aiken recollected that he 'glanced' at this document before signing it and 'assumed' it was in accordance with the contract, which he had read. He did not recall discussing it with any BHPP staff.[963] He understood the receivable to be a debt which had been written off in the books of BHPP and for which there was very little chance of recovery.[964] Mr Aiken said he had never considered that the shipment was a gift, because he had never been told that it was.[965]
27.173 It will be observed that BHPP had assigned to Tigris a 75% interest in a non-existent debt and authorised Tigris to recover it on Tigris' and BHPP's behalf. Although BHPP in its contract with Tigris provided that 'BHPP makes no representations and gives no warranties as to the validity of the claim',[966] no such qualification or reservation appeared in schedule C to the contract, the letter addressed 'To whom it may concern'.
This is the 'debt' which, as will be seen, Tigris and AWB later manage to recover.
27.174 Mr Aiken did not join BHPP until after 1996 shipment.[967] His evidence was that he believed the 'receivable' to be an unrecoverable debt which had been written off in the books of BHPP and that he treated it accordingly.[968] His evidence was that at no stage was he aware that the 1996 shipment was a gift.[969] I accept that evidence.
27.175 Mr Lyons knew Mr Davidson Kelly was trying to persuade Iraq to pay for the shipment of wheat which had been a gift. He drafted the agreement between BHPP and Tigris whereby BHPP retained 25 per cent of whatever Mr Davidson Kelly was able to recover. Mr Aiken signed the agreement under a misunderstanding as to the real facts of the 1996 shipment. Mr Aiken would not have signed the letter 'To whom it may concern' annexed to the September 2000 agreement recording BHPP's assignment of its 'rights to receive value from the Grain Board of Iraq' and authorising Tigris 'to negotiate details and terms of payment' had he been told there were no such rights, and in particular no right to seek payment. He was not so told by Mr Lyons or Mr Harley.
27.176 Mr Harley's evidence was that he told Mr Aiken that the shipment to Iraq was a gift on about 9 May 2000, well prior to him executing the contract with Tigris. I do not accept that evidence. Had he done so I am satisfied Mr Aitken would not have signed the letter annexed to the agreement with Tigris.
27.177 By entering into the agreement of 13 September 2000 with Tigris, and more particularly by signing the letter in Schedule C, BHPP assisted Tigris in pursuing repayment of a gift made by BHPP in 1996 by allowing Tigris to represent to Iraq that BHPP regarded the cost of the wheat shipment as being a 'receivable' to be repaid by Iraq. Whether any such representation would have any consequence depended upon the view of the transaction held by Iraq. BHPP so acted by mistake because Mr Aiken, who had no personal knowledge of the 1996 shipment, was not told at any time that the shipment had been approved by the Managing Directors of both BHP and BHPP only on the basis that the transaction was a gift, and further they had required both DFAT and United Nations approval which also was given only on the basis that the transaction was a gift.
27.178 What use Tigris and Mr Davidson Kelly made of Annexure C was entirely a matter for them.[970] As I have found, and as the documentary evidence makes plain, Mr Davidson Kelly was fully aware that the grain shipment had been made by BHPP as a gift.
27.179 On 15 September 2000, Mr Davidson Kelly emailed Mr Stott, who by then had returned to AWB.[971] He enclosed a draft letter to AWB concerning the BHPP receivable. He sought Mr Stott's comments. He also stated:
fyi Tigris is an Aussie registered company and enjoys the support of our friends at DFAT who, as I told you, are interested in the outcome of the discussions to recover the Obligation.
it was good to see you, Mark Vaile and Bob Bowker in Melbourne yesterday.[972]
27.180 The evidence of Mr Bowker and Mr Vaile was that they did not meet Mr Davidson Kelly in Melbourne as suggested, and that the matter was never raised with DFAT. The evidence of Mr Stott was that he did not remember meeting Mr Vaile and Mr Bowker on that day.[973] There is no evidence that Tigris 'enjoys the support of our friends at DFAT', or that DFAT was ever concerned about, or had any interest in, 'the outcome of the discussions to recover the Obligation.'
27.181 The letter ultimately forwarded to AWB on 28 September 2000 is on the letter head of The Tigris Petroleum Corporation Pty Limited which is an Australian incorporated company (Tigris Australia) with a Melbourne address.[974] Although controlled by Mr Davidson Kelly, it is a different company from Tigris which is Gibraltar registered and which was the assignee of BHPP's rights. The use of Tigris Australia is unexplained. The letter also contains changes from the draft forwarded to Mr Stott on 15 September 2000 indicating that Mr Stott had discussions with Mr Davidson Kelly as to its final form. The letter provided:
The Australian Wheat Board was helpful in assisting BHP Petroleum procure and deliver a cargo of 20,833 metric tonnes of Australian Wheat to Iraq in January 1996, prior to the adoption of the United Nations' Oil for Food Programme. The cost of the shipment was US$5 million.
The cargo was delivered on the basis that BHP Petroleum would be reimbursed in due course for the cargo, not later than 5 years from the date of shipment, with interest running at 10% per annum compound. The debt falls due on 26 January 2001, and the amount due to BHP Petroleum at that date, including interest, will stand at US$8,052,550.
BHP has appointed The Tigris Petroleum Corporation Limited as its agent to achieve the recovery of the outstanding obligation, and I should be very grateful if AWB Limited could assist us in achieving that result. A copy of the original Bill of Lading and the Export Invoice is attached for your information, together with a copy of the Assignment of the Obligation from BHP Petroleum to the Tigris Petroleum Corporation.[975]
27.182 The letter was not accurate. Mr Davidson Kelly stated Tigris had been appointed as agent to recover the debt when in fact it was the assignee of the 'Grain Board receivable'. It did not make it clear that it was Tigris and not Tigris Australia that was the beneficiary of the assignment.[976] The statement that 'The cargo was delivered on the basis that BHP Petroleum would be reimbursed in due course for the cargo, not later than 5 years from the date of shipment, with interest running at 10% per annum compound' was false. It was known to be false by each of Mr Davidson Kelly and Mr Stott.
27.183 On 4 October 2000, BHPP faxed to Mr Stott the 28 September letter noting:
Norman asked me to forward the attached to you. I am investigating the missing original that Carol Wood sent in the pouch last week.[977]
Also enclosed was a copy of BHPP's letter of indemnity in respect of the Ikan Sepat of 7 June 1996, and the original bill of lading and invoice.[978] Mr Stott referred the documents to Mr Lister and Mr Hogan with the note: 'Can we please discuss 6 October 2000', and requested Mr Hogan to file the documents.[979]
27.184 In early October 2000 an itinerary was prepared for a visit to Baghdad by Mr Stott and Mr Hogan.[980] The itinerary included a meeting on Saturday, 14 October 2000 with Mr Al-Fathi of the Iraqi Ministry of Oil.[981]
27.185 Mr Hogan's evidence was that Mr Stott had instructed him to raise the recovery of the debt in Iraq on that trip. Mr Stott was aware that the 1996 shipment had been a gift. Mr Hogan's recollection was that at that time he was told by Mr Stott it was a debt due to BHP, and he was only told of the involvement of Tigris prior to raising the issue on his February 2001 trip.[982] He said that Mr Stott had insisted that the matter be raised on his trips, including the October 2000 trip.[983] He did not accord the debt a high priority given other pressing issues for AWB, and the fact that Iraq owed money to the Australian farmers and the Government:
I treated the Tigris Petroleum one with probably a lower priority than dispatch/demurrage or other issues that I thought were more important to AWB. I saw that Tigris Petroleum tried to collect their debt when the Australian Government was owed 480 million and the Australian farmers were owed 98 million, we were trying to collect a $8m debt for another company, but it was insisted that I raise this issue every time.[984]
27.186 Mr Hogan also gave evidence that Mr Stott proposed 'hitting them for a fee' in relation to the debt recovery. His evidence was that Mr Stott was seeking a fee from Tigris rather than BHP, so the proposal to collect a fee probably arose prior to the February 2001 trip but after the October 2000 trip.[985]
During the October visit Mr Stott delivered a letter from Mr Davidson Kelly to Mr Al-Fathi. He said he could not recall the contents, and the letter has not been produced.[986] However o n 16 October 2000, Mr Stott on route from Iraq, emailed Mr Davidson Kelly advising that he had delivered a copy of the Tigris letter to the new IGB Director General, Mr Abdul-Rahman.[987] He had raised the debt recovery with the Minister and noted:
… The issue has been put on the table at the highest level and will be examined. A key part of this process will be Sadallah's view given that he is remembered by the minister as the person who help organise it. Your challenge/risk is Sadalla. My reading of the Baghdad discussions is that if Sadallah was to confirm our interpretation this would assist the process. However, if Sadallah runs around saying it was a gift then it is going to be tough.[988]
Despite the email to Mr Davidson Kelly, Mr Stott claimed he did not provide Mr Al-Fathi with any interpretation of what the arrangement between BHP and Iraq had been: he simply delivered the letter.[989] He said the use of the words 'our interpretation' were not intended to convey that he shared Mr Davidson Kelly's understanding of that arrangement.[990] Mr Stott did agree it was probable the letter provided to Mr Al-Fathi would have been consistent with Mr Davidson Kelly's letter to AWB of 28 September 2000, which spoke of a debt recoverable with 10 per cent per annum compound interest.[991] I do not doubt Mr Stott knew of the contents of the letter he delivered.
27.187 On 12 January 2001, Mr Stott received a letter (incorrectly dated 12 January 2000) from Mr Davidson Kelly, on Tigris Australia letterhead.[992] The letter was to be shown to Iraqi officials on the next AWB visit to Iraq.[993] Changes were made to the text by Mr Stott,[994] and faxed back to Mr Davidson Kelly on 16 January 2001 with Mr Stott's handwritten note:
Norman , I suggest a couple of changes. If you are happy then please amend and we will pass original to IGB during the next visit. We are due to be in Iraq on 29 January 2001.
Charles 16/1[995]
The penultimate sentence of the letter, unamended by Mr Stott read:
I am due to report to BHP and the Australian Government shortly and I would be grateful for an up-date of the current situation.[996]
27.188 There is no evidence to support that Mr Davidson Kelly was ever reporting to the Australian government. Mr Davidson Kelly and Mr Stott both knew the Australian Government was not being informed of the attempts to receive payment for BHPP's donation. Mr Stott gave evidence that he carefully checked the letter to ensure it would not give offence to AWB's customer, Iraq.[997]
27.189 On 1 February 2001, Mr Davidson Kelly's company, Maritimo Investments Limited, through which he was engaged by BHPP, wrote to BHPP terminating his employment contract with BHPP, to take effect from 31 March 2001.[998]
27.190 On 20 February 2001, Mr Hogan emailed Ms Moona (IGB):
You may recall that during my recent visit to Baghdad, I inquired about the status of the MV Ikan Sepat on behalf of Tigris Petroleum.
You advised that this issue was currently being discussed by the Central Bank of Iraq and the Ministry of Petroleum.
Can you advise on any developments?[999]
This inquiry is not mentioned in Mr Hogan's trip report of the visit,[1000] but it is recorded in his notes.[1001] Mr Hogan believed that it may have been about this time that the notion of requiring a fee to be paid for AWB's assistance was raised with Tigris.[1002]
27.191 On 20 February 2001, Mr Stott wrote to Mr Davidson Kelly confirming that Mr Hogan's recent delegation had raised 'the status of payment for the Ikan Sepat' with the IGB, who would raise it with the Central Bank of Iraq and the Ministry of Petroleum.[1003]
27.192 On 6 March 2001, Mr Hogan wrote to Mr Abdul-Rahman and advised:
We intend to visit Baghdad again in May. We can discuss the MV Ikan Sepat during this visit.
However, if you wish to meet with Tigris Petroleum, I can instruct their representative to travel to Baghdad to meet with you?[1004]
27.193 On 7 March 2001 Mr Davidson Kelly, as President of Tigris, sent a facsimile to the Iraqi Oil Minister, Mr Al-Rashid, which included:
There is one issue about which I would welcome your advice and guidance. You will remember that in early 1996, before the Oil for Food Programme was established, BHP Petroleum financed a cargo of grain delivered on the MV Ikan Sepat in January 1996. The cost of nearly US$5 million was to be repaid with interest on 26th January 2001. Tigris has been asked by BHP Petroleum to recover the receivable on their behalf, and discussions with the Iraq Grain Board to achieve this were commenced by the Australian Wheat Board in September 2000.
I understand that the IGB have referred the matter to the Ministry of Oil and the Central Bank of Iraq for authorisation to proceed to effect repayment. I enclose copies of my letters to the Australian Wheat Board 28th September 2000 and 16th January 2001, and their reply dated 20th February 2001. Authorisation to effect repayment is still awaited by the IGB from the relevant authority.
Excellency, I should be most grateful for any assistance you or your officials might give to conclude this transaction. I should be most happy to meet with you or your colleagues as you may direct to progress matters.[1005]
27.194 There is no evidence that BHPP asked Tigris 'to recover the receivable on their behalf'. It had in fact assigned all its rights to Tigris, subject to a right to receive 25 per cent of any recovery by Tigris.
27.195 On 28 March 2001, Mr Abdul-Rahman emailed Mr Hogan:
You are kindly requested to specify a convenient time to visit Baghdad for discussing all issues in Baghdad with yr representative and representative of Tigris Petroleum Co. as we asked you before.[1006]
27.196 On 5 April 2001, Mr Davidson Kelly wrote to the Minister of Oil with a proposal for preparation of a master development plan for the maintenance and enhancement of production from the Kirkuk field.[1007] He wrote:
… it is Tigris' intention that we should commence work immediately an agreement is reached between us, rather than wait for any UN approvals. This will, however, depend upon us reaching agreement on the outstanding receivable owed by the Ministry of Trade to BHP Petroleum, which Tigris is mandated to collect on BHP Petroleum's behalf. I should be most grateful for your advice and assistance in resolving this issue.[1008]
27.197 On 10 April 2001, Mr Davidson Kelly entered into a new contract with BHPP to spend 15 days per quarter on BHPP matters.[1009]
27.198 On 4 May 2001, Mr Hogan wrote to Mr Abdul-Rahman concerning his intended visit to Baghdad proposing as one of a number of issues for discussion, Tigris Petroleum.[1010]
27.199 On 6 May 2001, Mr Hogan emailed Mr Stott concerning Mr Hogan's Baghdad visit, and sought advice whether there was any word from Tigris.[1011] An email reporting on the trip written by Mr Hogan did not mention the Tigris transaction.[1012]
27.200 On 10 May 2001, Mr Davidson Kelly, on Tigris Australia letterhead, wrote to Mr Stott concerning Mr Stott's advice on discussions which had taken place that week in Baghdad.[1013] Mr Davidson Kelly noted Iraq had acknowledged its obligation to Tigris, and had requested Tigris make a proposal for settlement to be transmitted through AWB. Mr Davidson Kelly proposed that Tigris would accept simple rather than compound interest and thus the net amount due as at 26 January 2001, would be US$7.5M. He proposed 10 per cent simple interest on unpaid balances, and that the debt would be paid on two rests at 1 June 2001 and 1 December 2001.[1014] There was no discussion of the mechanism for payment.
27.201 On 16 May 2001, Mr Stott wrote to Mr Abdul-Rahman noting recent discussions concerning repayment for the grain, and forwarded Mr Davidson Kelly's letter. Mr Stott asked it be passed to appropriate authorities for their consideration.[1015]
27.202 On 30 January 2002, Mr Davidson Kelly sent a letter to Mr Abdul-Rahman.[1016] Mr Davidson Kelly noted it was then the sixth anniversary of the shipment, and he was anxious to resume discussions concerning settlement. He offered two mechanisms for payment:
The first mechanism would involve the co-operation of the AWB. In relation to the continuing sales of grain from Australia to Iraq, we would agree a surcharge calculated on a per tonne basis. This surcharge would be deducted from the outstanding Obligation until fully repaid.
The second mechanism would involve the allocation to Tigris of agreed quantities of Oil under the various phases of the MOU. The agreed profit element would be deducted from the Obligation on a per barrel basis until fully repaid.[1017]
It is evident from this letter that Mr Davidson Kelly knew Iraq lacked the means to satisfy the 'Obligation' directly and that it could not simply draw down, or request funds from, the escrow account to satisfy the claim.
27.203 On 26 April 2002, Mr Davidson Kelly wrote a letter to the Iraqi Vice President, Mr Ramadan. The letter stated that BHP had appointed Tigris Petroleum as its agent for the recovery of the 'obligation' and enclosed the following 'key documents' in relation to attempts to recover the debt:
Specifically it was suggested that repayment could be linked to future deliveries of grain by AWB to Iraq. It is our understanding that the proposal is being considered favourably, but that a higher level of authority is required to determine the matter.[1018]
Mr Davidson Kelly also stated in the second last paragraph:
On the successful recovery of the loan, Tigris will be in a position to reinvest in order to start work immediately on the key project, rather than awaiting approval from the United Nations Committees.[1019]
27.204 On 21 May 2002, Mr Davidson Kelly emailed Mr Aiken concerning the 'possible repayment of the Iraqi loan'.[1020] The same day he wrote a letter to Mr Aiken, incorrectly dated 21 May 2001.[1021] In the letter, Mr Davidson Kelly advised Mr Aiken of progress towards repayment of the debt, noting he had engaged AWB's assistance, and the Iraqi's had acknowledged the legitimacy of the claim. He noted that he, AWB and the Iraqis had been exploring mechanisms for repayment, and that the actual repayment process might be linked to shipments of Australian wheat and therefore made over a period of time.[1022]
27.205 On 21 May 2002, Mr Davidson Kelly emailed Mr Stott advising that he had not given up on the loan yet, and that the Vice President was referring the repayment to the Supreme Economic Council that weekend.[1023] He enclosed a copy of his 26 April 2002 letter to Mr Ramadan and his 21 May 2002 letter to Mr Aiken.
27.206 On 6 June 2002, Mr Aiken replied by email:
As you can imagine I am not holding my breath that this debt will roll in the door but do appreciate your efforts to recover.[1024]
27.207 On 25 July 2002, Mr Abdul-Rahman sent an email to Mr Hogan stating that the wheat aboard the vessel Mani P contained traces of 'iron powder'.[1025]
27.208 On 26 July 2002, Mr Long sent a facsimile to Mr Abdul-Rahman expressing concern about the contamination of the vessel, and stating that AWB did not believe it was responsible for any contamination of the wheat.[1026]
27.209 On 1 August 2002, Mr Abdul-Rahman sent another email to the chairman of AWB confirming the presence of iron powder in the Mani P and two further vessels, the Tuo Hai and the North Duchess. He advised that discharge of the vessels had been stopped. He suggested AWB send representatives to confirm the contamination.[1027]
27.210 On 2 August 2002, Mr Johnson sent an email entitled 'National Pool Iraq Update' to the AWB executive, including Messrs Lindberg, Ingleby, Stott, Geary, Johnstone, Long, Whitwell and Ms Scales, informing them of the Iron Filings Claim:
We have just received an email stating that the two vessels currently on berth have ceased discharging. The email states that Iron Powder has been found in the hatches and they have been rejected. The other origin vessel has been rejected due to a dead rat. This is another sign of the fact they are not in need of grain at the moment, and they are using it as a reason to signal to Australia the change in status.
This morning we will pursue all avenues to divert vessels already on the water.
The pool figures will be updated today, when data is available. Needless to say the figures in the sheet do not reflect any diversion, non performance of existing contracts. This is clearly going to happen, and outperformance is going to be impacted.[1028]
27.211 On 5 August 2002, the International Sales and Marketing group held a meeting in relation to the situation with the Iron Filings Claim. Mr Whitwell sent an email to the group following the meeting, recapping the details and outlining specific instructions. Members of the group were instructed to look into the evidence of the existence of the iron powder, put the owners on notice and to keep the charterer's liability insurers informed. The vessel owners were put on notice of a possible claim against them.
27.212 On 5 August 2002, a National Pool Iraq Status report was circulated.[1029] The report outlined the financial implications of the difficulties in performing the contract to which the Iron Filings Claim related.
27.213 On 6 August 2002, IGB sent a telex to AWB requesting confirmation of settlement of the Iron Filings Claim at a cost of US$7 per tonne to perform screening and cleaning of the suspected contaminated grain.[1030] This telex was circulated to Messrs Long, Whitwell, Edmonds-Wilson and Johnson.
27.214 On 7 August 2002, Mr Johnson sent an email to Messrs Lindberg, Ingleby, Stott Geary, Morrison, Goodacre, Johnstone, Long and Whitwell as well as Ms Scales, reporting that the Tai An Hai had berthed in Umm Qasr the previous day and it too was claimed to be contaminated.[1031] He referred to the IGB telex stating that it would discharge the three contaminated vessels if the grain was sieved at a cost of US$7 per tonne. Mr Johnson noted 'coincidently' that US$7 per tonne was approximately the amount of an error IGB had made when converting the contract price from US dollars to euro when the contract was initially booked.
Mr Johnson informed the executive that two further vessels on route for Umm Qasr had been diverted and of contingency plans for further shipments.
27.215 Mr Lindberg told Mr Stewart in July 2002 that he regarded the iron filings dispute to be serious enough for him personally to travel to Iraq to resolve it. Mr Stewart demurred because of the risks but Mr Lindberg convinced him that it was important that he go.[1032]
27.216 On 7 August 2002, a further National Pool Iraq Status Report was circulated. It noted the serious impact on the pool of rejection of the cargoes. Also, on 7 August 2002, Mr Edmonds-Wilson sent an email to Mr McBride detailing the Iron Filings Claim and the issues surrounding it.[1033] He indicated that the real problem was that IGB had diverted trucks from carrying wheat from Umm Qasr to deal with the local harvest, leading to slow discharge and 'logjam'. This demonstrates that AWB knew IGB was responsible for trucking arrangements at Umm Qasr.
27.217 On 7 August 2002, Mr Davidson Kelly wrote to Mr Stott concerning a proposed AWB visit to Baghdad and their discussions that day.[1034] Mr Davidson Kelly knew AWB had a number of vessels unable to discharge because of Iraqi claims of contamination, and that Iraq was also threatening to reduce purchases of Australian wheat because of its perception that the Australian government was hostile towards it. He also knew that AWB was sending a delegation to Iraq to resolve these issues. He wrote:
3. On the issue of the role Tigris could play, I confirm that The Tigris Petroleum Corporation Limited was registered in Gibraltar in September 2000. We would be most willing to work with you to resolve any issues you may have in relation to your dealings in country.
As I mentioned, I am considering reducing Tigris's Australian connection, and to establish a more politically acceptable presence in the Gulf. I can accelerate these plans if deemed to be advantageous. I expect to work closely with an eminent Qatari, who met the boss recently as part of an official delegation to the country.
4. Would your delegation be willing to deliver a letter from me to the Trade Minister, asking him to stimulate action re the loan repayment? Obviously they would only deliver it if things were going well!
Talk to you tomorrow.[1035]
Mr Stott replied:
Our team is arriving Tuesday 13 evening by car from Amman and currently scheduled to depart on 14 Thursday night or 15 Friday morning. They are staying at the Al Rasheed. The delegation will comprise of Andrew Lindberg, Trevor Flugge, Bob Cracknell and Michael Long.
Happy for the team to be armed with a letter from you to table if things are going well but on the other-hand if the environment is not conducive to it being tabled then best to keep it in their pockets for a better occasion.[1036]
Mr Stott's email was copied to Mr Long.
27.218 On 10 August 2002, Mr Davidson Kelly emailed Mr Long and Mr Stott enclosing a letter from him to be delivered to Dr Saleh if Mr Long judged it to be a suitable time to do so. Mr Long's secretary, Ms Robertson, copied the email and enclosure to Mr Edmonds-Wilson for inclusion in the brief for the trip delegates.[1037] The letter referred to Mr Davidson Kelly's letter to Mr Abdul-Rahman of 30 January 2002 suggesting repayment by a 'surcharge' on future wheat contracts. It authorised AWB to discuss the 'detailed mechanism for the repayment of the loan.' It stated, untruthfully, that Mr Davidson Kelly was 'now under some considerable pressure to explain the situation to the Board of Directors of BHP Billiton.'[1038]
27.219 On 12 August 2002, Mr Long emailed Mr Davidson Kelly with a copy to Mr Stott:
Dear Norman
Many thanks for your message and the the friendly contacts.
I will do my best with the Minister if the timing is appropriate and will let you know of the outcome.[1039]
Mr Long at this time was General Manager of International Sales and Marketing of AWB.[1040]
27.220 According to the Corporate Risk Board Report of 12 August 2002,[1041] as at that date only one vessel alleged to have a contaminated cargo, the Mani P, had completed discharge. Four others were awaiting the outcome of the delegation's visit before discharging.
27.221 Before the delegation departed for Iraq an executive brief was prepared. The brief outlined the contamination claim and noted that the IGB had requested financial compensation of US $7 per metric tonne to remove the iron powder.[1042] I accept that Mr Davidson Kelly's letter of 10 August was provided to delegates with the brief by Mr Edmonds-Wilson. Under the heading 'Iraq at a Glance' the brief listed a number of dot points, the last of which was:
27.222 On 16 August 2002, the AWB delegation, Messrs Flugge, Lindberg, Long and Cracknell, arrived in Iraq. Mr Whitwell sent an email the same day giving an update on the delegation's visit.[1044] He wrote that the delegation had one day of discussions in Baghdad, including discussions with the Minister for Trade. In a media release dated 18 August 2002, AWB reported the success of the delegation in securing discharge of the vessels, and securing contracts for 500,000 tonnes of wheat.[1045] On 19 August 2002, Mr Whitwell confirmed that the delegation had agreed with the Iraqis 'to unload the iron filing vessels and pay USD 6 pmt.'[1046] According to the evidence of Messrs Flugge, Lindberg, Long and Cracknell, the Tigris debt was not discussed. A trip report was not prepared following the August trip to Iraq. There is doubt regarding whether during the discussions with the Minister for Trade the method by which the agreed iron filings compensation was to be paid was discussed. The Minister was apparently of the view that it had been agreed with Mr Lindberg that it would be repaid using the inland transport mechanism. Mr Lindberg denied any such agreement was made. So also did Mr Long although he later signed a memorandum dated 7 February 2003 which stated that he had been present when such an agreement was made. The evidence is not sufficient for me to find that such an agreement was made in August between the Minister and Mr Lindberg.
