Government officials sucked in to oil-for-food scandal

Australia is facing humiliation over deliberate breaches of United Nations sanctions against Saddam Hussein by two of its major firms and claims of complicity by Government officials.

Evidence of secret kickbacks to Iraq by the Australian Wheat Board have broadened to include energy giant BHP Billiton, increasing demands for a widening of the inquiry into the illegal dealings.

AWB officials are reportedly seeking immunity from prosecution to present evidence of similar bribes and kickbacks to officials in Iran, Pakistan, Yemen and Indonesia.

The Australian said yesterday one former employee had told investigators that payments to foreign officials was common practice in an organisation that had long had a culture of "doing what it takes" to secure business with corrupt regimes.

In the US, the chairman of a Senate committee probing the UN's oil-for-food programme has called former Australian Ambassador Michael Thawley and his replacement, former domestic intelligence chief Denis Richardson, to appear before his inquiry.

Seven US senators have also urged their Agriculture Secretary to suspend an AWB subsidiary because of the claims and their belief Australian officials at least knew of the kickbacks.

The scandal emerging from the Australian inquiry into the allegations began during the oil-for-food programme designed to enable Iraq to sell oil for food and other humanitarian purposes during the embargo imposed after the first Gulf war.

The AWB paid up to A$300 million to a Jordanian trucking company, ostensibly for transporting wheat into Iraq but in fact as kickbacks to secure contracts and bypass UN sanctions.

Although the AWB denied knowing the firm, Alia, was half-owned by Iraq and had no trucks, evidence alleges deliberate breaches of the embargo. Records show that the payments were divided among Iraqi agencies.

It has also emerged that even after learning of the ownership of the firm last year, a senior AWB official had failed to disclose this to the UN investigation into the programme.

That inquiry found that the AWB payments had been funnelled back to Saddam's regime by Alia.

Evidence to the Australian inquiry headed by Terence Cole QC has now implicated BHP Billiton, which has launched its own internal investigation into revelations it used the AWB to secure its own embargo-busting payments from Iraq.

It is alleged that A$5 million of wheat "donated" to Iraq in 1995 as a humanitarian gesture was in fact a bid to win oil exploration licences, with repayment required with interest.

After Foreign Affairs Department advice that the repayment would breach UN sanctions, the AWB agreed to artificially inflate prices for two oil-for-food wheat contracts by A$8 million to recover the money.

BHP sold the debt to Tigris Petroleum, set up by two former employees and, the Cole inquiry was told, the AWB produced false agreements to conceal fund transfers to Tigris.

The revelations have outraged US Senators, who reacted furiously to news that former Ambassador Thawley had tried to block the American probe into the AWB kickbacks.

Foreign Minister Alexander Downer maintains that Thawley was merely reflecting Canberra's view that the US Senate probe was being driven by US commercial interests and that the UN inquiry was the appropriate forum.

But Senate inquiry head Norm Coleman demanded Thawley and Richardson appear before it, saying in a letter to Thawley that he was "deeply troubled" by his emphatic denials.

Coleman also said he believed AWB officials may have breached US laws by making false or misleading statements to investigators and that Foreign Affairs officials "were aware of and complicit in" the AWB kickbacks.

In Australia, the revelations have strengthened calls for the Cole inquiry to be widened to include the role of Government in the scandal.

Treasurer Peter Costello said he would consider an expansion if asked, and warned of possible prosecutions.