Bryce Edwards ' Opinion

Bryce Edwards is a lecturer in Politics at the University of Otago.

Bryce Edwards: The tricky business of mixing money and politics

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New Zealand prime minister John Key. Photo / AP
New Zealand prime minister John Key. Photo / AP

It seems that many of our politicians are rather 'tricky' when it comes to mixing business, money and politics.

The last week has been full of allegations about politicians and their conflicts of interest and dodgy fundraising mechanisms. For most voters the finer details will be irrelevant and boring, but this doesn't mean that it's a 'beltway' topic of little consequence. Instead, the battles over hypocrisy and untrustworthiness are becoming a defining feature of New Zealand politics. In an escalating battle over personal behaviour, business interests and donations, all parties seem to think that they can score easy points against their opponents, but the reality is everyone involved ends up looking hypocritical and 'tricky'.

National's 'tricky' restaurant fundraisers

The latest allegation about secret political donations has been leveled at Prime Minister John Key, as a result of his interview with Patrick Gower on TV3's The Nation at the weekend.

The gist of the allegation is that National used 'tricky' fundraising mechanisms that are at odds with Key's insistence on clarity around the identity of political donors and particularly his assertion that Cunliffe needs to name the donors to his trust. You can see Patrick Gower's 3-minute news report and article Key 'tricky' with donation dinner details. Most attention is directed at the use of a restaurant fundraising mechanism that funnels smaller donations into one large donation. As with the Cunliffe trust, it's not necessarily unlawfulness being alleged, but rather questions over principles and hypocrisy. Gower says the episode 'shows that with donations Mr Key and National can be "tricky" too'.

So is John Key being 'tricky'? No, according to electoral law expert Andrew Geddis - see his blog post One of these things actually isn't quite like the other, which is the best defence of National's fundraising methods. Geddis colourfully argues that there is a temptation to see the Cunliffe and Key fundraising schemes as having 'equivalence' but that 'it's a superficial and misleading similarity. Because the important difference is the intent in each case. Cunliffe's use of a trust was deliberately meant to enable individual gifts that otherwise would have to be declared to Parliament's registrar of pecuniary interests (which has a $500 threshold) to remain "faceless", in that it permitted only the Trust's gift to Cunliffe to be declared. It's the exact same strategem that the National Party used for years with its Waitemata Trust donation laundering vehicle - a practice that Labour criticised heavily at the time and enacted the Electoral Finance Act to stop (amongst other things). Which is why Cunliffe's decision to adopt the same strategy was so very, very silly. In comparison, none of the individual donations made at the Dinner at Antoine's (in the form of a $5000 payment to attend) had to be declared to the Electoral Commission, as the threshold for declaring party donations was at that time $10,000 (its since gone up to $15,000). So there was no necessary reason for the donations to be bundled together and passed over in one lump sum. It just seemed to happen that way because the owner of Antoine's got the attendees to first pay him for the dinner, then gave a single cheque to National a few days later, rather than the attendees writing out cheques to National directly. If they had done the latter - which would have been entirely legal - then we would not have had any record of the dinner taking place at all'.

Similarly, on the NBR website Matthew Hooton argues that 'the two situations are not comparable' - see: Key under fire for Antoine's donations. Hooton is quoted as saying that 'The Antoine's thing is more a case of an eccentric restaurateur taking it upon himself to raise funds for National, than anything to do with Mr Key or the party.... He rings round his friends, arranges a dinner, charges usurious amounts, invites Mr Key and then passes on some of the profits to the party'.

For further information on the legality of the two fundraising mechanisms, see David Farrar's Donation disclosure thresholds in which he explains 'the three different sorts of donations and the thresholds'.

For the most strongly worded cases against John Key and National in the blogosphere, see Martyn Bradbury's Pay back the 21 donors Mr Key and The Standard's Dinner money.

Possibly a better case is made by Danyl Mclauchlan in his post That is not it at all. For him - like Gower - it's not so much the legality in question, but whether there's an inconsistency on National and Key's part. Mclauchlan says, yes, the Cunliffe and Key examples might be different, but that 'doesn't get around the problem that they've been railing against anonymous political donations all week when they've spent the past few years raking in huge sums of money in anonymous political donations'.

