Bryce Edwards: 10 lessons from the Labour-Liu scandal

Photos / NZ Herald

It's time to review what has been the biggest political controversy of the 2014 election campaign so far - the furore over alleged party donations from businessman Donghua Liu and his relationship with Labour and National. What can we learn from what's been happening? What questions need to be answered about the incredibly murky and fraught affair? Some questions are answered in today's Herald editorial, Cries of bias will not stop reporting, but that won't satisfy many critics, and there is plenty more to debate about the issues involved.

1) 'Gotcha politics' can be legitimate, but hurt everyone

Scandals and scandalmongering have now become a central part of New Zealand electoral politics, and it's not about to go away. Political parties and the media have much to benefit from highlighting and using allegations of potential wrongdoing and illicit political and financial relationships.

As I argued sometime ago, the public should 'Get ready for a nasty election in which scandalmongering is the main campaigning weapon of politicians' - see my column, A nasty scandalmongering election campaign. I explained that 'Policy is out, and scandal is in. We might now expect that the next four months will descend into a bitter fight about the integrity of political opponents, with a large amount of mud being thrown around'.

The Liu controversy has produced many apparent 'victims' - from Maurice Williamson, first, through to the Labour Party, now. Arguably there are more victims than just the politicians themselves - with public confidence in politics being dented, along with negative ramifications for electoral participation, policy and debate.

Yet it would be nonsense to suggest that scandal isn't also an important and necessary part of democratic politics. Wrongdoing and untoward relations do need to be exposed and evaluated. So the media - as well as others - are quite right to pursue and publicise issues about money and politics. There is a public interest in locating where power lies in society, and about the influence of donations on the democratic process - especially when there are signs of obfuscation.

2) When parties focus on scandals, escalation occurs

When the Liu donation scandal first started being pushed by the Labour Party, John Key rather starkly warned against a campaign fight on this, saying: 'Do not go there'. This was in response to Labour seeking to campaign on cronyism and the 'Cabinet Club' donations. Key indicated he was ready to retaliate if Labour chose to campaign on party donations: 'I have quite a long list. If Labour members really want to invite me to table all of those, they are welcome to do that, but I just make one little warning to them: do not go there. But if you want me to, I am more than happy to' - see my column about this at the time, Is there 'cash for access' in NZ politics?.

We are now seeing the outcome of politicians choosing to fight on political finance issues. Retaliation always occurs. The nature of electoral politics is that politicians are mostly reluctant to start throwing around strong allegations for fear that they will then be subject to similar missiles coming back at them. But once the peace is broken, then an escalation of dirty warfare tends to occur.

Curiously there has been some restraint shown by some parties over the controversy. The NBR has recently highlighted that New Zealand First has been very quiet on the issue, despite it appearing to be 'a perfect scenario for a leader hot on Chinese race, corruption and immigration issues', speculating that the party could have been neutralized by accepting donations from Liu too. The newspaper reports, however, that 'Winston Peters says he doesn't know if his party has received donations from businessman Donghua Liu or not' - see Victoria Young's Winston Peters on Liu saga (paywalled).

3) Hypocrisy is always what riles voters most

Labour has been so damaged by the Liu scandal, not because of the alleged Liu donations themselves, but because the party was caught out after throwing mud itself. In most of these scandals the public reacts strongly if there is a sense of hypocrisy. Likewise, this was why the revelation of Cunliffe's immigration advocacy for Liu was so damaging.

From the public's perspective, Labour campaigned strongly on Liu's financial relationship with National, yet appeared to be also willing to advocate on his behalf and accept his money.

There is of course, continued outraged in Labour circles about the perceived unfairness of the scandal, but it has to be remembered that Labour's damage is largely self-inflicted. And even now, David Cunliffe might be accused of hypocrisy when he comes out with statements like 'I think New Zealanders really would like to see politicians concentrate on the issue that matter to them, not mudslinging by politicians' - see Tova O'Brien's Labour reviews Liu donations records.

4) Scandals suck oxygen away from what you want to talk about

There should be no doubt that the whole Liu controversy has been a distraction from more policy-related debates. As Toby Manhire says today, 'The past few weeks may offer little encouragement that this election will be fought over policy, philosophy and vision' - see: Soap operas aside, policy rules in this campaign. Manhire is, however, optimistic that a more 'policy-dominated campaign' will occur from here on in.

We should we wary, though, of politicians professing a belief in wanting to talk about 'the real issues'. For example, Claire Trevett points out that the Greens appear to be somewhat hypocritical on this: 'Yesterday the Green Party called for people to be talking about child poverty rather than attacking each other over donations. Other parties were far too busy fretting about their own poverty levels to bother with the children. Green co-leader Metiria Turei said the donations controversy was just not relevant to New Zealand families. That may be right, but it is also a bit rich, given it was the Greens who kicked off a prolonged attack over National's Cabinet Club donations scheme to begin with' - see: Pointscoring politics in danger of boring voters.

