David Cunliffe has admitted a trust was used to take donations for his leadership campaign, allowing him to sidestep the obligation to disclose donations in the MPs' register of financial interests.
Mr Cunliffe confirmed yesterday he used a trust to collect donations for his bid for the Labour leadership.
Mr Cunliffe said his campaign team opted to use a trust because the Labour Party's rules for the contest specified donations would be confidential. "That is a decision we made as a campaign team at the time, pursuant to the rules which meant donors could have an expectation of confidentiality."
Asked if he was trying to hide something he said "not at all. That has been common practice in New Zealand."
At the time of the leadership contest last November, the candidates for Labour had not realised donations of more than $500 would have to be declared as "gifts" in the Register of Pecuniary Interest.
The use of a trust means Mr Cunliffe does not have to list the donations separately in his return. Instead, he only has to disclose the trust and whether he was a trustee or beneficiary, but not the extent of any benefit from it.
Yesterday, Prime Minister John Key was scathing of Mr Cunliffe's use of a trust to sidestep disclosure given his past criticism of National for the same practice in the past. In 2008, Labour changed the law to prevent trusts being used to hide donations for general elections.
"This is a guy that was part of the Labour Party that reformed legislation in relation to donations that effectively precluded the use of trusts. The purpose of the pecuniary interests system is for there to be transparency and clarity."
By deadline, Mr Cunliffe had not responded to further written questions about whether he knew the names of donors who had given to the trust, or whether he had included individual donations in his return to the Labour Party under its rules.
Labour's General Secretary Tim Barnett said the returns the candidates provided to the party were confidential.
Why Labour leader David Cunliffe does not have to disclose donations:
*Donations of more than $500 have to be declared in an MP's register of pecuniary interests.
*But if a trust is used, only the trust has to be declared - not the donations.
*MPs must declare a trust if they are a trustee or beneficiary.
*They do not have to declare any benefit received from the trust.
*In 2007, Labour changed the law to prevent trusts being used to hide donations in general elections.