27.223 Mr Davidson Kelly wrote on 21 August 2002 to his agent in Iraq, Mr Jumah, concerning the AWB mission to Iraq:
The visit was led by AWB's managing Director, Andrew Lindberg, and was successful to the extent that Australian Wheat shipments to Iraq have been resumed. The AWB also expects to start detailed negotiations over the next series of shipments in a month or so. Michael Long informed me that no opportunity had arisen during the meeting with Minister of Trade His Excellency Dr Mohammed Mehdi Saleh to discuss or table the Tigris letter concerning the Loan repayment mechanism. However, The Director General, Iraq Grain Board, Mr Youssif Abdul-Rachman, informed Michel Long that the letter has been placed before the Minister and was receiving attention.
Michael Long undertook to keep me informed on the next visit by AWB to negotiate the pricing and delivery mechanisms for the next series of grain contracts. I suggest that, subject to obtaining the required visa, I should plan to be present in Baghdad at the same time as the Australian delegation, to finalise the details of the Tigris loan repayment. Please let me know if you are in agreement with this proposal.[1047]
It is clear from this letter that Tigris played no role in the resumption of Australian shipments to Iraq, and that the Tigris debt was not directly raised with the Minister for Trade on this trip.
27.224 Mr Davidson Kelly indicated in the letter that he had had some role in what he reported to be a distancing of the Australian Government position from that of the United States in relation to Iraq. There is no evidence whatsoever that he had contact with, or influence on, the Australian Government or that he played any such role. I am satisfied that he did not.
27.225 On 22 August 2002, IGB emailed Mr Hogan requesting that he 'confirm settlement of the contaminated quantities with iron powder that will be cleaned and screened in our silos by USD 6 (six) per mt for total cargo to each vessel.'[1048] Mr Hogan forwarded this email to Mr Whitwell.[1049] Mr Hogan noted:
We need to think how we 'legally' pay Iraq.[1050]
Mr Hogan obviously knew that payments to Iraq were prohibited.
27.226 On 22 August 2002, Messrs Lindberg, Hockey and Stewart had a meeting with Mr Downer and his staff informing them of the quality claims on the four vessels and the settlement agreement between AWB and Iraq.[1051] AWB noted their concerns about the genuineness of the quality complaints. Mr Downer advised that, on his information, the concerns had been genuine. The Prime Minister also attended the meeting briefly. No one from AWB advised the Minister about the Tigris debt, or the mechanism by which the payment for the iron filing settlement was to be made. Mr Lindberg told Mr Downer and the Prime Minister that AWB had 'accepted a price reduction for the shipments'.
27.227 The long-form contract for each of contracts A1111 and A1112, the contracts under which the contaminated wheat was shipped, provided:
Amounts related to the settlement of claims relevant to shortages, damages and any other discrepancies for each shipment (according to the confirmation of the Secretary General's designee which should be sent to the Secretary General within 24 hours) must be remitted to Iraqi account.[1052]
Thus the contracts provided, in terms, that any settlement of claims had to be paid into the escrow account. These were contracts the United Nations had approved.
27.228 On 26 August 2002, Mr Whitwell emailed Mr Abdul-Rahman confirming an agreement to pay US$6 per metric tonne as compensation on the Iron Filings Claim, as agreed by the AWB delegation between 15 and 18 August 2002.[1053] Mr Whitwell wrote:
We would like to confirm again our agreement to the settlement of contaminated quantities as agreed by our delegation from the 15-18/8/2002. To that end we would ask for your proposal with regard to a settlement process that would abide by relevant United Nations guidelines with respect to the Oil for Food program.
An option might be to offset this amount against monies outstanding to Tigris Petroleum and we would appreciate your view on this.[1054]
Mr Whitwell copied his email to Mr Long, Mr Hogan and Mr Edmonds-Wilson.[1055] When he drafted this email, he was aware that an agreement had been reached to pay the Iraqis $6 per metric tonne in settlement of the Iron Filings Claims. Mr Long had told him about the Tigris debt and the proposal to offset the iron filings settlement against the Tigris debt. Mr Whitwell had sent a draft of his 26 August 2002 email to Mr Long before sending it to Mr Abdul-Rahman, and Mr Long suggested that the Tigris offset option be included for the Iraqis' consideration.[1056]
AWBL's Board minutes of 31 August 2002 recorded that it had been informed that agreement had been reached on the Iron Filings Claim: 'agreement on reduction of $6 per tonne'.[1057] The method of payment of the compensation was not discussed.
27.229 On 6 September 2002, Mr Abdul-Rahman emailed Mr Hogan:
You are kindly requested to send representative from yr side and representative from (Tigris Petroleum cooperation Pty Limited) in order to discuss settlement of outstanding matter.[1058]
27.230 On 11 September 2002, Mr Long emailed Mr Davidson Kelly, with copies to Mr Geary, Mr Stott and Mr Hogan:
We may have an angle to assist you with debt recovery, ie the IGB has suggested we may send representatives from AWB and Tigris to Baghdad to discuss the matter.
Before we progress, would you please send to me all relevant documentation from BHP authorising AWB to negotiate/settle with Tigris/yourself on their behalf in part/full payment for the Iraqi debt to BHP.
The documentation will be scrutinised by our legal department and the authority for me to negotiate with you/IGB will need to be signed off by the Executive of the AWB.[1059]
27.231 On 12 September 2002, a meeting of the CRRC was held. The Chair, Mr Lindberg, and the CFO, Mr Ingleby were voting members but did not attend. Mr Johnstone, the Chief Risk Officer for AWB attended, as did Messrs Long, Johnson and Snowball.[1060] It was reported in the section on International Sales and Marketing:
Iraq
Iron powder vessels-all four original vessels have completed unloading and sailed, however Iraq Grains Board (IGB) have claimed contamination on two more vessels (currently at berth). These vessels will be discharged, however USD6 pmt will be payable.
New 500kmt contract-A1441. AWB received advice from IGB that the Central Bank of Iraq has advised BNP to establish an L/C. OIP (through the Australian Mission to the UN in New York) have advised the application is still subject to a funding notice, but expect funds to be available this week (by 13/09).[1061]
It is plain from the report that members of the CRRC had a level of familiarity with the Iraq market and the processes of payment through the United Nations.
27.232 The report was distributed to Ms Scales and Messrs Lindberg, Long, Johnson, Ingleby, Geary and Snowball amongst others.[1062] Mr Johnstone, AWB's Chief Risk Officer, recalled that Mr Long gave a presentation to the committee on Tigris' request that AWB assist it to recover a debt outstanding after a 1996 wheat shipment by BHP.[1063] Mr Long proposed that the compensation payment be offset against the Tigris debt. He advised Mr Long to put a written memorandum to the CRRC. He could not recall discussion in detail of how it was proposed that AWB would recover the money for Tigris, however he did advise that the issue of recovery and payment to Tigris would need to be referred to the ELG rather than the CRRC for approval and that the matter should be referred to the AWB legal department for review. The minutes record that:
The Tigris Petroleum wheat payment issue was highlighted with legal to review[1064]
27.233 On 13 September 2002, the Iraqi Embassy in Australia published a note from the Iraqi Trade Minister as follows:
As regards to the statements given by the Australian Foreign Minister claiming that Australia owes Iraq USD500Million, this is not true as the amount pending is only around USD (8,800,000) in favour of Australia/Tigris Petroleum Corporation Pty Limited representing value of a quantity of wheat shipped in 1996 plus interest until 30th Jan 2002.[1065]
27.234 On 16 September 2002, Mr Long sent to the CRRC members (which included Mr Lindberg and Mr Ingleby), as well as to Mr Cooper of AWB legal, and Mr Johnson the manager of the AWBI national pool, a memorandum which he also copied to Mr Geary, Mr Hogan and Mr Whitwell.[1066] He wrote:
During 1995/1996 BHP agreed to provide USD 5m worth of Australian wheat to the IGB as a gesture of good faith in view of BHP's desire to enter the Iraqi oil market.
AWB shipped the wheat on board MV Ikan Sempat in Jan. 1996 and were paid by BHP Petroleum.
IGB have acknowledged the outstanding debt owed to BHP who subsequently assigned their rights to Tigris Petroleum. The current debt including interest stands at some USD 8.8m.
AWB has always acknowledged that it would assist in this debt recovery process. This issue has been raised by AWB personnel with the Minister of Trade, HE Mohamed Medhi Saleh on a few occasions since the debt became due on 26 January 2001. The Minister has always acknowledged this debt.
AWB has agreed to pay IGB USD 6 per tonne on approximately 300 000mt under Contract Number A1111/A1112 as settlement for the 'iron filings' quality issues amounting to some USD1.8m. AWB raised the possibility of settlement of this quality claim by AWB paying Tigris as settlement of the Iraqi debt to Tigris. UN Regulations prohibit direct payment of funds to Iraq whilst Iraq is under UN sanctions. [emphasis added]
The IGB has recently invited representatives from AWB and Tigris to visit Baghdad to discuss this issue.
Furthermore, AWB today received a communication from the Iraq Charges de Affaires (attached) quoting the Iraqi Foreign Minister stating 'as regards to the statements by Australian Foreign Minister claiming that Australia owes Iraq USD 500m, this is not true as the amount pending is only around USD8.8m in favour of Australia/Tigris Petroleum Corporation Pty Ltd representing value of a quantity of wheat shipped in 1996 plus interest until 30th Jan 2002.' [emphasis in original]
ISM view this statement as extremely important in the context of the recent political noise over Australia's potential involvement in military aggression towards Iraq. It should also be noted that The Hon. Alexander Downer has just addressed the UN over Australia's position with respect to Iraq and has just met with the Iraqi Foreign Minister, HE Naji Sabri.
This statement could well be a phase in Iraq's plan to put more political pressure on the Howard Government. It could bring the AUD 500 m debt owed to the Australian Government into question. It should be noted that up until now, the Iraqi Trade Minister has always acknowledged this debt to the Australian Government. Should the Charges de Affaires leak this information to the press, it would have a serious negative impact on the Australian Government, particularly with farm incomes under considerable pressure.
Actions, Approvals
1. ISM request AWB Legal to review the file attached and to advise CRRC if ISM is authorised to negotiate with IGB/Tigris the settlement of the Iraqi debt to Tigris. Specifically it would involve AWB I paying monies to Tigris Petroleum subject to all the correct paperwork being received from both IGB and Tigris. Advice to go to CRRC for meeting Thursday 19 Sept 2002.
2. ME Desk/Government Relations to devise the most appropriate strategy for liaising with the Australian Government in relation to the latest advice from Charge de Affaires. This will need to be done quickly if we are to gain political mileage from it.
3. ME Desk to prepare a letter to HE Medhi Saleh from Andrew Lindberg alerting him to our concern over the recent correspondence and seeking his reconfirmation of the Australian debt.[1067]
Attached to the memorandum were the draft contract between BHP and AWB for the original shipment and the assignment of the debt to Tigris.[1068]
It was thus made clear to all AWB senior management, if it was not clear beforehand, that 'UN Regulations prohibit direct payment of funds to Iraq whilst Iraq is under UN sanctions.'[1069] Mr Cooper could find no record of any member of the AWB legal division giving the advice to the CRRC contemplated by the 16 September 2002 memorandum.[1070]
27.235 On 17 September 2002, Mr Foran, AWB Government Affairs Advisor, wrote to Mr Long advising of a proposed public position for AWB on the Iraqi press release.[1071] The email was copied to Mr Hogan and Mr Whitwell. Mr Long forwarded it to Mr Geary who forwarded it to Mr Ingleby, the Chief Financial Officer, stating:
… I have asked Michael to prepare a briefing note for the ELG. Will not be this week as we will wait for you to get back.
CES knows most about the background as he negotiated the deal from AWB side, then left to join BHP at around the time that it was being executed.
No need to get this to the September board, so ELG can decide on course of action in the next week or so.[1072]
27.236 On 19 September 2002 there was a Corporate Risk Review Committee meeting. The minutes of the meeting were not produced. On 22 March 2006, AWB produced some handwritten notes prepared by Mr Johnstone.[1073] On 13 June 2006, AWB produced some papers presented to the Committee which indicate that Mr Johnstone was present.[1074] Mr Johnstone's notes demonstrate that the discussion went beyond the matters listed in the papers and that at least the subject matter of Mr Long's memorandum was discussed. Mr Johnstone's notes in relation to sales to Iraq included:
* # 7 for Iron Filings
** Seeking confo. on debt outstanding.[1075]
Mr Johnstone gave evidence that the first note recorded that a seventh vessel had now been subject to a contamination claim and that the last probably related to the debt due by Iraq to the Australian Government rather than that due to Tigris.[1076]
27.237 Mr Ingleby is listed as a Committee member but gave evidence that he was overseas at the time of the meeting and did not attend. He did, however, read Mr Long's memorandum on his return.[1077] Ms Scales, who was on leave until 20 September 2002, agreed she must have read the memorandum later (but did not recall doing so) as she had a copy of it with her handwriting on it.[1078] Accordingly, they both knew that AWB had agreed to make a compensation payment to IGB, that UN sanctions prohibited a payment to Iraq and of the proposal to assist Tigris to recover a debt from Iraq and set part of that debt off against the compensation payment due. Mr Cooper accepted that a copy of the memorandum was addressed to him and that a copy he was shown, with a fluorescent marking over his name, demonstrated it was intended to be delivered to him.[1079] He said however, that he did not recall receiving it[1080] prior to finding a copy on a file compiled in August 2004 when he was asked to review the Tigris matter.[1081] Mr Whitwell accepted that the memorandum was addressed to him but did not remember receiving it at the time.[1082] He accepted however, that he knew at that time of the proposal to pay the iron filings compensation to Tigris rather than IGB, that there was a debt owed to Tigris by IGB and that UN sanctions prevented direct payment to Iraq.[1083] Mr Johnstone remembered attending but did not recall the 'methodology' for the proposed collection of the debt by AWB being discussed or receiving the legal advice.[1084] I am satisfied each CRRC member received the memorandum.
27.238 On 20 September 2002 Mr Lindberg, in accordance with the third action point of Mr Long's memorandum, wrote to Minister Saleh seeking his confirmation of the debt due to Australia and wheat farmers from deliveries prior to 1991. In relation to the Tigris matter he wrote:
AWB Limited is in agreement with your comments that monies owing to BHP/Tigris Petroleum Corporation Pty Ltd only total approximately US$8.8 million and represent the value, plus interest, of wheat shipped to Iraq in 1996 by AWB Limited on behalf of BHP/Tigris Petroleum.[1085]
27.239 On 30 September 2002, Mr Whitwell prepared a brief for the ELG at Mr Long's direction and sent him a copy to review.[1086] The brief contained the following:
Iraq Debt
USD 480 million approx still owed to Australian Govt/Farmers for Wheat Sales made before last Gulf War. Although 80 pct was paid out thru EFIC to the farmers 98 m is still owed. These funds remain frozen in foreign banks. However, on 16/09/02 Iraq Trade Minister claimed that the Iraqi people had no debt with Australia. In addition, IGB owe BHP Biliton USD 8 million for Cargo of Wheat sent to Iraq in 1996.
It did not deal with how AWB might obtain payment from Iraq of the debt owed to Australia or to Tigris.
27.240 On 15 October 2002, Mr Davidson Kelly emailed Mr Long:
… In relation to the recovery of the loan, I suggest that we settle on a fee payable in line with repayment of the loan. I expect this to be based upon deliveries of grain by you.
We reckon a fee to you of US$500,000 would be a fair reward for your assistance in concluding this matter, payable on the basis I have described. Expressed in percentages, this is over 6% of what we expect to recover.[1088]
Mr Long replied on 16 October 2002 that AWB expected the first instalment to be repaid by Iraq to be about US$1.8 million.[1089] AWB proposed that its US$500,000 fee be taken out of that first instalment.
27.241 On 17 October 2002, a draft reply to WEA's request of 17 September 2002 was provided by Ms Cattanach to Mr Whitwell for comment.[1090] Ms Cattanach's email to Mr Whitwell read (in part):
As mentioned previously there are gaps which I'm hoping you can fill if just very briefly. Steve will be reviewing it also & you'll notice I've got a couple of questions on the doc from him too. eg should certain info go to WEA or not?[1091]
27.242 On 23 October 2002, AWBI produced a market brief in response to the WEA's request.[1092] The brief principally addressed Iraq's announcement in July 2002 that it would halve its proposed purchase of 1 million tonnes of wheat as a consequence of the Australian government's position on Iraq, the quality claims and the contingencies for war. Neither inland transport fees nor their prepayment were mentioned nor was the ten perc ent after-sales-service fee incorporated into, and paid through, the inland transport fee.
It appears from a draft of the report which was prepared by Ms Cattanach, AWB's Research Market Analyst[1093] that originally there was included mention of the Tigris proposal.[1094] The draft noted that IGB owed Tigris Petroleum USD 8 million for Cargo of Wheat sent to Iraq in 1996 and that:
We have proposed the current rebates for 'Iron powder' should be offset against Tigris Petroleum. We have received a positive response from IGB. ISM requires ELG direction in regard to this matter.[1095]
Next to the paragraph regarding Tigris quoted above, Ms Cattanach noted: 'Steve, does WEA need to know this info??'[1096]
The entry regarding Tigris and the iron filings settlement was removed at the suggestion of Mr Whitwell.[1097] He wrote on the draft:
I think we have to separate the issues and do not feel that this issue is in our hands-it is bound up with un sanctions and regime change. I would suggest it should not be in this brief. I would therefore suggest today that the only issues to be resolved with the Iraqis are political to do with govt position and future business. ??[1098]
When questioned as to why he had formed the view that the information regarding Tigris ought not be passed on to the WEA, Mr Whitwell said:
Because in my mind, at October 20, sir, I believed that there were-really the three issues, or the issues that were unresolved, were the political issue between Iraq and Australia; our execution issues-ie, the ships on the water and getting them unloaded smoothly and out, and I think at that point in time we were also chasing a letter of credit; and how we were going to manage the war risk, or the increasing risk of war going forward, and how we were going to manage the exposure of our contracts. I didn't believe the Tigris debt issue to be an issue that was one that was unresolved or a priority for us.[1099]
Mr Whitwell disputed the suggestion that this was a deliberate deletion on his part with a view to keeping from the WEA any knowledge as to how it was proposed that the AWB might settle the Iron Filings Claim.[1100] Mr Whitwell also disputed the suggestion that there had been a deliberate decision not to tell the WEA about the Tigris debt.[1101]
27.243 On 27 October 2002, Mr Davidson Kelly wrote to his Iraqi representative Mr Jumah, concerning his discussions with AWB and proposals.[1102] His letter is reproduced on the following page.
27.244 It is clear Mr Davidson Kelly had been told by AWB that it did not regard direct payment of the Iron Filings Claim to Iraq as an available option no doubt because it was a plain breach of sanctions. Thus two alternatives were advanced, namely, payment to the escrow account which was the legal solution, or off setting the payment as part of the disguised Tigris transaction.
27.245 Mr Davidson Kelly had apparently suggested to AWB the debt be 'attached' to the next contract and that amounts due to him be called 'Commission'. This commission was said to be in respect of his alleged efforts to modify the position of the Australian Government with the presumed consequence of further purchases of Australian wheat. It is also to be noted that he had agreed that Iraq should be repaid any overpayment that resulted from adding a 'payment per ton' to the contract. It would appear from previous records that Mr Davidson Kelly's dealings were with Mr Long.
27.246 On 27 October 2002, Messrs Hogan and Whitwell arrived in Iraq for the purpose of further negotiations in relation to Tigris and the Iron Filings Claim. A note prepared for the trip stated:
Due to the inability to make payments direct to IGB because of the longstanding UN sanctions, we will propose that these amounts will be paid to BHP to offset the Tigris debt owed by IGB to BHP dating back to January 1996.[1103] [emphasis added]
The note also named a total of seven ships' cargoes being subject to compensation. The total compensation payable was US$2, 016, 133.86.[1104]
27.247 On 6 November 2002, Mr Whitwell emailed Mr Davidson Kelly copied to Mr Hogan and Mr Long[1105]:
It was good to meet you on our last trip and we briefed Sabah as to the results of our discussions, briefly they are as follows:
Had a first meeting with Dr Yousif where we put you approximate figures forward - however we emphasised that any agreement on the final actual figures had to be reached between Tigris representatives and appropriate persons in the govt - we were only facilitating possible repayment.
we took the following approx figures you gave us.
Date Compound Int: Simple Interest
26th Jan 2001 USD8,050,000 USD7,500,000
26th Jan 2002 USD8,855,000 USD8,000,000
26th Oct 2002 USD9,519,000 USD8,375,000
We suggested the following proposal
1. offsetting vessel claims (iron filings) against Tigris (BHP) debt -
2. Balance of debt to be recovered against new business (load up contract). - approx USD7.5 million (if using compound)
3. No further vessel claims would be used as offset - but would need to be redirected through UN account.
Yousif referred the issue to the Minister who we met that evening.
The minister wants to keep the two issues (vessel claims and Tigris debt) separate. He stated that the simple interest amount on the Tigris debt had received approval for repayment and that he felt through loading up the next Phase provided this opportunity.
Given that the next phase is due for discussion in Dec it was agreed that it was important that Tigris have arranged figures and agreed them prior to then. Sabah told us of your plans to be there his month.
We discussed with Sabah the possible difficulties in incorporating the entire debt into one 500 K contract. Suggested some alternate pressure could be bought to bear on the Govt by yourselves to increase the tonnage of next phase to make things easier, he said he would discuss this with you.
This email again made it plain that the means by which the debt was to be recovered was by inflating the price of new contracts.
27.248 Mr Long forwarded this email to 'the Executive'. Mr Lindberg did not recall ever seeing it.[1106] No copy of the email bearing his initials was produced. It was his practice to initial hard copies of emails which were read.
27.249 Mr Ingleby accepted that he received this email but did not give it 'any great attention'.[1107] Ms Scales did not recall reading this email in any detail.[1108] She acknowledged, however, that as the General Manager of AWBI she was concerned with the Iron Filings Claim, which was going to be funded by the pool.[1109] She said she would not necessarily have been interested in the mechanism of offsetting the Iron Filings Claim against the Tigris debt by loading up the next contract. In this regard she gave the following evidence:
A: …The important thing for the people in the pool, whether it's the pricing manager or the pool manager or our export position management team or our pool accounting group, and indeed the general manager, is to understand the nature of the exposure to make sure it's reflected accurately in the pool model such that we're not distributing funds out to farmers or reflecting pool equities on a fortnightly or weekly basis incorrectly to farmers. The actual if you like details around a mechanism wasn't something that I necessarily took interest in. We had -
Q: Go on, sorry.
A: Oh, I was just going to say we had subject matter experts in international sales and marketing that dealt directly with third-party counterparties.
Q: You wouldn't have taken interest in a matter which spoke of loading up contracts for future business?
A: Not at this stage, no, sir.
Q: You wouldn't have been concerned about the exposure of AWBI if contracts for future business were loaded up?
A: I'd be concerned on two fronts: one, that whatever we did was approved by the United Nations, as we were dealing in Iraq; and, secondly, that AWBI was informed that this was going to happen, so that dollars could be isolated in the accounts.[1110]
27.250 On 7 November 2002, Mr Whitwell sent an email to Messrs Lindberg, Ingleby, Stott, Geary, Long, Hogan, Edmonds-Wilson, Johnson, Goodacre, Fuller and Ms Scales, amongst others, concerning the recent trip to Iraq on 28 and 29 October.[1111] The email contained a summary of 'key outcomes'. They were:
27.251 Mr Lindberg said he could not recall reading this email, but accepted that he had when a copy bearing his initials was located. His evidence was that regarding payment of the iron filings compensation, he was aware that people were looking at options and taking advice,[1113] he was not involved in the detailed consideration of the matter but assumed it would be resolved through appropriate processes of negotiation, and assumed that whatever was resolved at the operational level would be done with UN approval.[1114]
27.252 Attached to the summary email was a trip report. Mr Lindberg's evidence was that he read the summary email but not the attached trip report which the summary email said was 'a fuller trip report should you need further information or background.'[1115] I accept Mr Lindberg's evidence that he did not read the attached trip report.
27.253 The attached report makes clear that at the conclusion of the meetings with the Minister in October:
The trip report recorded:
Vessel rejection claims as per original agreement to e paid through inland transport payment system against next contract - Phase 13
AWB to advise re payment mechanism of rebate…
This makes clear the method of payment of the claim was still a matter of debate.
27.254 The attached trip report of the meeting with the IGB on 28 October 2002 concerning the Tigris debt recovery, recorded discussion of the following proposals:
1. Offsetting vessel claims (iron filings) against Tigris (BHP) debt - approx USD2 million.
2. Balance of debt to be recovered against new business (load up contract). - approx USD7.5 million (if using compound)
3. No further vessel claims would be used as offset-but would need to be redirected through UN account.
IGB - confused abt amount and offer made by Tigris - Jan 2001, where Tigris would accept simple interest amount.
AWB advised we were not involved in the actual amount, but only the mechanism. Actual amount would be agreed between Tigris and relevant authority.
IGB - referred any decisions to the Minister.
AWB to get copy of letter sent by Tigris in Jan this year.[1116]
27.255 The proposals referred to in the report, but not in the summary, were put to Mr Abdul-Rahman and Ms Moona by Mr Hogan and Mr Whitwell.[1117] The concept of loading up the contracts came from discussions Mr Hogan had in Melbourne with Mr Long prior to the trip.[1118] Mr Whitwell could not recall where the idea to load up the contracts came from but said:
'I'd heard Mr Long say that as far as he was concerned, he had no objections and wanted us to discuss helping to recoup the Tigris debt.'[1119]
Q: By loading up future business?
A: Well, that's-yes, by-again, I'd better take this slowly, but that was certainly one of the mechanisms that might have been used, yes, sir.[1120]
The third proposal makes clear that Messrs Hogan and Whitwell knew that sanctions required any payment to Iraq of iron filings compensation to be paid to the UN escrow account.
27.256 I am satisfied that the proposal to 'load up' contracts to recover the Tigris debt came from Mr Davidson Kelly and was agreed to by Mr Long who then authorised Messrs Hogan and Whitwell to put the proposition to the Iraqis.
27.257 The report also recorded a meeting on 28 October 2002 with Minister Saleh on the Tigris issue. Messrs Hogan and Whitwell reported:
Simple Interest amount to be recovered by Tigris through loading up the next Phase 13 wheat business. This has received Cabinet approval.
Vessel rejection claims as per original agreement to be paid through inland transport system against next contract - phase 13. …
AWB to advise re payment mechanism of rebate and to brief Tigris re Iraqi position on their debt. Tigris to have arranged figures and agreed prior to AWB visit to Iraq in December.[1121]
It further recorded, concerning the Australian debt:
Minister was embarrassed by statement released by Iraqi Embassy in Canberra. He advised a corrected position would be forthcoming from Iraqi Embassy, regarding this matter. They fully acknowledge the debt and that it is owed to Australia[1122]
27.258 The emphasised paragraph makes clear that Minister Saleh and Messrs Hogan and Whitwell understood that the 'transport system' was a mechanism for passing monies to Iraq. That must also have been apparent to each of the senior AWB executives who read the report. However it also makes clear that AWB had not, at that time, accepted that payment mechanism.