Similarly, even this week on the day that Labour launched it's alternative budget, David Parker and David Cunliffe managed to overshadow his announcement by his attacking the media instead - see TVNZ's Cunliffe hints at legal action over Liu donations saga.

5) This scandal has hurt Labour more than National

Has Labour been vindicated over the Liu donations controversy? Certainly, it now appears that the Liu claims were heavily inflated. But the Herald argues today that the there are still questions for Labour: 'The core issue remains, however: At a minimum, removing Mr Barker's China trip and a donation to a rowing club the MP's daughter belonged to, Labour faces Liu's claim that he made $38,000 in donations to the party and anonymously through MPs' - see: Cries of bias will not stop reporting.

Similarly, National's David Farrar says that despite Liu's clarification, 'This leaves $40,000 he still claims he donated to Labour, including the $15,000 for the Helen Clark book. The disclosure limit in 2007 was $10,000 - so we still do not know why these were not disclosed' - see: Dong Liu clarifies donations. Farrar puts forward an explanation, saying, 'This suggests that possibly the $40,000 was split up between multiple electorates or candidates'.

Rob Salmond totally rejects that Labour still has to face up to such questions: 'No, at present Labour faces no claims at all. For there to be any claim to answer, Liu needs to back up his statements with some real, hard evidence. Bank records, receipts, things like that. That is because we now absolutely know that Liu's memory is faulty, so we cannot trust his recollections. And we also know his motives are compromised, after donating heavily to National in recent times. Once there is real, hard evidence of donations, then Labour can deal with it. Until then, there is nothing' - see: Herald editorialisal. Elsewhere, Salmond complains that the damage to his party over the controversy is probably to 'cost Labour around 2% in the polls, likely to National'.

Labour's blogging spindoctor Rob Salmond is very angry with the media, and vents his spleen in his post, New Zealand Herald tries to cover its butt; gets shit on its hands: 'Well I don't swear a lot on this blog, but the Herald can fuck right off with that claim. The only people with headaches are the Herald's journalists. They have been suckered, by a confirmed National party donor, to running an entirely false smear against Labour with absolutely no hard evidence to back it up. Worse, they have allowed themselves to be suckered just before en election campaign'.

A bigger damage has been to Labour's ability to campaign against National on allegations of cronyism. As Toby Manhire says, 'Labour emerges with its guns spiked on cronyism arguments' - see: Soap operas aside, policy rules in this campaign.

6) Allegations need to be treated as unconfirmed claims

We now know that original allegations of donations to Labour from Liu were extremely inflated in Bevan Hurley's Herald story, Businessman gifts $150k to Labour Party. This is explained by Jared Savage in his article, Liu: $100k not just for wine.

The controversy is therefore a timely reminded to all involved that allegations such as those about political finance need to be treated as 'unconfirmed claims', even if those making them are willing to go on the record with signed statements.

Of course there has been a healthy skepticism in the debate about the donation claims. All sorts of discussion in the media and blogosphere has looked at the veracity of the claims. The best has been on the Listener website - see Toby Manhire's Liu's Labour. Lost? Here's 10 theories. Of the ten possibilities listed by Manhire to explain the donation mystery, in retrospect four look rather prescient: '6. Donghua Liu's record-keeping and memory is woeful, and so is his handwriting... 7. Donghua Liu is telling porkies. 8. Donghua Liu came under pressure following Maurice Williamson's resignation and exaggerated his contribution to Labour. 9. Donghua Liu's translator is hopeless / vengeful'.

And, of course, many other bloggers raised good points questioning when an allegation should become a story - for example, Martyn Bradbury's blog post, I have just signed a statement claiming I donated $10billion to John Key for a cheap bottle of gin, where's my front page and lead on the TV news?.

But those around Labour should be careful not to be too pious about such notions, as the Liu allegations aren't the only over-inflated and evidence-lacking claims about political finance to be pushed into electoral debate. Many in Labour seem to have forgotten about all the years of numerous allegations put forward about opponents without evidence. There are many examples, but the standout one is of Trevour Mallard claiming during the 2005 election that National had an 'American bagman' collecting big donations for National.

7) Attacking the media is normally counterproductive

The New Zealand Herald has put forward a very strong and interesting defence of itself in today's editorial, Cries of bias will not stop reporting.

But not all are assuaged. Labour's blogging spindoctor Rob Salmond is very angry with the media, and vents his spleen in his post, New Zealand Herald tries to cover its butt; gets shit on its hands: 'Well I don't swear a lot on this blog, but the Herald can fuck right off with that claim. The only people with headaches are the Herald's journalists. They have been suckered, by a confirmed National party donor, to running an entirely false smear against Labour with absolutely no hard evidence to back it up. Worse, they have allowed themselves to be suckered just before en election campaign'.

Blogger Danyl Mclauchlan puts forward the best critique of the editorial, in his post, The difference. He argues that there's been a difference between the Herald's coverage of other scandals impacting negatively on National, because 'those stories turned out to be true', whereas the Liu story 'has turned out to be false'.

