In search of John Key

By Eugene Bingham, Carroll du Chateau, Paula Oliver

* In three months John Key will be standing for the country's highest office

* Polls suggest that the 47-year-old will be New Zealand's next Prime Minister

* Yet he remains relatively unknown. Who really is John Key? Where did he come from and what motivates his ambition?

John Key during his State of the Nation speech in 2008. Photo / Tim Hales
John Key during his State of the Nation speech in 2008. Photo / Tim Hales

One day around 1971, John Key arrived home from school, flopped down his bag and made an announcement: "I'm going to learn to play golf."

He was about 10, a cheerful but unremarkable pupil at Cobham Intermediate. His family - mother Ruth and older sisters Liz and Sue - lived in a state house on Hollyford Ave in the Christchurch suburb of Burnside. Inside, the turquoise carpet was offset by orange and black sofas, the lounge cleaned and tidied to motel standard. There wasn't room to practise putting, let alone a chip shot, on the bare, sloping front yard.

The family blanched. "He might as well have said he wanted to fly to the moon as far as we were concerned," says Sue. "Mum said, 'Why do you want to do that? That's going to cost money!"'

John, the man of the house since his father died several years before and the light in his Jewish mother's eyes, sat down and explained himself.

"He'd figured out that business guys have golf lunches," says Sue. "He told us 'I have to start working on those skills now so when I need them they're in place'."

This is one of hundreds of anecdotes the Weekend Herald gathered from scores of interviews for this project. His sisters spoke candidly about him after they were approached in the course of this inquiry, revealing family stories that even their famous brother wasn't aware of. The golf tale is a telling insight because it shows that Key, even as a child of 10, was driven and had calculated what he would have to do to achieve his goals.

The interesting thing about the Key family is that no-one tried to divert him from his golfing ambition. Ruth, who had worked nights to keep the money coming in, probably half expected it.

She would constantly tell the children, especially John: "You can do better than this; I expect you to work your way up in the world."

Step one in John Key's audacious plan was in place.

More than 35 years later, Key is making a bid to be prime minister. But who is he? Compared with others who have stood to lead the country, Key is a relative unknown. He swooped back into New Zealand six years ago, a multi-millionaire thanks to a lucrative investment bank career, then quickly rose to the top of the National Party. Poll ratings suggest he has a royal chance of seizing control.

For five months, the Weekend Herald has researched Key's background to ascertain the essence of the man. The picture which has emerged is of a person of driving ambition and determination who is prepared to do what it takes to achieve what he is aiming for. In pursuit of his goals, Key will not hesitate to seek out people he thinks are best-placed to help him. He is decisive and appears genuine, but at the same time does not like giving offence - it's this aspect of his character which, as we shall explore in part two next week, provides the ammunition for his political opponents to label him "Slippery John".

Today, in the first of a two-part investigation, we trace the family and working history of the man who would be prime minister.

New beginnings

The Key family story is one of new beginnings. It is the reason they ended up in New Zealand, and the reason his mother became a strong, fervent matriarch, whose robustness and rules shaped John Key.

His parents met in England in the aftermath of World War II. Ruth Lazar had fled to Britain in 1939 as a schoolgirl Jewish refugee from Nazi-occupied Austria. In 1948, when she was 25, her Aunt Lottie sent her to stay with a family she knew in Portsmouth. They were the Keys, who had a family business selling surgical instruments. One of the sons, George, 34, had come home from the war and was working in the business. He had been married before the war and had two sons.

Though Ruth and George were nine years apart in age, it was a convenient meeting. In Ruth, George found a woman unfazed by upheaval. He was looking for a clean start himself, a chance to escape the post-war gloom and leave his previous marriage behind; Ruth, having escaped the Holocaust, knew all about learning how to start again.

They married in the registry office at Portsmouth in September 1948 and little more than 12 months later had a daughter, Liz. George's parents had spent some time in Australia and the stories of life in the colony were tempting. Talk of emigration would not have bothered Ruth, who had never felt England was home.

As life would turn out, George Key was to have very little influence on his son John's life. But in choosing to leave Britain and opting to come to New Zealand among the wave "10 quid Poms" who arrived in the 1950s, George Key played a very significant role, setting his son on the path which would see him stand to lead this country.

When George, Ruth and Liz set out in the mid-1950s, their intended destination was Wellington. On the ship, Liz contracted measles and the family had to be quarantined during a stop-over in Australia. They missed the boat to Wellington and ended up in Auckland. Along the way, someone had told them of the endearing qualities of the Bay of Islands. From the densely-populated, depressing post-war Britain, the Keys gravitated to the sun-kissed, wide open north of New Zealand. They settled in Opua where George found work as a laundryman and Ruth was soon pregnant with their second daughter, Sue, born in late 1958.

If they'd hoped for an idyllic lifestyle though, they didn't find it in Opua. They were an ill-fit, the Keys and the Bay of Islands. Though it was a busy port and was connected to the south by rail, Opua of the late 1950s was no place for George Key - an Englishman's Englishman, never wearing shorts or short-sleeved shirts, nor swimming. He was very proper, in his way, and rigid. To him, Opua would have seemed a hick country town. He packed up the family again and moved to Auckland.

