Chapter 4


Chapter 4

The AFP Oil for Food Taskforce

4.1        As noted in Chapter 2, the Taskforce was established in response to the findings of the Cole inquiry that AWB Ltd might have committed offences under Commonwealth and Victorian legislation and its officers may have acted as accessories to those offences. This chapter looks at the work conducted by the Taskforce, the resources allocated to the Taskforce, the challenges faced by the Taskforce and the issues surrounding the shutdown of the Taskforce.

The work undertaken by the Taskforce

4.2        As noted by the Australian Federal Police (AFP), the Taskforce commenced work on 22 January 2007 comprising 10 officers from the AFP, two officers from Victoria Police and nine officers from Australian Securities and Investment Commission (ASIC), with administrative and legal support provided by the Commonwealth Department of Public Prosecutions (CDPP), the Attorney-General's Department (AGD) and the Department of the Prime Minister and Cabinet (PM&C).[1]

The first six months

4.3        As noted by Mr Chris Savundra of ASIC, during the first six months of the Taskforce's work while ASIC formed part of the Taskforce, a significant portion of that time was spent digesting materials from the Cole inquiry, planning and also scoping the investigation.[2] In an article published in The Saturday Age, Leonie Wood quoted Mr Brendan Caridi of ASIC who had told a Victorian court that during the six‑month period ASIC was involved in the Taskforce:

...very little investigative activity occurred...No witnesses were interviewed. The material from Prime Minister and Cabinet was not obtained...I think there was some material obtained from the Department of Foreign Affairs and Trade, but I think that was the extent of it...which led to ASIC making the decision in August [2007] to withdraw its operational staff and commence its own investigation.[3]

4.4        Mr David Marr, writing for Fairfax Media, made an argument that 'ASIC's decision to withdraw was based on the deeper worry that the Taskforce was too sluggish'.[4]

4.5        Mr Caridi subsequently explained that:

One often feels frustrated with many investigations but...I never formed the view that [the Taskforce] was inadequately resourced in terms of staffing.[5]

4.6        ASIC stated that it withdrew its staff from the Taskforce in late August 2007 to better concentrate on pursuing civil penalty proceedings under the Corporations Act. As justification for leaving the Taskforce and setting up its own parallel investigation ASIC cited the AFP's lack of power to investigate civil penalty breaches under the Corporations Act and that the statutory time limit for the commencement of civil proceedings on relevant wheat supply contracts had almost expired.[6]

4.7        Mr Savundra noted that there was another related reason for ASIC withdrawing from the Taskforce pertaining to the difficulties associated with the exercise of ASIC's compulsory powers within the confines of an AFP-led Taskforce.[7] ASIC confirmed that legal advice was taken with regard to both the limitation issue and the problems associated with the exercise of compulsory powers, prior to the decision to leave the Taskforce.[8] ASIC admitted that even though there was 'no single report underlying the decision of ASIC to withdraw from the taskforce...memoranda, emails and legal advice...preceded the decision to withdraw'.[9] ASIC stated that it did not raise any concerns or complaints about the running or resourcing of the Taskforce and it did not perceive that the Taskforce was being slowed down, diverted or impeded in doing its job.[10]

4.8        The parallel ASIC investigation is examined in chapter 5.

The ongoing investigation

4.9        In October 2007, Mr Robert Cornell, Secretary of AGD, stated that AGD held the view that the Taskforce had sufficient resources allocated to it to complete its job and the question of whether there was any need for changes to legislation had not arisen.[11]

4.10      In its submission to this inquiry, the AFP summarised the work of the Taskforce after it moved from the scoping stage to the investigation stage submitting that:

The scope of the [Taskforce] was to investigate all allegations of criminality raised by the Cole Inquiry. The [Taskforce] conducted wide ranging inquiries including interviewing a large number of witnesses and examining approximately 900,000 pages of documents submitted to the Cole Inquiry together with documents obtained from the UN, shipping records, and banking records.[12]

4.11      The AFP explained that prior to commencing its investigation, the AFP had sought legal advice about which offences it should focus on in its investigation. Based on this advice, the Taskforce decided to limit its investigation to those suspected crimes raised by the Cole inquiry. The AFP stated that:

No referrals were made to the [Taskforce] pursuant to [section] 6H of the Royal Commissions Act 1902 (false and misleading evidence to a Royal Commission).[13]

4.12      The AFP noted that the Taskforce had formally corresponded with numerous employees of AWB Ltd, but all declined the invitation to participate in formal records of interview. The Taskforce interviewed a number of former and current DFAT and AUSAID employees and 'directed significant resources towards a financial analysis of all relevant transactions', sourcing evidence from seven foreign jurisdictions.[14]