Labour's response, ever since the Liu story broke, has been to attack the media. This has especially been the case amongst its cheerleading partisans in the blogosphere. For example, The Standard published a post calling for a Herald journalist and editor to be fired - see: Take action against the Herald's lies. Likewise, The Standard's Lynn Prentice argued that 'this level of repeated systematic journalistic incompetence in reporting untruths does lead to questions of bias' - see: NZ Herald: Be journalists, check before 'reporting'.

See also Greg Presland's blog post on The Standard, Dear John Armstrong. He complains that, 'The basic problem John is that it looks like National has played the Herald like a puppet on this issue. Even worse it seems that the Herald has been complicit in the manufacturing of a scandal that with the benefit of hindsight has no substance'.

Labour leader David Cunliffe has also called for an apology from the Herald, and hinted at legal action - see Tova O'Brien's Labour vindicated by Liu's error.

Could this really happen? According to ex-Act MP and lawyer Stephen Franks, it's entirely unlikely. He told the NBR that there would be little point, and that 'legal proceedings would really be made for show' - see Victoria Young's Why Labour won't take legal action over Liu (paywalled). Franks says there is another problem: 'Labour would also have to prove that it had a reputation to lose, and as the party has plenty of "dirty linen" - as most political parties do - it would be difficult'.

8) National appears implicated in the Liu scandalmongering

A backlash against National is still possible over the controversy. As I told the NBR earlier in the week, 'National could be vulnerable to dirty tricks accusations if it's seen to be behind Liu making these allegations and he doesn't substantiate them' - see Chris Keall's National risks backlash over Liu accusations - Edwards (paywalled).

There are certainly still plenty of questions about National's involvement in the scandal. This is best put in Toby Manhire's column today: 'Who, meanwhile, was directing the action? One senior press gallery journalist wrote yesterday that "sources in the Government, with no love for Labour, say ministers were 'leaning all over' officials in the Ministry of Business, Innovation and Employment to ensure Cunliffe's letter was released quickly". Did National partisans urge Liu to write a statement amid the embarrassment of Maurice Williamson's resignation as minister for calling police about domestic violence charges he faced? They'd have been mad not to, perhaps. And yet the Prime Minister overplayed his hand: regularly hinting about more to come and the size of the donations lent an unhelpful Machiavellian air to Everyman Key' - see: Soap operas aside, policy rules in this campaign.

Danyl Mclauchlan makes the case even plainer, suggesting that someone in the National Party passed Liu's statement onto the Herald: 'since we know that person who took the false statement from Liu - a major donor to the National Party - passed the information in it onto the Prime Minister several weeks before they gave that statement to the Herald, I'm pretty confident in saying it came from National' - see: The difference.

Vernon Small also raises similar questions - and others - for National in his column, Liu saga hits harder when Labour's down.

9) New Zealand's political finance rules are discredited

This year's election is suddenly has a lot to do with political finance - with plenty of discussion of how parties are raising and spending their money. For a comprehensive discussion of some of the biggest donors and their motivations, see Anthony Hubbard's Thanks very much for the kind donation. Hubbard points to the fact that 'Donors of foreign origin are apt to fall under particular suspicion, as with Dotcom and the Chinese immigrant Donghua Liu'.

Similarly, Brian Rudman argues this week that the Liu controversy 'highlights how dependent New Zealand politics has become on the charity of random money-bags' - see: Wealthy buffoons hold our democracy hostage.

And a by-product of the Liu controversy has been to further flush out other examples of what might be seen as 'cash for access' to government ministers. Toby Manhire uncovered examples from 2007 of the sale of 'a harbour cruise with Chris Carter, a "catered private dinner with prime minister the Rt Hon Helen Clark", to provide "a unique opportunity for intimate conversation around the table with the nation's highest elected official" - see: Revealed: Labour's signed-wine fundraiser.

These historic and contemporary examples raise a lot of questions about whether the donations rules are working or not. For a discussion of this, see TVNZ's 9-minute Q+A debate, The Panel discuss the David Cunliffe interview (8:39). See also my own blog post, The Liu donations to Labour - discrediting the Electoral Act.

In this week's Listener, Jane Clifton also looks at party funding and argues the solutions are needed, at least to deal with the perception that politics is becoming corrupt: 'the body politic's urgent mission should be to find a way to reassure the public, while educating big donors, that in this country no strings attach to such giving. Public scepticism on this point is probably eternal. And conditioned from birth that money and friendship are transactional, foreign donors will take some convincing, too. But it is time for MPs at least to be less furtive and finger-pointy about the whole deal, because even without any evidence of corruption, party funding is now widely regarded as dodgy when it almost certainly isn't' - see: Who, me? (paywalled).

Another solution is put forward by Grant Duncan in Time to consider full state funding of political parties?.

10) Political finance scandals aren't to be taken too seriously

Amongst all the heavy words about corruption and lies, there's been some very good political satire. Scott Yorke has put forward the pro-Labour but also funny blog posts, My statement to the New Zealand Herald and The police must investigate the alleged Liu donations because..., while as usual Steve Braunias has put forward the bizarre, Secret diary of David Cunliffe.