AWB Limited

Last updated

AWB Limited
FormerlyAustralian Wheat Board
ASX:  AWB
Industry Grain
Founded1939
Founder Government of Australia
Defunct2010
Headquarters
Melbourne
,
Australia
Revenue$5.5 billion (2010)
$407 million (2010)
$13 million (2010)
Number of employees
2,200
Website www.awb.com.au

AWB Limited was a major grain marketing organisation based in Australia. Founded in 1939 by the Government of Australia as the Australian Wheat Board, in 1999 it became a private company, owned by wheat growers. It was acquired by Agrium in 2010.

Contents

History

The AWB was founded in 1939 to regulate the wheat market after the excesses of the Great Depression. The single desk dates to this period. This type of arrangement was not unique to Australia, as the Canadian Wheat Board was created in 1935 in a similar fashion (but its history dates back to an earlier wheat marketing board created during World War I, and also includes the experience of cooperative wheat pools during the 1920s).

For much of its early history, it was a government-run and owned company. In July 1999, it was restructured as a private company. It offered "class A" shares to those who met its definition of growers and who had the ability to elect the majority of its board and chairperson, [1] and from August 2001, 'class B' were publicly traded on the Australian Securities Exchange. [2] [3] In 2008, constitutional amendments were passed. Despite resistance from several wheat lobbies and industry groups, it consolidated ownership of AWB into one type of share, giving growers no special consideration. [1] This change was proposed by the AWB management as necessarily to having a simpler, lower-risk business model. [4]

After privatisation, AWB grew to incorporate a number of subsidiaries to diversify its income away from its wheat exports. Its subsidiary businesses include GrainFlow to manage collection of grain from farmers to ports, companies to ship the grain overseas to customers, and Landmark rural services.

Corporate structure

AWB Limited was a holding company owning a number of subsidiaries. Its shares were freely traded on the Australian Securities Exchange.

AWB Limited had a number of subsidiaries. Some of these subsidiaries existed due to legislative requirements relating to the operation of the single desk; others exist for the purpose of controlling credit risk. As of early 2006, they were:

AWB announced a new strategy in 2009 to simplify and de-risk the business. This resulted in the divestment of the financial services loan book to the ANZ Bank in December 2009. [5]

In March 2010, AWB announced the signing of a memorandum of understanding to sell the Geneva business and to joint venture the local grain trading business. [6]

Oil for food scandal

Previously a low profile organisation, the AWB made headlines in late 2005 when it was alleged that it had knowingly paid kickbacks to the Iraq Government, in violation of United Nations sanctions and Australian law. Following the Iraqi invasion of Kuwait in 1990, the United Nations had imposed a financial and trade embargo on Iraq. However, after facing criticism over the humanitarian impacts of the sanctions, the UN from 1995 until late 2003 allowed Iraq to trade oil on the world market in exchange for food, medicine and other humanitarian needs.[ citation needed ]

Despite this, at the insistence of the Iraq government of dictator Saddam Hussein, the AWB agreed to pay "transportation fees" of around $A$290 million.[ citation needed ] This money was paid to a Jordanian transportation company, Alia. Alia kept a small percentage of the fees, and paid the remainder onto Saddam's government.[ citation needed ] This breached the sanctions placed on the Iraqi regime.

The government-sanctioned Cole Inquiry into the company's role in the scandal has been completed and was tabled by Attorney-General Philip Ruddock on 27 November 2006. [7] The report found that, from mid-1999, AWB had knowingly entered into an arrangement that involved paying kickbacks to the Iraqi government, in order to retain its business. [8] The Inquiry recommended that 12 people be investigated for possible criminal and corporations offences over the scandal. [7]

At the height of the investigation, the single-desk arrangement from which AWB benefits came under criticism. In 2006, the Australian Grain Exporters Association asked the Government to remove AWB's monopoly export powers. [9] The oil-for-wheat scandal cast doubt among some grain exporters over the trust placed in the company, especially as they lost the ability to export to Iraq during the length of the Cole Inquiry, losing one of their biggest markets. [10]

The scandal resulted in international condemnation and litigation. On 11 July 2006, North American farmers claimed $1 billion in damages from AWB at Washington DC, alleging the Australian wheat exporter used bribery and other corrupt activities to corner grain markets. The growers claimed that AWB used the same techniques to secure grain sales in other markets in Asia and other countries in the Middle East. [11] The lawsuit was dismissed in March 2007. [12]

