Cunliffe's telco remarks broke Cabinet rules

David Cunliffe

Communications Minister David Cunliffe appears to have breached his own Cabinet guidelines, which strongly urge ministers not to talk about the prospects of companies such as Telecom.

Mr Cunliffe's comments about Telecom's dividend fall foul of the advice, which was drawn up in 2002 after Prime Minister Helen Clark blundered in suggesting Air New Zealand shareholders hang on to their shares.

The guidelines note that even if the Crown does not actually possess confidential information, "caution is required when acting on issues relating to a publicly listed company because there may be a perception that the Crown has access to confidential information".

They also say that if the Crown is an insider then ministers should not comment on a publicly listed company's value, the value of its shares, or its prospects as a company.

Sharemarket participants might act on statements by ministers, even if those statements are made without the benefit of confidential information, the guidelines warn.

Mr Cunliffe has ducked ongoing Opposition calls for his resignation since he told Bloomberg news agency last week that Telecom may have to cut its dividend payout to fund increased investment.

The statement was said to be instrumental in wiping $157 million off Telecom's market capitalisation and the Securities Commission is now investigating the issue.

Prime Minister Helen Clark has strongly defended Mr Cunliffe and claimed his remarks contained nothing that other other commentators had not said publicly.

Yesterday she reiterated that Mr Cunliffe did not have any inside information about Telecom's future dividends when he made the statements.

"I await the Securities Commission's findings, but I do note that Telecom today is trading higher than it was before the comments were made," Helen Clark said, referring to the company's share price.

Mr Cunliffe also appeared confident his comments had not fallen foul of the law. He said in a parliamentary debate that he welcomed the investigation.

"I want the facts on the table, I want them considered objectively and I will co-operate fully with that," Mr Cunliffe said.

"I think I know who's going to have the last laugh, and it isn't going to be them," he said of Opposition MPs.

Mobile phone company Vodafone last night helped his defence.

Vodafone allowed Mr Cunliffe's office to release a letter it sent disputing National Party criticisms that Mr Cunliffe could not keep commercial information confidential.

The unusual move by the phone company came after National leader Don Brash used question time to resurrect a High Court judgment from last year in which Mr Cunliffe was said to have knowingly passed confidential Vodafone information to the Commerce Commission.

Dr Brash suggested the judgment, together with Mr Cunliffe's Telecom comments, proved the minister had a problem keeping commercial information to himself.

But in a letter to Mr Cunliffe, Vodafone chief executive Russell Stanners said the company had no criticism of the minister.

The High Court judgment had brought "unexpected criticism" of Mr Cunliffe, and Vodafone wanted to "apologise for this very unfortunate situation", the letter said.


THE RULES OF DISCRETION

* Even if the Crown does not actually possess confidential information, caution is required because there might be a perception that the Crown has access to confidential information.

* Where the Crown is an insider and holds inside information, ministers and officials should not comment on a publicly listed company's value, the value of its shares or its prospects.

* Market participants might act on statements by ministers, even if those statements are made without the benefit of confidential information.

* It is impossible to predict the questions and issues that the media and other third parties may raise with ministers ... therefore ministers and officials should act cautiously when dealing with matters relating to a publicly listed company.


- Additional reporting by Brian Fallow