The Keys were living in Onehunga, at 9 August Place, when John Phillip Key was born, on August 9, 1961. For Ruth, the birth of a son was all she had yearned for. Throughout her life, she loved her daughters dearly and whole-heartedly, no question. But for her son, there was even more love in her heart - a fact both daughters mention. "Mum loved John, adored him. He was the favourite," Liz said. "And she would have told you that too," added Sue.

This bond with her son was Ruth's remaining vestige of her Jewish ancestry. She had left many of her roots behind. But in the way she was utterly devoted to John and acted with love and courage to make sure he could achieve, Ruth was a stereotypical Jewish mother.

More upheaval

Back in Auckland, George was still restless. He found a job in a plastics factory but he wanted to be self-employed as his parents had been.

The family moved to a small place in Campbell Rd, One Tree Hill, and it was while they lived there that John started school, attending Cornwall Park primary with Sue.

Soon, though, the family was on the move again. George and Ruth found an opportunity to run their own business, a restaurant in Tamaki Drive, St Heliers. They called it Harbour Lights after a place they both were fond of back in England. John and Sue switched to St Heliers Primary, and the Keys hoped they had at last found a place where they could settle down.

If only. In late 1960s Auckland, the restaurant trade was tough. A restaurateur who ran a place in Mission Bay around that time remembers there weren't many others around - dining out had not yet become a normal way of life for many Aucklanders.

Liz worked in the restaurant, helping to serve meals - more sandwiches, steak, eggs, chips and mashed potatoes than haute cuisine. Simplicity, though, was no answer to business success. Debts piled up and the home became tense.

Sue remembers carefree days running across the road to the beach, swimming nearly every afternoon after school.

But there were dark times too. George was a heavy drinker and this had a deep and lasting effect on the family, as well as being a source of friction at the time. Sue and John's memories of him revolve around his being drunk. Says John: "I remember one really weird instance ... . He'd been drinking, I remember that. He came home and he'd bought me a train set or car set or some sort of toy set. Mum had a real fit at him. [I was] thinking 'This is really cool, I've got these new toys', and Mum was having a real meltdown because he was home late and drunk."

The couple's relationship deteriorated and in 1969, George moved out and shifted to Mt Eden. Within weeks, though, he was dead, succumbing to heart failure, aged 55. John, then aged seven, says his only memory of the time is not going to the funeral.

The road south

Ruth Key, 46 with three children aged 19, 10 and 7, was a widow in a foreign land. The death of her husband, albeit recently estranged, must have been a tremendous shock. But Liz believes she was just as shocked when debt collectors called shortly after.

Ruth was advised that she could declare herself bankrupt or pay the money off. No records exist, although her daughters suspect the amount owed would only have seemed enormous because of Ruth's predicament. Whatever the sum, she decided to pay it back.

"Morally, it wouldn't have been an option for Mum [to go bankrupt]. If a debt was owed ... she had to pay it," says Sue.

Ruth made another life-changing decision - to leave town. Her daughters believe it was her inner desire to start again which drove her decision, rather than any shame about the debts.

"People probably didn't know about her having to pay the money back," says Liz. "She wasn't a person who carried her heart on her sleeve. She wouldn't have gone around saying, 'Woe is me'. She would have got off her bum and said, 'Right this is what's happening and we'll get on with it'."

Christchurch: Becoming part of the neighbourhood

Ruth decided on Christchurch where Liz had lived and worked for a short while. All their belongings were packed into an Austin A40 Somerset and the family set off, with Liz at the wheel (Ruth couldn't drive then).

John Key's memories of the move are limited. He remembers turning up at Aorangi Primary in Christchurch, near the Burnside state house he famously grew up in. He'd briefly been to another school, Richmond Primary, when the family initially lived in Glade Ave.

With the debt to pay off, Ruth Key not only had to look after her family, she had to find a job. She worked as a night porter, then later as a cleaner.

But her prime concern was home and the children. She kept house meticulously, and ran the family budget tightly. Money was accounted for in white envelopes labelled "food", "power", "rent".

When they moved into 19 Hollyford Ave, they found a neighbourhood that was warm and inviting.

A recently-settled state housing area surrounded by more affluent streets, Hollyford Ave was home to working class people. The Key's neighbours included a milkman, a rubber worker, a sheet metal worker, and a freezing worker. Bruce Faith, at number 17 when the Keys moved in, says it was "a wonderful community".

"We were all in the same boat at the same time - we were all struggling and helped each other out," he says. Fathers worked the vege garden, helped their neighbours dig their plots, children played in the street. Faith especially admired how Ruth brought up her children.

Gwendoline Howard, who lived at number 21, had more to do with the Keys because she had children around the same age. Although their life wasn't easy, she said Ruth worked hard, was a good neighbour and mother. "I'm not saying I would vote for him, but I do think John has done remarkably well, considering."

Being closer in age to Key, Sue spent more time growing up with her brother than Liz. She'd make him play with her dolls and there were always plenty of board and card games - Monopoly, Scrabble, 500 and poker.

"And yes it was always competitive," she says.

With no other adults in the house, and no relatives in the country, Ruth was the dominant figure in their lives.

"There were only the three of us and her. There wasn't anybody else, no aunts and uncles influencing us; she had complete control over us - in a good way," says Liz.

