The lawyers for AWB shareholders seeking over $100m in damages have told a court they were surprised by an apparent admission that it made payments to Iraq's government.
Opening a Federal Court trial in Sydney on Wednesday, John Sheahan, SC, a barrister acting for AWB shareholders, told the court that written submissions by AWB seemed to contain an admission that its "traditional position" about the payments was always false.
Retired farmers and former AWB shareholders John and Kaye Watson filed the class action against AWB in April 2007, and since then over 1,000 other retail and institutional shareholders have joined.
They are claiming a total of over $100 million in losses, a result of a drop in AWB shares when the 2006 Cole inquiry investigated AWB's payment of more than $290 million to the Iraq's former Saddam Hussein regime between 1999 and 2003.
Payments were 'disguised'
The payments were disguised as fees to Alia, a Jordanian company partly owned by the Iraqi Ministry of Transport, and were made in exchange for access to the country's lucrative wheat markets.
AWB shares lost about one-third of their value in the month after the Cole inquiry began in January 2006, he said.
Mr and Mrs Watson were in the court on Wednesday but made no public comment as they are due to appear as witnesses in the trial.
A key allegation against AWB is that the former monopoly wheat trader failed to meet continuous disclosure obligations imposed by the Corporations Act by not informing the market of the payments.
AWB blamed for misleading conduct
The applicants also allege AWB engaged in misleading or deceptive conduct through its representations about the nature of its dealings with Iraq and the company's integrity during this time.
AWB has denied these allegations.
Mr Sheahan said AWB's traditional position throughout the kickbacks scandal was illustrated by a press release it issued in response to the findings of United Nations inquiry into its Oil For Food Program in 2005.
AWB stated in the release that it did not and could not know what Alia did with the payments, described by Mr Sheahan as the company's "traditional position".
"In other words, it was a dupe or a patsy," he said.
Payments would go to Iraqi government
However in submissions to the court ahead of the current trial AWB admits it made payments that it knew would go to the Iraqi government, he said.
"We therefore read AWB's (submission) with some surprise," Mr Sheahan said.
"It would seem that involves an admission that AWB's traditional position was always false."
Justice Lindsay Foster commented that "those in control now may have come to this realisation recently", to which Mr Sheahan said he was not necessarily claiming the position was knowingly false, just that it was false.
Earlier Mr Sheahan told the court he was not planning to call any former AWB executives as witnesses in the trial, with the possible exception of the company's former regional manager for the Middle East, Dominic Hogan.
Mr Sheahan's opening submissions are expected to continue for several days, as he takes the court through documentary evidence chronologically detailing AWB's dealings in Iraq.
AWB is expected to open its defence in the trial on Monday.
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