Lawyer Graeme Edgeler (@GraemeEdgeler) has also made some similar points on Twitter, and got himself into a spirited debate with Steve Joyce (@stevenljoyce). Edgeler said there was an 'issue of hypocrisy, where National is asking Cunliffe to release more information that he is required to, but... is not then prepared to release more information than they are required to, when asked similarly'. For more Twitter debate, see my blog post Top tweets about National's anonymous restaurant dinner donations.

This morning TV3's Firstline also had a 7-minute discussion with Russell Brown and David Slack on the topic of Politics: A matter of trusts.

Cunliffe's trusts and business friends

How David Cunliffe could have managed to score such a spectacular own goal with his use of secret trusts continues to be a subject of analysis For the most interesting and amusing speculation about what's going on behind the scenes, see Rodney Hide's fictional account by Matt McCarten: A secret memo on secret trusts.

Tracy Watkins seeks to understand how such a politician as smart as Cunliffe could fail 'to realise the lack of transparency around donations to his leadership campaign and declaration of financial interests was a grenade waiting to go off', and in explanation she points to the fact that 'Cunliffe's biggest critics have always complained about a lack of self awareness as his potentially fatal flaw' - see: The enigma of Cunliffe. Similarly, see Toby Manhire's Labour woes lay bare 'bed blocking' crisis.

Fran O'Sullivan also has questions for Cunliffe: 'But he is yet to explain why this pair of donors didn't want to proudly proclaim their support for Cunliffe. Have these two other donors got something to hide? By insisting their identities remain secret they have inevitably fuelled speculation that they have something to gain from Cunliffe's ascension to the Labour leadership and may have been trying to buy influence. This is either true or it is not' - see: Donor slip exposes Cunliffe hypocrisy.

Cunliffe is under further scrutiny for his role in helping one of his business donor friends purchase a residential property - see Jonathan Milne's Politician aided with purchase of $4m paradise. Once again, a major part of the story is not so much the original substance of what happened, but the allegation that Cunliffe attempted to cover it up. For blogosphere reaction, see David Farrar's anti-Cunliffe take on it: More tricky and The Standard's pro-Cunliffe defence: Overreach.

Judith Collins and business relationships

Although Judith Collins might be hoping that Gower's allegations about John Key's restaurant fundraisers will take the focus off her, there continue to be vocal condemnations of her handling of the controversy over her dealings with the Oravida milk company. The strongest is the Dominion Post editorial which says it appears that Collins has breached the Cabinet Manual rules and there needs to be 'a careful inquiry to see what statements appeared and what changes were made, and when' - see: Collins must be above board. The editorial also points out that even after Oravida corrected its website on Collins' request, 'the website still contained photos of Ms Collins visiting the company and included an English text in which she praised its achievements'.

The Prime Ministers' backing of Collins over the saga might not be as strong as first appear according to Tracy Watkins' Endorsements and undisclosed donations. She says 'Key has instead been careful to frame his defence of Collins around the Cabinet office advice - and at the weekend put himself even further at arms length by suggesting that if there was a conflict of interest, it was up to Collins to manage it. That suggests Key is taking the time-honoured approach of waiting to see if anything further will come out before offering more fulsome backing of his minister'.

Certainly the Labour Opposition is still gunning for Collins, with Grant Robertson using new documents released by her office to make the point that the visit was "a well-organised publicity stunt and photo op, yet Judith Collins has spent the week trying to minimise and diminish it as a casual glass of milk"' - see Claire Trevett's 'Cuppa' claim over visit wrong: MP.

And No Right Turn reminds the PM of his 2008 claim that National would be more ethical in governance than Labour had been, and how poorly this claim compares with his recent pronouncements - see: "A higher standard of government".

Mixing money and politics

Some argue that the debate about politics and money is a distraction from 'real politics', as if there is no connection between funding political parties and public policy. This is the point made today in The Standard's Beltway blues: serving the public interest?. That blog post argues that looking into politician's connections to money is superficial and sensationalist.

But the central issues are actually quite profound and important. And the debate over the influence of wealth in politics will continue to be a major feature of New Zealand politics. For example, today the No Right Turn blog looks at National's Antoine's restaurant saga and draws attention to the sequence of events that led to Antoine's restaurant owner Tony Astle suddenly receiving an ONZM New Years Honour. No lines are drawn between the dots, leaving the reader to decide whether the business donations/fundraising and the Government award is linked - see: "Out of the blue".