27.259 The report recorded a meeting with Mr Jumah, on 29 October 2002 after their meeting with IGB and the Minister:
Sabah was DG of Iraqi Oil Board? Has connections with the Ministry of Oil and is a consultant with Tigris petroleum. Is well connected with Iraqi elite. AWB briefed him as to the Iraqi position vis a vis the Tigris debt and again clarified that our role was as facilitator only and that Tigris had to agree amount with Iraqis prior to our next meeting in Iraq. He advised Tigris rep would be in Iraq shortly to finalise.
We discussed possible difficulties in raising the price that significantly to incorporate the entire debt into one 500 K contract. Suggested some alternate pressure could be brought to bear on the Iraqi Govt to increase the tonnage of next contract to make things easier to pass through UN. He said he would look into it.[1123]
27.260 The last quoted paragraph shows a recognition by Messrs Hogan and Whitwell, which was being explained to all the AWB senior executives to whom the report was sent, that the recovery of the Tigris debt by loading up the price of wheat contracts, was to be hidden from the United Nations: there was an apprehension the debt recovery would become apparent if the price increase was too great. Mr Hogan's evidence confirmed this:
Q : Then, under 'Meeting with Minister - 28th October 2002 ':
Simple Interest amount to be recovered through loading up the next Phase 13 wheat business.
Is that the expression of an agreement that you'd reached with the minister?
A : Yes, that's what the minister would have advised, or we would have suggested to offset that, and he's agreed to do that. I would assume on that that we've suggested it to him.
Q : That would mean that at that stage it was expected by AWB that it would be a supplier of wheat to Iraq during Phase 13?
A : Correct, correct.
Q : And to load up the contracts would require the inflation of the contract price reflected in the contract so as to include an amount to cover the Tigris debt?
A : Correct. You would do a contract and agree on a final price of $220 a tonne and then, all right, the debt is X amount of dollars, add on $7, or whatever it equated to, per tonne.
Q : Well, the debt at simple interest, as referred to in this email, was US$8.375m?
A : Okay, so that would be over a million, and I think the issue was over 500,000 tonnes was going to load it up too much and make it possibly maybe too apparent that the contract price would have to be loaded up by maybe $16 to $17 a tonne, plus your inland, plus your 10 per cent. So I think your suggestion it had to go over a million tonnes so that the loading would only be - what did you say, it was 8.7 million.
Q : 8.375?
A : So you're only doing it by $8 a tonne, which is not as apparent.[1124]
27.261 Ms Scales did not recall reading the email but accepted she may have 'skimmed it.' She said that had she done so it would not have rung any 'warning bells' as she assumed that all contracts would be UN approved.'[1125]
27.262 On 7 November 2002, Mr Whitwell emailed Mr Johnson, Ms Scales, Mr Long and Mr Hogan advising that after the recent trip to Iraq there were a number of issues that needed discussion between the pool, international sales and marketing and public affairs.[1126] He proposed a meeting on the following Monday. Mr Whitwell noted the possible decrease in tonnage ordered and asked:
What more can be done to change Aus Gov/Iraq position? - Tigris ?[1127]
The foregoing suggests that Tigris may have been able to play some role in future wheat negotiations. Mr Whitwell advised that Iraqi Ministers had confirmed the Iraq debt from the Gulf War and that the Minister had advised his expected method of payment (inland transport payments) to pay the iron filing rebate. Mr Whitwell asked:
…do we have the sign off to do this - do we need anything from the UN?[1128]
27.263 Mr Whitwell was asked about the Iraqi Ministers' expectation that vessel rejection claims (iron filings) would be paid through the inland transport payment system:
Q : Well, I'm just wondering how we could read it in any other way:
Vessel rejection claims as per original agreement to be paid through inland transport payment system against next contract …
That would seem to imply, if not state directly, that the Iraqis were saying, 'You can pay the iron filings claim to us by using the same mechanism that you use to pay the inland transport fee'-
A : Yes, sir.
Q : -is that the way we should read that?
A : Yes, this is Minister Mehdi Saleh - this is him telling us that that is his understanding of how he wants it to happen, yes, sir.
Q : That carries with it, doesn't it, the obvious implication that money being paid on account of the inland transport fee was finding its way to the Iraqis, if he was recommending the same mechanism for the payment of the iron filings claim?
A : I mean, he was suggesting that, yes - I mean, he was suggesting paying Alia. This raised concerns for us, because we didn't think this was - we drew a differentiation between the inland transport fees which we thought were UN approved and this 2 million or whatever iron filings fee, which was for a quality claim. So it wasn't for a service that was provided. So, you know, in our minds it was something that couldn't be paid through the inland transportation system, because the inland transportation fees were approved, whereas this wasn't approved to pay quality claims back through in that way. So we drew - I mean, I had a clear distinction in my mind between the two things.[1129]
27.264 In a statement signed by Messrs Long and Whitwell in December 2004, intended for AWB's internal use as a record of facts relevant to the Tigris transaction, they note that in late October or early November 2002 they discussed the Tigris issue generally with Ms Scales and Mr Johnson and in particular the US$500,000 success fee. Messrs Long and Whitwell noted that all concerned 'were comfortable with the proposed deal' and that there was discussion about which AWB entity should receive the success fee.[1130] There was no evidence of such discussions led before me.
27.265 On 17 November 2002, Mr Davidson Kelly sent a letter to Mr Whitwell saying he had written to both the Minister for Trade, Dr Saleh and to Mr Abdul-Rahman, setting out the details of the deal which Tigris would be happy to implement.[1131] He enclosed a copy of the letter to Mr Abdul-Rahman and confirmed that AWB was authorised to negotiate the mechanism on behalf of Tigris Petroleum.[1132]
27.266 In the letter to Mr Abdul-Rahman, dated 17 November 2002, Mr Davidson Kelly referred to discussion between Mr Abdul-Rahman and himself in January 2002 relating to the 'repayment of the Loan, which was made in January 1996', and that he was writing 'on the occasion of the visit of the AWB delegation to Baghdad in November 2002.'[1133] Mr Davidson Kelly advised that Tigris had made a proposal to the Minister for Trade, Dr Saleh. The letter to the Minister was produced by Tigris and was in substantially identical terms to the letter to Mr Abdul Rahman.[1134] The proposal in both letters included the following:
In a further letter of 17 November 2002 to Mr Jumah, Mr Davidson Kelly also authorised him to act on Tigris' behalf to agree on repayment terms.[1135]
27.267 Between 19 and 21 November 2002, Mr Long and Mr Whitwell travelled to Baghdad and visited IGB, having been invited by IGB to make a further offer of Australian wheat.[1136] According to the trip report, Mr Long asked the IGB on 20 November 2002 (Ms Moona and Mr Talal) whether, 'for corporate governance reasons', the repayment of the iron filings rebate could be passed through Tigris or through further equipment to be provided by AWB rather than through Alia.[1137] IGB agreed to pass these suggestions onto the Minister. At a meeting with the Minister of Trade on 21 November 2002, Mr Long asked the Minister to reconsider the mechanism for repaying the rebate claim, and was advised the Minister would discuss the matter with the Ministry of Finance.[1138] Mr Whitwell later recorded[1139] that it was during this visit that he and Mr Long agreed with IGB and Tigris that the Tigris debt would be recovered by an 'uplift' to the contract for 1 million tonnes then being discussed.
While negotiations for the sale of wheat took place during this visit no concluded agreement was reached.[1140] Mr Whitwell continued negotiations with IGB upon their return.[1141]
27.268 On 25 November 2002, Mr Cuddihy (DFAT) emailed Mr Stephens at the Australian mission to the UN in New York. The email read as follows:
During the dispute over alleged contamination of some AWB Ltd wheat which arrived in Iraq earlier this year, AWB Ltd accepted that some of the cargoes were tainted with iron fillings. It agreed to accept a lower price for the 'tainted' wheat.
In this contect, AWB Ltd has asked me whether there's a mechanism for refunding the money paid by Iraq for the faulty wheat. The only warranty arrangements I am aware of require AWB Ltd to supply replacement wheat, rather than refund monies paid.
Grateful if you could ask OIP what AWB Ltd's options are in this case.[1142]
This enquiry was raised by DFAT as a result of Mr Hockey raising with Mr Cuddihy the issue of how the agreed iron filings rebate could be paid to Iraq.[1143]
27.269 On 26 November 2002, Mr Stephens replied to Mr Cuddihy's email.[1144] He stated that he had spoken to OIP and Treasury who said AWB had one of two options. He described the options as follows:
1. If there are additional shipments of wheat to go to Iraq under the contract in question, AWB can give a discount to Iraq when it receives its next invoice for those additional shipments.
2. If there are no further shipments under the contract, AWB can transfer funds to the Iraq escrow account operated by BNP Paribas. Any such transfer would have to clearly acknowledge the LC number (and any other relevant details) that would tie the refund explicitly to the AWB contract and would enable Treasury and BNP to ensure that the money is assigned back to the relevant phase and sector.
I hope this is clear. If not, please let me know.[1145]
Mr Cuddihy forwarded the email to Mr Hockey.
27.270 On 27 November 2002, Mr Hockey sent an email to Messrs Whitwell, Hogan and Long. Mr Hockey stated:
In a conversation with DFAT the other day I raised that we were going to have to find out a way of settling the iron filings payment issue, and asked for suggestions.
They have advised[1146]:
Mr Hockey set out verbatim points 1 and 2 of Mr Stephens' email to Mr Cuddihy of 26 November 2002.[1147] It must have been clear to AWB that, Mr Stephens having raised the matter with both OIP and the UN Treasury, the UN and DFAT's position was considered, formal and clear.
27.271 On 28 November 2002, Mr Whitwell emailed Mr Abdul-Rahman:
Following our meeting with the Minister last week we raised the issue of payment of the recent quality issue.
In particular we asked the Minister to reconsider his position to repay it directly to Alia Transport and instead asked whether it would be possible to offset it against Tigris for reasons already advised.
The Minister said he would discuss the matter again with his Excellency the Minister of finance and revert.
We would respectfully ask whether his Excellency has reached a decision in this regard
Thank you for you kind attention to this matter.[1148]
27.272 On 29 November 2000 Mr Whitwell sent an offer to IGB to supply a further 1 million tonnes of Australian wheat for delivery in the period 1 January 2003 to 30 June 2003.[1149] There were further communications regarding price and final agreement was reached in early December 2002.[1150]
27.273 On 4 December 2002, Mr Whitwell emailed Mr Abdul-Rahman confirming sale of 1 million tonnes of wheat to Iraq.[1151] It was noted that the price did not include an inland transport fee and that the inland transport fee was to be mutually agreed. It was further noted that the inland transport fee was to be payable in full before vessel discharge.[1152]
27.274 On 5 December 2002, Mr Abdul-Rahman confirmed the booking but advised the agreed price would be converted to euro.[1153]
27.275 On 5 December 2002, Mr Davidson Kelly emailed Mr Whitwell a letter he had prepared to Mr Abdul-Rahman.[1154] The letter, dated 4 December 2002 advised that Tigris would accept US$8,375,000 in satisfaction of its debt and would not require payment of any further interest.[1155] Tigris waived its right to interest on the basis that repayment was tied to the next contract for shipment of Australian grain. Mr Davidson Kelly noted the contract was likely to be in euro and agreed on the exchange rate for the principal contract applying to the payment to him. Mr Whitwell copied Mr Davidson Kelly's email to Messrs Long, Edmonds-Wilson and Hogan on 5 December 2002.[1156]
27.276 On 9 December 2002, Mr Whitwell emailed Mr Abdul-Rahman proposing two options for calculating the amount to be paid in excess of the already agreed price to deliver the tonnage CIF Umm Qasr.[1157] The email refers to an email of 28 November 2002 in which AWB again requested that the iron filings rebate be offset against the Tigris debt. Option A was to add to the inland transport fee of US$51.15 per tonne a sum of US$8.375 per tonne (which over the million tonnes would provide the $8,375,000 due to Tigris), but then deduct from that US$2.01389 per tonne in respect of the iron filings compensation. This option meant that the monies due to Iraq would be deducted from the amount payable to Tigris. Option B was simply to add to the price and the inland transport fee, US$8.375 per metric tonne in respect of the Tigris debt, and to pay the iron filings compensation separately through the inland transport fee as previously discussed.[1158] It is to be observed that neither option involved extracting the funds to be paid to Iraq as compensation from the escrow account.
27.277 On 11 December 2002, Mr Whitwell drafted a memorandum addressed to 'Senior Management' entitled 'Iron filing rebate payment and Tigris Petroleum'.[1159] This was at the direction of Mr Long. The document was prepared because Mr Long felt that it was important to raise the iron filing rebate and Tigris Petroleum recovery with Senior Management.[1160] However this memorandum was not sent.[1161] It was discussed with Mr Long and probably Mr Geary.
27.278 Notwithstanding Mr Whitwell's evidence that the memorandum was not circulated, Mr Geary recalled seeing this memorandum about 11 December 2002.[1162] He noted from it that the new contract with Iraq would be used as 'a conduit for repayment of the USD 8,375,000 owed to Tigris by IGB', that AWB was attempting, in relation to the compensation due to Iraq, 'to avoid a direct payment to a company with links to the Iraqi regime which might be construed to be in contravention of the UN Sanctions' and that the Iraqi Trade Minister had 'continually insisted on repayment directly as an addition to inland transport.' He noted that DFAT had advised that the rebate should either be repaid to the UN escrow account or be the subject of a corresponding price reduction in the next shipment. He also noted the suggestion by Mr Whitwell that: 'Repayment could be made under the guise of a service agreement between Alia/AWB.'[1163]
27.279 Mr Geary accepted that the memorandum raised concerns for him. He said he discussed the issue between himself, Mr Long, Mr Whitwell and Mr Hockey[1164] but that beyond this group they were 'socialising the issue' through AWB.[1165] By this he meant keeping other people informed of the group's thought processes, while the group focussed on potential strategies and tactics.[1166] These 'other people' included Ms Scales and Mr Cooper.[1167] Mr Geary said he specifically recalled discussing the issues with Ms Scales.[1168] He accepted that, notwithstanding his concerns, he authorised entering into contracts inflated for the Tigris debt and under which iron filings compensation would be paid to Iraq through Alia, and forwarding these contracts to the UN for approval.[1169] His evidence was that, although the contracts were executed by the parties and approved by the UN,[1170] he did not consider them 'binding'.[1171] He affected to understand a 'binding' contract to be one that had been carried into final effect.[1172] Having given this evidence in January 2006, in October 2006 having read counsel assisting's submissions, Mr Geary filed a statutory declaration that his discussions with Mr Hockey and Ms Scales took place after receipt of the memorandum of 7 February 2003, not 11 December 2002. I am not able to accept that evidence. Mr Hockey was not at AWB in Melbourne in February 2003, and nor was Ms Scales between 3 and 14 February 2003.
27.280 Mr Geary accepted the UN was not told of the inflation of the contract prices when the contracts were forwarded for approval[1173], but that he regarded that approval as 'preliminary': this was because Iraq was invaded before the letter of credit issued.[1174] He conceded DFAT was never told of the inflation of the contracts.[1175] Mr Geary conceded that payment to Iraq of the compensation through the inland transport fees would breach sanctions.[1176] He accepted that contracts A1670 and A1680 were entered into by AWB, in the form in which thye were signed, on his authority.[1177]
27.281 On 12 December 2002, AWB and the IGB entered into contract number A1670 for the sale of 500,000 tonnes of wheat.[1178] A contract in identical terms for the sale of a further 500,000 metric tonnes, A1680, was also made on that date.
27.282 The short-form contracts were signed by Mr Hogan.[1179] The long-form contracts were signed by Mr Long.[1180] These contracts also had clause 9F in them requiring any settlement payment for compensation to be paid to the escrow account. The contracts were approved by Mr Geary[1181] who was aware they had been inflated by the Tigris repayment.[1182]
27.283 On 12 December 2002, Mr Edmonds-Wilson emailed Messrs Werner and Lister to advise the final details of the sale.[1183] Mr Edmonds-Wilson noted that the previous sales note advising of a 1 million metric tonne sale had now been split into two 500,000 metric tonne sales. He noted the price included inland transport fees of ( 51.30pmt and an amount of ( 8.40pmt to recover the Tigris debt. In relation to the Tigris debt Mr Edmonds-Wilson advised:
As part of the contract agreement, AWB will recover the Tigris debt (outstanding since 1996) on behalf of Tigris Petroleum (USD8,375,000/1million mt). For this service, AWB are deducting USD500,000 (ie: AWB will pay Tigris Petroleum USD7,875,000 on a pro rata basis as vessels are being shipped).[1184]
27.284 On 12 December 2002, Mr Edmonds-Wilson sent an email containing the same information disclosing, in terms, that the price had been inflated to recover the Tigris debt, and that AWB was receiving a US$500,000 fee for its involvement, to Ms Scales, Messrs Johnson, Long, Geary, Hogan, and Whitwell.[1185] Mr Johnstone stated he was also informed of this sale but he is not shown as copied in on this email.[1186] The email, reproduced on the following page, noted that distribution has been restricted because of the Tigris issue.
27.285 Mr Edmonds-Wilson's evidence was that Mr Whitwell asked him to prepare this email. He said that Mr Whitwell instructed him to add the 'Private and Confidential' heading and Mr Whitwell would have determined the distribution list.[1187] Mr Whitwell did not dispute that he may have provided such a direction to Mr Edmonds-Wilson.[1188]
27.286 Ms Scales had no recollection of reading an email bearing the 'reduced list' notation which made her think she had not read the email. She acknowledged it likely she had read an email about the 1 million tonnes sale. If she had, her interest would have been in the 'net FOB' value as that was the critical figure for the Pool.[1189] Whether she read it or not, the email gave no indication that the details of the transaction would not be disclosed to the United Nations as Ms Scales believed all contracts were.
27.287 AWB has not produced minutes of the ELG, or any other management group, formally approving or authorising use of the new contracts as a conduit for the Tigris debt recovery. Mr Long's evidence was that the inflation of contracts to recoup the Tigris debt was 'common knowledge' among the ELG members.[1190] This accords with him sending them Mr Whitwell's 6 November 2002 email. Mr Stott, a member of the ELG at that time, claimed to have no recollection of when or how he learned of the proposal to load up the contracts, other than that he was not himself an architect of the proposal.[1191] He could not recall whether he discussed it with Mr Davidson Kelly.[1192] He could not recall Mr Davidson Kelly's letter of 17 November 2002 or whether he had seen it but believed he had not and was not involved.[1193] However this was a project he had been driving for years: it was he who revived the transaction in 2000.
27.288 Mr Lindberg, a member of the ELG, said he was aware from attending management meetings that consideration was being given in 2002 to options for recovering the Tigris debt and paying the contamination claims but that, as far as he knew, no conclusion had been reached.[1194] He said he had no role in selecting the mechanism for repayment of Iron Filings Claims and made no inquiries regarding such mechanism.[1195] I accept that evidence.
27.289 On 17 December 2002 Mr Whitwell sent an email to Mr Abdul-Rahman.[1196] His email read (in part):
In addition, would you please clarify your understanding of how you would like the quality issue rebate (approx USD 2 pmt) paid and its affect on the contract pricing.[1197]
27.290 On 17 December 2002, Mr Abdul-Rahman emailed Mr Hogan and advised that the sum of $2.017 was to be added to the inland transport payment to account for the quality issue rebate.[1198] He confirmed the inclusion in the price of the full amount of the Tigris debt. Mr Hogan received the email on 18 December 2002.
Mr Hogan's had no involvement in the negotiation of contracts A1670 and A1680, and after the August trip to Iraq he handed that market over to Mr Whitwell.[1199]
27.291 On the morning of 23 December 2002, Mr Whitwell received a copy of an email from Mr Abdul-Rahman to Mr Davidson Kelly entitled 'Loan to supply grain/wheat-January 1996'. Mr Abdul-Rahman wrote:
[We] are pleased to inform you that we have reach an agreement with AWB on the final above subject.
Pls coordinate with them accodingly.[1200]
Mr Whitwell copied the email the same day to Messrs Long, Edmonds-Wilson, Hogan, Geary, Stott and Johnson and to Ms Scales.
27.292 On 23 December 2002, Mr Hogan copied Mr Abdul-Rahman's email to Messrs Whitwell and Edmonds-Wilson.[1201] Mr Edmonds-Wilson that day faxed the contracts to Mr Cuddihy and DFAT with a UN 'Notification to ship goods to Iraq' in respect of each contract. He requested the material be forwarded to the United Nations for approval.[1202] Neither document made any mention of the inflation of the contracts to recover the Tigris debt, or the manner of payment proposed for the iron filings compensation.
27.293 The evidence establishes that by 23 December 2002:
27.294 Mr Davidson Kelly, and through him Tigris, knew that Iraq and AWB had inflated the price of wheat by US$8.375 per tonne under their contract, in order to pay US$8.375m at his direction, that the funds were to come from the UN escrow account and that the United Nations were not to be told of the inclusion of the 'loan' repayment in the purported price of the wheat. He had agreed to pay AWB US$500,000 to assist him to recoup the monies from the escrow account.
27.295 There is no evidence to indicate that BHPP was informed that the Tigris 'debt' was being collected or the means adopted by Iraq, Tigris and AWB for its collection, other than Mr Davidson Kelly's letter of 21 May 2002 to Mr Aiken. This advised that AWB was assisting recovery and that payments might be linked to shipments of wheat. There was no suggestion of inflating contracts without the United Nations knowledge.
27.296 In January and February 2003, Mr Whitwell continued to edit his 11 December 2002 draft memorandum. The Inquiry received seven iterations of the draft dated 11 December 2002, 10 January 2003 and 7 February 2003.[1203]
27.297 On 14 January 2003, Mr Whitwell emailed Mr Long concerning discussions they had as to the content of the memorandum.[1204] Mr Whitwell wrote:
I have redrafted the memo to include your suggestions and to highlight the issues etc and to now have one action point. I do think it is important on an issue such as this that IS&M are shown to have explored all the avenues before making this recommendation and highlight the exposure that this may bring the company. I agree that we have to keep a lid on this but feel strongly that we cannot afford to go down the line of repayment and when a problem possibly occurs be told by the ELG 'we were not aware of the possible implications of this method of repayment'. We have also provided a couple of solutions re: timing for the Service Agreement which may work to lessen the exposure level.
What were your reasons for just a file note?[1205]
Mr Long could not recall whether he had suggested to Mr Whitwell to 'keep a lid on this'.[1206] He rejected the suggestion that by saying so he meant 'let's not tell the ELG'.[1207] Mr Long did not ever give Mr Whitwell his reasons for presenting just a file note.[1208]
27.298 On 21 January 2003, Mr Whitwell faxed Mr Abdul Rahman:
Following your telex dated 15/1/2003 requesting a signed confirmation regarding the agreement to the pricing of the above contracts please find attached your contracts signed by us and a signed copy of your email dated 17/12/2003 with regards to pricing.[1209]
Mr Rahman's fax signed by AWB confirmed the quality rebate of US$2.017 per tonne for 1 million tonnes was to be paid through the inland transport fee and not deducted from the Tigris payment.
27.299 On 22 January 2003 Mr Whitwell met with Ms Lyons concerning the Iron Filings Claim.[1210] Ms Lyons said Mr Whitwell sought her advice as to whether, under the UN sanctions, the $6 per tonne to be paid to the IGB could be paid to 'an inland transport company' at IGB's direction, rather than through the inland transport company to the IGB.[1211] That is not borne out by her notes which read:
$6 per tonne rebate-IRAQ-when shipments held up late last year-iron filings-payment within course existing shipments-BUT Iraq Gov said NO-need to pay through Inland Transport-payment to a Jordan based company-links-you have looked and don't think any prohibition re: 'rebates'.
DFAT-off the cuff discussion[1212]
On 22 January 2003 Mr Whitwell provided Ms Lyons with a draft of his memorandum[1213] which bears Ms Lyons' handwritten notes.[1214] It is clear from the draft that it was a payment to IGB that was contemplated.
27.300 On 22 January 2003, Ms Lyons sought advice on the matters raised by Mr Whitwell from Ms Brasington of Blake Dawson Waldron. Ms Brasington provided her advice by email on 23 January 2003[1215]:
The real answer to the question you raised is that to make a cash rebate would be to provide funds contrary to the embargo resolution, resolution 661 (1990).
Resolution 661 (1990) provides at clause 4:-
'…all States shall not make available to the Government of Iraq or to any commercial, industrial or public utility undertaking in Iraq any funds or any other financial or economic resources and shall prevent their nationals and any persons within their territories from removing from their territories or otherwise making available to that Government or to any such undertaking any such funds or resources and from remitting any other funds to persons or bodies within Iraq…except payments exclusively for strictly medical or humanitarian purposes and, in humanitarian circumstances, foodstuffs.'
To make a cash rebate would directly contravene clause 4 above. If so, the Government of the Commonwealth of Australia would be obliged to prevent AWB Limited from making the remittance of funds.[1216]
The advice makes it clear that Ms Lyons did not seek advice about payments to a third party (such as Alia) outside Iraq.[1217] It was also made clear that payment to the IGB would violate sanctions. Ms Lyons did not disagree with Ms Brasington's advice.[1218]
27.301 AWB did not produce Ms Brasington's advice until after Mr Whitwell had given his evidence. Ms Lyons prepared and sent an email to Mr Whitwell and Mr Cooper on 24 January 2003,[1219] containing the advice that appears in the final draft of Mr Whitwell's memorandum of 7 February 2003 in the box marked 'LPP'.[1220] She described it as suggested text for his memorandum and recommended the memorandum be marked 'Private and Confidential'. She said that there was at the time 'an overwhelming commercial imperative to make' payment of the iron filings rebate.[1221]
The same day, Mr Whitwell forwarded Ms Lyons' email to Mr Johnson for his consideration and requested that he email his opinion.[1222]
27.302 On 23 January 2003, Mr Hockey sent an email to Mr Whitwell outlining his opinion regarding method of payment of the iron filings compensation.[1223] Mr Hockey noted:
My feeling on the issue is that (i) I don't think we should breach a UN sanction, so Jess's opinion carries all the weight (iii) if its legal, we should get an independent written opinion to that effect and just do it (iv) otherwise I think we are just going to have to advise Iraqis that we have tried everything and the only way we are able to recompense is through Escrow as a repayment and see what their response is.
My concern is there is a significant risk that the OIP will be unhappy if we don't go through their processes (high chance they will discover what has happened-our only possible defence is a written legal opinion to say its OK), and given we are always dependent upon their goodwill in shuffling phase funds, prioritising etc, we should do everything possible to keep them happy.