Sue: "She brought us up almost not realising we were children so that, like I say, we were adults before our time in some ways - not that she denied us our childhood. But we had to sit down and have a conversation, and you had to have an opinion, probably because she didn't have a husband to sit there and talk with and nobody said to her, 'you're not meant to talk to your children about those issues'."

Political stirrings

It was in this environment that Key's political instincts germinated. Ruth had a rule that they were to eat dinner together and that everyone was to bring a conversation topic to the table. She read newspapers religiously and expected her children to have opinions on current events or politics.

Sue also remembers fiery debates between her mother and brother. "Mum was fiercely Labour and John was fiercely for [National leader Sir Rob] Muldoon," says Sue. "I used to take the middle ground, they'd be on either side of the dinner table just about with knives out on each other as to who was right." So, even at a young age, he had gravitated to National, in spite of his mother's left leanings.

At one point in his childhood, Key gave his mother a National Party rosette for her birthday, to wind her up. She kept it until she died.

Key had decided from a very young age, perhaps only 8 or 9, that he wanted to be a politician. His sisters remember him declaring the desire to do two things: make a million dollars and become prime minister. Plenty of kids express interest in careers, but few stick to them so assiduously: business and politics, business and politics. This was the kid who took up golf because that's what businessmen did.

Key himself credits those early debates as sparking his interest in politics. He remembers being attracted by the fiery political arguments of the 1970s and 1980s. "They were quite intense debates - Kawerau and Kinleith and people striking over the Cook Strait ferries - all of those kind of things," he says. "It was certainly a period of time where politics were prominent and I was fascinated by it."

This fascination with the political debate of the time does not square with answers Key gave in his early political career about his stand on one of the most divisive issues of the early-1980s - the Springbok Tour. During a television interview before his rise to the leadership of the party, Key was asked: "In 1981, were you for or against the Springbok Tour?" He answered: "Oh, I can't even remember ... 1981, I was 20 ... ah ... I don't really know. I didn't really have a strong feeling on it at the time. Look, it's such a long time ago."

His answer is puzzling for someone who was surrounded by, and fascinated with, political debate. Whether he was pro-Tour or anti-Tour is almost irrelevant 27 years down the track. But saying that he can't remember how he felt leaves him open to criticism that he did not want to get off-side with people by stating his position. (In subsequent broadcast interviews, he sounds strangely confused. He has said that he didn't go to the games, but that he might have if he could have afforded it; and that he wasn't happy that the Springboks were here, but that he didn't feel strongly enough to go out on the street.)

School and study

At Burnside High, then the largest school in the country, John Key marked himself out as a diligent, hard-working student. He was not remembered as naturally bright but he applied himself. He left with a B Bursary.

What he shone in was public speaking, debating - in seventh form, he won the Freeman Cup for debating and the cup for public speaking - and economics.

Key's Burnside economics teacher, Robin Hughes, still teaches at the school. "[Key] sat up near the front, took an interest ... in economics, but he wasn't a world-beater by any stretch," Hughes says. It was more Key's diligence which struck Hughes.

He shared the economics prize in his last year at school with classmate Paul Commons. "He was focused and studious and he liked to do well," says Commons, who now lives in the United States with a high-powered job in the concrete industry and has not seen Key in about 20 years.

He also remembers Key as being very resourceful and someone who would seek advice.

"It was just generally the way he was, whether it was getting help to be good at maths or playing squash, any part of his life - he was good at finding the very best person who could help him achieve what he wanted to do." The pair knew each other at Canterbury University too, although Commons studied science while Key was in commerce.

Commons does not remember the young Key expressing political ambition. "If he had political aspirations then, I don't remember them but he was certainly very politically engaged and aware and very much a supporter of the Muldoon Government. I don't remember him being an active member of any party and certainly was not politically active on campus."

Commons' strong sense was that Key was at university as a means to an end. "He took a very pragmatic, business-orientated degree and moved on. He went to university to move on to the next phase of his life," he says.

Many of his Burnside contemporaries do not particularly remember him from those days, perhaps not surprising given the size of the school. "He just didn't stand out - for any reason," said one.

One school friend who certainly does remember Key is former TV journalist Mike Jaspers. The pair, who were at Burnside and Canterbury together, ended up working on opposite sides of the political divide when Jaspers worked for Labour Deputy Prime Minister and Key adversary Dr Michael Cullen. Key made references to their friendship during debates in the House, but Jaspers declined to be interviewed for this story.

Others were more forthcoming. Michelle Crosbie was at Burnside with Key and they became best mates at university. "John was certainly very determined and worked incredibly hard," says Crosbie, who remains friends with Key and has stayed in touch as their careers have allowed (she has a finance job in London).

She recalls Key waiting to pick her up one day. "He was sitting outside in his car - he would have been 18 or 19 at the time - and he was listening to Parliament on the radio." Not many teenage boys would be tuning into Parliament back then - probably fewer now - and Crosbie teased him about the incident for years.

Mostly, Crosbie remembers Key as a "nice, reliable sort of a guy. From my point of view, he was just a friend and it was a really neat friendship. He wasn't a particularly sophisticated teenager by any stretch. He wasn't worldly. He was hard-working."