The resources provided and used by the Taskforce

4.13      The AFP explained that the Australian government initially allocated $20.3 million to the Taskforce for the period between its inception and the 2008–09 financial year. An additional $3.1 million was subsequently allocated to the Taskforce in the 2009–10 budget to allow the work of the Taskforce to continue until the end of June 2010. The AFP submitted that it considered that the level of funding was sufficient to address the terms of reference.[15]

4.14      In her article in The Saturday Age, Ms Leone Wood cited a letter written by the then AFP Commissioner, Mick Keelty, to the CDPP on 25 August 2009 and copied to ASIC and the AGD. The letter mentioned that the AFP had spent only $5.95 million on the Taskforce. As noted by Ms Wood

The sum spent by the AFP, revealed in a letter released to The Saturday Age, is a fraction of the $30 million earmarked for all the investigative work that had to be done by the multi-agency taskforce and any subsequent litigation.[16]

Challenges faced by the Taskforce

4.15      The AFP submitted that the Taskforce faced a number of challenges during its investigation. These challenges included:

  • Evidence from the Cole inquiry from witnesses had to be recollected.
  • The AFP did not have a coercive power to compel a witness to give evidence. When the AFP sought relevant material from ASIC, under section 127 of the ASIC Act, the release of that information was challenged through court action by AWB Ltd.
  • Much of the material was held by international entities, which resulted in time-consuming legal processes and relied on the cooperation of overseas agencies.[17]

4.16      There were multiple evidentiary problems faced by the Taskforce. Under section 6DD of the Royal Commissions Act 1902 (Cth), oral evidence given by a natural person to a Royal Commission or evidence in the form of a document received pursuant to a summons, requirement or notice to a Royal Commission is not admissible in evidence against the person in civil or criminal proceedings in any Australian court.[18] Furthermore, as noted by the AFP, section 6 of the Royal Commissions Act 1902 (Cth) makes it an offence to fail to answer a question relevant to an inquiry which means that oral evidence given during the course of an inquiry might be considered by a court of law to have been obtained under duress or compulsion. This could have affected the admissibility of the oral evidence gathered by the Cole inquiry at a subsequent criminal trial.[19] It follows that, as explained by the AFP, in order to mount a successful prosecution the Taskforce needed to collate sufficient evidence from scratch to prove that the conduct of AWB Ltd or its officers had amounted to an offence.[20]

4.17      Mr Savundra explained that when the Taskforce was being set up the issue of using ASIC's coercive powers was raised with the AGD. The AGD sought advice on how to avoid legal issues relating to the use of the coercive powers.[21] In early 2008, the AFP approached ASIC to release information received through its coercive powers. AWB Ltd opposed the release in the Federal Court. The material was never released to the Taskforce.[22] ASIC took the position that the introduction of special purpose enabling legislation could have assisted the Taskforce in being able to use coercive powers of partner agencies to undertake its work more effectively. According to Mr Savundra, no enabling legislation was passed.[23] The issues surrounding the dissemination of information gained through ASIC's use of its coercive powers is further discussed in chapter 5.

4.18      According to the CDPP, Australia is currently a signatory to over 20 bilateral mutual assistance treaties and a number of international conventions which assist the mutual assistance process. The CDPP cooperates with international investigating agencies to take evidence from witnesses, execute search warrants and notices to produce material and to locate, restrain and recover proceeds of crime.[24] As noted by the AFP, the CDPP was a member of the Senior Coordination Group (SCG) of the Taskforce and provided administrative and back office assistance on the Taskforce.[25] However, although the CDPP has coercive powers, as pointed out by the AFP:

The CDPP is not an investigative agency and does not possess investigative powers. There are no means by which the CDPP can require witnesses to attend formal interviews during an investigation. As there was no prosecution, the CDPP was also not in a position to exercise any of its prosecutorial powers in relation to the examination of witnesses in a criminal trial.[26]

Proving an offence

4.19      Mr John Agius SC, the senior counsel assisting Commissioner Cole during the Cole inquiry, explained that the Cole inquiry found that the principle criminal offences that might have been breached were the former sections 29A, 29B and 29D of the Crimes Act 1914 (Cth), equating to sections 135.1, 135.4 and 136.1 of the Criminal Code (Cth), relating to intentionally acting dishonestly to obtain gain through deceiving a Commonwealth entity.[27] Mr Agius accepted that in order to prove that these offences had taken place it would be necessary to prove both a physical component and a mental component. AWB Ltd would have had to be found to have acted dishonestly and its acts would have had to be intentionally designed to deceive the Commonwealth.[28]

4.20      Mr Agius claimed that:

The fact of the transport fee, the fact that the money was being paid secretly and the fact that all of this was being done by a sham contract were never disclosed to the Commonwealth, and therefore that was a prima facie case of various of those sections.[29]

4.21      Mr Agius stated that, if the Commonwealth had actual knowledge of the intention to deceive, it would amount to a defence as:

