Matt Nippert is a business investigations reporter.

Billionaire Peter Thiel deal slammed as 'corporate welfare'

The Government is taking flak from both ends of the political spectrum over its dealings with billionaire Peter Thiel, with the New Zealand Initiative blasting its recent co-investment as "corporate welfare".

Eric Crampton, economist and head of research for pro-market think-tank NZI, had previously defended the government's granting of citizenship to Thiel who gained approval after appealing to then-Internal Affairs Minister Nathan Guy to waive requirements he live or intend to live here due to "exceptional circumstances".

Crampton said that decision was a "bet worth making at the time, and one that should not be regretted in retrospect".

However, following revelations Thiel exercised a buyout option in his partnership with the publicly-funded New Zealand Venture Investment Fund - a move that netted the Paypal founder $24m in profits while leaving NZVIF barely breaking even despite both parties bearing equal risk of loss - Crampton said going into business with Thiel was a gamble the Government should not have taken.

"The Government should not be involved in investment pump-priming activities," he said.

"Government economic diversification schemes, in which the government shares in the downside risk if the investment turns sour but only benefits on the upside through increased tax revenues from a successful business, are adventures best avoided," Crampton said.

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Billionaire Peter Thiel makes fortune after 'sweetheart' deal with Government

Venture capitalist Lance Wiggs, who said NZVIF crowded-out private sector activity, welcomed the scrutiny being applied to the government's adventures in venture capital.

He said the buyout option used by Thiel to profit from stockpiling Xero shares was "a lousy clause. That's quite apparent".

"If you saw you could invest millions a listed company, and get that financed for free by the New Zealand government - why wouldn't you do that? I would've done the same. You can't fault Valar for being smart - but you can blame the NZVIF," he said.

The NZVIF has declined the opportunity to discuss the terms of its deal with Valar, citing commercial sensitivity.

Finance Minister Steven Joyce, whose previous tenure as Minister of Economic development covered the NZVIF during the entire period of the funds' operation and buyout, yesterday continued to blame Labour for Thiel's multi-million dollar payday.

The partnership between NZVIF and Valar was announced by Joyce in 2012 and bought out by Thiel last October. But Joyce said the buyout option had been a feature of the NZVIF's formation in 2002 by the fifth Labour Government until he had requested it cease being used in 2015.

"We've subsequently changed it, but it was done by the government at the time and it worked exactly as they intended it to," Joyce said.

Labour Party's immigration spokesman Iain Lees Galloway has previously labelled the arrangement a "sweetheart deal" for Thiel overseen by Joyce.

Crampton called on the political finger-pointing to end.

"It would be nice if National and Labour stopped trying to blame each other for this particular deal and instead came to common agreement on ending corporate welfare," he said.

- NZ Herald

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