From a public relations perspective, the only red lights are breach of sanctions/legalities. 3rd parties with Iraq connections are no worries (as long as its legal).[1224]
'Jess' is Ms Lyons from AWB Legal. Mr Whitwell forwarded Mr Hockey's comments to Mr Johnson on 31 January 2003.[1225]
27.303 On 7 February 2003, Mr Whitwell prepared a further, final draft of his memorandum which was signed by Mr Long.[1226] The final draft was addressed to both Mr Geary and Mr Long and copied to Ms Scales, Ms Lyons of the AWB legal department, and Messrs Johnson, Hogan, Johnstone, Cooper and Hockey. It was in substantially the same form as the earlier drafts, and is reproduced on the following page.
27.304 The comment on page three:
They [AWBI] do however insist that the Managing Director is appraised of the situation.
appeared for the first time in the final draft. There is no mention in the memorandum of the contract provisions governing the payment of the agreed compensation or whether the request by Iraq to pay it directly was contrary to the contract provisions. Clause 9F of the long-form contracts required any payment for damages to be made to the escrow account.
27.305 Ms Lyons' advice in the box marked LPP addressed methods by which the proposed iron filings rebate might be concealed. It paid no attention to the one mechanism which Ms Brasington thought would comply with sanctions, namely factoring in price reductions in current or future sales, equal to the amount of the rebate.[1227] Ms Lyons' evidence that she was considering how a payment could be made to a Jordan based company[1228] cannot be reconciled with her references in the advice to:
27.306 Mr Cooper provided a copy of the memorandum in the same form to the Inquiry.[1230] On the last page of this copy, Mr Cooper wrote:
Diane, original was signed by ML and PAG. PAG advised it was with Andrew.[1231]
'ML' is Mr Long, 'PAG' is Mr Geary and 'Andrew' is Mr Lindberg. Mr Cooper believed he saw the memorandum shortly after it was written and discussed it with Ms Lyons. He said this was his first knowledge of the Tigris transaction.[1232]
27.307 Mr Hockey gave evidence that he had never seen Mr Whitwell's memorandum about the iron filings rebate, and that he had no knowledge of Tigris other than that it related to a debt. He said he was overseas when the final draft of the memorandum was produced (7 February 2003) and would never have agreed with the contents of the final draft, in particular, the idea that AWB put all the arrangements in place for making the repayment and only advising the Government afterwards.[1233] His position is consistent with his email of 23 January 2003.
27.308 Mr Whitwell's evidence was that the comment regarding AWBI's view had come from Mr Johnson. He said that he was unable to find an email reply from him but believed that he would have had a verbal discussion with him as he would not have put the comment in the memorandum otherwise.[1234]
27.309 Mr Johnson's evidence was that to the best of his recollection, he did not insist that the managing director be apprised of the situation.[1235] He said that he was aware at a high level of the issues outlined in the memorandum but he did not have a strong view as to the recommendations and accordingly he was 'always willing to act on legal advice provided in the recommendation'.[1236] The content of that 'legal advice' had not been disclosed by AWB at the time of Mr Johnson's evidence.
27.310 Mr Johnstone's evidence was that he received the memorandum, but not earlier drafts, and this was the first he learned of the plan to inflate the contract price and pay the funds collected, less the success fee, to Tigris.[1237] He was aware it was 'certainly a non-standard business transaction'.[1238] Notwithstanding he was the Chief Risk Officer for AWB, he said he took no action whatsoever on the basis that the decision to collect the money for Tigris, and the means by which it was done, were 'commercial decisions for the ELG to determine'.[1239] He knew, from being copied in on the sale email and from the memorandum itself that the inflated contract had already been entered into.
27.311 Ms Scales received this memorandum at some time after her return from leave on 14 February 2003. She was not consulted about the memorandum before it was issued and the statements in it attributing views and an approach from AWBI did not come from her.[1240]
She assumed that the contracts including the US$8.375 million in the price would be information of which 'the UN would be informed and we would have got approval from the United Nations',[1241] although she did not turn her mind to the mechanics of how that would appear in the contracts, she never having seen contracts which were submitted to the United Nations. On the copy of the memorandum she received she made a note:
How can we be assured IGB will recognise our payment of this debt.
This referred to the other matter addressed in the memorandum, namely, payment of the US$2 million iron filings compensation to Alia. This notation is consistent with Ms Scales' evidence that she did not know or believe that a payment to Alia was a payment to the IGB. Her note questions whether a payment to Alia would be recognised by IGB as a payment to it.
Ms Scales' later actions demonstrate that her belief was that the loading up of the contracts would have been disclosed in contracts submitted to the United Nations. When she was told in July 2004 of such loading up, and that it was not apparent on the face of the contract, she immediately questioned whether AWB had been acting in breach of sanctions and outside the Oil-for-Food programme. She required that AWB get senior legal advice to determine whether AWB could pay to Tigris the monies it had collected on account of the debt.
27.312 Apart from Mr Johnstone and Ms Lyons, the evidence of the other witnesses as to the 7 February 2003 memorandum and its earlier iterations was taken whilst AWB claimed privilege for the legal advice in the memorandum. This claim was withdrawn at the commencement of the Federal Court proceedings on 8 August 2006 and the documents provided to the Inquiry on 14 August 2006. It is to be observed that:
27.313 Ms Lyons claimed that her advice was not inconsistent with Ms Brasington's, that she intended her proposed transaction be scrutinised by the United Nations[1242]and that the transaction she was recommending was a payment to Alia and that the payment be recorded as part of the make up of the pricing for a service provider in future contracts.[1243] Ms Lyons conceded her drafting 'might be unclear'.[1244] I do not accept that evidence. Ms Lyons intended what she wrote, namely to recommend a way that AWB might carry out a transaction which she thought to be prohibited by sanctions in a manner which might minimise the risks of detection of so doing.
27.314 Informing the Government at a time immediately prior to shipment, meant the true situation was to be kept from the Australian Government until the last moment. The Australian Government was never informed of the inflation of the contract price to recover the Tigris debt, or the intention to pay the iron filings compensation by additional payments to Iraq through the inland transport system of payments to Alia.
27.315 On 10 February 2003, Mr Geary sent a file note concerning the iron filings rebate, marked 'Private and Confidential' to Mr Lindberg.[1245] He enclosed the 7 February 2003 memorandum signed by him and Mr Long.[1246] It read:
Andrew,
This is a sensitive issue as you can understand.
The first vessel under the new contract is due to be loaded in early April and a lot of things may change in Iraq between then and now. As we get closer to the loading of the first vessel, we will need to advise you so you can okay the payment mechanism with DFAT, ie Minister Downer.
My guess is that DFAT and the UN will have major problems with this and if they say 'no', then we will have to address another way to get the monies to Iraq-either reducing prices on future contracts or supplying additional wheat-whichever the Pool prefers.
Will discuss in more detail over the phone or when I next see you.[1247]
Mr Lindberg said he did not receive Mr Geary's memorandum or the attached memorandum signed by Mr Geary and Mr Long. Mr Lindberg never informed Minister Downer. AWB never made the iron filings compensation payments through the inland transport mechanism or otherwise. The monies remain due to Iraq .
27.316 On 12 February 2003, UN approval for contract A1680, given on 17 January 2003, was issued.[1248]
27.317 Ms Lyons, at her instigation, had separate meetings with Messrs Long and Whitwell and with Mr Geary, on 20 February 2003 concerning her iron filings advice. Privilege was claimed over both her advice and her note of their meeting. Once the claim was rejected by the Federal Court it revealed:
- just wanted to clarify there is certainly a risk involved in making any payment.
- AWB, in making any payment is taking a 'view' about the interpretation of the UN Security Counsel resolutions and we MUST notify the Australian Government.[1249]
27.318 By this time, having discussed the matter with Mr Cooper,[1250] Ms Lyons was concerned that a payment to Alia (which she maintained was what was recommended in her advice)[1251] should no longer be made without disclosure to the Government. Mr Cooper was concerned by Ms Lyons' sentiment.[1252]
27.319 At her meeting with Mr Geary, she inquired whether Mr Lindberg had cleared the proposal for payment. She was told that he had. She was told a memorandum had been provided to him by Mr Geary advising 'how sensitive/political this is and we will be informing Downer'.[1253] This is a reference to Mr Geary's 10 February 2003 file note. On 20 February 2003, Mr Long emailed Mr Geary and said:
Peter,
Understand you signed the memo that Chris brought down (and it has gone upstairs).
Could we please have a copy for the file so we can proceed.[1254]
Mr Geary replied the next day and copied his reply to Ms Lyons:
Michael,
I did sign with a covering note to Andrew. We need to sit down face to face with Andrew and tell him all the implications before we move forward. Jess also needs to be involved. I will try to find some time for him next week. When will the first vessel under the contract load??[1255]
The email to Ms Lyons enclosed the 7 February memorandum.
27.320 Mr Lindberg said he had no recollection of reading the 7 February 2003 memorandum, Mr Geary's file note of 10 February 2003 or of the proposed meeting.[1256] He did not recall discussion of the proposals in the memorandum.[1257] No memorandum signed by Messrs Geary and Long has been produced. Mr Geary said he had no discussion with Mr Lindberg because the incursion into Iraq occurred. There is no evidence from Mr Long or Ms Lyons of any discussion with Mr Lindberg. Whilst it would seem improbable that the memorandum did not go to Mr Lindberg's office, there is no evidence that he did see it or discuss its contents with anyone. I accept his evidence that he did not.
27.321 Mr Whitwell prepared a draft of the Tigris agreement from a document provided to him by Ms Lyons. He made some changes to the document and sent it back to Ms Lyons requesting her to work it into a proper agreement.[1258]
27.322 The agreement drafted by Mr Whitwell was produced after Mr Whitwell had concluded his evidence once the privilege claim over it was ultimately not pressed by AWB. The recitals in the draft are as follows:
A. Following various correspondence between AWB representatives and the President of Tigris petroleum it was agreed that in return for an agreed facilitation fee AWB Limited would help Tigris Petroleum in their attempts to recover a debt due to them by the Grain Board of Iraq for a cargo of Australian Wheat shipped to them by Tigris Petroleum in 1996.
B. It was also agreed between AWB and Tigris that the facilitation fee of USD 500,000 would be deducted from the total debt amount and that AWB would refund USD 7,875,000 to Tigris. It was also agreed that this facilitation fee would also be deducted by AWB Limited would be on an upfront basis and that repayments to Tigris would not begin until AWB had received this fee.
C. On or about the 20-21st November 2002 during a visit to Iraq Grain Board in Baghdad it was agreed by AWB limited in conjunction with the Grain Board of Iraq and Tigris Petroleum that a contract being discussed at that time for one million tonnes would include an uplift in the contract price by US 8, 375,000 Dollars.
D. The basic contract was finally agreed on the 4th December 2002, with AWB Limited effected a sale of 1,000,000 tonnes to the Grain Board of Iraq, Baghdad. Subsequnt amendments were then effected and the final contract was signed, including the agreed Tigris uplift on the 12th December 2002.[1259]
The recitals accord with the details of the transaction to recover the Tigris debt as revealed by the records to this time and accord with Mr Whitwell's evidence concerning it. It included BHP Billiton as a party to the transaction.
His draft provided that AWB's commission for recovering the debt would come from the proceeds of the first shipments and that BHP or its nominee would be paid US$8.375 per tonne, upon payment from the United Nations, on each tonne delivered under contracts A1670 and A1680 up to a total of US$7,875,000. It directed that AWB's commission be paid to its account at the Bank of New York.
27.323 Mr Whitwell emailed his draft back to Ms Lyons on 12 March 2003[1260] requesting her to settle his draft, noting that he required it for discussions with the counterparties 'next week'. Ms Lyons believed she did not read his draft of the agreement.
27.324 On 17 March 2003, Mr Davidson Kelly emailed Messrs Whitwell and Stott concerning Tigris.[1261] He had been corresponding with Mr Whitwell since 3 February 2003 to arrange a meeting to finalise details of an agreement for repayment of the Tigris debt. On 17 March 2003, Mr Whitwell replied to Mr Davidson Kelly:
Still need final sign off from Managing Director on various issues surrounding this deal before I can organise something with you. Am pushing it and will have to leave till Wed am your time before I can give final confirmation on our meeting and signing an agreement.[1262]
Mr Whitwell copied the exchange to Mr Long.
27.325 The incursion into Iraq commenced on 20 March 2003. Shortly before this an Iraq Emergency Response Team was formed by Mr Lindberg as a sub-committee of the ELG. Mr Lindberg chaired the team and the members were Mr Ingleby, Ms Scales and Mr Stott. Mr Johnstone was the executive officer and overall response co-ordinator. Mr Long was to co-ordinate market issues and Mr Hockey government and media issues.[1263] The team met almost daily until 16 April 2003 when it was disbanded shortly after the United Nations had restarted the Oil-for-Food programme and contracts A1670 and A1680, the contracts inflated to recover the Tigris debt, had received priority from the Office of the Iraq Programme.[1264]
On 20 March 2003 Mr Long emailed, among others, Messrs Lindberg, Stott, Johnstone, Ingleby, Cooper and Whitwell and Ms Scales and Ms Lyons noting that the inland transport payment to Alia of €2.468 million for the Pearl of Fujairah had been paid on 14 March 2003.[1265] A request for repayment had been made of Alia and its response was to be reported to the next meeting.
Mr Long advised that if the monies were not returned, they could be set off against amounts due to Iraq for the iron filings settlement and a separate sand contamination claim.
27.326 On 21 March 2003, Mr Davidson Kelly wrote to Mr Aiken (BHPP):
As for the recovery of the Grain Receivable, the war could not have come ata worse time. My trip to Aus to finalise details has been postponed. At best there will be a delay of a month or two. At worst we will have to start again with the new regime. Ce la vie![1266]
27.327 On 28 March 2003, BHPP prepared a 'Position Paper' on Iraq for submission to its Executive Committee in which it noted that it had assigned the Grain Board Receivable to Tigris but retained an interest if it was recovered.[1267]
27.328 On 6 May 2003 Mr Whitwell wrote a report for the Executive Leadership Group.[1268] Under the heading 'Tigris Commission', the document recorded:
Tigris Petroleum (BHP) has asked for an update of status of their agreement in light [of] current contract execution and when they will begin receiving payments. They intimated a number of influential people will need to start receiving funds and that further delays may cause difficulties going forward.[1269]
This appears to be the first documented AWB reference to the Tigris debt being referred to as a 'commission'. The report also dealt with lobbying efforts to have other contracts funded and executed (including contract A1680). It is clear Mr Davidson Kelly knew by then that amounts in part payment of the Tigris debt were to be received by AWB through the wheat contracts.
27.329 Mr Whitwell's evidence was that the reference to 'they intimated' was a reference to a telephone call that Mr Whitwell had with Mr Davidson Kelly.[1270] When questioned about his conversation, Mr Whitwell's evidence was:
Q: You say, 'They intimated a number of influential people'. What did Mr Davison Kelly say?
A: Sir, I can't recall specifically, but I got a sense from him what I have said there, which was that they intimated a number of influential people may need to start receiving funds.
The Commissioner: That's code for what?
A: It is code for the fact that he wants to pay people for funds. In my mind it set off an amber light that this was a bribe.
27.330 On 6 May 2003, an ELG meeting was held involving Messrs Lindberg, Ingleby, Geary, Stott and Ms Scales. The agenda noted that Mr Whitwell was to attend to discuss 'Iraq'.[1271] The action list compiled in respect of that meeting does not specify the actions to be taken in respect of Iraq but noted that the responsible ELG members were Messrs Lindberg, Ingleby, Stott and Ms Scales.[1272]
Ms Scales gave evidence that she would have received this ELG report but she could not recall reading it.[1273] Mr Stott could not recall reading the ELG report or discussing the Tigris commission with anyone at AWB or Mr Davidson Kelly.[1274] Mr Lindberg said he could not remember being at the meeting or agreeing anything.[1275] He agreed he was present when shown the minutes.
27.331 On 7 May 2003, Mr Whitwell received an email from Mr Davidson Kelly containing a draft agreement.[1276] The email stated:
1. We have written it in the name of Tigris, but we could just as well use one of its affiliated companies 'Maritimo Investments', also incorporated in Gibraltar (but with a different number) if you would prefer.
2. The numbers are quite simple. We are due USD8,375,000. Less your $500,000 leaves USD7,875,000. Or $7.875 per ton.
3. We have prorated the payments on a tonnage basis, as this is fairest for all parties, given the significant slippage in the program me and our requirement to keep all parties incentivised.[1277]
Mr Whitwell copied Mr Davidson Kelly's email and enclosure to Mr Long and Mr Stott later that day.[1278] Mr Whitwell replied to Mr Davidson Kelly on 8 May 2003: 'will study and revert'.[1279]
27.332 The draft 'Service Agreement', expressed to be between AWB Limited and Tigris, recited that 'Tigris has been of material assistance in procuring for AWB a contract for the supply of Australian wheat to Iraq.'[1280] It provided that, subject to the terms of the agreement, AWB would pay to Tigris an amount equal to US$7,875,000 in consideration of the services provided by Tigris. This payment was called 'compensation'. The services were said to be 'services provided by Tigris in relation to the negotiations in execution of the contract'. The contract was defined to be a contract or contracts entered into between AWB and the Government of Iraq for the supply of 1 million tonnes of Australian wheat. It provided that the sum due to Tigris would be paid at the rate of US$7.875 per tonne of grain delivered. The contract did not mention the payment of any sum to AWB. The fee due to AWB had been accounted for in this version of the contract by reducing the amount to be paid to Tigris.
The agreement forwarded under cover of the email from Mr Davidson Kelly of 7 May was plainly inconsistent with paragraph two of the accompanying email.
27.333 On 28 May 2003, Mr Whitwell sent an email enclosing the draft Tigris agreement to Ms Lyons and Mr Cooper, both of whom were recipients of his 7 February 2003 memorandum, with copies to Messrs Geary, Stott and Hockey[1281]:
Following on from last Iraq brief to ELG where it was agreed we would pay Tigris commission I received following from Tigris which I have reviewed. Some comments:
1. too complicated-we need a much simpler document
2. In previous discussion AWB was to receive payment up front but in light of changed circumstances it is probably better to waive this and proceed on pro rata basis as proposed by Tigris-keeps them incentivised.
3. not happy about passing contracts to Tigris;
4. clauses of immediate concern are 2, 4.2, 5, 6, 9;
5. will we have tax implications?
6. Payment should be within 7 days not 48 hours.
Would you please have a look at this and provide comments/redraft so I may pass back to Tigris[1282]
It is clear that despite denials of some participants in the 6 May 2003 ELG meeting, the ELG did agree to pay Tigris 'commission' at that meeting. The email was sent to Messrs Geary and Stott who were present at the meeting and senior to Mr Whitwell. They knew that there was no 'commission' due by AWB to Tigris, and that in truth AWB was collecting on behalf of Tigris a supposed 'debt' owed by Iraq. It was AWB which was to receive a 'commission' of US$500,000 for so doing, not the reverse arrangement.
27.334 Mr Whitwell's was asked about this version of the agreement:
Q: What is plain is that, if we look at the substance of the draft that Mr Davidson Kelly sent you, the arrangement as between AWB and Tigris is therein depicted as a service agreement, that Tigris is being paid by AWB for some services rendered, which was quite different to what you had asked the legal department to prepare for you, and quite different from what you understood to be the arrangement between AWB and Tigris. Do you agree with that?
A: Look, by that stage, in May, I have to be-you know, again, I am trying to recall to the best of my memory, but, look, I thought by that stage that there were elements of, you know, a service agreement in it. For example-in my mind I am just going through this at this moment in time. Clearly, I know that the original deal was put on because of the debt recovery, but I also, in my mind, know that we were facing a situation where we were at 500,000 tonnes with the minister, and we went up to a million tonnes, and I'm sure-I don't know for sure, but, you know, one assumes that the Tigris guys were influential in getting us up to a million tonnes.
…
But look, clearly in my mind, in May, I still thought this was debt recovery, but I am just saying that, you know, Norman putting this agreement over to me in this form, whilst I had serious reservations about the style of it, as I say, I'm open minded and I was just saying, at that point in time, I could see elements of how they had maybe helped us provide a service.[1283]
…
Q: … you don't say anything about the fact that this agreement doesn't reflect the true situation. You comment on the contract almost clause by clause, without actually drawing legal's attention to the fact that there never was any commission or compensation arrangement between AWB and Tigris. Why didn't you just say to legal, 'I don't know what Norman is up to, but this doesn't reflect what happened'?
A: Sorry, I tried to give some context around it. I am looking at an agreement. I am seeing this agreement and I don't think that it is at a final stage of really looking into it. I am-I have got a lot of other things that are a higher priority. You know, it is just-I would treat it differently, I suppose, if somebody was saying, 'This is the final draft. Are you happy with it?' As far as I am concerned this is still at a very early stage of its existence, and it is still in very much a draft form.[1284]
Later drafts could not reflect the true arrangement if the drafter was not informed of factual errors. Mr Whitwell denied that he was interested in disguising the nature of the payments that were going to be made by AWB to Tigris.[1285] He maintained that he had no interest in trying to describe it as anything other than recovery of a debt.[1286]
27.335 On 2 June 2003 Ms Lyons replied to Mr Whitwell's email of 28 May 2003 and copied her email to Ms Trotter (AWB Group Tax Manager).[1287] She noted that she had marked up an agreement for Tigris and that Ms Trotter had discussed with her the tax clause and appeared to be generally comfortable with it.[1288] This draft[1289] added that the services were provided to AWBI rather than AWB, contained an acknowledgment that Tigris was uncertain whether the Government of Iraq would honour the terms of the contract, and provided that AWB would only be responsible for payment pro rata of actual tonnage shipped and paid for. Ms Lyons' draft did not refer to 'commission'. However, it did not reflect the true arrangement, namely, that AWB was collecting a debt through inflating its contract prices, and that the true consideration was a payment of US$500,000.
27.336 Ms Lyons gave evidence to the effect that by the time she received Mr Davidson Kelly's draft, she had either no knowledge or no recollection of the true facts of the transaction. She said because Mr Whitwell said in his covering email it would probably be better to waive 'the payment AWB was to receive upfront' that she did not need to concern herself with what that payment was.[1290] She did not ask Mr Whitwell to explain this and said she acted solely on the basis that Mr Whitwell said the ELG had approved payment to Tigris.[1291]
27.337 On 4 June 2003, Ms Trotter advised Mr Whitwell and Ms Lyons regarding the tax aspects of the draft.[1292] She advised withholding tax would not apply, and that 'GST should not apply to the transaction, as Tigris is providing a service in carrying on its business outside of Australia, and AWBL is acquiring the service in carrying on its business'. There is no evidence whether Ms Trotter knew that Tigris was in fact being paid the amount of a 'debt' collected by AWB on its behalf; indeed such tax advice as she gave could only be based upon the false circumstances of which she was advised. There is no evidence before the Inquiry that the tax aspects of the true agreement were ever considered.
27.338 On 6 June 2003, Mr Whitwell emailed Mr Davidson Kelly forwarding him the draft prepared by Ms Lyons.[1293] It was in June 2003 that AWB advised Mr Davidson Kelly that it had begun receiving the Tigris monies.[1294]
27.339 On 7 June 2003, Mr Davidson Kelly replied to Mr Whitwell advising that the lawyer's comments were acceptable, and he wished to sign the agreement. He sought advice as to the expected payment dates.[1295] On 10 June 2003, Mr Whitwell replied to Mr Davidson Kelly advising he would look through the contract and may need to meet Mr Davidson Kelly in Melbourne to discuss it.[1296]
27.340 On 11 June 2003, Mr Whitwell emailed Mr Davidson Kelly requesting that they speak that day noting there had been a 'few developments from our side which I probably need to chat with you in person about?'[1297]
27.341 On 16 June 2003, Mr Whitwell emailed to the Management Group an Iraq brief and trip report.[1298] The Iraq brief was an ELG report dated 15 June 2003.[1299] The ELG report noted, in respect of the 'Tigris Commission', that the issue had been put on hold in light of the need for possible further renegotiation of current contracts, and that Mr Whitwell would meet Tigris officials in London on 22 June 2003. This renegotiation related to the World Food Programme requirement that all contract prices be reduced by 10 per cent to eliminate the after-sales-service fee.
27.342 A confidential trip report in respect of visits to London, Amman and Iraq between 23 and 30 June 2003 recorded a meeting between Messrs Long, Whitwell and Davidson Kelly in London.[1300] It noted that AWB would keep in contact over progress of contracts and look at possible 'ring-fencing' of commissions received. Mr Davidson Kelly said he had recently met with IGB in Baghdad and it wished to 'honour the contracts'. The report noted that former IGB officials, now with the Iraqi Ministry of Trade, were very loyal towards AWB and would be urging prioritisation of its contracts. The 'loading up' of those contracts to recoup the Tigris debt is not discussed in the report. An 'action' to be taken, with respect to the World Food Programme contracting team in Rome, was to maintain close liaison with them with a view to processing any further shipments against A1670 and A1680, being the two contracts containing the inflated price to recover the Tigris debt. Mr Johnstone, as Chief Risk Officer, read the report and assumed the ELG had approved the Tigris proposal.[1301] ELG approval would not of course have made the uplifting of the contract price either lawful or prudent.
27.343 On 26 August 2003, Mr Whitwell drafted a memorandum to Mr Owen and Mr Tan of AWB Trade Finance concerning 'Tigris Petroleum Commission'.[1302] The draft memorandum was copied to Messrs Aucher, Johnstone, Johnson and Long. Mr Whitwell wrote:
Following Telephone conversation of yesterday and your request for a memo on the subject. I confirm that with the agreement of the Pool and the (Iraq Emergency response committee) it has been agreed to provide for a payment of a commission to Tigris Petroleum that was agreed at time of concluding contract. In agreement with Tigris the quantum value of this commission is USD7,875,000 and is to be accumulated on a USD7.875 pmt basis against tonnage shipped and paid for under AWB contracts A1670/1680 to Iraq. Due the possibility that these contracts may not be executed in full it was agreed by ML/CW with the delegated representative of Tigris that AWB will hold these funds and ensure that interest is earned on these commissions from the moment payment is received under this contract by AWB. Interest will then be added on to the initial commission that will be repayed to Tigris in due course if the contract is fully executed or is deemed appropriate by AWB. In the event that the contracts are not fully executed or other conditions change further discussions will be held with the representatives of Tigris to agree the way forward. Would you therefore kindly advise the relevant interest rate for these commissions (to be reported to Tigris) and set up the relevant reporting and accounting mechanisms.[1303]
The memorandum was false. There had been no agreement between Tigris and AWBI, at the time contracts A1670 and A1680 were concluded, to pay Tigris a commission. Mr Johnstone read this email but said that he did not notice that what he knew to be a debt (due from IGB) was now being described to the Trade Finance area as a commission (due from AWB). He did not notice that AWB was paying interest on the 'commission'.[1304] Mr Johnstone was a recipient of the 7 February memorandum precisely because of the risks inherent in what was planned. He had earlier directed Mr Long to prepare a paper on this issue for ELG approval. It is extraordinary that as Chief Risk Officer, he failed to notice a fundamental change in the nature of the transactions.
