AWB chairman 'should have blown whistle'

AWB's chairman could have put a stop to its "evil" sham payments which effectively exported $300 million in cash to Saddam Hussein's brutal regime, a court has heard.

Instead, the Australian wheat exporter simply closed its eyes and paid the kickbacks, designed to get around UN sanctions on trade with Iraq, the trial of AWB's former chairman Trevor James Flugge and former group general manager trading Peter Anthony Geary heard.

Australian Securities and Investments Commission (ASIC) counsel Norman O'Bryan SC said Mr Flugge should have blown the whistle.

"As chairman of the board of this company, Mr Flugge could have done many things which would have put an effective end to what occurred," Mr O'Bryan said on Monday.

Mr O'Bryan said Mr Flugge should have said: "We must not do this. We must stop. It's wrong. It's evil."

The Victorian Supreme Court heard AWB's contracts with the Iraqi Grain Board under the UN oil-for-food program were inflated by disguised inland transportation and after-sale service fees.

Mr O'Bryan said unknown to Australia's international competitors, AWB accepted a lower price for its wheat and the secret payments effectively handed currency to an Iraqi government desperately in need of all the international currency it could get.

"In effect AWB became an exporter of two commodities from Australia - wheat and cash."

The court heard the Iraqis demanded the fees, which AWB paid to an intermediary company in Jordan called Alia, linked to the Hussein regime, and then recovered the money from a UN escrow account.

"It's no secret around AWB that the trucking fee and the service charge is that, a mechanism of extracting more dollars from the escrow account," Mr O'Bryan said.

ASIC alleges Mr Geary, the fourth highest paid staff member at AWB, personally authorised six payments of the purported fees totalling almost 20 million euros ($A31.03 million) to Alia between March 2002 and February 2003.

ASIC's case also covers Mr Geary's alleged knowledge of AWB inflating contract prices to recover more than $US7 million ($A9.56 million), picking up a $US500,000 ($A682,000) commission, for a debt IGB owed to another company Tigris Petroleum Corporation Ltd.

"This is simply a straight-out fraud being practised upon the UN and the UN escrow account - nothing to do with inland transport fees, simply a designed fraud to inflate the price of wheat," Mr O'Bryan said.

AWB ended up with more than 80 per cent of the Iraqi market.

"It's no coincidence that during those same years AWB was paying the Iraqis tens of millions, amounting to hundreds of millions, by way of fees," Mr O'Bryan said.

The scam came undone after coalition forces including Australia invaded Iraq in 2003.

"It did not take long for the coalition authorities to recognise that some of these contracts under the oil-for-food program had these fees and kickbacks imposed on them," Mr O'Bryan said.

Mr Flugge and Mr Geary face a 10-week civil trial for allegedly breaching their duties as officers.

In a statement, Mr Flugge said he hoped the case would finally put to rest the untested allegations, rumours and innuendo he and his family had lived with since the ASIC action started in 2007.

"I fervently believe now, as I did from day one, that I have done nothing wrong," he said.