THE Victorian Court of Appeal has dismissed an appeal by the Australian Securities and Investments Commission (ASIC) against a judgement of the Supreme Court of Victoria made by Justice Robson on 15 December 2016 that cleared a former AWB executive of knowing about payments in contravention of United Nations sanctions against Iraq.

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

ASIC Commissioner John Price said ASIC noted the decision of the Court of Appeal in relation to the case against Mr Geary and was currently reviewing it.

“AWB’s manipulation of the Oil-for-Food Programme was a matter of significant concern and public interest and, accordingly, ASIC considered it important that cases be brought against the individuals who were suspected to be involved,” Commissioner Price said.

“This has led to court-imposed fines against the former AWB chairman, Trevor Flugge, chief executive officer, Andrew Lindberg, and chief financial officer, Paul Ingleby, and orders that they be disqualified from managing corporations.”

At the end of its 94-page judgment the Court of Appeal said: “In arriving at (the) decision, and in rejecting all of ASIC’s proposed grounds of appeal, it should not be thought that this court in any way condones the conduct of those senior AWB officials, particularly Lindberg, and to a lesser degree, Flugge and Ingleby, who were proved to have been at the centre of this entire sorry affair.”

Background:

• In 2004, the United Nations (UN) established an Independent Inquiry Committee (IIC) to investigate allegations that the Iraqi government had evaded Security Council Resolutions (which imposed sanctions on Iraq) through bribery, kickbacks and surcharges on oil and illicit payments in respect of humanitarian goods.
• In October 2005, the IIC presented its findings that, among other things, kickbacks were paid to Iraq in connection with contracts with various foreign companies, including AWB, in relation to the supply of humanitarian goods.
• Arising from the IIC findings, the Australian Government established a Commission of Inquiry (the Cole Inquiry) in November 2005 to enquire into, among other things, matters relating to AWB’s supply of wheat to Iraq under the United Nations Oil-for-Food Program (OFFP).
• In his final report in November 2006, Commissioner Terence Cole made various adverse findings against, among others, officers of AWB and recommended that those matters be investigated by relevant agencies, including ASIC and the Australian Federal Police (AFP).
• In February 2007, a taskforce was established by the Australian Government, led by the AFP, to investigate matters arising from the Cole Inquiry, with ASIC contributing staff to that taskforce. In August 2007, ASIC withdrew its staff from the taskforce and commenced a separate independent investigation.
• In December 2007, ASIC commenced civil penalty proceedings in the Supreme Court of Victoria against six former directors and officers of AWB, namely Trevor Flugge, Andrew Lindberg, Paul Ingleby, Peter Geary, Charles Stott and Michael Long (refer: 07-332MR).
• In November 2008, the Court ordered a stay of ASIC’s proceedings against each of the defendants (except Mr Lindberg, AWB’s former managing director) until such time as they were advised that no criminal proceedings would be instituted against them.
• In August 2009, the AFP announced that its investigation into criminal matters arising from the Cole Inquiry had been discontinued.
• In May 2010, ASIC, terminated its investigation into suspected criminal contraventions of the Corporations Act (Act) based on its consideration of the evidence it had gathered. As a result of this and the earlier decision by the AFP to discontinue its investigation, the Court ordered on 2 August 2010 a lifting of the stay of the proceedings against Messrs Flugge, Ingleby, Geary, Stott and Long.
• In August 2012, Justice Robson of the Supreme Court of Victoria ordered that Mr Lindberg be disqualified from managing corporations until 12 September 2014 and pay a pecuniary penalty of $100,000 for contravening section 180(1) of the Act which requires company directors and officers to discharge their duties with due care and diligence (refer: 12-191MR).
• In March 2013, the Victorian Court of Appeal ordered that Paul Ingleby, AWB’s former chief financial officer, be disqualified from managing corporations for a period of 15 months and pay a pecuniary penalty of $40,000 (refer:13-055MR).
• In December 2013, ASIC discontinued its proceedings in the Supreme Court of Victoria against Charles Stott and Michael Long for alleged breaches of their duties as officers of AWB in connection with the OFFP after ASIC formed a view that it was no longer in the public interest to pursue its claims (refer:13-363MR).
• On 15 December 2016, Justice Robson of the Supreme Court of Victoria found that 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 section 180(1) of the Act.
• The Court 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 section 181 of the Act (refer: 16-441MR).
• On 10 April 2017, Mr Flugge was ordered by the Supreme Court of Victoria to pay a pecuniary penalty of $50,000 and be disqualified from managing corporations for a period of five years following the Court’s findings that he contravened s.180(1) of the Corporations Act (refer: 17-110MR)
• Also, on 15 December 2016, Justice Robson dismissed the proceedings against Mr Geary, finding that he did not contravene his duties as an officer in connection with AWB’s supply of wheat to Iraq under the OFFP (refer: 16-441MR).
• ASIC appealed Justice Robson’s decision in the case against Mr Geary, with the appeal heard by the Court of Appeal in November 2017 (refer: 17-030MR).

Source: ASIC