Anthony Steadman, former head of the Department of Trade and Industry's export licensing unit, said his statement did not accurately reflect government knowledge about defence-related exports to Iraq after being twice amended by prosecution lawyers.
Despite complaining that he was 'unhappy' with the initial statement, he had signed it because he 'assumed the legal advice he was given was correct', he said.
His final statement suggested government suspicions that the exports were destined for weapons plants were overridden by 'reassurances' from the company that the exports were intended for civil use. He admitted that the exports were really allowed to protect intelligence sources, and the reassurances were irrelevant.
He had later given evidence at the Old Bailey in the prosecution of three businessmen charged with breaches of export regulations. The businessmen maintained that the Government was kept fully informed about the company's activities and sanctioned them. They were acquitted.
Mr Steadman said Customs investigators, who drew up his initial statement, failed to reflect the extent of government knowledge that the Coventry- based machine tool company was supplying equipment to Iraqi weapons factories.
'I told them (Customs and Excise) I was unhappy with this section because it wasn't positive enough about the state of our knowledge,' he said.
His statement also said he had briefed ministers about the situation and Customs had warned of their suspicions about the company's links with Iraq. It was referred to Andrew Leithead, a Treasury solicitor, who said the references should be deleted.
Mr Steadman said he had agreed to sign the revised statement even though it was inaccurate. He said he assumed there had been a 'good reason' for the deletions.
Presiley Baxendale QC, the inquiry counsel, asked: 'Did it worry you that things were being taken in and out of your statement at will?'
Mr Steadman replied: 'I assumed people were acting in good faith.'
His statement was amended a third time following advice from Alan Moses QC, leading counsel for Customs and Excise, who warned that the trial judge would reject 'gagging orders' signed by ministers to withhold papers revealing the true extent of the Government's knowledge if officials claimed they had no suspicions about what the company was doing.
He admitted the third statement wrongly stated that there was no hard evidence to link Matrix Churchill to the Iraqi munitions industry, saying he had forgotten about repeated intelligence reports warning that the firm's machines were going to President Saddam Hussein's ballistic missile programme. He admitted failing to check the information.
He admitted he would not have signed the statement if he had remembered the intelligence. 'I was convinced in my mind I was right because of my contact with the company over the period.'
Lord Justice Scott said the fact that the defendants 'would never be in a position' to challenge his statement made it more important that Mr Steadman was certain he did not 'misrepresent' the situation.
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