27.344 On 27 August 2003, Mr Whitwell sent the memorandum to Mr Owen and Mr Tan and copied it to the other addressees.[1305] An exchange of emails followed involving Messrs Whitwell, Owen, Tan, Aucher, Long, Johnson and Johnstone making arrangements for the holding of the Tigris debt.[1306] Mr Owen on 1 September 2003 inquired as to Tigris's domicile for tax purposes[1307] and on 2 September 2003, Mr Whitwell contacted Mr Davidson Kelly to confirm that Gibraltar was the domicile.[1308] Mr Davidson Kelly confirmed this on 2 September 2003.[1309]
27.345 It will be recalled that on 11 September 2003 the World Food Programme sent a facsimile to Mr Whitwell regarding the renegotiation of contract A1670.[1310] The facsimile listed renegotiation terms that had been provided by the Coalition Provisional Authority for consideration. One of the terms listed for consideration was:
The value of the tonnage renegotiated will be reduced 10 percent (10%).[1311]
27.346 Before responding Mr Whitwell consulted with the pool manager Mr Johnson, and Mr Long who was in Baghdad at the time. Mr Long advised that if AWB wished to maintain the contracts it would be obliged to agree to the 10% reduction. On 16 September 2003 Mr Whitwell responded to the World Food Programme's facsimile.[1312] Under the heading 'Reduction by 10 percent of contract value' the fax read:
Whilst we would stress that this is extremely abnormal to consider such an arbitrary reduction in contract price we assume that this has been made as a request by the Iraqi Grain Board in consultation with the CPA and that this reduction is associated in some way with a re-evaluation of inland transport and After Sales costs. As such we agree to the reduction as long as our associated extra costs resulting from the delay in executing this contract are taken into account.[1313]
Mr Whitwell knew of the inclusion of inflated costs for transportation and after-sales service in the contracts. He also knew of the inclusion of the Tigris debt element in these contracts.
27.347 On 17 September 2003, Mr Whitwell received a fax from the World Food Programme concerning renegotiation of contract 1680 which advised, under the heading 'Price Correction', that:
WFP have been requested by CPA to deduct the after sales service fee of 10 percent on this contract.[1314]
This advice was repeated in point 6 of the fax which stated:
WFP have been requested by CPA to deduct the after sales service fee of 10 percent on this contract. The revised price per MT will be [a specified amount].[1315]
This fax makes it clear that the 10 per cent reduction in price was due to elimination of the 'after-sales-service fee'. Mr Whitwell did not respond to the World Food Programme suggesting such a fee was not included in the contract price.
27.348 On 18 September 2003, Ms Lyons emailed Mr Whitwell, copied to Mr Cooper, stating:
I confirm that you have asked me whether the World Food Programme (WFP) is entitled, under the provisions of the relevant UN Security Council Resolutions, to arbitrarily, unilaterally alter the price down by 10%.
…
The WFP is also entitled… to negotiate and agree on necessary adjustments to the terms of the reviewed contracts. These words do not entitle the WFP to arbitrarily or unilaterally adjust the contract price.[1316]
Later that day, Mr Whitwell received from Mr Edmonds-Wilson a copy of the email of 9 December 2002 discussing the two pricing options for contracts A1670 and A1680 which disclosed the inclusion in the price of both the Tigris debt (at US$8.375 per metric tonne) and an inland transport fee (of US$51.15 per metric tonne).[1317] There is no record of him informing Ms Lyons of this.
27.349 On 22 September 2003, Mr Whitwell sent Ms Scales a memorandum which related to Tigris.[1318] He wrote:
Commission has been ring-fenced in AWB accounts pending final execution of contract.[1319]
This memorandum was copied to Messrs Stott, Ingleby, Hockey, Johnson, Geary, Lindberg and Johnstone.[1320]
27.350 On 25 September 2003, Mr Whitwell sent a signed contract to the World Food Programme with the price reduced by 10%.[1321] He did not inform the World Food Programme that the previous contract price had included the inflation for the Tigris debt.
27.351 On 8 November 2003, Mr Davidson Kelly emailed Mr Long pursuing execution of the contract with Tigris and proffered a modified payment proposal. Mr Long forwarded the email to Mr Whitwell.[1322]
27.352 On 10 November 2003, Mr Long in an email to Mr Davidson Kelly, copied to Mr Whitwell, advised that AWB preferred to leave 'everything until the end, including the written proposal'.[1323] Mr Davidson Kelly replied that he currently had no contract, no performance from AWB under their agreement, and no certainty that AWB would eventually perform.[1324] Mr Long replied on 10 November 2003 that:
You have AWB as certainty. Please leave it alone until I indicated.[1325]
Mr Davidson Kelly replied on 12 November 2003:
Glad to hear it. To what extent is Aus Gov aware.? I have private dinner tomorrow (my time) with Minister Defence on his way across Atlantic. He usually enquires re status.[1326]
27.353 The evidence of Mr Hill, who was Defence Minister at the time, was that he did dine with Mr Davidson Kelly that evening and that he had known Mr Davidson Kelly on a social basis for about 10 years. His evidence was that he had never discussed AWB's dealings with Mr Davidson Kelly and that he neither knew of, nor enquired about, AWB's attempts to recover amounts said to be due to any company associated with Mr Davidson Kelly.[1327]
Mr Long replied on 12 November 2003:
Matters between Tigris/BHP and AWB are just that.[1328]
27.354 Neither AWB or Tigris ever informed the Australian Government that contracts A1670 and A1680 had been inflated to recover the Tigris debt from the escrow account.
27.355 On 6 February 2004, Mr Davidson Kelly met with Mr Aiken in London. Mr Aiken did not recall the meeting but believed the prospect of entering into a new agreement with Mr Davidson Kelly was discussed.[1329] He had a general recollection of being told that 'we're not going to see any money' in relation to the 'Grain Board Receivable'.[1330] He subsequently received a letter dated 12 February 2004 setting out Mr Davidson Kelly's proposal for a new agreement with BHPP.[1331] It did not mention the 'Receivable'. It was addressed to Mr Worthington, and Mr Aiken referred it to him. Mr Worthington commenced work on a draft term sheet for the relationship with Tigris but did not recall any reference to the 'Receivable' until he saw reference to it in a draft term sheet in July 2004.
27.356 By February 2004, Mr Davidson Kelly knew that the Tigris debt had commenced being recovered by AWB from mid 2003, and as it was progressively recovered, was being held by AWB and earning interest. He did not tell BHPP of that fact. Rather, he negotiated a new arrangement whereby BHPP surrendered any claim it had to that sum.
27.357 On 17 March 2004, following a conversation with Mr Long, Mr Davidson Kelly emailed Mr Long a further draft agreement based on the version received from AWB's lawyers in May 2003.
On 19 March 2004, Mr Long forwarded the email and draft to Mr Whitwell.[1332] The same day, he also forwarded it to Ms Peavey.[1333] He told Ms Peavey that Ms Lyons had previously been involved and recommended she speak with her.
27.358 On 31 March 2004, Mr Long emailed Messrs Johnston, Whitwell and others advising that, by its renegotiation of contracts A1670 and A1680, AWB had improved its projected FOB price on the contracts by over US$30 per tonne.
27.359 On 14 April 2004 Mr Long wrote a note to Mr Whitwell on the cover page of a draft Tigris agreement dated 1 April 2003.[1334] He wrote:
Please revisit this to ensure that it is accurate and relevant. Need to ensure that the service performed is clearly articulated, ie assisted with the brokering of contracts 1670/1680 during a particularly sensitive time in 2002 when our wheat sales were in jeopardy because of the political tension existing at the time.
Please get legal and pool sign off. We will then take it to ELG for final approval.[1335]
27.360 On 20 April 2004, Mr Whitwell emailed Mr Long a further draft with minor alterations.[1336] Mr Whitwell removed some of the references to Iraq. Mr Whitwell noted that:
… we have made much of our close relationship with IGB and if we up play Tigris role in this contract etc, and this ever gets in the wrong hands there could undermine perceptions of AWB position in Iraq etc-could be embarrassing.[1337]
Mr Whitwell noted in his email that if Mr Long was satisfied he had set the right tone, he would forward the draft agreement to 'legal' to sign off before getting Pool approval.
27.361 On 23 April 2004, Mr Johnson requested of Mr Whitwell and Mr Edmonds-Wilson a 'rundown' on the status of the payment of the 'Tigris commission', and how it was to be accounted for.[1338] He noted:
… Most importantly is it a pricing condition in the system, or has the price been grossed up, but we are just paying the rebate from sales revenue. This is important when we are netting sales back to a net fob value for pool equities and our performance.[1339]
Mr Edmonds-Wilson referred the request to Mr Owen who noted in his reply of 23 April 2004 that a monthly spreadsheet was provided to International Sales and Marketing.[1340] Mr Owen advised: 'Once it gets to a million tonnes, Int'l Marketing will have to arrange payment/s.'[1341]
Annexed to Mr Owen's email was a spreadsheet showing the 'commissions' held on behalf of Tigris and the funds deposited between 21 May 2003 and 30 March 2004. The spreadsheet showed that US$4,481,197.21 of the principal debt had been collected to that time.[1342]
27.362 On 23 April 2004, Mr Edmonds-Wilson sent the spreadsheet to Mr Johnson and advised:
Trade Finance have been allocating Tigris commission into a separate deposit for payment at a later stage (i.e: once we hit 1 million mt we will decide how to pay). Please see attached spreadsheet for current funds allocated.[1343]
27.363 On 23 April 2004, Mr Johnson emailed Mr Edmonds-Wilson requesting a copy of the agreement with BHP.[1344] Mr Edmonds-Wilson replied to Mr Johnson that day, copied to Mr Whitwell, advising:
BHP restructured its commercial interests in Iraq by transferred this issue to Tigris Petroleum, hence our agreement is with Tigris. I am just trying to track down a signed copy.'[1345]
Later that day, Mr Edmonds-Wilson forwarded Mr Johnson an email attaching the most recent draft from Mr Davidson Kelly and advised Mr Johnson:
I believe nothing signed as yet, however a copy of the current document is attached.[1346]
Mr Whitwell then emailed Messrs Johnson, Edmonds-Wilson and Owen to advise:
nothing has been paid. I have given ML a final draft of the agreement which after his sign off will come to you and legal for approval before we send up to CRRC/ELG for final approval and sign off ready to be paid post contract.
I believe it is provided for in the system and was in the original net fob cost calcs.[1347]
27.364 On 23 April 2004, Mr Tan emailed Mr Edmonds-Wilson, copied to Messrs Johnson, Whitwell and Au of AWB's Trade Finance Area, and enquired:
…whether the pricing for Iraq contracts takes into account this commsion i.e. is it factored into the base price or can we see it as a separate pricing item e.g. land freight, war risk etc.[1348]
Mr Au replied, copying it to the same individuals:
Originally we intended to put it into the pricing condition as an accrual. But as SD could not accrue for a third party and also the tonnage used is paid mt not loaded mt. and with interest accrued as well, we decided to accrue it outside the pricing mechanism.[1349]
27.365 On 24 April 2004, Mr Long replied to Mr Whitwell concerning his comments on the Tigris draft Agreement.[1350] Mr Long wrote:
2. We need to rethink about deducting 10% as per our deduction, otherwise, the wheat farmer is subsidising tigris. I will raise this with Norman.
Once i give you the feedback on 10%, let's get legal sign off. After which, we will give it to PAG as an ELG paper. Happy for you to start drafting that paper and pass it to me for comments if you like.
Recd email form NDK wanting to come down and sign. I told him to wait and we would let him know when is an appropriate time.[1351]
27.366 On 26 April 2004, Mr Whitwell replied:
… I am confused on the deduction point-the total was 8.375 mill and we took of 500K and gave the balance back in this-I cannot see subsidisation happening there.
re legal-I have to discuss this with Rosemary and Chris Qunnell today.[1352]
Mr Quennell was the lawyer heading Project Rose.
Mr Long replied that day:
is the 500k deducted in the agreement? should it be… need to think about that one???
don't worry about the subsidisation argument… we got 10% deducted so should he, you were the one that raised this point??.[1353]
Mr Whitwell replied on 27 April 2004:
Ok I'm with you now-you were talking about our renegotiation with wfp-I was off on a different tangent.
yep agree-he has to take the pain as well.[1354]
Mr Long responded the following day:
ok, please adjust agreement accordingly.[1355]
27.367 On 30 April 2004, Mr Whitwell prepared a further draft agreement with Tigris in which he altered the amount of 'compensation' to be paid to Tigris to US$7,037,500 and consequently reduced the rate per tonne Tigris was to be paid to US$7.0375.[1356] Mr Whitwell sent the draft to Ms Peavey and copied it to Mr Long. He asked that she check it and then send it to Mr Johnson. He noted 'main differences are the quantum-we have taken off 10% and arbitration in Victoria not blighty'.[1357] The contract still recorded that compensation to Tigris was due 7 days after the final payment on the sale contracts. Amendments to the arbitration provision were as noted.[1358] The payment figures were reduced by 10 per cent from the previous draft as directed by Mr Long. The payment to AWB of US$500,000 was not mentioned.
27.368 On 3 May 2004, Ms Gibson of AWB Trade Finance sent Mr Edmonds-Wilson a memorandum updating the funds received on account of the Tigris 'commission'.[1359] Ms Gibson noted on the memorandum:
If shipped over 1mill tonnes or more-Pool needs to send $ back to Iraqis[1360]
27.369 On 1 June 2004, AWB sought advice from Mr Quennell concerning 'Project Water'.[1361] This was the code name given to the Tigris dealing. It will be recalled that Mr Quennell had been assisting with the Project Rose investigation commenced in June 2003 and that the United Nations' IIC investigation had been announced in April 2004.
On 1 June 2004 Mr Whitwell emailed Ms Peavey requesting her advice on a draft agreement he had previously sent.[1362] Ms Peavey replied that day that she would be meeting later that day with Mr Quennell of Blake Dawson Waldron to discuss the Tigris matter. She noted:
I know this has been sitting on the backburner a little given everything else going on with Iraq - but we need to be squeaky clean on this one.[1363]
The email was copied to Mr Johnson and Mr Long.
27.370 On 9 June 2004, Mr Quennell emailed a draft agreement to Ms Peavey.[1364] He described the enclosed draft[1365] as a clean copy of a marked up version. The marked up version appears to have been prepared by Ms Brasington of Blake Dawson Waldron.[1366]
This version refers to BHP Billiton Petroleum as a party to the arrangement, from which it may be inferred that Mr Quennell and Ms Brasington were provided with some supporting documentation and were aware that BHPP retained a 25% interest in the sum recovered. It also referred to BHPP advancing sums to AWBI to pay for wheat supplied by AWBI to the IGB under contracts A1111 and A1112 in December 2001.
There is no evidence of BHPP funding those contracts or of their knowledge of, or involvement in, this draft agreement or the recovery process. These recitals would appear to be an error.
Mr Quennell's draft referred to the payment to Tigris as 'compensation', made no reference to AWB's success fee and gave the total due as US$7,037,5000, that is, the original debt less the success fee and the further 10% reduction negotiated by Mr Long. A question is included in the draft enquiring as to how the debt of the IGB increased from US$5 million to US$8 million and what the original contracts said about interest.[1367]
27.371 Ms Peavey copied Mr Quennell's email and draft to Messrs Long and Whitwell on 9 June 2004, noting 'when you are in tomorrow we need to also finalise this document.'[1368]
27.372 A version of Mr Quennell's draft, produced after Mr Whitwell had given his evidence and once privilege claims were no longer pressed, bears handwritten annotations[1369] made by Ms Peavey.[1370]
In this version, references to BHPP funding wheat purchases in 2001 are lined through as is a handwritten note correcting the date to 1996 and 'compensation' is changed to 'commission'. The reference to the difficulties said to be faced in the recital is amended to include 'AWBI's ability to secure future sales of Australian wheat'.
Ms Peavey's evidence was that the amendments were made at a meeting attended by her, Mr Whitwell and a lawyer from Blake Dawson Waldron.[1371] This lawyer was probably Ms Brasington.[1372] On this occasion, Ms Peavey was told that Tigris was due a commission by reason of services it had performed in restoring AWB's trade to Iraq.[1373] She said she was confused because she had also been told that the money represented the proceeds of a debt.[1374] Mr Whitwell espoused both views.[1375] Ms Peavey agreed that the two accounts were contradictory.[1376] She thought that she discussed her concerns with Mr Cooper and Mr Quennell subsequently.[1377]
27.373 After this meeting, Mr Quennell received instructions that the agreement should reflect that the sum payable to Tigris was on account of a commission.[1378] He had earlier been told that the payment to Tigris represented the proceeds of IGB's debt for wheat that had earlier been delivered.[1379]
27.374 On 10 June 2004, Ms Peavey sent Mr Whitwell an amended draft incorporating the changes indicated by the handwritten notes.[1380] In this draft, all references to BHPP were omitted and all references to 'compensation' were now 'commission'.[1381] The contracts involved, A1670 and A1680, were now correctly referred to. Tigris was said to have been of material assistance in procuring those contracts. The cover page still stated the agreement was between AWBL and Tigris but the contract itself amended the counterparty to 'AWB (International) Limited'. It contained a formula for the calculation of interest due to Tigris.
27.375 On 21 June 2004, Mr Whitwell wrote to Ms Peavey advising that the draft was acceptable except that, in recital A, it referred to assistance being given in 2001 rather than 2002.[1382] He asked this be corrected so that he could give it to Mr Long for signing. It would appear that this correction was not in fact made.
The draft agreement went through further iterations until the version of August 2004 which omitted money terms and provided simply that the 'commission' was to be the total amount of principal plus interest that would be due to Tigris on the date on which the agreement was to be executed, and that AWB agreed to pay that 'commission'.[1383] This draft did not disclose that interest had accrued on behalf of Tigris, or give any indication as to the basis upon which it was being paid. Reference to the relevant contracts was omitted. This copy has the handwritten annotation, 'email to J Cooper'. Mr Cooper's evidence was that he did not receive this until Ms Peavey sent it to him for a review of the Tigris transaction in August 2004.[1384] A draft of this contract[1385] was prepared by Blake Dawson Waldron. Mr Quennell sent that draft to Ms Peavey on 6 August 2004 and noted that 'I gather Sarah Scales needs this urgently.'[1386] This covering email was not provided until after Ms Scales gave evidence.
27.376 On 2 July 2004 a paper was prepared to calculate how well AWB had fared in achievement of its targets for contracts A1680 and A1670.[1387] The paper showed that, notwithstanding the 10% reduction introduced by the WFP in September 2003 for wheat remaining to be shipped under the contracts, the retention of the inland transport and after-sales-service fees, the re-negotiation of the contracts for matters and claims such as diversion, speeding up the contracts, demurrage, deviation and detention and the fact that the costs on both contracts were within original budgets, meant that the net FOB price achieved for the contracts was more than US$39 million ahead of their original target.
The paper recorded that the initial price included amounts for the Tigris debt recovery, that International Sales and Marketing had recovered €7,944,525 but only had to pay Tigris US$7,035,000. It noted the return from involvement in the Tigris transaction, including the service fee and foreign exchange gains, was US$2,657,000.
27.377 On 2 July 2004, Mr Worthington met with Mr Aiken to discuss BHPP's new arrangement with Tigris. He was instructed to release BHPP's interest in the debt if it had been written off in the accounts.[1388]
The final iteration of a memorandum to Mr Aiken from Mr Worthington[1389] dated 21 July 2004 provided[1390]:
7.3 receivable rights : Transfer to Tigris of the balance 25% of the Australian Grain Board Receivable (US$5 million total), which was retained by BHP Billiton but written off some years ago.[1391]
The proposal to relinquish BHPP's interest in the Receivable, as part of a larger arrangement with Tigris, was approved by Mr Aiken on 22 July 2004[1392].
27.378 On 15 July 2004, Ms Peavey emailed Mr Whitwell and Mr Long with a draft advice she proposed to send to Mr Johnson, the Pool Manager, regarding his concerns over Tigris.[1393] AWB claimed privilege until August 2006 over a relevant portion of this email and accordingly it was not put to Mr Whitwell or Mr Long. That portion is noted below.[1394]
27.379 At 9.15am on 16 July 2004, Mr Long replied to Mr Whitwell and Ms Peavey noting that the 1 million tonne contract was entered into with the past Iraqi regime.[1395] He also advised:
the payment is due when all monies received from UN… we expect this any time now and need the agreement in place prior to the final payment.[1396]
Ms Peavey incorporated the information provided by Mr Whitwell and Mr Long into her advice to Mr Johnson and emailed Mr Johnson, copied to Mr Whitwell and Mr Long, on 16 July 2004, at 11.37 am. That email is reproduced on the following page.
27.380 On 26 July 2004, Mr Ingleby, AWB's Chief Financial Officer, emailed Ms Scales and Mr Long:
I notice in the June fin rept there is mention as to how to treat the $.5m commission re Tigris-why isn't this revenue for L as it was L's employees who engineered the result?[1397]
According to Mr Long and Mr Whitwell[1398] during a general discussion between them, Ms Scales and Mr Johnson in about late October or early November 2002 concerning the Tigris recovery, the question of the distribution of the success fee had arisen but not been resolved.
27.381 On 12 August 2004 Mr Cooper instructed Mr Quennell to undertake a review of the Tigris transaction. Mr Quennell undertook a factual review.[1399] He was not briefed with a statement of facts, but was left to find for himself the facts on which his advice was to be based.[1400]
27.382 On 13 August 2004, Ms Peavey telephoned Ms Lyons to elicit her knowledge of the Tigris transaction. Her file note recorded:
PC to J Lyons re: Tigris
- she approached initially by C Allcott to do agreement re Tigris arrangement
- she did memo to ELG re payments
- thought it dodgy
- work of OFF + payments
- no service actually provided by Tigris
- concerned about Tigris + IGB connection (will money from OFF go back to IGB)[1401]
Ms Lyons remembered having a conversation with Ms Peavey, but thought the first three points might have been about the Iron Filings Claim.[1402] She thought the last three points might be information that Ms Peavey was providing her[1403] but said she did not have an independent recollection and was reconstructing the conversation from the file note.[1404] Her explanation is improbable. Ms Lyons had prepared for inclusion in the memorandum of 7 February 2003 proposals by which payments might be able to be made for iron filings compensation although she recognised the prohibitions in resolution 661 of making payments to Iraq. She was later concerned about the integrity of her advice recognising it posed risks for AWB and so informed Mr Geary and Mr Long. She knew Tigris had not provided any service to AWB and that AWB had recovered a debt on Tigris' behalf by inflating wheat prices because that is what the 7 February memorandum said, and she was concerned whether there was a connection between Tigris and IGB. I am satisfied that the note records information provided by Ms Lyons to Ms Peavey.
27.383 Late on 23 August 2004 Mr Quennell provided a draft chronology of events relating to the Tigris transaction to Mr Cooper. The draft was updated by Mr Quennell's team between that time and 8 September 2004.[1405]
27.384 On 7 September 2004, Mr Owen emailed Mr Whitwell, copied to Mr Long and Ms Peavey, and informed them:
Following part payment for MV [vessel name masked for confidentiality], paid for 24,322.10 tonnes, we have now passed mean quantity for contracts A1670 & A1680. As such we have collected in excess of amount required in terms of your memo of 26 August 03.
In view of the above, and as we are expecting further payments for this vessel (approx. 13,107.90 tonnes still unpaid).
Please advise how we are to account for overpayment to date and whether these funds are to be refunded to buyers.[1406]
27.385 On 8 September 2004 Mr Quennell briefed Mr Cooper on his findings to that time. He provided to Mr Cooper an updated chronology of what he and his team had found through their inquiries, and a summary containing preliminary views on the documents.[1407]
27.386 On 9 September 2004 at 9.38am, Ms Scales emailed Mr Cooper asking:
Jim,
What is the status re Tigris agreement.?
What is the timeline on a decision?[1408]
Mr Cooper responded 'seeing Andrew today', to which Ms Scales replied, 'Why?'[1409]
27.387 At 6.43pm that day, Mr Cooper wrote again to Ms Scales, copied to Mr Long and Mr Geary:
Sarah - have finished factual review. Briefing Andrew Lindberg on that tomorrow. Conclusion is that on the facts we have been provided there is no breach of Australian law. Facts are however quite patchy. There appears to be a breach of UN resolution 661 because the increase in contract payments to repay the Tigris debt and the processing of this higher amount through the OFF program was never disclosed and was not a payment for a humanitarian purpose.
I am proposing having relevant IS&M staff involved in the matter sign off on the written summary of facts we have prepared (Charles [Stott], Michael [Long] and Chris [Whitwell]) and when this is done I recommend that payment to Tigris be made.[1410]
27.388 Mr Cooper said that his recommendation to pay Tigris, notwithstanding the breach of sanctions, was conditional upon considerable further legal work being done, rather than simply having those who provided the summary of facts that had been gathered already 'signing off' on them.[1411] He expressed no such condition. Further, he made the same recommendation in his email dated 16 September 2004, addressed to Messrs Lindberg, Stott, Long, Whitwell, Geary and Ms Scales.[1412]
27.389 On 10 September 2004 Mr Cooper briefed Mr Lindberg on the state of the Project Water investigation.[1413] He advised him that a factual review had been undertaken and advice received from Mr Quennell. Mr Cooper gave Mr Lindberg an outline of the matter as it had been compiled in Mr Quennell's factual chronology.[1414]
He advised Mr Lindberg that AWB had recouped the Tigris debt by inflating, or loading up, the contract price for wheat.[1415] Mr Lindberg asked Mr Cooper to seek legal advice on whether the method employed by AWB to collect the debt owed to Tigris was in breach of sanctions.[1416]
27.390 On 13 September, Mr Whitwell replied to Mr Owen's email of 7 September 2003 copied to Mr Long and Ms Peavey, and requested Mr Owen to:
…put them on hold until the whole issue of Tigris is settled-Rosemary, is there any progress on this?[1417]
Mr Owen replied:
No problems, but another payment expected by 14 Sep 04, and I think Paul may need it resolved before end of financial year 30 Sep 04.[1418]
'Paul' is a reference to Mr Ingleby. The amount collected in excess of the amount agreed to be paid to Tigris was never repaid to Iraq. Had it been a commission on sales arranged by Tigris it would have been paid to Tigris, but it was not.
