Something is rotten in the state of New Zealand politics. That at least will be the public's verdict on the latest political finance scandal involving government minister John Banks and his extremely dodgy, if not illegal, campaign finance practices. This scandal therefore has the potential to have a significant impact on politics in this country. It will reinforce to the public the grubby and deceitful character of politics, and increase their suspicions about the probity of relationships and money between politicians and the wealthy. Many voters already believe that politicians, parties and governments aren't to be trusted, and this scandal will do little to change their minds.

The Banks/Dotcom scandal is such an explosive one that it's already being reported internationally - see, for example, the coverage in Britain Guardian newspaper: Kim Dotcom donation claims rock New Zealand coalition. The story broke, first, on TV3's Campbell Live show on Friday, which contained revelations about Kim Dotcom's donation to John Banks' mayoral campaign, complete with video of Banks toasting the Megaupload founder at his birthday party - see: Banks knew about 'anonymous' Dotcom donation - reports and the actual video.

There are many aspects and ramifications of the scandal that are currently being explored in the reporting and analysis of the scandal, including the following questions.

1) Why has this scandal emerged?


The story goes (according to David Garrett commenting on Kiwiblog;, that Mr Dotcom, having found himself an unwilling resident in the Epsom electorate (namely Mount Eden prison), asked the local MP (and birthday party attendee) for help but was rebuffed. It seems that the internet tycoon sought revenge on John Banks by releasing the details of his donations. And it's now reported that Dotcom is intending to supply records to back up his claim that Banks was well aware of the origin of the anonymous donation. The on-going saga is well reported in the following items: :Dotcom to supply records to prove Banks donation, Police look at Banks' Dotcom funds, and Banks' funds: Dotcom checks books.

2) Has John Banks actually broken the law, and what are the chances of a conviction?

It appears that if Banks is charged, the burden of proof will lie with the prosecution to prove that Banks knew the source of the donation. For a legal analysis see Andrew Geddis' So let the sun shine in, face it with a grin and Graeme Edgeler's The law may be that stupid.

3) Can John Banks and Act survive the public's judgement?

For Banks and the Act Party this is a matter of survival so you can expect them to fight using whatever weapons they have, including legal technicalities - so there is still a strong chance that no prosecution will ever be made. Of course as Gordon Campbell points out, 'Maintaining a defence of plausible deniability may serve to keep you out of a courtroom, but it doesn't do much for the credibility of you and your party in the court of public opinion' - see: On the John Banks vs Kim Dotcom saga.

Although Labour has called for Banks to stand down while the claims are investigated they have been joined by others who you would think might be a little more sympathetic to Banks including Rodney Hide along with David Farrar and Karl du Fresne, both of whom agree that it 'doesn't look good'.

If Banks decides to dig in, this could be played out in slow motion - very slow motion, as Cameron Slater points out. The Police record on dealing quickly with these sorts of allegations is not good and it could easily drag out until after the 2014 election - see Cameron Slater's Stand Down?

The situation is looking very messy for John Banks, particularly as many found his response on Sunday's Q + A evasive and unconvincing - watch here. In this regard, John Hartevelt says that 'Even if Banks does sneak out of this one without official censure, he has utterly failed on numerous counts of political judgement' - see: Is Banks broken or just bruised? Hartevelt also says that 'John Banks has really blundered his way through' with 'bizarre bluff and bluster'. For similar commentary, see Russell Brown's #JohnDotBanks and all, and my TV3 Firstline interview: Bryce Edwards on Kim Dotcom's John Banks donation and Video.
4) How will the National Government be affected by this scandal?


The impact on the National-led Government could also be significant, again with risk of 'rottenness' pervading its dealings with political finance, the elite, and companies such as SkyCity. There is a real danger for National that it will be strongly tainted by John Banks' dodgy dealings, because it has arrived in the wake of increasing suspicions involving ACC, and the SkyCity convention deal (as well as Phil Heatley's use of ministerial credit cards, and Pansy Wong's use of parliamentary resources).

At the moment it's being reported that the Prime Minister is standing by his minister. But as Audrey Young reminds us in her very good opinion piece today, John Key also stood by Nick Smith too - 'until he didn't' - see: Banks vs Dotcom - a mystery for the police.

