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AWB Iraq payments no worse than any other commercial difficulty: expert

‘There’s a continuum between the trivial and the serious and sometimes you cross the line’, said Martin Kriewaldt. Photo: Jim RiceAWB’s payments to Saddam Hussain’s regime in Iraq in breach of UN sanctions, totalling more than $US220 million, was no more serious a company issue than shipping delays, lost wheat and the mismatching of hedging books, a court has heard.
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Expert witness, company director Martin Kriewaldt, told the Supreme Court of Victoria he had considered the trucking fees as another commercial consideration for the company with no special importance.

Mr Kriewaldt, who was called to give evidence by lawyers for former AWB chairman Trevor Flugge, is a former director of Oil Search and Macarthur Coal and is currently chairman of building materials supplier XLam New Zealand.

In the civil proceeding before Judge Ross Robson, the n Securities and Investment Commission allege Mr Flugge and former wheat marketing executive Peter Geary breached their duties as directors and officers of the company over their knowledge of the sanction-busting payments AWB was paying to the Iraq regime between 1999 and 2003.

ASIC also alleges AWB’s shareholders suffered losses as a result of Mr Flugge and Mr Geary’s actions after the company’s stock suffered heavy falls in late 2005 when the alleged wrongdoings came to light.

Mr Flugge and Mr Geary deny all allegations of wrongdoing.

“[It was] yet another commercial and logistical difficulty [the need to pay fees],” Mr Kriewaldt said.

Mr Kriewaldt was challenged by ASIC lawyer Norman O’Bryan under cross-examination.

“And you maintain that view, do you, despite what happened to AWB following the Royal Commission?” Mr O’Bryan, SC, asked.

Mr Kriewaldt said he did maintain that view despite the damning Cole Inquiry in 2006 finding Mr Flugge and other AWB representatives had made multiple breaches of the Corporations Act.

“Have you always held that view?” Mr O’Bryan asked.

“I had an open mind on it. I didn’t know the facts,” Mr Kriewaldt said. Mr Kriewaldt said he could not recall reading the Cole Inquiry report or even the daily newspaper reports on the inquiry.

“I can’t rely on what the newspapers say in regards to the report of the inquiry. I would prefer to look at the original evidence,” Mr Kriewaldt said.

“I was not relevant for me to look at the Cole Inquiry to see what was there,” Mr Kriewaldt added.

When asked to clarify whether he regarded the final report of the Cole Inquiry as an accurate reflection of the events at the inquiry, Mr Kriewaldt replied: “Certainly the report is more reliable than the newspaper.”

Mr Kriewaldt also testified that as a company director Mr Flugge did not have an obligation to tell his fellow AWB directors about the trucking fees payments.

“There’s a continuum between the trivial and the serious and sometimes you cross the line.”

He was later taken to a damning internal AWB report by Arthur Andersen provided to Mr Flugge before the payments were made, public saying the payments were illegal.

“I do not think there is enough in there to say you must give it to other members of the board.”

Yesterday, the court heard lawyers for Mr Flugge argue the former chairman had no idea the fee payments would breach UN sanctions.

The trial continues. Defence for Mr Geary is expected to begin next week.

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