May 2006



By Robert Manne
Illustration by Jeff Fisher.

Illustration by Jeff Fisher.

Constitutional conservatives often suggest that there once existed a Golden Age in Australia when the Westminster principle of ministerial responsibility was scrupulously honoured. Defenders of the Howard government usually claim that there has been no erosion of the doctrine of ministerial responsibility over the past decade. Both positions seem wrong. There was never a time when ministers did not scramble to retain office or blame others for their own or their department’s faults. Yet there has also never been a time when proof of a minister’s lies to parliament, or of the grotesque mismanagement of public affairs by the departments for which they are responsible, has mattered less.

The most fundamental aspect of the principle of ministerial responsibility is the understanding that ministers must resign when it is proved that they have deliberately misled parliament. In the past this was honoured. Under the prime ministership of John Howard there have been occasions where, on a matter of political importance, ministers have intentionally misled parliament and survived. One example must suffice.

In early October 2001, at the beginning of the federal election campaign, both the immigration minister, Philip Ruddock and the prime minister, John Howard, revealed that Iraqi asylum seekers were throwing their children into the ocean. At the time they believed this to be true. Although within days most senior people in defence realised that no evidence supporting the claim existed, on the basis of the politicised public service’s sensitivity to the government’s need not to know the truth, no formal advice to this effect was provided. Three days before the election the Australian revealed that locals on Christmas Island had been told by the sailors involved that the story was false. The prime minister appeared at the National Press Club on 8 November. He insisted that he had not been advised that the children overboard allegation was wrong. Following the election, on 14 February 2002, he informed the parliament: “I never received any advice from my department or from any other official or from any of my colleagues indicating that the advice was untrue …”

The proof that the prime minister had lied only emerged in August 2004 when Mike Scrafton, a former career public servant who had been seconded to work in the office of the defence minister, Peter Reith, decided to break a three-year silence. What Scrafton revealed was that he and the prime minister had spoken by phone on the evening of 7 November 2001. Scrafton, ignoring the need-not-to-know principle, had bravely informed the prime minister that no one in the defence department now believed that children had been thrown overboard.

It is almost certain that Scrafton’s account of the conversation was true. He was a highly respected public servant. He had no political allegiances. It is inconceivable that he could have imagined that he had told the prime minister something as important as this when he had not. He had no motive to lie. His story was indirectly confirmed by a second public servant, Jenny McKendry, to whom he spoke on the morning following his conversation with Howard. To prove the veracity of his story Scrafton offered to undertake a lie detector test. Can it be believed he would have done so if he were lying? He passed the test.

Following Scrafton’s evidence it became clear that the prime minister had misled the nation on 8 November 2001 and, more importantly, in regard to the Westminster convention, that he had misled the parliament on 14 February 2002. Nothing much happened. According to current practice, then, ministerial responsibility in contemporary Australia does not appear to include the requirement that ministers who have deliberately misled parliament must resign.

The same is true with regard to systematic ministerial administrative failure, as the following story reveals. For ten months, between April 2004 and February 2005, a mentally ill Australian resident, Cornelia Rau, was detained under the provisions of the Immigration Act as a suspected unlawful non-citizen. Following Rau’s discovery and release, the government appointed a former head of the Australian Federal Police, Mick Palmer, to investigate the case. Palmer’s findings were accepted by the government in their entirety.

Palmer wrote in chapter seven of his report about the disastrous failings in two key sections of the immigration department: detention and compliance. He showed that staffers, responsible for imprisoning thousands of people, were ignorant of the department’s own rules; that officers were discouraged from using common sense; that all criticism was regarded as politically motivated; that the “culture” of these sections was one of “self-justification” and “denial”; and that in the department this culture went almost to the top.

The response to this aspect of the Palmer inquiry was odd. The prime minister shrugged off the rather half-hearted calls from the Opposition and the media for the resignation of the two ministers who had been in charge of the department for the past nine years. Howard believed that the failure to tackle – or even to notice – calamitous weaknesses in the department for which they were responsible did not constitute grounds for ministerial resignation. For the department’s failings only its secretary, Bill Farmer, who was moved from his post to the ambassadorship in Jakarta, formally shouldered any blame. A new principle emerged: not ministerial but secretarial responsibility.

This brings us to the largest scandal in the history of the Howard government: the payment by AWB of bribes to Saddam Hussein. As a result of the Cole inquiry certain key facts are no longer in dispute. AWB was the world’s largest participant in the UN’s Oil-for-Food scheme. Between 1998 and 2003 it sold Iraq $2 billion of wheat. In return for this market it paid the regime $300 million in kickbacks. The mechanism was simple. All transactions in the Oil-for-Food program were conducted through a UN ‘escrow’ account. Iraq paid AWB inflated prices for its wheat into this account. In return, AWB paid substantial sums in US dollars directly to a Jordanian trucking company, Alia, a front company for the Iraqi regime. The trucking fees increased sharply over time. In 1999 AWB paid Alia $US12 per metric tonne of wheat. On the eve of the Iraqi invasion it paid $US56. This foreign currency went from Alia to Iraq. As economists tell us, money is ‘fungible’. AWB’s $300 million undoubtedly increased the funds available for Saddam to beautify his palaces and pay rewards for murder.

As the Beazley Opposition has gone hoarse pointing out, the terms of reference of the Cole inquiry are very narrow. It is concerned with whether AWB or other corporations broke Australian law. It is not concerned with the performance of the Australian government. Nonetheless, in the course of its investigations the inquiry has uncovered considerable evidence revealing what information of relevance to AWB’s Iraqi wheat-trade practices reached the Howard government and how this information was assessed. Judgment of the government’s AWB performance begins with an examination of this evidence.