27.391 Mr Cooper spoke with Mr Davidson Kelly at 5.05pm, Thursday 16 September 2004.[1419] He recorded that Mr Davidson Kelly said BHPP had a right to collect a grain receivable, that Tigris would act as agent for BHPP, and that Tigris would pay BHPP a share once the receivable was collected. He told Mr Cooper that Tigris was a Gibraltar company and that Tigris Australia was a subsidiary of the Gibraltar company.
Mr Davidson Kelly advised he was the President (but not a director) of the Gibraltar company, that the directors of that company were lawyers in a Gibraltar law firm and that Tigris was a 'foundation' which was 'essentially a trust'; and that the beneficiaries of the trust were four members of his wife's family. Mr Cooper asked why Tigris had so much political influence in Iraq in 2002 when AWB was in danger of losing its market there and was advised of Mr Davidson Kelly's Iraq representative who had influence within the oil ministry.
27.392 Later the same day Mr Cooper sent an email to Messrs Lindberg, Stott, Long, Whitwell and Geary and to Ms Scales:
Dear All
Just confirmation of the process.
I have completed factual review and discussed with Andrew.
I have talked today to Norman Davidson-Kelly, President of Tigris, who is based in London. I have taken notes and I am satisfied with his explanation of issues.
Next step is to have Charles sign-off the factual statement as a true and correct record. As Charles is on leave next week we will provide the statement to him in the week of his return. After Charles has signed we will have Michael Long and Chris Whitwell sign-off.
Following sign-off by Charles, Michael and Chris I then recommend payment of the amount owing from AWBI to Tigris.
I have discussed this timetable with Norman Davidson-Kelly and although he is frustrated with the overall delay, he accepts that we need to go through this process. He stated that he views AWB as a friend and has offered assistance in Iraq to AWB in the future if this is required.[1420]
27.393 On 17 September 2004 Mr Cooper asked Mr Quennell to draft a summary of facts in a form to be signed off by Messrs Stott, Long and Whitwell.[1421]
27.394 On 30 September 2004 a further draft agreement was prepared by Ms Peavey who emailed it to Mr Cooper.[1422] Only the date appeared to be changed from Mr Quennell's August draft.[1423] The agreement was shown to be between AWBI and Tigris. It made no reference to the monies being a debt collected on Tigris' behalf, nor the method of their collection. The payment was described as commission, and was stated to be based on Tigris providing material assistance in procuring contracts for AWBI in 2001. No mention is made of the US$500,000 payable by Tigris, nor that the sum to be paid to Tigris included interest.[1424] Mr Cooper could not explain, even accepting that Tigris had rendered services, how any mention of the debt had been omitted. The notion that the sum payable to Tigris represented the proceeds of the recovery of a debt is inconsistent with the notion that the same amount is payable by AWB to Tigris as a commission for service allegedly rendered by Tigris to AWB. Mr Cooper was unable to explain how the debt could change into a commission.[1425] On 30 September 2004, Mr Cooper forwarded the agreement to Mr Davidson Kelly with an email which read:
Attached is the draft agreement.
As discussed, I will arrange sign off from Charles Stott and Michael Long internally before we're able to finish the transaction. Michael Long is currently on leave this week. I will progress this as fast as possible.[1426]
27.395 On 30 September 2004, Mr Davidson Kelly replied:
Many thanks for the draft. I return it with minor changes to the banking details. Otherwise it is fine.
The only real issue outstanding from our point of view is to agree the amount, including interest. I imagine that how we will do this will depend on how you were holding the funds. If they were deposited as received in a separate account, it should be relatively straightforward. (I understand that you were going to do that). But it would be more complicated if they were co-mingled.
Either way, should we fix a target date for signature so I can line up our directors? Also, the Bank could give us an estimate of the amount owing, including interest, at that date to enable us to finalise the agreement a day or two in advance.[1427]
27.396 On 13 October 2004, AWB received a 'draft' advice from Dr Donaghue of Counsel.[1428] Dr Donaghue was briefed on 5 October 2004 to advise whether the recovery of funds for Tigris breached either resolution 661 or constituted an offence under Australian law. The draft opinion was that resolution 661 had not been breached but that offences against section 70.2 of the Criminal Code Act 1995 (Commonwealth) and sections 81 or 82 of the Crimes Act 1958 (Victoria) may have been committed, and that payment of funds to Tigris might constitute a further offence against section 88 of the Crimes Act 1958. He advised the money should not be paid.
27.397 On 14 October 2006, Mr Quennell at Mr Cooper's direction, briefed Mr Tracey QC[1429] and Mr Richter QC[1430] to advise regarding the Tigris transaction. The observations to Mr Richter included the following:
In essence, the transaction in relation to which Counsel is requested to advise involves the inflation of the price of wheat sold to the Grain Board of Iraq (IGB) by AWB pursuant to contract numbers 1670 and 1680 (copies attached) as part of the Oil for Food Programme as a means of recovering a debt owed by IGB to BHP Petroleum Pty Limited (BHPP) arising out of the provision by BHPP to IGB of a cargo of wheat in 1996. The debt was subsequently assigned by BHPP to Tigris Petroleum (Tigris). AWB was able to recover on behalf of BHPP/Tigris the sum of approximately US$8m in return for which AWB received a fee from Tigris of US$500,000. AWB has not yet remitted the recovered funds to Tigris.[1431]
and later:
Against the above background, the price of wheat of sold to IGB by AWB under contracts 1670 and 1680 (both dated 11 December 2002) were inflated by US$8.375 per metric tonne so as to enable the repayment by IGB of the debt owed by IGB to BHPP/Tigris.[1432]
No suggestion was made in the instructions to either Mr Tracey or Mr Richter that the amount recovered was due to Tigris as commission or for services rendered.
27.398 Mr Tracey gave advice in conference on 22 and 26 October 2004. He advised that on a statement of facts later verified by Messrs Stott, Long and Whitwell the payment of the Tigris debt from the UN escrow account did not breach resolution 661 because resolution 661 prohibited payments to Iraq, not payments from Iraq.[1433]
27.399 Mr Richter was briefed with Dr Donaghue's advice. Mr Richter also provided urgent oral advice in conference on 15 October 2004 apparently to the effect that he did not consider that any of the crimes he was asked to advise on had been committed.[1434] Presumably the crimes referred to were those noted in Dr Donaghue's advice. On 22 December 2004, Mr Richter and Mr Donaghue gave advice in writing, which is referred to below.
27.400 On 10 November 2004, Mr Cooper emailed to Mr Lindberg and Ms Scales, and copied to Mr Quennell, a further draft Tigris agreement.[1435] The handwriting on the email is Ms Scales.[1436] The portions for which privilege was claimed are indicated on the email reproduced on the following page.
27.401 Paragraph 8 makes clear that the USD500,000 to be paid to AWB by Tigris was for recovering the Tigris debt. It was to be deducted from funds recovered. That being so the balance of funds held by AWB and for which approval was being sought to pay out of pool funds to Tigris, was recovered debt funds. Yet paragraph 7, which addressed the question which must be affirmatively answered before such funds could be paid out of the pool, treated the monies differently. As Mr Cooper pointed out, those deciding to pay the funds out of the pool had to be satisfied that the payment 'maximises the next pool return to growers… by securing … markets for wheat'. Mr Cooper went on to express the opinion that: 'my view is that this transaction did assist AWBI in securing the Iraqi grain market'. Mr Cooper did not state in his email what 'this transaction' was. It could not be the recovery of the debt for Tigris referred to in paragraph 8 because that had nothing to do with 'securing' the Iraqi wheat market. Mr Cooper did not have any basis for asserting that Tigris had assisted AWB in 'securing' the Iraq market in 2002. The draft unsigned statement of facts on which he seeks to rely to support that view, did not do so.[1437] Regarding the statement in that draft:
Tigris offered assistance to AWB in 2002 in procuring contracts between AWBI and IGB. Informal understanding reached with Tigris to this effect (no written agreement).[1438]
there is the comment:
What did Davidson Kelly do? Was the restoration of the 1 MT sale a result of his efforts? We don't know. It was possibly a combination of AWB's and Tigris' efforts.[1439]
27.402 I do not doubt that Mr Cooper knew the sum held was a debt recovered. He said so in paragraph 8. He thought that there was no basis upon which collected debt monies could be paid out from the pool unless they could be characterised as 'maximising the net pool return to growers… by securing, developing, or maintaining markets.' Accordingly, if the monies could be said to be a 'commission' or 'service fee' for assisting to 'secure' the Iraqi market, the monies could justifiably be paid out to Tigris. That was why the agreement was drawn up in the form that it was.
27.403 By the time this email was sent, Mr Cooper and Mr Quennell had received advice from two senior Counsel, Messrs Tracey QC and Richter QC concerning the Tigris transaction.[1440] Mr Quennell's evidence was that that advice concerned the legality of making payment of the funds collected to Tigris[1441] but that Counsel were not asked about the legality of recording a recovered debt being paid out as a commission.
27.404 On 11 November 2003, Mr Quennell sent Mr Cooper an amended chronology of the Tigris transaction following discussions with Mr Whitwell.[1442]
27.405 On 16 November 2004 Mr Cooper sent a further email to Dr Fuller, enclosing the above email entitled 'Approval required for Tigris transaction', asking Dr Fuller to look at it as soon as he was able.[1443]
27.406 On 19 November 2004, Dr Fuller emailed Mr Cooper, copied to Mr Lindberg:
Discussion with Andrew Lindberg today. Approval, on an in-principle basis, of the Tigris payment. Formal approval to occur next week. Success fee 100% to AWB (International) Limited's account.[1444]
The copy of this email produced to the commission bears Mr Lindberg's handwritten notation:
OK, but need to see documents.[1445]
Mr Lindberg initialled this and dated it 21 November 2004.[1446]
The 'success fee' was the US$500,000 fee payable for successfully recovering the Tigris 'debt'.
27.407 On 21 November 2004, Mr Cooper wrote to Mr Quennell, and AWB's internal tax adviser, Mr Whipp, forwarding them the September draft of the Tigris agreement.[1447] He enclosed a spreadsheet of 'commissions' collected between May 2003 and October 2004 showing that nearly US$50,000 in excess of the amount AWB had agreed with Iraq to collect from the escrow account had been received.[1448] This did not include, and the spreadsheet did not show, the 10% reduction negotiated by Mr Long.
Mr Cooper informed them of the success fee, now to be paid to AWBI, and sought any final amendments from Mr Quennell and advice on any tax aspects from Mr Whipp. There has been no evidence to show that Mr Whipp was informed of the true circumstances.
27.408 On 23 November 2004 Mr Quennell sent Mr Cooper an email enclosing draft amendments.[1449] In his email, Mr Quennell quoted Mr Davidson Kelly's letter of 4 December 2002 to Mr Yousif which made plain the transaction was recovery of a debt of US$8.375 million. It also made clear Mr Quennell knew of the inflation of contracts A1670 and A1680, and was aware of the agreement to deduct from the debt recovered the success fee of US$500,000. Mr Cooper copied the email and enclosure to Mr Long asking 'is this how the payment to Tigris works?'[1450] The only material difference from the previous draft was that the 'commission' payable to Tigris was a net sum 'after deduction of the agreed success fee of US$500,000.'
27.409 On 25 November 2004, BHPP entered into a participation agreement with Tigris, executed by Mr Worthington and Mr Davidson Kelly.[1451] By clause 8.4 it was agreed that, with effect from 25 November 2004, Tigris was no longer obliged to pay BHP any amount pursuant to clause 3.2 of the agreement made between them on 13 September 2000.[1452] At the date of this agreement neither Tigris nor any of Mr Davidson Kelly's companies had received any payment from AWB in respect of 'the Grain Board Receivable'. Mr Davidson Kelly knew however, that the monies had been collected and payment was imminent. He did not tell BHPP.
27.410 On 26 November 2004, Mr Quennell provided Mr Cooper a further draft agreement.[1453] This version replaced the expression 'commission' with 'service fee' and provided that fee to be US$7,087,202.24. There was no indication that it included interest although, as is clear from the previous draft and Mr Quennell's email, it did. The draft provided that the service fee was nett of the success fee and withholding tax.
The difference in amounts payable between this and Mr Quennell's previous draft is that Mr Quennell had previously not deducted any amount for withholding tax. It would appear this draft incorporates Mr Whipp's tax advice and that either Mr Cooper or Mr Long spoke to him about correct calculation of the payment. It is not known why the commission became a service fee, other than Mr Cooper said it was on Mr Whipp's advice.[1454] The agreement does not state what the 'service fee' was for, although the recital does refer to assistance in execution of contracts and AWB's securing of future contracts.
27.411 On 26 November 2004, Mr Cooper emailed Mr Davidson Kelly stating:
Attached is the final draft of the Agreement. I have updated your bank
account details but please check them a second time.
The amount to be paid is US$7,087,202.24 as you agreed finally with Michael Long yesterday.
The amount was calculated as US$8.375 million, less 10%, less AWBI's success fee of US$0.5 million, plus interest of US$55,224.72, less withholding tax (on the interest) of US$5,522.48 US$7,087,202.24.
Let me know that you are happy with the Agreement and I will have it signed ASAP in Melbourne, scanned and sent to you as a PDF document. Your directors in Gibraltar should print and sign 2 copies of the PDF'd document and then return them to me by PDF or fax and I will then commence processing payment on receipt of your signed version.[1455]
27.412 On 29 November 2004, Mr Davidson Kelly wrote to Mr Cooper concerning further draft versions of the Tigris agreement. He wrote:
In case we are still suffering from enemy action, I attach as agreed a copy of the relevant clause of the Agreement.[1456]
Mr Davidson Kelly offered to provide AWB with an invoice notwithstanding Tigris had rendered no services to AWB or AWBI.[1457]
27.413 On 30 November 2004, Ms Gibson wrote to Mr Edmonds-Wilson and Mr Cooper enclosing a spreadsheet entitled: 'Commissions held on behalf of Tigris Petroleum Corp. Ltd.'[1458] The schedule recorded that as at 29 November 2004, US$7,924,702.24 had been collected, notwithstanding that the debt then due was US$7,037,500, or US$7,537,500 including AWB's fee for recovering the monies.
27.414 On 1 December 2004, Mr Davidson Kelly faxed an invoice from Tigris to AWBI in respect of a 'Service Fee' of US$7,537,500 less a 'Success Fee' due AWBI of US$500,000.[1459] Also invoiced was interest to 29 November 2004 of US$55,224.72 less Australian withholding tax of $5,522.46, making a total payable to Tigris of US$7,087,202.24.[1460] The invoice was stated to be for:
The provision of services under the Agreement between AWB (International) Ltd and Tigris effective 12 December 2002.[1461]
On 1 December 2004, there was no agreement signed between Tigris and AWB (International) Ltd. The date 12 December 2002 was the date of Mr Edmonds-Wilson's email to senior management specifying the final details of the 1 million tonne sale to Iraq under contracts A1670 and A1680, within which there was included as part of the inflated price 'Tigris debt-USD8.375' per tonne.
The invoice was a sham designed to support the concept that AWBI owed Tigris a commission or service fee. Mr Cooper verified the invoice by signing it on 2 December 2004.[1462]
27.415 The Tigris invoice showed a reduction in the amount of the debt reduced by 10 per cent negotiated by Mr Long, plus a specified amount for interest. The interest must have been advised by AWB as Mr Davidson Kelly would have no basis for calculating it. The reason for the reduction in the amount of the debt appeared in an email from Mr Cooper to Mr Lindberg and Dr Fuller, copied to Mr Long and Ms Scales, on 2 December 2004.[1463] In that email, Mr Cooper attached a final agreement for execution by either Dr Fuller or Mr Lindberg. He reported:
I have checked everything as follows:
1. the amount payable has been verified by the papers and by Michael Long. You need to know that last week Michael Long saved AWBI a further US$837,000 on this deal by convincing Tigris that they should also accept the 10% reduction imposed by the World Food Program on AWBI. They reluctantly agreed and reduced the amount payable by that amount. This means that AWBI has made US$1.375m on this transaction. I confirm our decision that 100% of this money is being retained by AWBI.
2. I have had AWB's Tax Manager sign off the agreement (Stuart Whipp);
3. Norman Davidson Kelly of Tigris has signed off on the agreement;
4. Richard-we want to leave the arbitration clause in the document. If there is any future disagreement (although we can't think what it would be given the only task is payment), then it will be resolved privately by an arbitrator, not publicly in the courts. If we do not include the arbitration clause, then any dispute would have to be resolved publicly in the courts and this is not desirable.
Andrew-I know you asked to see the final version of the agreement. If you are happy with it, I need it signed by you or Richard-only one of you needs to sign.
I have sent signing copies up to your office.
I would like to get the document signed ASAP.
In terms of the AWB internal paperwork[1464] implementing actual payment in USD by AWBI, Sarah Scales needs to approve this as GM of the AWB National Pool, accordingly to AWBI's Management Authorisations. I have separately forwarded that paperwork to her for signature.[1465]
27.416 Ms Scales' copy bears the handwritten notation 'AL - signed off on agreement'.[1466] The document was only produced after Ms Scales had given evidence.
27.417 The authorisation to pay Tigris Petroleum Corporation in US currency was signed by Mr Cooper on 2 December 2004 and by Ms Scales on 6 December 2004. The total was US$7,087,202.24.
27.418 The Tigris agreement was ultimately executed by Tigris on 7 December and received by Mr Cooper on the morning of 8 December 2004.[1467] Sometime between 2 and 14 December 2004 Dr Fuller executed the agreement on behalf of AWB. An executed version was provided by AWB.[1468] This version had as its effective date 12 December 2002 (the date of contracts A1670 and A1680). It described the payment to Tigris as a 'service fee' but did not describe the services said to have been provided by Tigris other than to note in recital (B): 'Tigris has been of significant material assistance in procuring for AWBI contracts for the supply of Australian wheat.' It is noted, in clause 4.2, that the service fee was the net amount payable to Tigris after deduction of a 'success fee' of US$500,000 payable by Tigris to AWBI, and Australian withholding tax. The amount to be paid was US$7,087,202.24 as in the invoice provided by Tigris. The contract did not specify what the success fee was for. The only 'success' involved was in recovering the Tigris 'debt'. Tigris provided no services to AWBI, and had no arrangement with it to do so. The contract did not reveal interest paid to Tigris, or the fact that the payment was for the recovery of a debt, not for services provided. It is unknown whether the tax advice given by Mr Whipp, or the amount of tax ultimately paid reflected the actual transaction.
27.419 The Tigris payment was effected on 9 December 2004 in the amount of the 'invoice' and the final contract.[1469] It was discussed at an ELG meeting on 13 December 2004[1470] and at a Joint Information Session for the Directors of AWBL and AWBI on 14 December 2004.[1471]
27.420 On 13, 14 and 15 December 2004, Messrs Stott, Long and Whitwell finally signed an agreed 'Project Water - Summary'; that summary is reproduced on p. 275 and following.
27.421 It was on the basis of earlier drafts of this statement of facts that Counsel had advised, that the Tigris agreement had been drawn and that Mr Cooper sought and obtained Mr Lindberg's authority to proceed.
27.422 When asked why the final agreement said nothing about what AWB did to earn the success fee of US$500,000, Mr Cooper said:
I personally couldn't explain that, because I relied on the drafting that was done by others.[1472]
Mr Cooper was at that time General Counsel of AWB; he was responsible for the comprehensive review of the Tigris transaction known as Project Water; it was he who forwarded the final agreement for execution to Mr Davidson Kelly, and to Mr Lindberg and Dr Fuller, and he who had checked and verified all aspects of the transaction. In those circumstances it is disingenuous of him to disclaim responsibility for the form of the agreement.
27.423 There was no evidence before the Inquiry which would support the view:
The evidence did establish that AWB and Tigris agreed that AWB would recover the alleged debt of US$8.375 million by inflating the price of contracts A1670 and A1680, and that AWB would receive a fee of US$500,000 for so doing. That is what occurred.
27.424 Messrs Cooper and Quennell, and Ms Peavey and Ms Lyons all knew the true facts of the Tigris transaction. Whilst they claimed to rely on Mr Whitwell's or Mr Long's instructions, neither Mr Whitwell or Mr Long was prepared to sign a statement saying that there was any commission arrangement between Tigris and AWB as the final agreement provided. None of them offered any credible explanation of what they thought that commission arrangement to be, or how the final agreement could have omitted all reference to a debt.
27.425 Mr Quennell gave evidence that he did not believe the transaction to be falsely described 'on the basis of the instructions I had received',[1473] and that he accepted those instructions.[1474] The summary of the facts does not accord with those instructions and Mr Quennell's email of 23 November 2004 shows that he knew the true factual situation.
No valid reason was ever given to him which might explain how a debt due from IGB to Tigris collected by AWB could change in character to be a commission payable to Tigris for services it allegedly rendered to AWB. Mr Quennell acknowledged that the two scenarios were different.[1475] He also acknowledged that the money had been recovered by AWB as a debt.[1476] He instructed Counsel it was a debt on 3 occasions when he was briefing them to see if monies were lawfully obtained. He knew the summary of facts had no reference to a commission agreement. Mr Quennell could not explain why no such reference appeared in the summary.[1477]
Tigris ' decision to forego money due to it, which was a decision Mr Quennell was aware of,[1478] made no sense if what it was to receive was payment of a commission payable by AWB.
27.426 Despite Mr Cooper's assertions that there were two transactions between Tigris and AWB, the final agreement executed between AWBI and Tigris, which Mr Cooper circulated and sought to have finalised, made reference only to one transaction. It made no reference to a debt.
27.427 It should be noted that it appears that a sum of US$263,449.39, in addition to the debt amount of US$8,375,000, was paid to AWB from the escrow account. This was due to the shipment under contracts A1670 and A1680 being 31,453.644 tonnes of wheat in excess of 1 million tonnes.[1479] Mr Cooper suggested that these excess funds should be refunded to the IGB.[1480] There is no evidence before this Inquiry to suggest that the amount was in fact refunded to the IGB. Nor is there evidence to show to what other purpose those funds were applied.
27.428 With the exception of Mr Lindberg, none of the directors of AWBL and AWBI were notified of the Tigris transaction until the meetings of the Boards in December 2004.[1481]
27.429 There were three meetings attended by directors in December 2004 at which the Tigris transaction was discussed. The first was a joint information session on 14 December 2004. Later that day there was a meeting of the board of AWBI. On 15 December there was a meeting of the board of AWBL.
Before the joint information meeting, Mr Lindberg told Mr Stewart, the Chairman, that he had a matter he needed to raise with the directors. He did not elaborate.[1482]
At the joint information session, Mr Lindberg introduced the matter of Tigris. He indicated the transaction fell within the scope of his delegated authority, and the matter was being brought to the Boards' attention for their information. Approval for the transaction was thus not being sought from the Boards. The Boards were told the transaction was 'done',[1483] as indeed it was, having been completed on 9 December 2004. As Mr Stewart said:
It was an information item, it was presented as being within the delegated authorities, there was no decision required. I think, had it been a decision item, it certainly would have sparked a great-basically more detail in terms of analysis by-certainly by myself, and certainly I would understand by the other directors. So it's in that context, I think, that it is understandable, although I think regrettable, that the board didn't look at it in a different light and turn its mind to it in a more detailed fashion.[1484]
27.430 The substance of the information conveyed to the Directors by Mr Lindberg was recorded in a file note by Mr Cooper.[1485] The Boards were informed that:
Earlier that day Mr Cooper had emailed Mr Quennell to get confirmation from Mr Richter of his advice that there was 'no criminal exposure.'[1487] Mr Richter did not respond until 17 December 2004.
27.431 According to the evidence of the directors, they were informed at this joint meeting and the two board meetings that:
However:
27.432 Concerns regarding the transaction were raised by Mr Simpson and Mr Thame. To Mr Simpson, the transaction seemed 'extraordinary', and he requested that a memorandum about the matter be provided at the next board meeting. It was not. To Mr Thame, AWBI had been tainted by the transaction, it raised reputational issues, and AWB would be unwise to rely purely on legal advice. He compared the situation with that then facing James Hardie which, in the face of large asbestos related claims, had moved its assets offshore, and was subject to widespread reputational criticism and inquiry.[1491] Mr Gibson asked for an explanation of how the transaction would appear in the accounts.[1492]
Neither query was answered at the board meeting. Both directors expected management would follow up on their queries. Nothing was done by management about either query, and neither matter was apparently raised or followed up at later board meetings.[1493]
27.433 The minutes of the later meeting of the Board of AWBI record:
The Managing Director briefed the Board in relation to the Tigris transaction. It was noted that Tigris had assisted AWB in recovering threatened wheat sales in Iraq in 2002; in consideration for that assistance AWB had assisted Tigris in recovering a debt owed to Tigris by the Grains Board of Iraq; Tigris had paid a commission for the recovery of the debt and all of that commission was paid to AWB (International) Limited and therefore to growers.[1494] AWB had obtained legal advice regarding the transaction, and the Board was informed that, having collected the money, it was lawful to pay it.[1495]
The minutes record that AWBI received a commission for assisting Tigris in recovering a debt. That is not what the agreement between AWBI and Tigris recorded, but the Board was not informed of the substance of the document signed on behalf of AWBI by its executives.
27.434 The AWBL Board met on 15 December. Mr Lindberg again gave a presentation. The minutes again record the Board being told a commission had been received for assistance in recovery of a debt, in precisely the same terms as the AWBI board had been informed the preceding day. Again the Board was told that Counsel's advice was that, having collected the money, it was lawful to pay it to Tigris.
27.435 What Mr Lindberg conveyed to the Boards was consistent with the advice he had received from Mr Cooper, in particular as set out in Mr Cooper's memorandum to him on 10 November 2004. It was consistent with the legal advice AWB had received as Mr Cooper had conveyed it to Mr Lindberg. Mr Lindberg assumed that having been advised that factual matters had been examined and legal advice obtained, the Tigris agreement would accord with the verified factual position and that advice. The concerns raised by the Boards related to absence of a satisfactory explanation how AWB had been involved in collecting a debt on behalf of a third party.[1496]
27.436 On 17 December 2004, Mr Cooper received Mr Richter's email confirming 'the advice I gave in the urgent conference we had with the AWB was that none of the crimes with respect to which I was asked were committed.'[1497]
On 22 December 2004, he received Mr Richter's and Dr Donaghue's advice that in their opinion, despite the fact that the United Nations may have been deceived and might not have paid the money if it knew it was for other than a humanitarian purchase, no crime had been committed.
