The head of the inquiry into the kickbacks scandal, Terence Cole, QC, accused AWB lawyer Jessica Lyons of suggesting ways AWB could get around United Nations sanctions which banned any payments to the Iraqi government.
Newly released documents shown to the inquiry show how Ms Lyons provided AWB sales and marketing executive Chris Whitwell with legal advice about how to make the payment in January 2003.
AWB had agreed to pay the money to the Iraqi Grain Board (IGB), which had accused AWB in 2002 of sending a shipment of wheat contaminated with iron filings.
AWB never ended up paying the money, which the Iraqis wanted funnelled through a Jordanian based trucking firm part-owned by Saddam's regime, because of the US-led invasion of Iraq in March 2003.
However, just three months before the invasion, Mr Whitwell asked Ms Lyons for advice about whether any compensation could be paid for the iron filings claim.
Ms Lyons emailed him on January 24, 2003, noting that UN resolutions expressly forbade any payments to Saddam's government.
However, she set out three suggestions about how the payments could possibly be made.
Ms Lyons suggested the payments could be made in instalments, made to a company other than the IGB and based outside Iraq, and be recorded as being part of a settlement between the Iraqis and AWB over the contaminated wheat shipment from 2002.
"If we ensure that the above requirements are met then I consider it will be at least arguable that we are not 'making funds or financial resources available' to the Iraqi government," Ms
Lyons wrote.
Commissioner Cole today suggested to Ms Lyons that she was providing advice on how AWB could get around UN sanctions.
"Not to put too sharp a point on it, you have said in first few paragraphs (of the email) we can't pay money to Iraq and then said here's a way of getting around the sanctions," he said.
But Ms Lyons said what she wrote was a "legalistic interpretation" of how legitimate payments could be made.
"At the time I genuinely considered that payment to the transport company could be made that would not fall foul of the UN sanctions," she told the inquiry.
Ms Lyons denied suggestions by counsel assisting the inquiry John Agius, SC, that she had put her ethics as a lawyer aside and succumbed to pressure to come up with a scheme so AWB could get around UN sanctions and still make the payments.
"There was certainly an overwhelming commercial imperative to make this payment ... I think there was a commercial imperative to make the payment but I absolutely don't believe I would have been proposing something that would have been a breach of the sanctions.
"But I did have concerns about this advice after having provided it."
The inquiry continues.