In August 2009, the Australian Federal Police dropped their investigation into any criminal actions undertaken by AWB and others in this matter. This decision came after Paul Hastings QC declared the prospect of convictions was limited and "not in the public interest". [13] The Australian Securities & Investments Commission then proceeded with several civil cases against six former directors and officers of AWB. [14] AWB's former managing director Andrew Lindberg and former chief financial officer Paul Ingleby were ultimately fined and banned from managing a company for one year. [15] [16] Former chairman Trevor Flugge was also fined, and banned from managing a company for five years. [17] A civil suit brought by shareholders of AWB was settled out of court for $39.5 million in February 2010. [18]

Australia's government has distanced itself from the payments to Saddam Hussein's regime, given Australia's contribution to military action against Hussein in the 2003 invasion of Iraq. Andrew Lindberg resigned as managing director on 9 February 2006 and from the board of directors on 22 February 2006 under intense public and media pressure. [19]

Business performance post Cole Inquiry

In the years immediately following the Cole Inquiry, AWB continued to be dogged by bad performance. [20]

Following the publication of the Cole Inquiry, a new management team was installed under the leadership of Gordon Davis who was recruited from Orica in August 2006. Davis successfully reformed the constitution and the shareholder structure to consolidate into 1 class of shareholder. [4]

This new management team has not been entirely without controversy. On 26 April 2007, Yahoo News reported that AWB also breached US sanctions on Iran. These sanctions prohibit American citizens and companies using American currency from trading with Iran. In 2006, AWB's US subsidiary attempted to pay an Iranian transport company approximately $1 million, in clear breach of the US sanctions. [21]

In 2009, the company faced difficulties in another new market, when it was forced to recapitalise the balance sheet after the company produced significant losses from the expansion of trading activities into Brazil under Davis. [22]

Despite making a small profit in 2009, [23] in March 2010, the company announced a profit downgrade from domestic trading activities. [24] In May 2010, it reported a half-year loss of $64.8 million, which it claimed due to the cost of settling the shareholder class action for $39.5m, and a loss of $65.4m on restructuring costs associated with its sale of the Landmark Financial Services loan and deposit books. [23]

Sale

In July 2010, AWB entered into an agreement to merge with GrainCorp. [25] This did not proceed, after Agrium made a successful takeover offer that was completed in December 2010, with the company delisted from the Australian Securities Exchange. [26] [27] [28] In 2011, Cargill acquired the AWB Commodity Management business from Agrium. [29]

Related Research Articles

<span class="mw-page-title-main">Oil-for-Food Programme</span> Programme headed by the United Nations

The Oil-for-Food Programme (OIP) was established by the United Nations in 1995 to allow Iraq to sell oil on the world market in exchange for food, medicine, and other humanitarian needs for ordinary Iraqi citizens without allowing Iraq to boost its military capabilities.

<span class="mw-page-title-main">Canadian Wheat Board</span> Defunct Canadian marketing board

The Canadian Wheat Board was a marketing board for wheat and barley in Western Canada. Established by the Parliament of Canada on 5 July 1935, its operation was governed by the Canadian Wheat Board Act as a mandatory producer marketing system for wheat and barley in Alberta, Saskatchewan, Manitoba, and a small part of British Columbia. It was illegal for any farmer in areas under the CWB's jurisdiction to sell their wheat and barley through any other channel than the CWB. Although often called a monopoly, it was actually a monopsony since it was the only buyer of wheat and barley. It was a marketing agency acting on behalf of Western Canadian farmers, passing all profits from its operation back to farmers. Its market power over wheat and barley marketing was referred to as the "Single Desk".

<span class="mw-page-title-main">Agrium</span>

Agrium Inc. was a major retail supplier of agricultural products and services in North America, South America and Australia and a wholesale producer and marketer of all three major agricultural nutrients and a supplier of specialty fertilizers in North America.

Andrew Alexander Lindberg is an Australian businessman.

The Export Wheat Commission (EWC) was a statutory authority of the Australian government. The EWC was established on 1 October 2007 and superseded the Wheat Export Authority (WEA). The EWC was a statutory commission operating under the Financial Management and Accountability Act 1997.