The other significant thing Crosbie recalled was how the young Key started his first job the day after his last university exam. Everyone else took a long summer holiday, but not him. "That was when it really became clear that John had a different level of determination than the rest of us. He was already making moves," she says.


In fact Key's determination was evident throughout his boyhood and teenage years.

He was even prepared to sacrifice the subject he was naturally talented at. His friend Michael Gale reveals how at university, Key started out in economics, then switched to accountancy. While many of the university lecturers do not remember Key particularly well - "I understand he was in my class, but that's all I know," said one - his first-year economics lecturer certainly does, and vividly recalls Key dropping economics.

"He was a very good student - I think he got an A or A plus," says Frank Tay, who was head of department. Key was one of a group of top students whom Tay wrote to, encouraging him to continue with economics. Key declined. "He said that the reason he went to accountancy was because he looked at the boards of directors and found most of them were accountants," says Tay.

That determination played out in his sporting pursuits too. As well as golf, he played rugby - not particularly well - but from his late teens until his early 20s, his main sport was squash. "It would be fair to say he wasn't a natural - he just applied himself," says fellow Burnside squash club player Chris Wasley.

"He trained and trained and trained and he was always asking questions. He was always trying to find out from people how to play this shot, what they did when they did this ... "

Key was also a stickler for the rules and kept cool on court. "What you find with squash is people can be Jekyll and Hyde," says Wasley. "Their characters can change. I don't remember him ever getting aggressive on the squash court."

Key eventually made it into the club's division one team which included a line-up of guys who would go on to be successful in the business and finance world. As well as Key and Wasley, a top financial planner based in Christchurch, there was Robin Clements, now the senior economist for UBS NZ, Mark Crosbie, who works in finance in Sydney, and Christchurch businessman Stuart Hargreaves.

In the NZ Who's Who in 1995 and 1998, Key is recorded as being a member of the South Island Colts, a team he maintains he played for. But others spoken to do not remember there being such a team, although there was a Canterbury Colts team which Key was in. (It's one example of where Key can be untidy with details. In another example, his CV lists him as being at Burnside from 1973 to 1978, but that would mean he was at high school for six years, not the usual five. His school yearbook records him being in seventh form in 1979. The university dates in his CV are wrong too. Such quibbles are a minor point, but they highlight that when it comes to the minutiae, he can be oddly imprecise.)

Crosbie, who played in the Canterbury Colts with Key, says his teammate would train five days a week at 6am and by doing that improved dramatically. "His great sense of humour, thinking a bit differently to others and his remarkable work ethic are the things I remember about him," says Crosbie.

Fellow Burnside clubmate and UBS economist Clements says Key always struck him as someone who had a bright personality and was ambitious. "It always looked like he was someone who was going to succeed." Clements said Key was not someone he would call a friend, though the pair did come across each other from time to time. But when Key moved to Sydney and was considering entering politics, he spoke with Clements about his thoughts on the New Zealand economy. Just as in his school days, here was Key seeking out a person who could help him understand the things he needed to know.

Party animal

As he made the leap from university student to businessman, John Key was a young man who had endured dramatic upheaval in his life, but who always knew where he was going.

He was measured, but knew how to enjoy time with friends: in his teens, he hosted several parties at Hollyford Ave while his mother was away.

Neighbour Gwendoline Howard says one particular party started quiet, then grew. Eventually, there were people outside the house and the Howard's fence was banged over. "But then they quickly fixed it up," she adds hastily.

He was polite, but always persistent: the Howards had a table tennis table and Key would often come over looking for a game. "We'd all be gathered around the lounge and he'd go around the room asking for someone to play with and in the finish we went [and played] just to satisfy him," says Howard.

He was respectful of his mother and loved her deeply, but by his early 20s their relationship had subtly changed. He had grown up always following her rules (and there were plenty), but Key began to lead his mother ever so slightly. He taught her how to drive, he convinced her to stop smoking, and he helped her spend a little of her money on the stockmarket.

The trader within was stirring.

The cheeky businessman

In the late summer of 1982, John Key walked into Dave Phillipson's office at Canterbury International and asked for a job. Over the university holidays, he had worked for accountants McCulloch Menzies (now Deloittes), the job he started the day after his last exam. But he had figured out that auditing was not what he wanted to do and sniffed out his next opportunity.

Key was 21, Phillipson around 10 years older. "He knocked on my door and I told him I had no more jobs, we'd just put on three or four young people' says Phillipson.

"Key told me 'I'll save you more money than it'll cost to employ me.' It sort of summed up the confidence of the guy."

Phillipson was intrigued, then hooked. Key had the go-getter enthusiasm he needed to catapult the hidebound clothing company into an international brand different from anything New Zealand had seen. "We wanted to set up Canterbury store franchises in America and Australia," he says. "John had tremendous confidence, was really, really bright.

"He'd say, 'Why are you doing it this way? Why don't you try this?' I knew immediately I didn't want to let him go."

Key had chosen the job carefully. His sister Liz was a receptionist with Canterbury's parent company, Lane Walker Rudkin. His girlfriend, Bronagh Dougan, worked in the warehouse during school holidays. Most of all it was exciting. And he and the team were given their heads.

