Saudi farm deal could be examined by Auditor-General

Auditor General of New Zealand Lyn Provost. File photo / NZ Herald

The deal that saw millions of dollars spent on a businessman's Saudi Arabian farm could be scrutinised by the Auditor-General.

Foreign Minister Murray McCully came under further pressure today, with questions about whether a threat of legal action cited as a reason for the deal was genuine.

Green Party trade spokesman James Shaw revealed that he had written to the Auditor-General, Lyn Provost, asking for the farm deal to be investigated, specifically procurement processes.

"Everyone knows lawyers throw around threats of big law suits to gain leverage for their clients," Mr Shaw said.

"The fact the Government appears to have believed the hype and jumped at these threats is both remarkable and possibly in breach of proper process."

A spokesman for the Office of the Auditor-General confirmed receipt of Mr Shaw's letter and would consider the request "as per our usual process".

National has pushed back this week by blaming Labour for antagonising businessman Sheikh Hamood Al Ali Khalaf to the extent where the Government was exposed to a legal claim of up to $30 million.

Spending about $11.5 million on Mr Al Ali Khalaf's farm in Saudi Arabia was a way to defuse that threat, Mr McCully argued.

It would also mend relations with the Saudis to make a stalled regional free trade more likely, and serve as a demonstration base for Kiwi agribusiness.

Labour has said the legal threat was clearly hollow from the start, and during questioning by media Mr McCully confirmed it had been withdrawn by the time Cabinet signed-off on the deal in February, 2013.

"At the beginning of these events there was legal action being discussed amongst the parties, also a WTO [World Trade Organisation] suit being discussed amongst some of the parties as well."

Mr McCully said that legal action was off the table by the time Cabinet agreed to the farm, "because I had been dealing with the matter and tried to avoid the compensation claim and taken compensation out of the discussion".

Prime Minister John Key said whether a legal threat was "live" or not at the time Cabinet was told of the deal was not critical.

"Sometimes people say I might take legal action... sometimes what then happens is you try and find a way to resolve that issue, and therefore, because you are looking to resolve it, they put that legal action on hold. That's a pretty normal practice."

However, Labour's export growth and trade spokesman David Parker said any legal claim had to be brought within six years of the cause of that claim to be valid.

"We have on record Mr Carter, who was then the Minister of Agriculture... saying that the National Government was going to reverse the ban on the export of live sheep for slaughter. The National Government then reversed their position.

"But even if that is so, it is no excuse for this $4 million payment because it was perfectly within the power of the Government to extend the ban on the export of live sheep, and you don't have to pay anyone for the purpose of governing New Zealand."