The Cole Inquiry, formally the Inquiry into certain Australian companies in relation to the UN Oil-For-Food Programme, was a Royal Commission established by the Australian government pursuant to the Royal Commissions Act 1902 to investigate "whether decisions, actions, conduct or payments by Australian companies mentioned in the Volcker Inquiry into the United Nations Oil-for-Food Programme breached any Federal, State or Territory law."

Terence Rhoderic Hudson Cole,, is an Australian jurist, known best for presiding over two Australian Government Royal Commissions.

Caroline Overington is an Australian journalist and author. Overington has written 13 books. She has twice won the Walkley Award for investigative journalism, as well as winning the Sir Keith Murdoch prize for journalism (2007), the Blake Dawson Waldron Prize (2008) and the Davitt Award for Crime Writing (2015).

Trafigura is a multinational commodity trading company domiciled in Singapore with major regional hubs in Geneva, Houston, Montevideo and Mumbai, founded in 1993. The company trades in base metals and energy. It is the world's largest private metals trader and second-largest oil trader having built or purchased stakes in pipelines, mines, smelters, ports and storage terminals.

Trevor James Flugge is an Australian farmer and businessman. He is best known as a former official of the Australian Wheat Board (AWB). He joined the board in 1984, was chair of AWB in 1995–2002, and was present at meetings in Iraq which were linked to the Oil-for-Food scandal, and an inquiry by the United Nations.

<span class="mw-page-title-main">El Zorro (railway)</span>

El Zorro was an Australian railway operator hauling freight and infrastructure trains in Victoria and New South Wales.

<span class="mw-page-title-main">Paul O'Sullivan (diplomat)</span> Australian diplomat and public servant

Paul Thomas O'Sullivan, is an Australian diplomat and public servant who served as Australia's High Commissioner to New Zealand and as former Director-General of Security. O'Sullivan accepted a role as a political advisor for the Abbott government in 2013.

The Wheat Export Authority (WEA) was established 1 July 1999 as part of restructuring the former government-owned Australian Wheat Board in preparation for its sale as AWB Limited. It was felt that a number of the tasks carried out by the previous Australian Wheat Board would not be appropriate for a privately owned body; thus, the WEA was established. The WEA's role was determined by the Wheat Marketing Act 1989 and its operations were funded by a charge on Australian wheat exports.

The Oil-for-Food Program Hearings were held by the U.S Senate Permanent Subcommittee on Investigations beginning in 2004 to investigate abuses of the United Nations (UN) Oil-for-Food Programme in which the economically sanctioned country of Iraq was intended to be able to sell limited amounts of oil in exchange for vital food and medicine for its population.

Richardson International Limited is a privately held Canadian agricultural and food industry company headquartered in Winnipeg, Manitoba. The company is one of several companies that are owned by James Richardson & Sons Limited. The company is a worldwide handler and merchandiser of all major Canadian-grown grains and oilseeds and a vertically integrated processor and manufacturer of oats and canola-based products. Richardson has over 2,500 employees across Canada, the U.S. and U.K. Richardson International is a subsidiary of James Richardson & Sons, Limited, established in 1857.

<i>Neat Domestic Training Pty Ltd v AWB Ltd</i> Judgement of the High Court of Australia

NEAT Domestic Trading Pty Ltd v AWB Ltd was a case before the High Court of Australia which was decided in 2003.

The AWB oil-for-wheat scandal refers to the payment of kickbacks to the regime of Iraqi president Saddam Hussein in contravention of the United Nations Oil-for-Food Humanitarian Programme. AWB Limited is a major grain marketing organisation based in Australia. For much of the 20th and early 21st century, it was an Australian Government entity operating a single desk regime over Australian wheat, meaning it had the sole ability to export Australian wheat, which it paid a single, fixed price for. In the mid-2000s, it was found to have been, through middlemen, paying kickbacks to the regime of Saddam Hussein, in exchange for lucrative wheat contracts. This was in direct contradiction of United Nations Sanctions, and of Australian law.

A single desk is a monopoly marketer and buyer of a product with multiple suppliers. They were common in markets for agricultural produce.

The wheat industry of Australia has been organised by government regulation, by both the Commonwealth Government and state governments.