Counsel's advice included the following:
There are several references in the documents to getting the transaction 'through' the UN. There are also discussions about the 'difficulty' in incorporating the entire Tigris debt into one 500,000 tonne contract. Those documents suggest that the relevant AWB employees believed that a single contract was not large enough to absorb the additional US$8.3 million without that affecting the price of the contract in a way that would put it beyond the normal commercial wheat price parameters acceptable to the OFF program. There were, however, other considerations which made this the lever to increase the quantum of wheat which would be sold and in preserving the important market share of wheat sales by the AWB.
In light of the above, while we consider it possible that the AWB employees who structured the Tigris transaction might be found to have engaged in misleading conduct for certain purposes, this is not sufficient to establish the offence. There must be a causal link between the obtaining of the property and the deception-it must be obtained by the deception. It does not follow from the fact that a deception might have been carried out that that deception caused the obtaining of property in the required sense.[1498]
27.437 On 9 February 2005, Ms Peavey emailed Mr Cooper to advise that AWBI still retained US$250,000 being excess funds recovered from Iraq by the inflation of contracts A1670 and A1680.[1499] She advised:
Chris Whitwell, Michael Long and David Johnston are putting a proposal to Management about what to do with the money. They are aware that there is a risk that the IGB may request repayment of this money sometime in the future. If the IGB is aware of the situation, however this is unclear.
It is being suggested to Management that the money be used for training and machinary in Iraq.[1500]
27.438 That money was not refunded to Iraq and not paid to any of Tigris, Mr Davidson Kelly or BHPP. Mr Long gave evidence that, as at 31 January 2006, AWB had 'never paid a cent' of the amount agreed to be paid to Iraq in respect of the iron filings and other quality claims.[1501] He said the amount due is 'still sitting in the accounts of AWBI.'[1502] That sum of US$2.17 million remains due. Nor, it seems, was the US$250,000 excess collection from IGB in respect of the Tigris debt, ever repaid by AWB to IGB.
[669] Ex 527, WST.0024.0002_R, para. 1.
[670] Ex 527, WST.0024.0002_R at 0003_R, para. 11.
[671] Ex 524, WST.0022.0001 at 0004, para. 18.
[672] Ex 524, WST.0022.0001 at para. 1.
[673] Ex 536, WST.0025.0001_R at 0002_R, para. 6-9.
[674] Ex 538, WST.0026.0001_R at paras 4 and 8.
[675] Ex 1068, AWB.0274.0120_R at 0121_R.
[676] Ex 410, JMC.0001.0102_R at 0103_R.
[677] Ex 1123, AWB.0306.0377 _R at point 2.
[678] Ex 1124, AWB.0306.0390 _R.
[679] Ex 1122, AWB.0306.0368 _R .
[680] Ex 1125, AWB.0306.0413_R at 0414_R.
[681] Ex 1129, AWB.0306.0443 _R .
[682] Ex 1121, AWB.0306.0366 _R .
[683] Ex 1126, AWB.0306.0418 _R .
[684] Ex 1128, AWB.0306.0430 _R at 0431 _R .
[685] Ex 1128, AWB.0306.0430 _R .
[686] T 2165.28-30.
[687] T 2166.37-39.
[688] Ex 1148, BHP.0003.0018_R-0022_R.
[689] Ex 1148, BHP.0003.0018_R at 0019_R.
[690] Ex 1148, BHP.0003.0018_R at 0021_R.
[691] Ex 1148, BHP.0003.0018 _R at 0022 _R .
[692] Ex 1147, BHP.0003.0017_R.
[693] Ex 524, WST.0022.0001 at 0011, para. 54.
[694] Ex 1149, BHP.0003.0068 _R .
[695] Ex 1146, BHP.0003.0003 _R - 0006 _R .
[696] Ex 1165, BHP.0006.0007.
[697] Ex 524, WST.0022.0001 at 0012, paras 58-61.
[698] Ex 524, WST.0022.0001 at 0015, paras 62-64.
[699] Ex 1120, AWB.0306.0350 _R -0351 _R .
[700] Ex 1127, AWB.0306.0429 _R .
[701] Ex 1116, AWB.0306.0332 _R at 0333 _R .
[702] Ex 1116, AWB.0306.0332_R at 0333_R .
[703] Ex 1119, AWB.0306.0345 _R at 0346 _R .
[704] Ex 1118, AWB.0306.0343 _R .
[705] Ex 1172, BHP.0007.0014.
[706] Ex 1137, BHP.0001.0060 _R .
[707] Ex 524, WST.0022.0001 at 0019, para. 76.
[708] Ex 1117, AWB.0306.0335 _R .
[709] Ex 1166, BHP.0006.0014.
[710] Ex 1167, BHP.0006.0017.
[711] Ex 524, WST.0022.0001 at 0022, paras 87-90.
[712] Ex 1173, BHP.0007.0015.
[713] Ex 219, AWB.0129.0054.
[714] T 2227.12-14.
[715] Ex 219, AWB.0129.0054.
[716] Ex 223, AWB.0129.0011-0014.
[717] Ex 223, AWB.0129.0011 at 0015.
[718] Ex 223, AWB.0129.0032-0035.
[719] Ex 201, AWB.0129.0003-0006.
[720] Ex 529, WST.0022.0076 at 0101.
[721] Ex 202, AWB.0129.0043.
[722] Ex 1098, AWB.0306.0247 _R .
[723] Ex 1111, AWB.0306.0275_R .
[724] Ex 1186, BHP.0009.0146.
[725] Ex 223, AWB.0129.0053_R.
[726] Ex 223, AWB.0129.0047-0049.
[727] Ex 1114, AWB.0306.0307 _R at 0310 _R .
[728] Ex 223, AWB.0129.0055.
[729] Ex 1174, BHP.0007.0016.
[730] Ex 203, AWB.0129.0057.
[731] Ex 1106, AWB.0306.0262 _R .
[732] Ex 1107, AWB.0306.0263 _R .
[733] Ex 1105, AWB.0306.0261 _R .
[734] Ex 1104, AWB.0306.0260 _R .
[735] Ex 1104, AWB.0306.0260_R.
[736] Ex 524, WST.0022.0001 at 0027, para.108.
[737] Ex 524, WST.0022.0001 at 0027, para.107-109.
[738] Ex 1170, BHP.0007.0009.
[739] Ex 1170, BHP.0007.0009.
[740] Ex 1171, BHP.0007.0010-0012.
[741] Ex 1175, BHP.0007.0018-0020.
[742] Ex 524, WST.0022.0001 at 0029, para. 113.
[743] Ex 1175, BHP.0007.0018 at 0019.
[744] Ex 1175, BHP.0007.0018 at 0019.
[745] Ex 1175, BHP.0007.0018 at 0020.
[746] Ex 1175, BHP.0007.0018 at 0020.
[747] Ex 1182, BHP.0008.0006-0009.
[748] Ex 1182, BHP.0008.0006 at 0007.
[749] Ex 1183, BHP.0008.0010- 0016.
[750] Ex 529, WST.0022.0076 at 0129.
[751] Ex 524, WST.0022.0001 at 0033, para. 131.
[752] Ex 1103, AWB.0306.0258 _R .
[753] Ex 1187, BHP.0009.0150.
[754] Ex 524, WST.0022.0001 at 0035, para. 138.
[755] Ex 1102, AWB.0306.0256 _R .
[756] Ex 566, DFT.0013.0092.
[757] Ex 566, DFT.0013.0092.
[758] Ex 1169, BHP.0006.0029.
[759] Ex 524, WST.0022.0001 at 0038, paras 144-145.
[760] Ex 1193, DFT.0001.0004.
[761] Ex 1193, DFT.0001.0004.
[762] Ex 1100, AWB.0306.0253 _R .
[763] Ex 1101, AWB.0306.0255 _R .
[764] Ex 545, DFT.0010.0012.
[765] Ex 545, DFT.0010.0012.
[766] Ex 569, DFT.0013.0094-0095.
[767] Ex 569, DFT.0013.0094.
[768] Ex 566, DFT.0013.0099-0101.
[769] Ex 566, DFT.0013.0099.
[770] Ex 1196, DFT.0010.0021-0022.
[771] Ex 204, AWB.0106.0018-0019.
[772] Ex 204, AWB.0106.0018.
[773] Ex 204, AWB.0106.0018 at 0019.
[774] Ex 1108, AWB.0306.0267 _R .
[775] Ex 1112, AWB.0306.0277 _R at 0278 _R .
[776] Ex 1099, AWB.0306.0251 _R .
[777] Ex 843, DFT.0013.0501 at 0502.
[778] Ex 1115, AWB.0306.0311 _R at 0312 _R .
[779] Ex 1109, AWB.0306.0271 _R .
[780] Ex 1110, AWB.0306.0272 _R .
[781] Ex 1097, AWB.0306.0240 _R -0241 _R .
[782] Ex 1115, AWB.0306.0311_R at 0312_R.
[783] Ex 1097, AWB.0306.0240_R.
[784] Ex 529, WST.0022.0076 at 0151.
[785] Ex 524, WST.0022.0001 at 0040, paras 156-157.
[786] Ex 1096, AWB.0306.0238 _R .
[787] Ex 537, WST.0025.0032.
[788] Ex 524, WST.0022.0001 at 0042, para. 164.
[789] Ex 1176, BHP.0007.0021.
[790] Ex 655, WST.0027.0016 at 0020, para. 21.
[791] Ex 655, WST.0027.0016 at 0020, para. 21.
[792] Ex 200, AWB.0129.0002.
[793] Ex 200, AWB.0129.0002.
[794] Ex 205, AWB.0129.0062.
[795] Ex 207, AWB.0129.0059.
[796] Ex 1095, AWB.0306.0206 _R .
[797] Ex 1092, AWB.0306.0197 _R .
[798] Ex 1532, AWB.0306.0203-0204.
[799] Ex 200, AWB.0129.0002.
[800] Ex 531, BHP.0007.0025-0028.
[801] Ex 531, BHP.0007.0025 at 0026.
[802] Ex 531, BHP.0007.0025 at 0027.
[803] Ex 531, BHP.0007.0025 at 0027.
[804] Ex 1138, BHP.0001.0061_R.
[805] Ex 269, DFT.0010.0180.
[806] Ex 269, DFT.0010.0180.
[807] Ex 269, DFT.0010.0180.
[808] Ex 199, AWB.0129.0076_R.
[809] Ex 1089, AWB.0306.0180_R.
[810] Discussed below.
[811] Ex 1094, AWB.0306.0200_R-0201_R .
[812] Ex 1094, AWB.0306.0200_R .
[813] Ex 410, JMC.0001.0013.
[814] Ex 1091, AWB.0306.0196_R .
[815] Ex 1531, AWB.0306.0191.
[816] Ex 741, AWB.0306.0186-0187.
[817] Ex 1086, AWB.0306.0150_R.
[818] Ex 270, DFT.0010.0182-0183.
[819] Ex 270, DFT.0010.0182 at 0183.
[820] Ex 1085, AWB.0306.0149_R.
[821] Ex 1084, AWB.0306.0148_R.
[822] Ex 1083, AWB.0306.0147_R.
[823] Ex 1082, AWB.0306.0144_R.
[824] Ex 1150, BHP.0003.0078_R.
[825] Ex 1150, BHP.0003.0078_R.
[826] Ex 271, DFT.0010.0184.
[827] Ex 738, AWB.0269.0137.
[828] Ex 1081, AWB.0306.0139_R.
[829] Ex 740, AWB.0306.0188.
[830] Ex 524, WST.0022.0001 at 0047, para. 188.
[831] Ex 1080, AWB.0306.0133_R.
[832] Ex 1093, AWB.0306.0199_R.
[833] Ex 700, DFT.0035.0006-0009.
[834] Ex 700, DFT.0035.0006 at 0008 .
[835] Ex 998, WST.0026.0124_R.
[836] Ex 998, WST.0026.0124_R.
[837] Ex 1068, AWB.0274.0120_R at 0121_R .
[838] Ex 524, WST.0022.0001 at 0047, para. 190; Ex 536, WST.0025.0001_R at 0008_R, para. 34; Agenda at Ex 1377, WST.0025.0033_R-0035_R; Minutes at Ex 529, WST.0022.0076 at 0185-0188.
[839] Ex 1377, WST.0025.0033_R.
[840] Ex 529, WST.0022.0076 at 0186.
[841] Ex 1188, BHP.0009.0165_R at 0167_R.
[842] Ex 1188, BHP.0009.0165_R at 0167_R.
[843] Ex 1188, BHP.0009.0165_R at 0168_R.
[844] Ex 1188, BHP.0009.0165_R at 0168_R.
[845] Ex 1188, BHP.0009.0165_R at 0169_R.
[846] Ex 1177, BHP.0007.0035.
[847] Ex 1178, BHP.0007.0036.
[848] Ex 537, WST.0025.0046.
[849] Ex 1075, AWB.0306.0091_R.
[850] Ex 1075, AWB.0306.0091_R.
[851] Ex 1078, AWB.0306.0099 .
[852] Ex 1079, AWB.0306.0102_R.
[853] Ex 1076, AWB.0306.0096_R.
[854] Ex 1077, AWB.0306.0097_R.
[855] Ex 1077, AWB.0306.0097_R at 0098_R.
[856] Ex 1140, BHP.0001.0066_R.
[857] Ex 1140, BHP.0001.0066_R.
[858] Ex 1139, BHP.0001.0062_R-0063_R.
[859] Ex 1139, BHP.0001.0062_R at 0063_R.
[860] Ex 1074, AWB.0306.0089_R.
[861] Ex 1073, AWB.0306.0087_R.
[862] Ex 1197, DFT.0010.0091-0092 .
[863] Ex 1197, DFT.0010.0091.
[864] Ex 632, DFT.0013.0571 at 0572, para. 8.
[865] Ex 632, DFT.0013.0571 at 0572, paras 9-10.
[866] Ex 536, WST.0025.0001_R at 0016_R, para. 60.
[867] Ex 536, WST.0025.0001_R at 0016_R, para. 62.
[868] T 4327.46-T 4328.4.
[869] Ex 1071, AWB.0306.0048-0049.
[870] Ex 1071, AWB.0306.0048 at 0049.
[871] Ex 1071, AWB.0306.0048 at 0049 .
[872] Ex 1070, AWB.0306.0047_R.
[873] Ex 1066, AWB.0247.0271-0274.
[874] Ex 1066, AWB.0247.0272 at 0273 .
[875] Ex 1072, AWB.0306.0085_R .
[876] Ex 267, AWB.0205.0019.
[877] Ex 1151, BHP.0003.0085.
[878] Ex 272, DFT.0010.0185.
[879] Ex 630, DFT.0010.0114.
[880] Ex 742, BHP.0007.0047-0048.
[881] Ex 629, DFT.0010.0109.
[882] Ex 629, DFT.0010.0109.
[883] Ex 742, BHP.0007.0047.
[884] Ex 742, BHP.0007.0047.
[885] Ex 742, BHP.0007.0046.
[886] Ex 532, AWB.0306.0185.
[887] Ex 1145, BHP.0002.0008_R.
[888] Ex 1189, BHP.0009.0173 at 0246.
[889] Ex 1189, BHP.0009.0173 at 0246.
[890] Ex 1090, AWB.0306.0181_R.
[891] Ex 1088, AWB.0306.0178_R-0179_R.
[892] Ex 1190, BHP.0009.0295 .
[893] Ex 1190, BHP.0009.0295 at 0296 .
[894] Ex 539, WST.0026.0128.
[895] Ex 539, WST.0026.0128.
[896] Ex 539, WST.0026.0128.
[897] Ex 538, WST.0026.0001_R at 0003_R, para. 11.
[898] T 4426.15.
[899] Ex 538, WST.0026.0001_R at 0013_R, para. 46.
[900] Ex 538, WST.0026.0001_R at 0013_R, para. 46.
[901] T 4427.26.
[902] T 4427.47.
[903] Ex 199, AWB.0129.0075_R.
[904] Ex 1087, AWB.0306.0177_R.
[905] Ex 540, BHP.0007.0049.
[906] T 4358.20.
[907] Ex 208, AWB.0129.0152-0153.
[908] T 2180.9.
[909] Ex 537, WST.0025.0058, WST.0025.0228.
[910] Ex 208, AWB.0129.0152-0153.
[911] Ex 208, AWB.0129.0152.
[912] On 26 October 2000 (Ex 209, AWB.0129.0151), Mr Davidson Kelly faxed Mr Stott and enclosed a copy of the letter of 21 June 1996 that Mr Stott had sent to Mr Daoud suggesting that, 'At a later stage in accordance with the original understanding, BHP to receive value by presenting the original documents to the IGB/CBI.' (Ex 209, AWB.0129.0152 at 0153) This supports the inference that the letter was actually sent.
[913] T 2451.37-43.
[914] Ex 1195, DFT.0001.0335-0336.
[915] Ex 1194, DFT.0001.0332-0334.
[916] Ex 1195, DFT.0001.0335.
[917] Ex 1195, DFT.0001.0335.
[918] Ex 1195, DFT.0001.0335.
[919] Ex 1195, DFT.0001.0335 at 0336.
[920] Ex 1195, DFT.0001.0335 at 0336.
[921] Ex 1195, DFT.0001.0335 at 0336.
[922] Ex 1195, DFT.0001.0335 at 0336.
[923] Ex 1185, BHP.0008.0036 at 0043.
[924] Ex 1191, BHP.0009.0299.
[925] Ex 657, BHP.0003.0091 at 0093.
[926] Ex 1152, BHP.0003.0094_R-0100_R.
[927] Ex 1152, BHP.0003.0094_R at 0096_R.
[928] Ex 1141, BHP.0001.0067_R -0070_R.
[929] Ex 1153, BHP.0003.0109.
[930] Ex 1153, BHP.0003.0109 at 0110.
[931] Ex 537, WST.0025.0196.
[932] Ex 537, WST.0025.0196.
[933] Ex 1399, BHP.0004.0003.
[934] Ex 273, BHP.0004.0071.
[935] Ex 1158, BHP.0005.0043.
[936] Ex 1155, BHP.0004.0076.
[937] Ex 1155, BHP.0004.0076.
[938] Ex 1156, BHP.0004.0080.
[939] Ex 1156, BHP.0004.0080.
[940] Ex 1159, BHP.0005.0062_R.
[941] Ex 274, BHP.0004.0082.
[942] Ex 274, BHP.0004.0082.
[943] Ex 524, WST.0022.0001 at 0057, para. 230.
[944] Ex 275, BHP.0004.0083.
[945] Ex 1157, BHP.0004.0084.
[946] Ex 524, WST.0022.0001 at 0059, para. 237.
[947] Ex 527, WST.0024.0002_R at 0015_R, para. 63.
[948] T 4294.30.
[949] Ex 276, BHP.0004.0081.
[950] Ex 537, WST.0025.0199.
[951] Ex 537, WST.0025.0199.
[952] Ex 537, WST.0025.0199.
[953] Ex 1192, BHP.0009.0310-0314.
[954] Ex 1192, BHP.0009.0310 at 0311.
[955] Ex 198, WST.0001.0137 at 0138, para. 5.
[956] Ex 1179, BHP.0007.0090-0093.
[957] Ex 1179, BHP.0007.0090.
[958] Ex 1179, BHP.0007.0090.
[959] Ex 1179, BHP.0007.0090 at 0091.
[960] Ex 1184, BHP.0008.0030-0031.
[961] Ex 1184, BHP.0008.0030.
[962] Ex 210, AWB.0102.0176.
[963] Ex 527, WST.0024.0002_R at 0020_R, paras 79-80.
[964] Ex 527, WST.0024.0002_R at 0015_R, para. 63.
[965] T 4294.30.
[966] Ex 1179, BHP.0007.0090 at 0091, para. 3.1.
[967] Ex 527, WST.0024.0002_R, paras 3-6.
[968] Ex 527, WST.0024.0002_R at 0015_R, para. 63; T 4293.6-T 4294.34.
[969] T 4294.32.
[970] Ho and Szeto (1989) 39 ACrimR 145, 147 (Maxwell, Hunt and McInerney JJ); R v Benli 1998 2 VR 157, 161.
[971] Ex 211, AWB.0106.0104.
[972] Ex 211, AWB.0106.0104.
[973] T 2190.18.
[974] Ex 220, AWB.0102.0185_R.
[975] Ex 220, AWB.0102.0185_R.
[976] Ex 220, AWB.0102.0185_R.
[977] Ex 221, AWB.0102.0184.
[978] Ex 221, AWB.0102.0187, AWB.0102.0188-0189, AWB.0102.0190.
[979] Ex 221, AWB.0102.0184.
[980] Ex 155, AWB.5004.0168_R-0171_R.
[981] Ex 155, AWB.5004.0168 at 0169_R.
[982] T 2101-T 2102.
[983] T 2102.32.
[984] T 2101.32-40.
[985] T 2102.34.
[986] T 2251.33-T 2253.18.
[987] Ex 224, AWB.5009.0368_R.
[988] Ex 224, AWB.5009.0368_R.
[989] T 2254.4.
[990] T 2254.14.
[991] T 2255.23.
[992] Ex 743, TIG.0001.0015.
[993] Ex 743, TIG.0001.0015.
[994] Mr Stott would not accept he made the changes but agreed he may have directed them to be made: T6221.29-T 6222.18.
[995] Ex 743, TIG.0001.0015.
[996] Ex 743, TIG.0001.0015.
[997] T 6222.32.
[998] Ex 528, WST.0024.0089 at 0112; Ex 527, WST.0024.0002_R at 0020_R, para. 82 (a).
[999] Ex 225, AWB.0129.0080.
[1000] Ex 381, AWB.0084.0046_R-0050_R.
[1001] Ex 174, AWB.0185.0450_R.
[1002] T 2102.35.
[1003] Ex 1067, AWB.0247.0261_R.
[1004] Ex 226, AWB.0129.0082.
[1005] Ex 1180, BHP.0007.0095.
[1006] Ex 175, AWB.0129.0083.
[1007] Ex 1181, BHP.0007.0099.
[1008] Ex 1181, BHP.0007.0099.
[1009] Ex 527, WST.0024.0002_R at 0020_R, para. 82; Ex 528, WST.0024.0089 at 0113.
[1010] Ex 1051, AWB.0129.0085_R.
[1011] Ex 1052, AWB.0129.0087_R.
[1012] Ex 384, SNO.0001.0073_R-0077_R.
[1013] Ex 227, AWB.0103.0071-0072.
[1014] Ex 227, AWB.0103.0071 at 0072.
[1015] Ex 257, AWB.0103.0074.
[1016] Ex 1053, AWB.0129.0088_R-0089_R.
[1017] Ex 1053, AWB.0129.0088_R.
[1018] Ex 259, AWB.0129.0095 at 0096.
[1019] Ex 259, AWB.0129.0095 at 0096.
[1020] Ex 1142, BHP.0001.0074_R.
[1021] Ex 258, AWB.0129.0093_R-0094_R.
[1022] Copies of this document were produced by AWB (Ex 258, AWB.0129.0093_R) and BHPP (Ex 1143, BHP.0001.0075_R-0076 _R ).
[1023] Ex 259, AWB.0129.0092.
[1024] Ex 1142, BHP.0001.0074_R.
[1025] Ex 1133, AWB.5046.0055_R.
[1026] Ex 1055, AWB.0140.0390_R.
[1027] Ex 1134, AWB.5046.0058_R.
[1028] Ex 1242, WST.0004.0022.
[1029] Ex 1069, AWB.0305.0161_R-0162_R.
[1030] Ex 694, WST.0036.0126_R at 0127_R.
[1031] Ex 335, WST.0009.0481.
[1032] Ex 497, WST.0019.0046_R at 0059_R, para. 57.
[1033] Ex 1135, AWB.5061.0271_R.
[1034] Ex 260, AWB.0129.0097_R.
[1035] Ex 260, AWB.0129.0097_R.
[1036] Ex 260, AWB.0129.0097_R.
[1037] Ex 262, AWB.0129.0099_R.
[1038] Ex 996, AWB.0247.0255.
[1039] Ex 261, AWB.0129.0100.
[1040] Ex 75, WST.0001.0088, para. 3.
[1041] Ex 1377, WST.0041.0021_R at 0026_R.
[1042] Ex 1236, AWB.0176.0053_R.
[1043] Ex 1236, AWB.0176.0053_R at 0055_R.
[1044] Ex 1132, AWB.5001.0011_R-0012_R.
[1045] Ex 1533, AWB.0411.0041.
[1046] Ex 1054, AWB.0140.0038_R.
[1047] Ex 745, TIG.0001.0029.
[1048] Ex 957, AWB.0140.0022.
[1049] Ex 957, AWB.0140.0022.
[1050] Ex 957, AWB.0140.0022.
[1051] Ex 542, DFT.0005.0175.
[1052] Ex 1467, AWB.0062.0244_R at 0248_R, para. 9.F; Ex 1468, AWB.0062.0099_R at 0103_R, para. 9.F.
[1053] Ex 301, AWB.0140.0011.
[1054] Ex 301, AWB.0140.0011.
[1055] Ex 263, AWB.0129.0104.
[1056] Ex 301, AWB.0129.0102.
[1057] Ex 336, AWB.0157.0096_R at 0101_R.
[1058] Ex 264, AWB.0129.0105.
[1059] Ex 265, AWB.0129.0106.
[1060] Ex 1377, WST.0041.0067_R.
[1061] Ex 1037, WST.0041.0044 at 0049.
[1062] Ex 1037, WST.0041.0044.
[1063] Ex 1037, WST.0041.0003 at 0006, para. 15.
[1064] Ex 1377, WST.0041.0067 at 0068.
[1065] Ex 410, JMC.0001.0003 at 0004.
[1066] Ex 23, AWB.0129.0116-0117.
[1067] Ex 23, AWB.0129.0116.
[1068] T 7088.2.
[1069] Ex 23, AWB.0129.0116.
[1070] T 3184.17.
[1071] Ex 335, WST.0009.0447.
[1072] Ex 335, WST.0009.0447.
[1073] Ex 1130, AWB.0376.004_R.
[1074] Ex 1377, AWB.0425.0001_R-0022_R.
[1075] Ex 1130, AWB.0376.0004_R.
[1076] Ex 1037, WST.0041.0003 at 0007, para. 19.
[1077] Ex 335, WST.0009.0001 at 0039, paras 154-155.
[1078] Ex 339, WST.0004.0176 at 0179, para. 16.
[1079] Ex 409, WST.0010.0076 at 0079, para. 16.
[1080] T 3182.22.
[1081] T 3182.41.
[1082] T 5805.27.
[1083] T 5807.4.
[1084] Ex 1037, WST.0041.0003 at 0009, para. 20.
[1085] Ex 1572, AWB.0142.0356.
[1086] Ex 1377, AWB.0129.0137.