And although in his blog post One of these things actually isn't quite like the other, Andrew Geddis defends National's restaurant fundraising from some of the accusations being made, he also raises some highly critical questions about whether such fundraisers are selling access to politicians.

The whole issue of potential quid-pro-quo deals resulting from the private funding of politics raises questions about how to regulate money in politics and how politicians can ensure that they are not ethically compromised. Ex-Labour Party bagman Mike Williams writes about his own experience with Labour and New Zealand First raising money and reveals the ways he attempted to keep money and politics separate, but also his strong belief that Winston Peters was not guilty of the 2008 allegations about donations from Owen Glenn - see: How to keep donations secret.

Fran O'Sullivan disputes the notion that money and politics are kept separate by trusts: 'Does anyone seriously believe this convoluted charade stops the politicians from making educated guesses over who is backing them? Or that Auckland Mayor Len Brown hasn't a clue over which business people contributed to his campaign fund trust? I don't think so' - see: Donor slip exposes Cunliffe hypocrisy.

The reality is that anonymous donations are notoriously difficult to regulate. The simplest solution is to either ban them outright or allow them in total. But New Zealand (and many other countries) attempts to allow a half-way house solution whereby some anonymous donations are allowed - i.e. those below a certain threshold - and others are banned. This discrepancy in the rules, together with other flaws in the regulations, will always allow anonymous donations of varying sizes to go undetected. In fact, according to David Farrar, the Cunliffe donations controversy is going to help John Banks fight against the charges in his upcoming court trial - see: Will Banks use the Cunliffe defence in court.

National's use of Antoine's restaurant to raise campaign finance is not entirely unique. All parties use a variety of fundraising events, albeit with very different amounts of money involved. There's also the possibility that such fundraising in New Zealand can be legally classed as a 'business activity' therefore bypassing the Electoral Act and avoiding disclosure. My own blog post, Using restaurant dinners and other business activity to get around donation disclosure, explains this further.

Related to this, Frank Macskasy raises some interesting questions on the Daily Blog - see: National's fund-raising at Antoine's - was GST paid?. Although it might appear a trivial question involving trivial amounts of money, Macskasy's question about GST goes to the heart of whether such activities are 'business transactions' or donations. He quotes the IRD's definition of a donation: 'A donation is an unconditional gift only if the giver receives nothing in return', and suggests the Antoine's dinners do not qualify.

In the end, all politicians lose out from this focus on where they get their money from, and how they spend it. This is why, until recently, politicians avoided such fights breaking out. Interestingly, therefore, Rob Salmond, who blogs for Labour's Leader's Office, says today 'I hope we can all pull out of this bipartisan dive into the political gutter, because I for one would much rather we spend the year talking about policy ideas that actually matter to New Zealanders' lives' - see: Donations, donations, donations. But he also says: 'Both Labour and National evidently think they have braces of ammunition for a war of words over whose fundraising is dodgier than whose. My advice to National, a party seen by the public as being too close to big business and as having feathered their own mates' nests too much, is look very, very carefully before you leap in there'.

Finally, with the word 'tricky' quickly becoming a theme of the 2014 election campaign, inevitably the RUN DMC song of the same name is being called into play by commentators and satirists. DJ McQuillan (@mcquillanatorz) (aka Newstalk ZB parliamentary gallery reporter Laura McQuillan) has remixed a 30-second rap entitled 'Tricky David Cunlife'. Of course this satirical snippet can be seen as laughing at either Cunliffe or Key, depending on how you listen to it. And this is, after all, a nice metaphor for the whole 'tricky' business.

- NZ Herald

Bryce Edwards

Bryce Edwards is a lecturer in Politics at the University of Otago.

Bryce Edwards is a lecturer in Politics at the University of Otago. He teaches and researches on New Zealand politics, public policy, political parties, elections, and political communication. His PhD, completed in 2003, was on 'Political Parties in New Zealand: A Study of Ideological and Organisational Transformation'. He is currently working on a book entitled 'Who Runs New Zealand? An Anatomy of Power'. He is also on the board of directors for Transparency International New Zealand.

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