Phillipson talks about how he would set Key against Neil Cameron who had started a couple of days earlier. "I'd say, 'I think I'll give this to Neil because you can't do it'. That's the way I got the best out of John."

"I used to give them the hard jobs.When the market dried up in Canada I had 30,000 pairs of red, green and gold men's pants with no flies, and elastic waists. So I said to John, 'Get rid of them. I don't care where, I just want to get rid of them'."

What he didn't want was for the pants to end up in one of Canterbury's licensed territories, especially Europe. Key took a plane to London, hooked up with a man who reminded him of the character Arthur Daley from TV's Minder, who took the lot and sold them to Poland.

Another time Phillipson sent him to Auckland and he forgot to make an appointment. "He arrived there and the guy I'd sent him to talk to had meetings all day. John asked what he was doing for breakfast and the guy said he'd give him half an hour - and John was still there with him at three in the afternoon."

Over the three or four years that Key and his mates were at Canterbury, the brand grew from $5 million to $40 million. "We did so much with those young people," says Phillipson.

More than 30 years later, many of that early Canterbury crowd live within a tennis ball throw of each other. "We all went all over the world then came back and ended up in Parnell," says Celia Ryan, who worked with Key as 21-year-old Celia Wright. At the time she was in charge of Canterbury's licensing operation. "There's Petrena [Miller] who now owns her own clothing label. We play tennis together three days a week, I see Richard [Leggat] through his work with charitable organisations." And she just sees Key dashing past.

The key dealer

For Key, Canterbury was a launch pad. Now he needed to make some money. After he and Bronagh had married in the summer of 1984, the world beckoned. Soon after Roger Douglas and David Lange had floated the dollar in 1985, they were watching TV in their flat. "It was a day in the life of a foreign exchange trader," remembers Key. "I said to Bronagh, 'I could do that!'

"'Yes,' she said. 'Probably'."

That was enough. Key started writing to banks asking for a job. DFC offered him one, flew him to Wellington. "The small issue: 'we want you to be a salesman not a trader'." He turned his back, and after checking that Phillipson would keep his job open, he and Bronagh headed for Australia where Elders Merchant Finance offered him a trader position working out of Wellington.

For Bronagh it was a let-down: the OE was on hold. For Elders it was a gamble: traders are born and not made. Key had yet to prove himself. For Key it was step three in the Grand Plan: the break he had been waiting for.

Then, during the last stage of the hiring process, after the appointment had been signed off by Elders' man in Wellington, a visiting director from New York, decided Key did not have what it took: "You're a really bright young man, you're going to be very successful but you'll never make it as a trader. Forget it"

"No," said Key. "You're wrong".

Eventually Key got the job, but with no car, no fancy package and no big salary.

Then they left him in charge for a day and he made trades of $100,000.

They were volatile times. New Zealand was just coming out of import controls and had floated the dollar. "The NZ dollar would open at 52c and we'd be trading at 47c within one hour!" recalls Key. "It was extreme, unheard of, and that's what was attracting the big US players to the New Zealand market."

Within 18 months of various dealers coming over from Sydney every few weeks or months, then leaving again, Key was running the dealing room. Paul Richards, who joined him in 1986 was impressed by his ability to lead. "John's not dictatorial," he explains. He chooses his team very well, seeks their opinions, then ultimately makes the decision himself."

Richards recalls Key as unflappable. "He's not a guy who would start yelling. He'd look around his team when it was really looking pretty bad. 'Guys, what do you think?'

"We'd each proffer our opinion - then he'd make his decision."

"Decision-making at this level is instinctive," he continues. "You've trained for that moment when you have to make that decision in a split second.

"I've seen John face some enormous potential losses and he keeps a very, very, cool head," adds Richards who is now a managing director at UBS in Stamford Connecticut.

Richards and Key were drawn into the so-called "H-fee" scandal, two sham foreign exchange deals involving Elders IXL in 1988 worth about $70 million. The deals formed part of the case against jailed former Equiticorp chief Allan Hawkins.

In 1988, Key was on the verge of leaving Elders, unshackling himself from a three-year contract after agreeing to three months' "gardening leave" before taking up his new job at Bankers Trust, newly established in New Zealand. On his last day, he took Richards to lunch at a Wellington restaurant called Plimmer House where they drank champagne to mark Key's departure. During the lunch, Richards had to leave, saying he had to meet Australian-based Elders director Ken Jarrett.

When Jarrett became a figure the Serious Fraud Office was interested in as it probed the Equiticorp case, investigators interviewed Richards, who spoke to them about the meeting with Jarrett. Key was also interviewed by the SFO to verify Richards' recollection that he had met with Jarrett. Although Key was never summonsed as a witness, the Equiticorp trial heard that Richards would be called to give evidence for the prosecution, detailing how he had been instructed to help create the necessary profit and loss for the foreign exchange basis.

Jarrett was eventually jailed for six months after pleading guilty to companies code offences in relation to the payment.

The deals in this saga, one of New Zealand's most notorious white-collar crimes, were transacted after Key had left.

Labour taunted Key in Parliament last year about the 'H-fee.' Key immediately went on the front foot and told Herald political reporters that Labour had missed its target. The record would show, he said, that he wasn't involved. But the the interesting thing, Key said at the time, was that if he had still been working at Elders, it would likely have been him, not Richards, with whom Jarrett would have met that day.