There would not be any deception of the Commonwealth if the Commonwealth were aware that, in effect, it was being deceived. So the offence could not be made up. But there was certainly no credible evidence that the Commonwealth was aware of the true nature of the contracts between AWB and the IGB.[30]

4.22      However, Mr Agius cautioned that his knowledge of the work of the Taskforce was limited, stating:

You should know that neither I nor any of the other counsel, to the best of my knowledge, were ever consulted, so I do not know what the [Taskforce] actually did, what advice they had and which witnesses were available to them. So I am in the dark on some fairly material information.[31]

4.23      Mr Peter Hastings QC, who reviewed the work of the Taskforce, explained that deceit was not the only issue that needed to be reconciled, it was also necessary to prove that a gain could be attributed to the deceit and this would require an examination of whether the OIP would have approved the contracts even if they were aware of the payment of the trucking and service fees. Mr Hastings stated:

...a number of the legal issues that arise from all this include not just the question of deceit but the question of what the consequences were and what the alternatives would have been if the deceit had not taken place. There are a whole series of related issues which needed to be looked at before any decision could be made as to whether there were reasonable prospects of succeeding with a prosecution.[32]

4.24      The AFP explained that:

The Taskforce needed to gather sufficient admissible evidence of the relevant deception and how it may have influenced Commonwealth Officials, together with admissible evidence required to establish the other aspects of the offence(s).

The Taskforce’s work was therefore affected to the extent that arguments were available to AWB that particular conduct did not satisfy applicable legal thresholds, or that particular defences could be made out. This included the potential defence that DFAT adopted a limited approach to scrutinising AWB contracts. The Taskforce was aware that the evidence it gathered needed to be correspondingly cogent in order to overcome any such arguments in any prosecution.[33]

4.25      The Chair accepts AFP's evidence given that, after the Taskforce had been shut down, in AWB Ltd's outline of opening submissions to the case of Watson and Watson v AWB Ltd, a civil class action that was eventually settled out of court, AWB Ltd admitted having paid trucking fees to Alia in full knowledge that the fees were being remitted to the ISCWT. However, AWB Ltd disputed that:

...payment of the Fees was contrary to the UN Sanctions; that AWB knew, believed or was aware of this; that the UN and DFAT did not know AWB was paying the Fees and could not and/or would not have permitted it if they did know...[34]

4.26      ASIC informed the committee that the civil class action was settled out of court for $39.5 million.[35]

4.27      On 7 June 2012, Mr Nick McKenzie of Fairfax Media compiled a report examining the conduct of the Taskforce and the circumstances surrounding its shutdown. This report formed the basis of an article in The Age co-written by Mr Richard Baker (2012 article) and a segment on ABC's 7.30. In the transcript of the segment on 7.30, former Acting-Coordinator of the Taskforce, Mr Ross Fusca, in response to a question from Mr McKenzie said that the information gathered by the Taskforce was:

...broadly...saying that senior [government] officials were aware of what was happening, what had happened in as much as that they were aware of the kickbacks.[36]

4.28      The AFP, in response to a question on notice asking whether the Taskforce received any evidence to suggest that political figures or public officials were aware of the payments made by AWB Ltd for the transport costs of grain in Iraq, limited its response to:

The Task Force did not receive any evidence that political figures had knowledge of payments made by AWB Ltd for the transport costs of grain in Iraq.[37]

4.29      Mr Agius commented on the transportation fees and DFAT's awareness of those fees by saying:

DFAT may well have known—and I believe it probably did know—that there was a transportation fee. What they did not know was that the transportation fee was a sham. It was a device to permit AWB to increase the price of the wheat and to pay an intermediary for transport.[38]

4.30      Whether or not there was knowledge of the transportation fees, AWB Ltd noted that it was open to the UN to take the view that the payment of fees by AWB Ltd was not contrary to the UN sanctions. AWB Ltd argued that it was possible that the UN could have come to this conclusion given the concerns expressed about the high level of holds on humanitarian contracts and the fact that the UN took a pragmatic approach to payments by suppliers to the Iraqi government, as shown by the lack of action taken over allegations that the Iraqi government were demanding kickbacks and illegal commissions on contracts for humanitarian supplies.[39]

Shutting down the Taskforce

4.31      In July 2009, the then AFP Commissioner, Mr Mick Keelty engaged Mr Peter Hastings QC to undertake a review of the Taskforce and provide advice on the likelihood of any successful prosecutions (the Hastings advice). The AFP submitted that:

Mr Hastings QC advised the resources that would be required to mount a prosecution, and the consequential costs, would be disproportionate to the prospects of the criminal prosecution succeeding.[40]

4.32      Mr Hastings stated that he based his advice on a number of sources including the findings of the Cole inquiry, the instructions provided in the brief of evidence and oral communications with those involved in the Taskforce.[41]