<span class="mw-page-title-main">Bronte Moules</span> Australian diplomat

Bronte Moules is an Australian diplomat. She was Ambassador to Zimbabwe, having previously served as Deputy High Commissioner to Papua New Guinea. Moules also had responsibility for Malawi, the Democratic Republic of the Congo, the Republic of the Congo, and Zambia. She became Ambassador to Myanmar effective January 2011.

References

  1. 1 2 AWB Constitution", ABC Rural, 14 January 2008. Retrieved 25 May 2010
  2. ↑ Admission to Official List Australian Securities Exchange 22 August 2001
  3. ↑ Corporate History AWB Limited
  4. 1 2 "AWB Ltd 2009 Annual Review Archived 2011-07-06 at the Wayback Machine ", AWB Limited. Retrieved 25 May 2010
  5. ↑ "Completion of Landmark Financial Services sale to ANZ". ASX. Archived from the original on 12 March 2011. Retrieved 24 May 2010.
  6. ↑ "AWB and Gavilon sign MoU regarding Commodities Management". AWB. Archived from the original on 12 March 2011. Retrieved 24 May 2010.
  7. 1 2 "Cole Recommends Criminal Probe", News Limited, 2006. Retrieved 27/11/06
  8. ↑ "Summary, Recommendations and Background". Cole Inquiry. Australian Department of the Attorney-General. Archived from the original on 23 March 2011. Retrieved 24 May 2010.
  9. ↑ Clifford, Catherine (25 January 2006). "Grain exporters wants AWB monopoly removed". ABC Rural News. Retrieved 25 May 2010.
  10. ↑ McCutcheon, Peter (16 February 2006). "Wheat farmers consider the future of single desk policy". 7.30 Report . Archived from the original on 13 January 2009. Retrieved 25 May 2010.
  11. ↑ "US wheat farmers sue AWB". ABC News . 11 July 2006. Archived from the original on 18 April 2008. Retrieved 24 May 2010.
  12. ↑ "US court dismisses AWB lawsuit". The Age . 27 March 2008. Retrieved 24 May 2010.
  13. ↑ Overington, Caroline (29 August 2009). "Federal police drop AWB investigation". The Australian . News Limited. Retrieved 24 May 2010.
  14. ↑ "ASIC launches civil penalty action against former officers of AWB". Australian Securities & Investments Commission. Archived from the original on 10 May 2010. Retrieved 24 May 2010.
  15. ↑ "Former AWB boss fined over Iraqi bribes". ABC News. 9 August 2012. Retrieved 14 January 2024.
  16. ↑ Durkin, Patrick (14 December 2016). "ASIC loses AWB case against Trevor Flugge a decade after Oil-for-Food". Australian Financial Review. Retrieved 14 January 2024.
  17. ↑ Lee, Jane (10 April 2017). "Former AWB Chairman Trevor Flugge banned for five years over oil-for-food scandal". The Sydney Morning Herald. Retrieved 14 January 2024.
  18. ↑ Casben, Liv (15 February 2010). "AWB to pay shareholders $40m". ABC News. Retrieved 24 May 2010.
  19. ↑ AAP (9 February 2006). "Kickbacks: AWB boss quits". Sydney Morning Herald . Retrieved 24 May 2010.
  20. ↑ Leyonhjelm, David (19 March 2010). "Was the old AWB better?". Business Spectator . Retrieved 24 May 2010.
  21. ↑ "AWB 'breaches UN sanctions on Iran". Sydney Morning Herald. 26 April 2007. Retrieved 24 May 2010.
  22. ↑ Hopkins, Philip (23 July 2009). "AWB closes Brazil ops after $65m loss". Sydney Morning Herald. Retrieved 24 May 2010.
  23. 1 2 Brindal, Ray (17 March 2010). "AWB still paying a high price for Iraq kickbacks". The Australian. Retrieved 20 May 2010.
  24. ↑ Brindal, Ray (17 March 2010). "AWB falls sharply on profit downgrade". The Australian. Retrieved 24 May 2010.
  25. ↑ GrainCorp and AWB Enter into Merger Implementation Deed GrainCorp 30 July 2010
  26. ↑ Agrium makes proposal to acquire AWB World Grain 15 August 2010
  27. ↑ Backing for AWB takeover Weekly Times 1 November 2010
  28. ↑ AWB Limited: Removal from Official List Australian Securities Exchange 10 December 2010
  29. ↑ Agrium sells AWB commodity management business to Cargill World Grain 15 December 2010
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.