PM's don't sell advice sparks official probe

By VERNON SMALL

The Securities Commission will investigate the Prime Minister's extraordinary comments on Air New Zealand's future, which inadvertently halted trading in the airline's shares yesterday.

Hours after the Government tried to dismiss the debacle as media exaggeration, the commission, which has wide jurisdiction, said it would hold an inquiry to examine share trading on Tuesday and Wednesday and also the roles of key participants.

Last night's announcement targeted "the effects on the market of various announcements and disclosures concerning Air New Zealand and the role of market participants and others in the period leading up to the resumption of trading [yesterday]."

The inquiry is likely to compound the embarrassment of a Government which yesterday scrambled for cover after the Prime Minister advised small Air NZ shareholders not to sell their shares.

As the Government has been privy to much of the negotiation over the airline's future, eyebrows were raised over what she knew that the investing public did not.

Helen Clark refused to answer questions on her "don't sell" comments, which led the stock exchange to halt trading in the shares yesterday morning.

Instead, she left Finance Minister Michael Cullen to field queries about her words, which were widely seen as a vote of confidence despite brokers' warnings that uncertainty made investment in the troubled national carrier risky.

Air NZ "A" shares, restricted to New Zealand owners, rose 8c to 26c on Tuesday, before her positive comments were published.

But when the market opened yesterday buyers immediately offered 45c.

After trading resumed in mid-afternoon, the A shares rose 7c to 34c and the B shares, available to foreign buyers, closed 5c up at 30c.

The airline's future has been shrouded in doubt as the Government and major shareholders hold secret talks on whether a proposed $850 million rescue plan can save it.

Dr Cullen took almost three hours to emerge from Premier House, where Labour was holding an all-day caucus, as the Government prepared a response and sought legal advice on whether the Prime Minister's comments had exposed it to any liability.

He confirmed that the Solicitor-General had advised the Government there was no legal liability.

The angry Finance Minister rounded on journalists, saying they asked ministers "silly questions" about Air NZ then published the answers.

But he did not question the accuracy of the comments attributed to Helen Clark.

Asked what advice he would give small shareholders, he said they should not read the Herald.

But Act MP Stephen Franks rubbished Dr Cullen's claim that the media were asking "silly" questions.

"The market reacts by halving, then doubling, the share price and we are supposed to believe they are silly questions?"

He said Helen Clark did not understand business, but was frustrated at the slow pace of progress on resolving Air NZ's problems.

"Her judgment has gone with her patience."

National's deputy leader, Bill English, said Helen Clark's actions amounted to "commercial vandalism" and showed she could not distinguish business from politics.

Mr Franks, who was a member of the stock exchange's market surveillance panel before entering politics, said the Prime Minister might be culpable under insider trading law.

While her comments appeared to be "don't sell" advice, they were really advice that the shares were worth more than the market was expecting.

She would remain exposed until all the price-sensitive information the Government had been given was made public.

It is not the first time Helen Clark's comments have influenced the direction of the shares.

She prompted a major selloff on Monday after saying statutory management was a "viable option" if the Government's preferred rescue package did not go ahead. But on that occasion, the stock exchange made no move to suspend trading.

Dr Cullen said a transcript of the interview had been sent to the Securities Commission.

After a request from the stock exchange market surveillance panel, Air NZ said it had read Helen Clark's statements and considered that the media had made more of them than was warranted or intended.

While her views were reassuring, they did not constitute a statement on the company's future structure.

Air NZ also said it had no knowledge of reported calls from the Prime Minister's office sounding out sharebrokers on the market's reaction to plans involving Government capital injections or underwriting.

Dr Cullen said "best inquiries" indicated the reports were not correct. "Certainly no one was acting on the instructions of the Prime Minister."

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