Morris Corporation won the catering contract last June in partnership with a Kuwaiti company, KCPC, soon after the fall of Saddam Hussein.
The deal was praised by the Howard Government as a signal that Australian companies would get fair treatment over postwar contracts in Iraq.
The contract was to feed 18,000 troops at three camp sites in northern Iraq. But the US company quietly cancelled the deal six weeks later, saying that Morris and its Kuwaiti partner had not met their obligations.
Now an insider involved in the deal alleges that the Australian-Kuwaiti joint venture was approached by a Halliburton employee seeking kickbacks worth up to $3 million during the contract negotiations. "We're not talking about a paper bag. This guy was after a percentage of your sales every month."
The allegations surfaced during a messy legal brawl between Halliburton and its former contractors Morris and KCPC, who are seeking a settlement over the termination of the contract.
The head of Morris Corporation, Robert McVicker, was in Washington this week for legal talks over the settlement.
Questioned at his Washington hotel, Mr McVicker told said he could not comment on the allegations surrounding the collapse of the deal because of the legal negotiations.
But he did say: "While we are disheartened about what's happened in Iraq, we stand to be accountable by whoever. At the very least we have our integrity in tact. We still believe there's an opportunity in Iraq. At this time it would be foolhardy to make comments that could prohibit us from gaining more work.
The smell of corruption in Iraq is getting hard to avoid. In other news, apparently Ahmed Chalabi is now under criminal investigation for his dealings with the CPA. These things happen when you abandon traditional checks and balances. I suppose it's understandable for the Bush administration to feel threatened by the Geneva Conventions. Only the Bush administration could see double-entry book-keeping as a threat to civilisation.
There's a lesson for the Man of Steel as well. The Bush administration is not much interested in his concerns, especially when his government eagerly abandons its citizens to the Bushlag archipelago.