A 2001 Department of Foreign Affairs and Trade document revealed at the Cole inquiry into the AWB bribery scandal yesterday detailed efforts by Saddam's regime to corrupt the UN oil-for-food program by collecting kickbacks.
It was distributed widely within the government, including the offices of Prime Minister John Howard, Foreign Minister Alexander Downer, Trade Minister Mark Vaile and then agriculture minister Warren Truss.
The opposition Labor Party says the cable, written by government official Bronte Moules, should have set off alarms in the government.
But Mr Howard said it was misleading to say the government had been tipped off about bribes.
"When you read the cable you find, in fact, that the diplomat in
New York told the government in Canberra that they had received assurances from AWB that kickbacks had not been paid," he told Southern Cross radio. "They did not believe for a moment they had been paid."
He said the cable showed Ms Moules had pointed out to AWB that the United Nations Security Council resolutions must be observed and warned the wheat marketer against any suggestion the sanctions could be avoided.
Mr Howard said the situation could not be compared with TV show
Hogan's Heroes character Sergeant Schultz, whose catchphrase was "I know nothing". "It's not a Sergeant Schultz situation," he said.
"How can it be a Sergeant Schultz situation if we have an eminent lawyer who is conducting a thorough investigation and is receiving full cooperation from the government?"
Mr Howard said no evidence had been produced before the Cole commission demonstrating that government ministers had been told the AWB paid kickbacks.
He said the response of the diplomat was first class in warning AWB of its obligations.
"She then reported that she was satisfied on the basis of the assurances given by AWB that no kickbacks had been paid," he said.
"Now it is all very well five years later when people turn around and say you should have done this, you should have done that. People have to react... from the circumstances of the time."
Mr Howard said the cable showed a diplomat doing her job, not negligence.
"We did not know that kickbacks were being paid by AWB. Suspicions of that first arose in the context of the Volcker Inquiry which was long after the oil-for-food program had ended.
"At all times, I encouraged not only the government but also I instructed the government and I encouraged AWB - in no uncertain terms - to cooperate fully with the Volcker Inquiry," Mr Howard said.