ASIC: Cole was wrong

In an extraordinary day of courtroom cross-examination, Brendan Caridi, a senior manager in ASIC's fraud investigation unit, also offered rare insights into the regulator's lack of resources, saying ASIC in 2006 deployed just three employees to monitor "very sporadically" the Cole Inquiry, and that was "only when capacity permitted".

The Cole Inquiry, which reported in late 2006, found that AWB for at least four years capitulated to Iraqi demands and secretly paid kickbacks to Saddam Hussein's corrupt regime in breach of UN sanctions.

"I had approximately three officers who would review transcripts (from the Cole Inquiry) on a sporadic basis," Mr Caridi told the Victorian Supreme Court yesterday, adding the investigators read "about 5 per cent of the transcript".

He said that ASIC at the time had many other matters under investigation and the allocation of officers to AWB "would have depended on those other matters".

Mr Caridi also indicated that ASIC in 2007 was not entirely happy with being locked into the oil-for-food taskforce, led by the Federal Police.

That was because while the taskforce focused on potentially serious criminal offences arising from AWB's kickbacks, time was running out for ASIC to sue AWB officers under civil penalty provisions of the Corporations Act, he said.

Mr Caridi was called to give evidence yesterday before Justice Ross Robson, who is hearing Mr Lindberg's bid to halt permanently the second of two civil penalty cases ASIC has initiated against him.

In the first, ASIC alleges Mr Lindberg breached his fiduciary duties because he should have stopped the kickbacks, and by not doing so, brought AWB into disrepute.

ASIC's second case, filed earlier this month, alleges he misled the board about Project Rose (an internal AWB investigation now widely discredited as a cover-up), the so-called Tigris payment and the nature of inquiries by the UN's independent Volcker Inquiry into the Iraq kickbacks.

The Tigris deal involved AWB rorting the UN escrow account to help a former BHP executive, Norman Davidson Kelly, extract more than $US7 million for a highly dubious "debt" he claimed was owed by Iraq.

Mr Lindberg has asked the court to halt the second case, describing it as an abuse of process, unjustifiably oppressive, vexatious and unfair.

Mr Caridi told the court that in August 2007 ASIC split from the oil-for-food taskforce. Nine ASIC officers deployed to the taskforce were recalled and joined by 10 more ASIC investigators and legal advisers, plus, for one month only, three officers of the federal police.

He said ASIC, anxious to file its civil penalty cases before a six-year statute of limitations expired in December 2007, directed its investigations from August 2007 until December 2007 solely on identifying potential breaches arising from five AWB wheat export contracts with Iraq.

After December 2007, when it filed civil penalty cases against six former officers, including Mr Lindberg and a former chairman Trevor Flugge, ASIC turned its attention to possible criminal breaches of the Corporations Act, Mr Caridi said.

But he said ASIC at that stage "was not aware of any likely civil penalties breaches that might warrant further investigation" nor did it intend issuing any further civil actions.

Mr Caridi conceded ASIC had all the material from the Cole Inquiry, including witness statements, but said it was only this year that the investigators saw more potential civil breaches by Mr Lindberg.

He said in February and March this year, after reviewing certain documents and interviewing witnesses, including former AWB chairman Brendan Stewart, ASIC investigators decided Mr Lindberg "might have knowingly or negligently misled the board" about Project Rose, the Tigris payment and the Volcker Inquiry.

Mr Caridi said although Commissioner Terence Cole, QC, in 2006 exonerated Mr Lindberg, saying the former CEO did not know about the wheat exporter's secret payments of $US225 million to Iraq, ASIC reached a different view.

"We disagreed with Commissioner Cole, respectfully," he said.

The hearing continues.