THE former chairman of AWB Limited (AWB), Trevor Flugge, has been found by the Supreme Court of Victoria to have breached his duties as a director of AWB in connection with $300 million in payments made to the Government of Iraq while that country was subject to United Nations (UN) sanctions.

Trevor Flugge

The Court found Mr Flugge failed to make adequate enquiries about the propriety of the payment of inland transportation fees and as a consequence, failed to stop AWB engaging in improper conduct in paying the inland transportation fees to the Government of Iraq, in contravention of s180(1) of the Corporations Act.

It also found that it had not been established that Mr Flugge knew that AWB was making payments to Iraq contrary to UN sanctions and, therefore, was not satisfied that he had breached s181 of the Act.

The Court dismissed the proceedings against the former AWB group general manager of trading, Peter Geary, finding that he did not contravene his duties as an officer in connection with AWB’s supply of wheat to Iraq under the United Nations’ Oil-for-Food Programme.

The findings follow a nine-week trial that concluded in December 2015.

The Australian Securities and Investments Commission (ASIC) is seeking the following orders be made by the Court against Mr Flugge:

• declarations that Mr Flugge has contravened the Act;
• orders disqualifying Mr Flugge from managing a corporation; and
• an order imposing a pecuniary penalty.

The Court will hold a hearing about penalties in respect of Mr Flugge on February 16, 2017.

Mr Flugge was the chairman of AWB from 1999 until March 2002, during which time he led AWB delegations to Iraq.

Allegations that the AWB made illegal payments to the Saddam Hussein regime while it was under UN sanctions to secure wheat sale contracts prompted the Cole Inquiry, which found in 2006 that AWB had paid $300 million in kickbacks to the regime.

Read the full Court’s judgement at http://download.asic.gov.au/media/4113228/16-441mr-orders.pdf

Source: ASIC