A step up

Leaving Elders behind him, Key had been lured to Bankers Trust with an offer he couldn't refuse. They bought him out of his three-year contract, and he and Bronagh moved to Auckland and BT's new offices.

Gavin Walker, then CEO of Bankers Trust New Zealand (now director of Lion Nathan, Goodman Fielder and BT Investment Management) describes why he hired Key: "We realised there was an up-and-coming dealer in New Zealand. I watched his performance in the market for a while, saw where his career was heading, then offered him the opportunity to run a much larger foreign exchange, FX, desk."

He can still remember asking his new recruit, "What's your long-term aspiration at BT?

"He leaned across the desk: 'I want your job'. It was partly in jest but, at the end of the day, he believed he was good enough to do your job."
Key also told his boss about his long-term ambition to be Prime Minister. "He told me that when he was in his early teens he wrote to Bill Rowling, to tell him that he, John Key, would be the Prime Minister." From Key's point of view it was a chance to move on to the global stage. He wanted to be noticed. It was also a chance to make real money. "One of the things that attracted people to BT was that we had performance-based remuneration," says Walker. "How well you did depended on how you performed. It was all about performance."

It was politics, combined with Key's trading instincts, that cemented his reputation with BT. Key worked from dawn to way past dusk, and slept with a Reuters screen beside the bed so he could wake up and check rates during the night.

On December 14 1988, all of New Zealand was holding its breath as then-Prime Minister, David Lange, moved to sack his Minister of Finance, Roger Douglas.

The Key family was involved in its own tragedy. Bronagh's 18-month-old nephew had drowned in a swimming pool. "We came out of funeral then I turned on car radio and Radio New Zealand was saying 'Roger Douglas is going to be sacked at 2pm this afternoon'," explains Key.

He went back to the dealing room and it was really, really quiet. "I said to them 'Roger Douglas is going to be sacked, the Kiwi's going to collapse! What position have we got?' They all looked at me, 'nah, no, no ... '

"So I went out and sold this massive amount.

"Those days there was a lot of bravado between Citibank and BT - us and the big American banks," says Key. "I remember clicking into the direct line. 'I'm not gonna make you a price one minute before Roger Douglas gets sacked.' And the man said 'Oh the mighty BT is too scared to make us a price ... "I said, `no the mighty BT is not and this is the rate'. And I was quite a lot lower and the guy sold."

He draws his breath in through his teeth at the memory of the victory. "It was mayhem after that - we were there to about 9 o'clock. But I knew I'd made a lot ... it was millions. I remember Gavin coming over and asking 'is it a half million?' 'No it's way more than that.' I don't remember if it was one, two or three million.

"It was a record for what I'd made, and certainly the firm did very, very well."

Key's strategy was to sell New Zealand dollars, which were relatively highly priced, before the rest of the world realised the impact of Douglas' sacking. Then, when they did catch on, and the dollar fell, he could - and did - buy them back at a cheaper rate. As he says, "It's a bit like housing. If you think you can sell a house and buy it back a month later at a cheaper price - you sell high and buy low."

But it wasn't simply Key's killer market instincts that made him a success at Bankers Trust. As Gavin Walker explains, they also trusted him. "When you're in the FX market, daily turnover runs to millions of dollars. You need implicit trust in [your dealers] and to understand the individual. John was then, and still is, a very likeable character. Someone who could handle stress. He had this calmness, he actually revelled in it. It didn't get to him on a personal basis."

Key talks about people affectionately known as phone throwers. "I've been in dealing rooms where phones were flying over my head," he says. "But once you lose your temper you've lost control. And once you've lost control you can't get out. We were taking really big positions, some really ugly positions for the firm. And they're paying me to get it right and not to lose my temper."

Soon Key was managing the dealing room, was on the four-person board of BT New Zealand and was also one of two New Zealanders on the board of BT Australia.

He was valued for the competition he brought to transtasman business. "The better we performed, the more Australia were convinced they'd beat us, and the more money they made," says Key. "The competition was really fearsome for a long period."

Adds Craig Stobo, who joined BT in 1989 as an economist and market analyst after a career in Foreign Affairs in Australia: "Part of the deal for traders is to get their emotions out of the equation. I've never seen John lose his temper, ever. He's a very measured man. If you allowed your emotions to override your clinical view of the risks, you would be in trouble."

Stobo describes an exciting, high-powered, dealing room. By then the BT team had grown to around 30 people and, he says, "John had built the FX side to a very profitable part of the business. It was the best place to work in New Zealand at the time."

Top dealers made a lot of money - $400,000-$600,000 including bonuses - worked hard, played hard. There was client entertaining: dinners, rugby matches, rally car driving, weekend trips to Australia, but the focus was always, 'you've still got to get up in the morning and do your job'". According to Walker and Stobo, Key did not get into the lap-dancing side of the culture. "He was not a big drinker," says Stobo. "I've never seen him drunk and I've never seen him have a cigarette in his life - a straight up and down guy."
But it was not all big salaries and corporate entertaining. There was huge responsibility for relatively young men.

