THE Australian Securities and Investments Commission's bid to sue former AWB chief executive Andrew Lindberg for allegedly misleading fellow directors is looking dire after a Victorian Supreme Court judge launched a broadside at the way it has handled the case.
Justice Ross Robson yesterday suggested the corporate regulator had raised "silly" examples to support its allegation that Mr Lindberg misled AWB directors or failed to tell them what he knew about AWB's secret program of paying kickbacks to Iraq.
He sharply criticised ASIC investigators and the credibility of an affidavit that the court heard was drafted by ASIC lawyers on behalf of a senior ASIC investigator Brendan Caridi.
AWB secretly paid more than $US225 million in kickbacks, disguised as trucking fees, to Iraq for at least four years until US-led forces invaded Baghdad and toppled Saddam Hussein. The payments, which AWB hotly denied for three years, breached UN sanctions and ultimately caused AWB commercial damage.
Mr Lindberg wants the court to halt one of two civil penalty cases ASIC has initiated against him. In the first, ASIC alleges Mr Lindberg breached his fiduciary duties because he knew about the kickbacks and failed to stop them.
The second, initiated on November 6 and which Mr Lindberg wants thrown out, alleges he misled AWB's board over Project Rose, the Tigris payment and the grave nature of the UN Volcker inquiry's investigations into AWB's dealings with Iraq.
Mr Lindberg claims that allowing the second case to proceed would be vexatious, oppressive and unfair.
ASIC has told the court that when Justice Robson rejected its request this year to amend the first case to incorporate the second, it believed the only option was to start a fresh action against Mr Lindberg.
On Monday, Mr Caridi told the court that it was not until early this year, more than 12 months after ASIC filed civil penalty cases against six AWB officers, that ASIC investigators realised Mr Lindberg may have committed more serious breaches of the Corporations Act by allegedly misleading the board.
But Justice Robson yesterday suggested Mr Lindberg might want to argue that ASIC was "gilding the lily", adding that if the regulator believed for some time that Mr Lindberg knew about the kickbacks, then its officers were slow to understand what flowed from that. "I can say now I do not find him (Mr Caridi) a dishonest witness. I think he did the best he could in the circumstances," he said.
But he suggested Mr Caridi's evidence was hampered by "what the (ASIC) lawyers put in front of him".
"The problem was none of the 19 (ASIC) investigators joined the dots," Justice Robson said. "Once you say that Mr Lindberg knew about the bribes, everything from there was a complete sham."
He said if ASIC wanted to argue that Mr Lindberg knew that the trucking fees were in fact bribes, which was what it argued in its first case, "everything he did thereafter concerning the allegations that these fees were bribes was a fraud", so ASIC's case alleging he misled the board is only an example of that.
"When he spoke to the lawyers and said, 'We'd like you to investigate' that is fraud," the judge said. "When he wrote to the prime minister, when he wrote to (former foreign minister) Mr Downer, when he gave instructions for lawyers to go to Washington. I mean, this is what I don't understand the second proceeding is doing.
"Once you establish that he knew (about the kickbacks), everything that happened thereafter until he left, he stood by and allowed to happen, knowing that people were going up the wrong path - whether it's Project Rose, the Volcker inquiry, the letter to Mr Downer, talking to the solicitors, talking to his subordinates, talking to his secretary, everything he did.
"And if anybody sat down and thought about it, it's obvious that once you allege he knew, and he didn't tell the board, it's obvious he didn't tell anybody.
"The criticism is not that he misled the board, it is that he kept quiet and allowed it to go on," the judge said. "The criticism is he just remained mute while the company is spending a fortune defending these allegations."
But the judge said those allegations were already included in ASIC's first case and, he told Mr Lindberg's lawyers, "the consequences, as you appreciate, are really serious".
"If they had nipped it in the bud, there wouldn't have been a Cole inquiry," he said.
The hearing continues.
Email a friend