It's the perception of course that will be most worrying to John Key and National. All that is missing now is for Bronwyn Pullar's name to crop up in the mix (although Cameron Slater does say that Michelle Boag was in charge of Banks' fundraising) and all of National's scandals will have converged - and that's a big danger for the Government.

5) What would happen in a by-election?

If there was a by-election, it raises some fascinating possibilities. The most likely scenario would be for list MP Paul Goldsmith to win the seat for National, thus gaining National another list MP. Of course this would also mean the demise of Act as a parliamentary party and, in all probability, as a political force. For a wider survey of what might happen, see Geoffrey Miller's guest post on the liberation blog, which outlines Five possible consequences of the John Banks donation allegations, including a merger between Act and National.

On a lighter note John Banks' repeated references to cabbage boats is explored by Toby Manhire (John Banks and the whole cabbage boat business; ), and parodied by Scott Yorke (A Statement By John Banks).

6) Will this lead to changes to political finance laws?

It seems inevitable that changes will come partly as a result of this scandal - see for example, Chloe Johnson's Loophole may close, Chris Keall's Banks needs to stand down and shut up - Hide, Mike Smith's Policy for Money?, and No Right Turn's Time to reform local electoral law.

The public are already suspicious about the cash-based relationships between politicians and wealthy individuals or corporations, and the issue of anonymous donations go to the heart of this. The disclosure of donations to political parties in 2011, due to be publicly released tomorrow, will receive more than the usual scrutiny.

And it's certainly the case that the law covering donations to local government candidates is far less restrictive than that covering parliamentary elections where anonymous donations are limited to $1500 except where the donation is made through the Electoral Commission to guarantee anonymity. The rules for parliamentary candidates would probably also have prevented Banks from accepting donations from Kim Dotcom because he would likely have been classed as 'an overseas person' which would have also limited such a donation to a maximum of $1500.

7) Can Labour benefit from this scandal?

National's misfortune could finally be Labour's gain. The question for Labour is will its struggling leader be able to capitalize on this in a way that he has not been able to so far? The nice guy, non-politician image Shearer has been working to cultivate seems to be tailor made to benefit his party on issues like this.

Speculation continued over the weekend about Shearer's leadership with the Sunday Star Times saying that he was An implausible Prime Minister and Brian Edwards indulging in some 'I told you so' in On David Shearer And Wisdom Before And After The Event.

Audrey Young reports that Shearer has hit back, angrily denying rumours of deep divisions in his office (see: Rumours of office rift rile Shearer), singling out the Labour-aligned blog, The Standard, for particular criticism. The Herald (Labour leader shaping up as quiet achiever;) and David Farrar (Let Shearer be Shearer;) both argue that Shearer deserves at least until the end of the year to prove he is up to the job (although Farrar's input will no doubt trigger a frenzy of speculation about his motives - is it a double bluff?)

While there seems to be a consensus emerging that Shearer should be given until the end of the year, Danyl Mclauchlan and Martyn Bradbury point to a speech given by David Cunliffe at the weekend, supposedly about economic development ideas, but looking more like the type of basic positioning statement that many have been waiting for from Shearer - see Mclauchlan's Cunliffe shores up the base (which also incudes the text of the speech) and Bradbury's Cunliffe launches 'True Labour' speech. See also, David Farrar's analysis of the speech.

Other important or interesting political items today include:

Steve Braunias has a warning for David Shearer about who he gets into bed with in the very funny Secret Diary of David Shearer.

Matthew Hooton speculates that a Key, Peters reconciliation on 2014 cards.

Elizabeth Puranam reports that Thousands join Auckland asset sale protest on Saturday, and the Citizens Initiated Referendum petition on the assets has formally begun collecting signatures - see: Keep our assets. Sign the petition. Investment banker Rob Cameron, who led the 2009 taskforce which proposed the asset sales, has blasted the Government's attempts to sell the policy as 'a disaster' - see: RNZ's Cameron critical of efforts to sell asset sale benefits.

The Electoral Commission has released results of a survey on why record numbers of people didn't vote in last year's election - see: 'Low value of vote, lack of trust' key to poor election turnout.

Phil Kitchin reports that a key meeting between Bronwyn Pullar, Michelle Boag and ACC staff was recorded, and it appears to contradict ACC's version of events - see: Recording at odds with ACC extortion allegations.