AWB has admitted that it knew the fees it was paying to a Jordanian transport company were being passed on to Saddam Hussein's regime.
But the grain exporter will defend a $100 million shareholder class action by saying Australian and United Nations officials knew of the payments - and they did not breach the UN Oil-for-Food Program.
When the class action began in the Federal Court yesterday, the barrister for the shareholders, John Sheahan, SC, said he had read ''with some surprise'' the admission in AWB's outline of submissions filed on Monday.
Mr Sheahan read out earlier statements by AWB to the stock exchange, including one from October 2005 saying that ''AWB has consistently maintained its position that it did not know, and could not know, what Alia [the Jordanian company] did with the money AWB paid to it by way of transport fees''.
Mr Sheahan said this reflected the company's ''traditional position'' about its dealings with Alia, expressed when Paul Volcker investigated the issue for the UN in 2005 and Terence Cole, QC, conducted an Australian commission of inquiry in 2006.
In the outline of submissions filed this week, AWB's barrister, Charles Scerri, QC, said: ''AWB admits, in respect of the contracts pleaded in the statement of claim, that it paid the fees to Alia [and] that it knew the fees were to be remitted by Alia to the Iraqi State Company for Water Transport.''
Mr Scerri is not expected to begin his opening address until Monday, but his outline said that in addition to showing that the UN and the Department of Foreign Affairs knew about the payments, his client would show that it met its obligations under the stock exchange's continuous disclosure regime and did not mislead the sharemarket.
Mr Sheahan said the outline ''would seem to involve an admission that AWB's traditional position was always false''.
He said ''one of the least satisfactory parts of AWB's conduct'', given its admission, was ''that when these issues were raised with it, its tactic was to imply that the allegations were maliciously raised for commercial purposes by its competitors'', he said. The competitors were North American wheatgrowers, who sounded the alarm.
Mr Sheahan said the evidence would show that UN and Australian officials trusted AWB.
Referring to written exchanges among officials after Canadian wheatgrowers complained to the UN, he said: ''There seems to have been a level of confidence that AWB and Australia would be doing the right thing about this, so that if there was a breach it would be inadvertent.''
He also referred to dozens of AWB documents, which he said chronicled how executives came up with ''a payment to facilitate the disguise''.
Internal emails showed that senior AWB officers had ''knowledge of the true beneficiary of this money''. The emails were ''a manifestation of the concern about revealing the true nature of the transactions'', he said.
Shareholders are seeking compensation for losses they say were caused by belated disclosure of facts during the Cole inquiry. ''We say because the market price for AWB shares was inflated by its misconduct, the shares could only be acquired at an inflated price,'' Mr Sheahan said.
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