[1087] Ex 1377, HDD.0014.1197_R.
[1088] Ex 410, JMC.0001.0036.
[1089] Ex 410, JMC.0001.0037.
[1090] Ex 707, AWB.0405.0193_R.
[1091] Ex 707, AWB.0405.0193_R.
[1092] Ex 464, WEA.0011.0001 (request); Ex 1495, AWB.0267.0256_R (response), AWB.0267.0257_R-0260_R (Brief).
[1093] Ex 706, AWB.0405.0194_R; Ex 707, AWB.0405.0192.
[1094] Ex 1410, AWB.0177.0013_R at 0016_R.
[1095] Ex 1410, AWB.0177.0013_R at 0016_R.
[1096] Ex 1410, AWB.0177.0013_R at 0016_R.
[1097] Ex 465, AWB.0177.0012.
[1098] Ex 1410, AWB.0177.0013_R at 0016_R.
[1099] T 5808.9-19.
[1100] T 5811.32-36.
[1101] T 5811.38-T 5812.3.
[1102] Ex 746, TIG.0001.0031-0032.
[1103] Ex 195, AWB.0191.0013_R.
[1104] Ex 195, AWB.0191.0013_R.
[1105] Ex 196, AWB.0129.0159_R.
[1106] T 683.28-33.
[1107] Ex 335, WST.0009.0001 at 0048, paras 207-209.
[1108] T 2851.24.
[1109] T 2851.34; T 2850.39.
[1110] T 2851.40-T 2852.20.
[1111] Ex 194, AWB.0129.0167.
[1112] Ex 28, WST.0002.0079.
[1113] T 969.13-16.
[1114] T 683.38-41, 688.8-12.
[1115] T 690.28; T 691.9.
[1116] Ex 26, AWB.0129.0171.
[1117] T 2136.45.
[1118] T 2137.20.
[1119] T 2695.30.
[1120] T 2695.30.
[1121] Ex 26, AWB.0129.0171 at 0172.
[1122] Ex 26, AWB.0129.0171 at 0173.
[1123] Ex 26, AWB.0129.0171 at 0174.
[1124] T 2139.13-T 2140.6.
[1125] Ex 339, WST.0004.0176, para. 18.
[1126] Ex 27, AWB.0129.0178.
[1127] Ex 27, AWB.0129.0178.
[1128] Ex 27, AWB.0129.0178.
[1129] T 2698.27-T 2699.16.
[1130] Ex 1321, AWB.9002.0041 at 0045, para. 32.
[1131] Ex 277, AWB.0104.0293.
[1132] Ex 277, AWB.0104.0294-0295.
[1133] Ex 277, AWB.0104.0294.
[1134] Ex 744, TIG.0001.0035-0036.
[1135] Ex 996, TIG.0001.0038.
[1136] Ex 76, WST.0004.0063 at 0088, para. 83.
[1137] Ex 1242, WST.0004.0028_R.
[1138] Ex 1242, WST.0004.0028_R at 0030_R.
[1139] Ex 1032, AWB.8001.0033_R at C.
[1140] Ex 76, WST.0004.0063 at 0088, para. 84.
[1141] Ex 76, WST.0004.0063 at 0088, para. 84.
[1142] Ex 580, DFT.0001.0489.
[1143] Ex 304, AWB.5020.0203.
[1144] Ex 43, DFT.0001.0490.
[1145] Ex 43, DFT.0001.0490.
[1146] Ex 304, AWB.5020.0203.
[1147] Ex 304, AWB.5020.0203; Ex 43, DFT.0001.0490.
[1148] Ex 1377, AWB.0427.0001_R.
[1149] Ex 300, WST.0001.0066 at 0069, para. 16; Ex 1377, AWB.0147.0131_R-0134_R.
[1150] Ex 300, WST.0001.0066 at 0069, para. 16.
[1151] Ex 1424, AWB.0356.0119_R. See also Mr Emons email to Messrs Lindberg, Ingleby and others of 5 December 2002 (Ex 278, AWB.5020.0234_R).
[1152] Ex 1424, AWB.0356.0119_R. See also Mr Emons email to Messrs Lindberg, Ingleby and others of 5 December 2002 (Ex 278, AWB.5020.0234_R).
[1153] Ex 1377, AWB.0129.0187_R.
[1154] Ex 1377, AWB.0129.0192.
[1155] Ex 1377, AWB.0129.0193-0194.
[1156] Ex 1377, AWB.0129.0192.
[1157] Ex 1223, AWB.0147.0119-0120.
[1158] Ex 1223, AWB.0147.0119.
[1159] Ex 28, AWB.0129.0199.
[1160] T 2706.38.
[1161] T 2706.45.
[1162] T 1129.41.
[1163] T 1130.45-T 1131.
[1164] T 1132.41.
[1165] T 1132.45.
[1166] T 1133.25.
[1167] T 1133.47-T 1134.12.
[1168] T 1149.14.
[1169] T 1140.14; T 1147.17.
[1170] T 1143.44.
[1171] T 1138.12.
[1172] T 1154.6.
[1173] T 1160.8.
[1174] T 1161.22.
[1175] T 1162.16; T 1165.27.
[1176] T 1135.38.
[1177] T 1179.35-T 1180.36.
[1178] Ex 1223, AWB.0060.0343.
[1179] Ex 1223, AWB.0060.0343.
[1180] Ex 1223, AWB.0060.0336-0339.
[1181] T 1180.33.
[1182] T 1127-T 1128.
[1183] Ex 410, JMC.0001.0052_R-0053_R.
[1184] Ex 410, JMC.0001.0052_R at 0053_R.
[1185] Ex 340, AWB.0147.0092_R-0094_R.
[1186] Ex 1037, WST.0041.0003 at 0010, para. 22.
[1187] Ex 722, WST.0038.0143_R at 0164_R, para. 19.3.
[1188] T 5846.43.
[1189] T 2858-T 2861.
[1190] T 1662.
[1191] T 6224.25.
[1192] T 6224.29.
[1193] T 6227.34.
[1194] T 681.6.
[1195] T 678.16.
[1196] Ex 1223, AWB.0147.0084.
[1197] Ex 1223, AWB.0147.0084.
[1198] Ex 1377, AWB.0129.0215.
[1199] T 2144.28.
[1200] Ex 1377, AWB.0247.0233.
[1201] Ex 410, JMC.0001.0041_R.
[1202] Ex 729, AWB.0111.0492.
[1203] Ex 028, AWB.0129.0199; Ex 1198, HDD.0014.0968-0969; Ex 1199, HDD.0014.1168; Ex 1200, HDD.0014.1169-1170; Ex 1064, AWB.0247.0224-0225; Ex 1065, AWB.0247.0229-0231 (contains claimed LPP material; Ex 1201, HDD.0014.1174-1176.
[1204] Ex 30, AWB.0129.0220.
[1205] Ex 30, AWB.0129.0220.
[1206] T 1662.15.
[1207] T 1662.25.
[1208] T 1664.16.
[1209] Ex 410, JMC.0001.0040.
[1210] Ex 1277, WST.0048.0047 at 0050, para. 19; T 6914.
[1211] Ex 1277, WST.0048.0047 at 0050, para. 21; T 7215.
[1212] Ex 1278, AWB.9000.0009. This file note was the subject of a privilege claim when Ms Lyons first gave evidence.
[1213] Ex 306, AWB.0129.0217-0218.
[1214] T 6936.7.
[1215] Ex 1279, AWB.9000.0014.
[1216] Ex 1279, AWB.9000.0014.
[1217] Ms Lyons' evidence was that she asked Ms Brasington to consider whether a payment could be made to Alia in the manner requested by IGB (T 7224.28). Ms Brasington identified the 'real answer to the question' Ms Lyons had raised by reference to the making of a cash rebate to IGB. As Ms Lyons accepted (T 7228.34), Ms Brasington's advice could relate to that question only. Nowhere in the memorandum is reference made by Ms Brasington to payment being made to a Jordanian trucking company. Finally, Ms Lyons did not suggest that she contacted Ms Brasington to ask her to answer the question she stated she wanted Ms Brasington to answer.
[1218] T 7231.44.
[1219] Ex 1280, AWB.9000.0017-0018.
[1220] See below.
[1221] T 7238.9.
[1222] Ex 491, AWB.5016.0093_R.
[1223] Ex 1063, AWB.0247.0220.
[1224] Ex 1063, AWB.0247.0220.
[1225] Ex 33, AWB.5016.0115.
[1226] Ex 1534, AWB.8001.0016 at 0018.
[1227] Ex 1279, AWB.9000.0114.
[1228] T 7239.38.
[1229] Ex 1534, AWB.8001.0016 at 0017.
[1230] Ex 410, JMC.0001.0062-0064.
[1231] Ex 410, JMC.0001.0062 at 0064.
[1232] T 7280.
[1233] T 5883.32.
[1234] T 5818.30.
[1235] T 3828.16; T 3830.12.
[1236] T 3830.3.
[1237] T 7089.39.
[1238] T 7090.2.
[1239] Ex 1037, WST.0041.0003 at 0010, para. 23.
[1240] T 2870-T 2871.
[1241] T 2864.
[1242] T 7241.9.
[1243] T 7242.6.
[1244] T 7242.6.
[1245] Ex 410, JMC.0001.0059.
[1246] T 1192.14.
[1247] Ex 410, JMC.0001.0059.
[1248] Ex 56, AWB.0060.0174.
[1249] Ex 1282, AWB.9000.0023.
[1250] T 7246.39.
[1251] T 7248.15.
[1252] T 7276.6.
[1253] Ex 412, AWB.0293.0231 at 0232.
[1254] Ex 410, JMC.0001.0060.
[1255] Ex 410, JMC.0001.0060.
[1256] T 865.9.
[1257] T 3200.19-20.
[1258] T 2721.37.
[1259] Ex 1026, WST.0043.0033_R.
[1260] Ex 1026, WST.0043.0001 at 0007, paras 51-52; Ex 1026, WST.0043.0031 at 0032.
[1261] Ex 281, AWB.0129.0240.
[1262] Ex 281, AWB.0129.0240.
[1263] Ex 1037, WST.0041.0003 at 0010, para. 24. Ex 1037, WST.0041.0102.
[1264] Ex 1037, WST.0041.0003 at 0010, para. 24.
[1265] Ex 335, WST.0009.0379.
[1266] Ex 1161, BHP.0005.0081_R.
[1267] Ex 1160, BHP.0005.0077_R - 0080_R.
[1268] Ex 315, ELG.0002.0087_R - 0088_R.
[1269] Ex 315, ELG.0002.0087_R at 0088_R.
[1270] T 2738.8.
[1271] Ex 410, JMC.0001.0080.
[1272] Ex 410, JMC.0001.0081.
[1273] T 2881.40.
[1274] T 2496.9.
[1275] T 774.18.
[1276] Ex 1041, AWB.0294.0331; Ex 1041, AWB.0294.0332-0338.
[1277] Ex 1041, AWB.0294.0331.
[1278] Ex 283, AWB.0129.0283_R.
[1279] Ex 308, AWB.0129.0291.
[1280] Ex 74, AWB.0129.0300 at 0301.
[1281] Ex 34, AWB.0129.0298; Ex 74, AWB.0129.0300-0306.
[1282] Ex 34, AWB.0129.0298.
[1283] T 2725-T 2726.
[1284] T 2728.21.
[1285] T 2728.42.
[1286] T 2729.1.
[1287] Ex 310, AWB.0216.0049.
[1288] Ex 309, AWB.0216.0031.
[1289] Ex 309, AWB.0216.0032-0038.
[1290] T 6977.
[1291] T 6978.
[1292] Ex 310, AWB.0216.0049.
[1293] Ex 311, AWB.0216.0058.
[1294] Ex 1377, AWB.9001.0098.
[1295] Ex 312, AWB.0216.0066.
[1296] Ex 313, AWB.0216.0070.
[1297] Ex 314, AWB.0216.0072.
[1298] Ex 1057, AWB.0199.0047_R.
[1299] Ex 323, AWB.0202.0049_R-0050_R.
[1300] Ex 1555, AWB.0202.0044_R-0047_R.
[1301] Ex 1037, WST.0041.0003 at 0011, para. 25.
[1302] Ex 316, AWB.0202.0077.
[1303] Ex 316, AWB.0202.0077.
[1304] T 7097.15-T 7098.42.
[1305] Ex 318, AWB.0202.0076.
[1306] Ex 318, AWB.0202.0081-0084.
[1307] Ex 318, AWB.0202.0081 at 0082.
[1308] Ex 1555, AWB.0202.0091_R.
[1309] Ex 1555, AWB.0202.0092_R.
[1310] Ex 322, AWB.0060.0320.
[1311] Ex 322, AWB.0060.0320.
[1312] Ex 321, AWB.0060.0317_R-0319_R.
[1313] Ex 321, AWB.0060.0317_R at 0318_R.
[1314] Ex 1223, AWB.0060.0315 at 0316.
[1315] Ex 1223, AWB.0060.0315 at 0316.
[1316] Ex 324, AWB.0154.0144.
[1317] Ex 1555, AWB.0202.0006_R.
[1318] Ex 1376, AWB.0202.0113_R.
[1319] Ex 1376, AWB.0202.0113_R.
[1320] Ex 1555, AWB.0202.0114_R.
[1321] Ex 1223, AWB.0060.0308-0312.
[1322] Ex 1555, AWB.0202.0117_R.
[1323] Ex 1555, AWB.0202.0116_R.
[1324] Ex 1555, AWB.0202.0116_R.
[1325] Ex 1555, AWB.0202.0115_R.
[1326] Ex 1555, AWB.0202.0115_R.
[1327] Ex 1306, DFT.0039.0005 at 0008, para. 16.
[1328] Ex 1555, AWB.0202.0115_R.
[1329] Ex 527, WST.0024.0002_R at 0027_R, para. 101.
[1330] Ex 527, WST.0024.0002_R at 0027_R, para. 101.
[1331] Ex 527, WST.0024.0002_R at 0027_R, para. 102.
[1332] Ex 1555, AWB.0202.0131_R.
[1333] Ex 1377, AWB.8001.0072.
[1334] Ex 1041, AWB.0247.0160.
[1335] Ex 1041, AWB.0247.0160.
[1336] Ex 1555, AWB.0202.0147_R; Ex 1041, AWB.0202.0148_R-0153_R.
[1337] Ex 1555, AWB.0202.0147_R.
[1338] Ex 327, AWB.0202.0154.
[1339] Ex 327, AWB.0202.0154.
[1340] Ex 327, AWB.0202.0168.
[1341] Ex 327, AWB.0202.0168.
[1342] Ex 327, AWB.0202.0170_R.
[1343] Ex 327, AWB.0202.0164_R.
[1344] Ex 327, AWB.0202.0174_R
[1345] Ex 327, AWB.0202.0174_R.
[1346] Ex 1555, AWB.0202.0200_R.
[1347] Ex 327, AWB.0202.0154.
[1348] Ex 327, AWB.0202.0171_R.
[1349] Ex 327, AWB.0202.0163.
[1350] Ex 327, AWB.0202.0177.
[1351] Ex 327, AWB.0202.0177.
[1352] Ex 327, AWB.0202.0180.
[1353] Ex 327, AWB.0202.0182_R.
[1354] Ex 327, AWB.0202.0184.
[1355] Ex 327, AWB.0202.0186_R; All of the above emails in the chain are in Ex 327, AWB.0202.0186_R-0187_R.
[1356] Ex 1041, AWB.0199.0187_R at 0189_R.
[1357] Ex 1041, AWB.8001.0080.
[1358] Ex 1041, AWB.0199.0187_R at 0189_R.
[1359] Ex 1555, AWB.0202.0008_R.
[1360] Ex 1555, AWB.0202.0008_R.
[1361] Ex 1060, AWB.0216.0077_R.
[1362] Ex 1041, AWB.8001.0099_R.
[1363] Ex 1041, AWB.8001.0099_R.
[1364] Ex 1377, AWB.8001.0116_R.
[1365] Ex 1377, AWB.8001.0118_R-0124_R.
[1366] Ex 1041, AWB.8001.0090_R at 0097_R.
[1367] Ex 1377, AWB.8001.0118 at 0120, para. 3.2.
[1368] Ex 1377, AWB.8001.0116_R.
[1369] Ex 1041, AWB.8001.0108_R at 0109_R.
[1370] T 7357.32.
[1371] T 7358.3.
[1372] See the evidence of Mr Quennell at T 7378.
[1373] T 7358.36; the evidence of Mr Quennell is to the same effect-see T 7378.
[1374] T 7359.13.
[1375] T 7359.40-47.
[1376] T 7360.4.
[1377] T 7365.44.
[1378] T 7378.34.
[1379] T 7380.37.
[1380] Ex 1041, AWB.8001.0126_R.
[1381] Ex 1041, AWB.8001.0127_R-0132_R.
[1382] Ex 1377, AWB.8001.0138_R.
[1383] Ex 1041, AWB.0202.0033_R-0037_R.
[1384] T 3205.23.
[1385] Ex 1041, AWB.8001.0194_R-0198_R.
[1386] Ex 1041, AWB.8001.0192.
[1387] Ex 1377, AWB.0242.0025_R.
[1388] Ex 538, WST.0026.0001_R at 0027_R, para. 98.
[1389] Appears to be called Tigris 05C.doc.
[1390] Ex 1163, BHP.0005.0108-0109; Ex 1164, BHP.0005.0110_R-0114_R.
[1391] Ex 1164, BHP.0005.0110_R at 0113_R.
[1392] Ex 538, WST.0026.0001_R at 0030_R, para. 107; Ex 539, WST.0026.0267.
[1393] Ex 319, AWB.0216.0084_R.
[1394] Ex 1377, AWB.8001.0140.
[1395] Ex 1061, AWB.0216.0083_R.
[1396] Ex 1061, AWB.0216.0083_R.
[1397] Ex 1059, AWB.0199.0194_R.
[1398] Ex 1321, AWB.9002.0041 at 0046, para.32.
[1399] T 3209.10-17.
[1400] T 3234.6.
[1401] Ex 1283, AWB.9003.0333_R.
[1402] T 7252.25.
[1403] T 7254.43.
[1404] T 7255.8.
[1405] Ex 681, JMC.0002.0001 at 0021, para. 46.
[1406] Ex 461, WST.0015.0189_R.
[1407] T 3218.37-40.
[1408] Ex 414, AWB.0277.0025.
[1409] Ex 414, AWB.0277.0025; The email records that Mr Cooper responded to Ms Scales at 9.21 am and she replied at 9.38 am. Given the time of Ms Scales' initial email was 9.38 am, the time recorded on at least one of the emails must be incorrect.
[1410] Ex 1377, AWB.0277.0026_R.
[1411] T 7285.
[1412] Ex 1293, AWB.0430.0038_R.
[1413] T 3218.8-15.
[1414] T 3234.18-38
[1415] T 3237.2-6
[1416] T 3250.31-33
[1417] Ex 1555, AWB.0202.0199_R.
[1418] Ex 461, WST.0015.0191_R.
[1419] Ex 415, JMC.0001.0102_R - 0103_R.
[1420] Ex 1377, AWB.0277.0029_R.
[1421] Ex 409, WST.0010.0076 at 0083, para. 25.
[1422] Ex 1295, AWB.8001.0200_R, AWB.8001.0201_R-0205_R.
[1423] Ex 1294, AWB.8001.0194_R-0198_R.
[1424] Ex 1571, WST.0016.0104_R - 0108_R.
[1425] T 7296.7.
[1426] Ex 1131, AWB.0425. 0026_R.
[1427] Ex 1131, AWB.0425.0026_R.
[1428] Ex 1276, AWB.9001.0311.
[1429] Ex 1276, AWB.9001.0337.
[1430] Ex 1276, AWB.9002.0083 at 0084.
[1431] Ex 1276, AWB.9002.0083 at 0084.
[1432] Ex 1276, AWB.9002.0083 at 0085.
[1433] Ex 1276, AWB.9001.0362, para. 3.
[1434] Ex 1377, AWB.9002.0049_R.
[1435] Ex 1377, AWB.9001.0375_R-0376_R.
[1436] T 2954.
[1437] Ex 1544, AWB.9001.0115.
[1438] Ex 1544, AWB.9001.0115 at 0119.
[1439] Ex 1544, AWB.9001.0115 at 0119.
[1440] Ex 409, WST.0010.0076 at 0083, para. 25; T 7136.
[1441] T 7136.21.
[1442] Ex 1377, AWB.8001.0207_R.
[1443] Ex 682, AWB.0331.0262_R.
[1444] Ex 44, EXH.0001.0039.
[1445] Ex 44, EXH.0001.0039.
[1446] Ex 44, EXH.0001.0039.
[1447] Ex 1377, AWB.8001.0209.
[1448] Ex 1377, AWB.8001.0215_R at 0216_R.
[1449] Ex 1041, AWB.8001.0219_R.
[1450] Ex 1041, AWB.8001.0219_R.
[1451] Ex 1144, BHP.0001.0104-0130.
[1452] Ex 1144, BHP.0001.0104 at 0118.
[1453] Ex 1045, AWB.8001.0238_R, AWB.8001.0240_R-0243_R.
[1454] Ex 408, WST.0001.0350 at 0354, para. 22.
[1455] Ex 1377, AWB.0277.0072_R at 0073_R.
[1456] Ex 416, JMC.0001.0104.
[1457] Ex 416, JMC.0001.0104.
[1458] Ex 1056, AWB.0199.0039_R-0040_R.
[1459] Ex 343, AWB.0269.0144_R at 0145_R.
[1460] Ex 343, AWB.0269.0144_R at 0145_R.
[1461] Ex 343, AWB.0269.0144_R at 0145_R.
[1462] Ex 343, AWB.0269.0144_R.
[1463] Ex 1041, AWB.8001.0245.
[1464] The paperwork referred to in Mr Cooper's email is Ex 343, AWB.0269.0144_R.
[1465] Ex 1571, WST.0016.0110_R.
[1466] Ex 1041, AWB.8001.0252.
[1467] Ex 1377, AWB.0277.0090.
[1468] Ex 38, AWB.0193.0265-0269.
[1469] Ex 41, EXH.0001.0034 at 0035.
[1470] Ex 1571, WST.0016.0126_R.
[1471] Ex 410, JMC.0001.0112; Ex 040, EXH.0001.0032; Agenda is Ex 1203, AWB.0373.451_R.
[1472] T 5480.18-19.
[1473] T 7390.41-42.
[1474] T 7390.44-47.
[1475] T 7383.26.
[1476] T 7383.44.
[1477] T 7396.31-33.
[1478] T 7392.5.
[1479] Ex 1377, AWB.0277.0098; 31,453.644 mt x US$8.375 per mt = US$263,449.39.
[1480] Ex 353, AWB.0281.0001_R
[1481] Ex 519, WST.0020.0002_R at 0019_R, para. 59; T 4210.33; T 4226.1.
[1482] Ex 497, WST.0019.0046_R at 0072_R, para. 119.
[1483] T 4212.18; T 4228.44; No vote was taken on it-see Ex 1239, AWB.0194.0039_R at 0041_R; Ex 1240, AWB.0194.0047_R at 0057_R; T 4213.44.
[1484] T 4037.37.
[1485] Ex 410, JMC.0001.0112.
[1486] Ex 410, JMC.0001.0112.
[1487] Ex 1377, AWB.9002.0036.
[1488] This evidence is also consistent with Mr Fuller's notes of the meeting of AWBL held on 15 December 2004, which refers to the recovery of US$8 million. See Mr Moffet at T 4193.30; Mr Simpson at T 4211.33; Mr Thame at T 4235.29; Mr Donges at T 5605.19-45; Mr Barry-Ex 778, AWB.0415.0002_R at 0003_R, para. 8; Mr McClelland-Ex 779, AWB.0415.0004 at 0005, para. 9; Mr Martin-Ex 976, WST.0033.0154_R at 0155_R, paras 11-12. This was also Mr Lindberg's understanding-T 771.11.
[1489] Mr Simpson at T 4211.43; Mr Stewart at T 4030.8.
[1490] Mr Moffet-Ex 519, WST.0020.0002_R at 0020_R, para. 61; T 4194.45-T 4195.7; Mr Barry-Ex 778, AWB.0415.0002_R at 0003_R, para. 8; Mr Barry-Ex 973, WST.0033.0093_R, para. 5; Mr McClelland-Ex 779, AWB.0415.0004 at 0005, para. 9; Mr McClelland-Ex 977, WST.0033.0123_R at 0125_R, para. 5; Mr Chamarette-Ex 780, AWB.0415.0006, para. 8; Mr Fitzgerald-Ex 781, AWB.0415.0008 at 0009, para. 9; Mr Polson-Ex 782, AWB.0415.0010 at 0011, para. 9; Mr Starr-Ex 788, AWB.0417.0009 at 0010, para. 8; Mr Simpson at T 4212.28 and T 4218.24; Mr Stewart-Ex 497, WST.0019.0046_R at 0073_R, para. 122, T 4030.46; T 4031.11; T 4039.27; T 4040.36; Mr Donges said that he had no recollection of what was said about how the money was collected (T 5624.9); Mr Gibson's evidence was that he either did not hear reference being made to the means of payment or he could not recall reference to it (T 5654.28).
The evidence of Mr Lindberg (for example at T 817.4, T 817.21, T 846.21) and Mr Cooper (Ex 681, JMC.0002.0001 at 0023, para. 56) was to the contrary and to the effect that the Boards were in fact informed that the wheat prices were inflated. Mr Cooper's evidence was to the effect that Mr Lindberg told the board that AWB had collected the debt through its contract but he did not discuss the detail about what those contracts were or the mechanism (T3238.18).
Neither the formal minutes nor the notes prepared by Dr Fuller, Mr Cooper and Ms Scales advert to the contractual price being inflated.
Mr Thame, according to Ms Scales' note, thought AWBI to be tainted because the Tigris cheque had passed through AWBI's account and not because AWBI had inflated the wheat prices. (Ex 344, AWB.0270.0024_R).
[1491] Ex 344, AWB.0270.0024_R, set out above.
[1492] Ex 508, WST.0016.0141_R at 0142_R.
[1493] Mr Donges at T 5610; Mr Gibson at T 5369.
[1494] Ex 1239, AWB.0194.0039_R at 0041_R.
[1495] Ex 1377, AWB.9005.0144_R at 0146_R.
[1496] Ex 973, WST.0033.0093_R, para. 5; Mr Simpson at T 4212.8.
[1497] Ex 1377, AWB.9002.0049_R.
[1498] Ex 1276, AWB.9002.0051 at 0066.
[1499] Ex 41, EXH.0001.0034.
[1500] Ex 41, EXH.0001.0034.
[1501] T 1668.35; T 1672.21.
[1502] T 1669.46.