4.33      Based on the Hastings advice, on 28 August 2009, former Commissioner Keelty announced that the Taskforce would be disbanded.[42] The Hastings advice has never been made public. As outlined in chapter 2, the work of the Taskforce was previously examined by the Parliamentary Joint Committee on the Australian Commission for Law Enforcement Integrity during its inquiry into the integrity of overseas Commonwealth law enforcement operations. The AFP noted that the Joint Committee had requested a copy of the Hastings advice, but, through the then Minister for Home Affairs and Justice, the Hon Jason Clare MP, the AFP made a claim of public interest immunity over the Hastings advice.[43] The AFP did provide a private briefing on the advice to the Joint Committee on 20 September 2012 and the Parliamentary Joint Committee report did not include any recommendations on the work of the Taskforce.[44]

Was the Taskforce shut down prematurely?

4.34      The 2012 article by Mr McKenzie and Mr Baker quoted from an interview with Mr Fusca, who claimed that:

...there were not enough investigators to analyse the millions of documents produced to Terence Cole's commission, let alone begin interviewing witnesses and liaising with overseas agencies.[45]

4.35      Mr Fusca also claimed that members of the Taskforce from ASIC and the Victoria Police raised questions on how seriously the AFP was taking the work of the Taskforce. As noted by Mr McKenzie on 7.30, Mr Fusca said that the Taskforce encountered resistance, as if someone wanted the investigation to fail.[46] This claim was further supported by evidence obtained by The Age that two other members of the Taskforce believed that the inquiry could have been better managed.[47]

4.36      Mr McKenzie stated:

...I spoke confidentially to some of [Mr Fusca's] colleagues in the Taskforce. I will not name them, for obvious reasons, but they did express concern that there was a lack of support and backing from up on high for the [Taskforce's] work, and that the [Taskforce] was, perhaps not set up to fail, but certainly did not have the drive that it needed...They held his concerns about the lack of support from up on high for the [Taskforce] and the fact that it was, in their view, wrapped up early. As to why that happened, they could only speculate, and so could I.[48]

4.37      In the 2012 article, Mr McKenzie and Mr Baker noted Mr Fusca's claims that the Hastings advice, which led Mr Keelty to announce the shutdown of the Taskforce, was made prematurely. Mr Fusca claimed that the Taskforce still had 'months and months' of work to complete in order to gather all the relevant evidence. The article implied that the 2009 advice contradicted confidential advice written by Mr Hastings QC in April 2008 which stated 'I agree that there is a proper basis for pursuing a case of fraud to the effect that...[officials were] deceived into granting approval [to AWB] for the export of wheat to Iraq'.[49]

4.38      In order to contradict any suggestion that he may have been externally influenced when drafting his 2009 advice Mr Hastings volunteered that:

I acted for the Commonwealth for 35 years that I was in practice, and on no occasion was I ever asked to advise on the basis of giving a specific response. In every occasion that I was ever briefed by a Commonwealth officer or a Commonwealth agency, I was always given an open opportunity to form my view as to what I thought the position was. Not once in my entire career was I ever asked to give an advice to a particular result or effect.[50]

4.39      Mr McKenzie reported that Mr Fusca believed that he had been offered a promotion by a senior member of the AFP if he 'could somehow close the inquiry'. Mr Fusca also claimed that on the following day he was approached by another senior AFP officer who, citing budgetary concerns, told him that the criminal brief of the Taskforce had to be completed by April 2009 when, in Mr Fusca's opinion, given the resources dedicated to the Taskforce it could not be completed until the end of 2009. Mr Fusca stated:

A number of avenues were never pursued and they were [an] integral part of the investigation. The inquiry was far from complete; far from completed.[51]

4.40      Mr McKenzie tried to summarise the claims that the Taskforce may have been shut down prematurely by stating that:

...it was...inescapable that there were no criminal charges laid flowing from what was a very important royal commission into corporate misconduct. It was also inescapable that the legal advice that Mr Hastings finally gave...was given before the [Taskforce] had completed its duties. In our analysis of this, it simply occurred to us that the [Taskforce], had it been left to complete its work, might have had some evidentiary findings that could have changed Mr Hastings's advice. There could have been a range of other offences looked at, things such as false accounting, money laundering and foreign bribery offences, that might have meant that a prosecution could have been forthcoming. It could have been that a reluctant witness, upon being charged with a relatively minor criminal offence, would have agreed to give evidence against others, therefore opening up fresh avenues for the [Taskforce].[52]

4.41      In a more recent article, Mr Baker and Mr McKenzie noted that the AFP had denied the claim that the Taskforce was under-resourced and shut down prematurely. In response, the AFP stated that the Taskforce had comprised more than 20 state and federal officers and had a multimillion dollar budget.[53]

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