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The court also said the Australian Securities and Investments Commission (ASIC) failed to show that Flugge knew that AWB was making payments to Iraq contrary to United Nations sanctions.
 
SYDNEY, AUSTRALIA — The Australian Supreme Court of Victoria has determined that Trevor Flugge, the former chairman of AWB Ltd. (AWB), breached his duties as a director of AWB in connection with payments made to the Iraqi government while that country was subject to United Nations sanctions.

In a Dec. 15 ruling, the court found that Flugge failed to make adequate enquiries about the propriety of the payment of inland transportation fees and as a consequence, failed to stop AWB from engaging in improper conduct in paying the inland transportation fees of approximately A$220 million to the Iraqi government.

“The fact that the complaint was being pursued by the UN should have alerted him to question whether the UN had knowingly approved what AWB was doing,” Justice Ross Robson of the Australian Supreme Court of Victoria wrote in his ruling.

Robson also noted that if Flugge had carried out his duties he “would have found the true nature of the trucking payments and that AWB was flouting, on a large scale, UN resolutions, which if disclosed would severely damage AWB’s good name and reputation. Flugge would have ascertained that AWB was paying a trucking fees that Canada had also been asked to pay but had refused to pay as Canada were advised by the OIP that to make such payments Canada would be in breach of UN sanctions to pay U.S. dollars to Iraq or one of its instrumentalities.”

The court also said the Australian Securities and Investments Commission (ASIC) failed to show that Flugge knew that AWB was making payments to Iraq contrary to United Nations sanctions.

The court dismissed the proceedings against Peter Geary, the former AWB group general manager of trading, 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 Program.

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

ASIC is seeking the following orders to be made by the court against Flugge:
  • declarations that Flugge has contravened the Act;
  • ·orders disqualifying Flugge from managing a corporation; and
  • an order imposing a pecuniary penalty.

The court will hold a hearing about penalties in respect of Flugge on Feb. 16, 2017.

ASIC is currently reviewing the court's decision and has no further comment at this time.

The investigation began in 2004 and has been ongoing. In August 2012, Andrew Lindberg, former chief executive officer of AWB, was ordered by the courts to be disqualified from managing corporations and pay a pecuniary penalty of A$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. In March 2013, Paul Ingleby, the former chief financial officer of AWB, was ordered to be disqualified as well and pay a pecuniary penalty of A$40,000. The two cases were the last to be decided in a series of cases brought against AWB officers by ASIC.