Lawsuit against AWB dropped

NORTH American wheat farmers have withdrawn a $US1 billion ($1.3 billion) class action against the embattled AWB.

NORTH American wheat farmers have withdrawn a $US1 billion ($1.3 billion) class action against the embattled AWB.

Sources told The Australian that the lawsuit - brought by a US legal firm on behalf of a group of farmers who are mostly over 75, destitute and living in Kansas - was considered unlikely to succeed before a conservative court in Washington, where the action was filed.

It may yet be filed in another jurisdiction, with a more sympathetic judge.

The withdrawal of the action, even if temporary, means one less problem for AWB, which yesterday announced a disastrous 68 per cent slump in profits, to $58.1million.

The company said it had spent $23.7million on the Cole inquiry into its $290million kickbacks to Saddam Hussein's regime, with the final report due out tomorrow.

AWB has also spent $10.2million on redundancies.

Managing director Gordon Davis - who all but conceded the loss of the single desk sales regime yesterday - said AWB had abandoned the Iraq market, once worth about $800million a year.

He said Australian farmers would not produce enough wheat in this drought year to sell to Iraq, even if the new regime was buying. "In a sense, with a very small crop, the question of selling wheat to Iraq is moot for the immediate future," he said.

Mr Davis said the company was trying to prepare for any changes the Howard Government had in mind after Commissioner Terence Cole hands down his report on the kickbacks scandal. He wanted AWB to be "best placed for whatever eventualities occur" but refused to go into detail.

He noted there had been a "degree of management turnover" at AWB - the CEO and at least seven senior executives have left the company since the Cole inquiry started.

"It's a pact between the Government and wheat growers - what they wish to do with those arrangements in the future," Mr Davis said. The company had been "mindful" that at some point the export arrangements could change.

He said the results were "clearly disappointing compared to previous years, but in the circumstances a significant achievement". AWB shares are the worst-performing on the benchmark S&P/ASX 200 index this year, having plunged 59 per cent since December.

The company refused to give "any guidance on the profit number" for the future.

Mr Davis said a new culture would be imposed on AWB. "Clearly there is a task ahead on reputation," he said. "We're doing a lot of work there", so AWB employees "when they reach that fork in the road, they know what decision to make".

"The journey we're going through, it won't be quick."

Mr Davis acknowledged the tough road ahead, saying that due to the uncertainty surrounding the immediate future of the company "we don't intend to issue any profit guidance" at present.

The Australian reported in June that North American farmers had lodged the $US1billion claim after AWB was named as the largest single supplier of kickbacks to Saddam's regime.

The farmers hoped to sue AWB using the RICO (Racketeer Influenced and Corrupt Organisations) or racketeering laws, which were designed to bankrupt the Mafia.

But US lawyers were unable to convincingly show the court how ... AWB's actions had harmed US wheat farmers.