One of BT Auckland's clients was BT New York dealer Andrew Krieger, who decided to take advantage of the volatility of the New Zealand dollar. "At the time the market was relatively inefficient so there were large jumps in the FX rate as Andy made his impact," explains Stobo, who later became managing director of BT Funds New Zealand.

As the record book shows, when Krieger made his most famous speculative raid on the kiwi in 1987, Key had yet to start at Bankers Trust. Krieger believed the kiwi was over-valued and bet on a fall, selling hundreds of millions of dollars at a time, and once pushing the price of the kiwi down 5 per cent in a day, and eventually, he claims in his book, The Money Bazaar, helped begin a fall in the value of the New Zealand dollar. The strategy was to rebuy when the kiwi bottomed out at 59c.

The Reserve Bank was alarmed but the crisis passed. Key was not at BT during Kriger's spectacular raid, but when he began running the dealing room at BT in 1988 he dealt with the New York-based American, a relationship he was comfortable with. He told the Sunday Star-Times earlier this year, that Krieger ``was a very intelligent guy.'' Key's then-boss, Gavin Walker, points out that working with Krieger was part of the job. ``Managing that relationship on behalf of the dealing room was part of John's responsibilities. He knew everything Krieger was executing on our desk.''

Walker was ``gutted'' when Key went to Merrill Lynch. ``I tried very, very hard to keep him,'' he remembers. The move came in 1995, soon after Key was called up to BT Singapore, the company's biggest hub, with the riskiest traders - sometimes making a billion dollars a night.

The problem was, although they made a lot, they lost just as much. Key was one of the few traders who managed to make money, and they asked him to leave Auckland and run the Singapore office.

Although the move was signed off by New York, Key was not popular back home. Both the Australian and New Zealand offices were worried he would raid their business and people. Then, when he was asked to run the New York office Bronagh, who had toddler Stephie in tow and was pregnant with Max, was not sure she wanted to go to New York. Says Key: "Everyone was unhappy. Australia was unhappy, New Zealand was unhappy, New York was unhappy, Singapore was unhappy. And Bronagh was unhappy."

Eventually he called a head-hunter who had offered him a job a few years before and took a job with Merrill Lynch Singapore.

"Then all hell broke loose at BT. I just said 'I'm out of here' and I left."

Into the big time

It was 1995. Again Key blasted through the ranks. His confidence was legendary. London-based senior executive Steve Bellotti visited, and when he asked what the new recruit thought of the company's FX performance, he was direct. "It sucks!'' Bellotti, a fast-talking Australian from Gympie, near Noosa, said: "If you're so clever I'll send you up to head office in London, and if you don't make it in 12 months, I'll sack you.''

Key shot back: "If I don't make it in 11 months, I'll quit.'' Bellotti made him global head of foreign exchange and he revolutionised the "blue blood'' investment banking sector. "There was this massive opportunity to cross-sell the firm,'' says Key. "We'd go to these fund managers and we'd talk to them about equities, but we wouldn't necessarily leverage foreign exchange - and when we did, they'd say our capability wasn't that good.

"So I wandered up to London and said, 'we're going to go interbank FX - make prices to the other banks'. Morgan Stanley, Goldman Sachs and Merrill Lynch, the blue-blood investment banks, didn't do that,'' he explains. "We actually took on the big banks, Citibank, Chase, then we went and hired their staff and went to their clients and told them `look, we've got all those same capabilities as Citibank in FX and options. Plus we had this beautiful thing going because we were the first to supply margin trading to big hedge funds. We had the capability to cross-sell them several products using one bit of margin.''

Remembers Bellotti: "I brought him to London and he shot the lights out there too. Within three to four years Merrill Lynch, London, was regarded as one of the premier businesses.''

Key explains: "I had a whole lot of people working for me who were at the cutting edge of delivering quite complex and new and innovative products. They tended to either be a new product or into a new market, usually the emerging markets, Russia, Brazil, Argentina. I wasn't the guy sitting there dreaming it all up, but I was the guy who was responsible for those people.'' Did he foresee the problems which resulted in the sub-prime crisis? ``Was it hard to predict? Not really.''

The products which underpinned the sub-prime boom - then bust - were hatched in 2004-2005, long after Key had left Merrill. Indeed, he says when he went back to London in 2007 he was "horrified'' at the level of risk Merrill was running. "It was enormous and I just didn't think that enough had changed to warrant that level of risk.''

Back in the late 1990s Key was in his element, working at the centre of the universe for FX. He presided over around 140 dealers trading billions of dollars a day. The Asian markets came in in the morning and New York in the afternoon. ``Within two years we went from being 43 in euromoney to number three,'' Key says.

"He never mucked up,'' says Bellotti. "Although they lost money, as you do, he never panicked, never stressed out, just did his job.''

Geoff Massam, a New Zealander then running the IT part of Merrill Lynch's FX business, now with Deutsche Bank in Connecticut, remembers how Key would be on the phone to the Governor of the Reserve Bank, Don Brash: "Though he wouldn't do it in a name-dropping way - he was talking to people like that all the time.''

Massam believes Key's knowledge of the global economy would give him a "huge advantage'' in running the country.

