Ex-AWB chairman’s reputation ‘untarnished’

Megan NeilThe West Australian
Flugge didn't know AWB's big secret: judge
Camera IconFlugge didn't know AWB's big secret: judge Credit: AAPIMAGE

Katanning farmer Trevor Flugge's reputation for honesty remains untarnished, says the judge who rejected the corporate regulator's case that the former AWB chairman knew about the wheat exporter's "very big and dark secret".

Mr Flugge has been banned from managing a company for five years and fined $50,000 for failing to make inquiries and uncover the truth, after a judge cleared him of knowing about AWB's $US223 million in sham payments to Iraq.

Victorian Supreme Court Justice Ross Robson said the Australian Securities and Investments Commission failed to make out its very serious dishonesty allegations against Mr Flugge and the 70-year-old's reputation for honesty has not been tarnished.

"ASIC alleged Mr Flugge was a hypocrite in that Mr Flugge sat on the board ticking off codes of conduct when behind the back of the board he knew of a 'very big and dark secret, which was behaviour by senior executives of his company, directly contrary to what was in that code of conduct', and that 'worse than doing nothing about it, he positively encouraged management to get on and do this dirty work'."

Justice Robson said Mr Flugge had been of great service to Australian commerce, wheat farmers and the Australian community generally.

AWB's contracts with the Iraqi Grain Board under the United Nations oil-for-food program were inflated by disguised inland transportation fees, a scandal uncovered after the US-led invasion of Iraq that toppled Saddam Hussein in 2003.

Justice Robson said it was the duty of those managing AWB - such as the managing director, the legal department, the corporate risk review committee and the executive leadership group - to ensure AWB was conducting its international trade with probity and observing UN sanctions.

"It appears that these people and bodies may have not properly carried out their duties.

"One would have expected, at the least, some correspondence informing the UN fully of what the IGB had requested, particularly as the fees involved the payment of internationally traded currencies to Iraq."

The judge found Mr Flugge should have made inquiries after being told, at a Washington meeting in 2000, that the UN was looking into whether AWB was making improper payments to Iraq.

The court heard it is highly likely ASIC will appeal the judge's finding that Mr Flugge did not know the payments were contrary to UN sanctions.

Mr Flugge, who says he has no interest in future corporate positions, is reviewing the judgment and considering his position.

ASIC is appealing Justice Robson's dismissal of its case against AWB's former trading manager Peter Geary.

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