In early 2000 the UN passed on to Canberra complaints from Canada that AWB was paying kickbacks to a Jordanian company. The foreign minister, Alexander Downer, told parliament he “would have” read the relevant cables. He told the Cole inquiry he had not. Whatever the case, the complaints were dismissed by a DFAT officer, Bill Bowker, without investigation. In October 2000 AWB belatedly asked DFAT whether it was lawful under the Oil-for–Food program to pay trucking fees to a Jordanian company. DFAT did not ask the UN. Even though one senior DFAT officer, Jill Courtney, already knew that AWB was using Alia, and even though Canberra had been informed as early as 1998 by overseas intelligence that Alia was a front company for the Iraqi regime, another DFAT officer, Jane Drake-Brockman, approved the idea. The letter giving government blessing to AWB payment of the Jordanian trucking fees is presently missing from the DFAT files.

Although under UN Security Council Resolution 661 governments were responsible for ensuring their nationals comply with Iraq sanctions, DFAT interpreted its role in the Oil-for-Food program as a “post-box” for the passage of AWB contracts to the UN. The reason for this interpretation of its obligation has never been satisfactorily explained. If DFAT had done no more than check the contract price Iraq was paying AWB against the world price for wheat, it would have instantly been aware of something strange.

Until mid-2002 Australia’s wheat trade with Iraq went smoothly. At this point a crisis arose. To punish Australia for its membership in the US-led anti-Iraq coalition, the Iraqis threatened to breach contract after ‘discovering’ iron filings in an AWB shipment of wheat. A high-level AWB delegation, accompanied by DFAT officials, rushed to Baghdad. Not only was the wheat trade saved: because the Alia kickbacks were increased to more than $US50 per tonne, on paper Iraq now agreed to pay AWB an even more generous price. We are asked to believe that no one in Canberra was puzzled by Iraq’s decision to reward Australian farmers for their government’s enthusiastic participation in preparations for the invasion of Iraq.

Following the occupation of Iraq, many documents were discovered that revealed the systematic corruption of the Oil-for-Food program. In June 2003 an analysis produced by Captain Blake-Puckett of the US Army showed that every single contract had involved kickbacks ranging from 10% to 19%. The report was summarily dismissed by DFAT. In October, the US Defense Audit Agency reported on an AWB contract that involved a $US14 million bribe. The report leaked in Washington. DFAT described the claim not merely as wrong but as “reprehensible”. However, evidence mounted. In March 2004 a DFAT report conceded for the first time that AWB trucking fees might have reached the coffers of Saddam Hussein. The curiosity of the foreign minister was finally aroused: “This worries me.” Downer called for a report. His curiosity was brief. The report never came.

As evidence became overwhelming that the AWB had paid kickbacks to a regime that Downer described as evil and had deceived his government for many years, the foreign minister showed no anger. He told AWB executives that they could not be blamed for what happened to the money paid to Alia. He recorded that he was “relaxed” about the whole affair. In October 2004 Downer sent the Australian ambassador to the US, Michael Thawley, to see Senator Coleman, in order to prevent a congressional investigation into AWB. Even though DFAT had conducted no inquiry into AWB, Thawley absolutely denied that it had paid any bribes. At the time of the creation of the UN’s Oil-for-Food inquiry, Australia’s attitude appeared to the inquiry’s head, Paul Volcker, to be “forbidding”. Until the prime minister personally intervened, Downer even tried to prevent Volcker from interviewing DFAT officers or seeing DFAT cables. When Downer met Volcker in September 2005 someone present at the meeting claimed that the foreign minister had justified AWB’s behaviour on the ground that paying bribes was the only way to do business with Iraq.

Alexander Downer is the minister with responsibility for the conduct of the Howard government during the AWB scandal. While no evidence has yet emerged to show that he or his department were aware, before Volcker, that AWB was paying bribes, during the Cole inquiry a vast amount of evidence has been produced that shows that if he or his department had actually been interested in this question they could readily have discovered that this was likely to be the case. The Australian government knew that Iraq was corrupting the Oil-for-Food program. Indeed, this was one of the reasons we went to war. It had been informed that Canadians believed that AWB was paying kickbacks; that AWB was paying trucking fees to the Jordanian company Alia; that Alia was a front company for Saddam’s regime; and that trucking fees were a mechanism for the payment of kickbacks. By the simplest check it could have discovered that Iraq was paying AWB vastly inflated prices for its wheat. And by the simplest use of common sense it should have smelt a rat when Iraq responded to Australian hostility by raising the price it paid for our wheat. Yet at no time between 1999 and 2005 did Downer ask his department to investigate whether or not AWB was paying Iraq bribes. Joining dots requires an act of will. To satisfy the contradictory requirements of wheat farmers and the American ally, the government desperately needed not to know.

For once the Australian’s editorialists have got it right: “Short of a neon sign flashing ‘Saddam bribes hidden here’ it is hard to imagine what more Mr Downer and DFAT would have needed to comprehensively investigate AWB.” If Australian politics still included a principle of ministerial responsibility, several weeks ago the prime minister would have called upon his foreign minister to resign. Don’t hold your breath.

Robert Manne

Robert Manne is emeritus professor of politics and vice-chancellor’s fellow at La Trobe University. His most recent books are The Mind of the Islamic State and On Borrowed Time.

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