Although a "great client person'' responsible for serving the people who ran the world's biggest pension funds, Key, who worked 12-14 hour days, did not subscribe to the lap-dancing, carousing, money trader stereotype. "We didn't do that, condone that,'' says Bellotti. "It was all just good clean fun. Sure we'd go out drinking with clients, go on trips with them, skiing to Verbier and St Moritz - but apart from that it wasn't our thing.''

Key agrees: "Yes there's always been a lot of entertainment and nightlife - which is why it was pretty difficult for me to say I hadn't been to a strip club when they asked me in the press gallery - yet I was always reasonably conservative. Bronagh came with me quite a lot. It was obscene amounts of money sometimes. That was the nature of the industry. It wasn't debauched, and on a personal level it never translated to what I did.''

Getting out

If anything, Key was a dedicated family man and doting son. He remained close to his mother, despite the geographical distance between them. He brought Bronagh and the children home once or twice a year, and every day he was in his London office, he began his morning with a call to his mother as he hung up his jacket and logged into his computer.

When Ruth started forgetting those phone calls - she'd ring him back half an hour later complaining that she had not heard from him - he knew something was wrong. Soon afterwards, she was diagnosed with Alzheimers disease. Her health deteriorated and in May 2000, she died, succumbing to pneumonia. Key had lost the person who had had the greatest influence in his life.

In London, Key and Bronagh had bought a house in Barnes, just past Fulham, a 35-40 minute commute from the City, and Bronagh, at home with Stephie and Max, made friends and put down roots. Money was no problem - successful investment bankers were earning £2 million-£3 million a year, including bonuses.

While Key had ridden reasonably comfortably through the monetary crises of the 90s - the Russian debt crisis, the Asian crisis and dot com crisis - many did not. Merrills suffered heavy losses and Key, as the surviving manager had the task of sacking hundreds of staff. As he told Metro magazine, he earned himself the title of ``smiling assassin'' during the sacking spree.

Key says he is against across-the-board sackings: "You destroy morale, it's expensive. I was sorry for people on a personal level,'' he says. "We had a good team and no-one likes going. And on a business level they don't make sense. I was asked to fire people in FX and in the derivatives business when it was counter-cyclical. It was really crazy.

"I remember arguing with New York management in 1999. Look you've got this wrong. If you make me sack these people, not only will you be losing the thing that's making you money, you'll have to rehire them again.''

Bellotti, like many other middle-aged former traders, now travels the world investing his money - in his case in luxury resort complexes. He considers Key a world-beater.

"His career's a good lesson in life when it comes to risk management. Most people don't know what risk versus reward - or return - is about. John does. One weighs up the odds, balances the situation, measures the people, balances the evidence. John Key totally understands his environment and the outcomes. He transcends the market, geography and people. This guy is going to put New Zealand on the world stage.''

Bellotti remembers back to one winter's day, standing in the rain outside the office in the 3pm gloom of Ropemaker St, near Liverpool Street Station, and talking to Key: ``There must be more to life than this?''

By 2001 Key was homesick. It was time for the next step of the plan: He flew to New York to see their ultimate boss, G. Kelly Martin, and resigned. ``Clearly John you're having a mid-life crisis, let's talk this through for God's sakes,'' said Martin, who has extricated himself from a business dinner in San Francisco to talk about his former employee. ``John faced off some of the biggest clients in the world, including governments,'' he says. ``He worked with the Government of Singapore, the Central Bank of China, some of the big Middle Eastern pension funds, Shell and US Fidelity and Capital. He had a very good handle on a variety of financial products: one of the most senior client people we had.''

But Key was adamant. "No, I want to go. That's what I want to do.''

"Was I upset to lose him? Oh no,'' says Martin. "Talented people want to do interesting things and it's kind of hard to hold them back.''

But why send him to manage debt markets in Australia? Was he fired?

"No, no, no,'' says Martin. "He was specifically asked by me to go down to Sydney and give Merrill Lynch another year and a half and help me find out what the strategy in Australia should be. He came up with some very good insights, helped us focus on certain areas, the right clients, and set up in a way that made a lot of sense.''

"We joke with each other, we don't know what training we got at Merrill Lynch but we seem able to adapt to make an impact in other areas. But I think if you bring the basics: risk/reward; investment/return you can take those skills to other activities.''

That same group at Merrill Lynch are now scattered over the world. One is an assistant secretary of defence in Asia, 25 are CEOs of different industries. Martin himself, now 49, is CEO and president of Dublin-based Elan, the largest biotech company in Europe developing drugs to fight multiple sclerosis and Alzheimers.

"And then there's John who's a very special and unique guy,'' says Martin.

"A lot of people have plans but very few execute them. John did.''

Coming home

In 2001, Key called a summit, shouting his sisters and their families to Hanmer Springs, 90 minutes drive north of Christchurch, to tell them his plan. He was going to return to New Zealand to stand for Parliament and follow-through on the promise he'd made as a boy - to become Prime Minister.

The initial reaction was similar to that which he received when he announced his plan to take up golf.

Liz tried to convince him to think of another job, perhaps CEO of Air New Zealand. Sue was adamant that it was a stupid idea. ``I ... said, `Don't do it. Everybody hates politicians. There must be something you can do'.''

But his mind was made up.

- NZ Herald

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