Andrew Lindberg denies knowing about the fees at the time

Senior managers at Australian wheat exporter AWB were aware they were paying kickbacks to Saddam Hussein's government, an inquiry has heard.

An Australian government commission is probing allegations that AWB breached UN sanctions imposed on Iraq through the oil-for-food programme.

An inquiry counsel produced a document on Tuesday suggesting AWB executives knew a 'trucking fee' was extraneous.

The Australian government has denied it was aware UN rules were being broken.

According to an independent report into the oil-for-food scandal, released last October, AWB paid a Jordanian company, Alia Transport, for the transportation of the wheat it was selling to Iraq, but Alia transpired to be a front company for Saddam Hussein's government.

A 10% "after sales service fee" was later introduced by the Iraqi government, in addition to transportation costs, which was also fabricated and acted simply as a kickback to Baghdad, the report said.

Incriminating evidence

The document cited on Tuesday was a report by two AWB executives in 2001. It referred to the 10% "after sales service fee" in a way which suggested the executives knew it was a kickback.

"We believe the increase in trucking fee... is a mechanism of extracting more dollars from the escrow account [UN oil-for-food funds]," the report said.

When AWB's chief executive, Andrew Lindberg, was questioned by the independent inquiry last year, he denied any knowledge of Iraqi service fees.

But quizzed again on Tuesday, he said he had subsequently learned of the 10% fee in recent months, and conceded it was "a problem", but may not have been interpreted as such by AWB officials.

"It would have been better if the contracts had identified the explicit amounts and had received explicit approval," he said.

The AWB is now a private listed company but was the government's wheat board at the time.

The commission is also investigating the government's own role in the AWB exports.

But Trade Minister Mark Vaile denied there was any evidence that Australian officials knew of the kickbacks.

"I'm not aware of any evidence that shows that the government, or government officials, did know about the transport arrangements," he told local media.

Key role

The Australian wheat exporter was the largest single supplier of humanitarian goods under the oil-for-food programme.

The programme allowed the Iraqis to sell oil and import food and medicine at a time when sanctions had been introduced.

The UN inquiry report released in October showed that AWB had made a total of US$222m in so-called "side payments" for the transportation of wheat.

The UN found no direct evidence that AWB had knowingly paid bribes, but investigators said that the company's staff should have realised where the money was going.

The inquiry in Sydney will determine if AWB and two other smaller organisations have broken any Australian laws in their oil-for-food dealings.