New Zealand is officially one of the least corrupt countries in the world. But it could be argued that our political system is still biased in favour of the wealthy.
Here — as in other countries — wealthy individuals and businesses are able to disproportionately influence policy decisions and the distribution of resources in their favour. The suspicion is that the wealthy make donations to politicians and their parties in the understanding or hope that the politicians will return the favour.
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To help guard against such undue influence of wealth, New Zealand has rules around political finance, especially in terms of donations to political parties. Large donations have to be publicly declared by the parties, with some exceptions. The idea is that if the public is aware of these financial relationships, they will be on guard against politicians unduly acting in favour of their benefactors.
Inevitably, some politicians and wealthy individuals try to find ways to keep their financial contributions secret. That appears to be the case in the scandal involving New Zealand First and its associated organisation the New Zealand First Foundation. The latter is a conduit for receiving donations from the wealthy, and in some way or another using those funds for the benefit of the party. Winston Peters has categorically denied that his party has been involved in any wrongdoing. But questions continue to be asked about the legality and morality of these arrangements.
The first details of the scandal came to light eight days ago in a story by RNZ's Guyon Espiner, in which he outlined the role of the New Zealand First Foundation in providing loans to the party — see: Mysterious foundation loaning New Zealand First money.
Here are Espiner's details about the loans: "Records show New Zealand First has disclosed three loans from the New Zealand First Foundation. In 2017, it received $73,000. Then in 2018, it received a separate loan of $76,622, in what the Electoral Commission says was a loan executed to 'replace the first loan'. In 2019, it received another loan for $44,923. Those giving money to the foundation are able to remain anonymous because under electoral law, loans are not subject to the same disclosure requirements as donations."
In this story, Otago University law professor Andrew Geddis is reported as believing the arrangement "did not provide the level of transparency the public needed, especially from a party with ministers in government". Geddis said it was important to know where NZ First got its money: "We want to know that so that we can then trace any public decisions that this party and its ministers are making back through and see, is it benefiting people who've helped fund them? And that's a fundamental question in any democracy."
The Foundation's trustees, Espiner reported, are two key NZ First individuals, Brian Henry and Doug Woolerton. Henry has various roles in the party, including its "judicial officer", as well as being Peters' lawyer. When contacted by Espiner, Henry hung up the phone after stating "There is nothing to talk about. That's the end of the conversation". Woolerton, Espiner reports, "wouldn't say what the foundation was, what his role as a trustee involved or whether he believed he had conflicts of interest given he also ran a lobbying firm."
In a useful follow-up to Espiner's expose, Boris Jancic and Claire Trevett delved further into why the foundation would be providing the funding to the party in the form of a loan — see: Many questions, no answers about 'opaque' NZ First Foundation. Geddis is quoted again, suggesting "the donations laws allow a political party to avoid disclosing donors and set up a form of money-go-round by using a third party to 'loan' it money, which was repaid and loaned again when it was needed."
And Claire Trevett also explains how the arrangement could be legal, in her column, Does NZ First's mystery foundation meet PM Jacinda Ardern's 'spirit of the law' test?
The scandal then became much more serious when Taupō Times reporter Matt Shand started publishing a series of articles reporting on documents he obtained from the Foundation. The first one of these, from two days ago, NZ First Foundation dodging electoral rules? Records suggest breaches, began like this: "Almost half a million dollars in political donations appear to have been hidden inside a secret slush fund controlled by a coterie of Deputy Prime Minister Winston Peters' trusted advisers. The secretive New Zealand First Foundation collected donations from wealthy donors and used the money to finance election campaigns, pay for an MP's legal advice, advertising, fund a $5000 day at the Wellington races and even pay an IRD bill."
Shand reported: "Donors to the foundation include food manufacturers, racing interests, forestry owners and wealthy property developers. Efforts have been made by party officials to find out details of the foundation and some say they were removed from the party when they challenged Peters or Henry about finances. There is now a conga line of NZ First Party officials who say they have been forced out of the party."
In an accompanying article, Shand reports that electoral law expert Graeme Edgeler suggested the arrangements could be illegal, but it depended on whether the Foundation is legally part of New Zealand First for the purposes of the Electoral Act — see: Why the NZ First slush fund 'could breach electoral law': expert.
Either way, it appears a crime has been committed, according to Edgeler: "If the foundation is separate then the party secretaries may have committed corrupt or illegal practices around failing to declare donations… If the foundation is part of New Zealand First then the party secretary has likely committed offences around not declaring donations to the foundation and failing to keep records."
The same article also suggests that there may have been an attempt to split large donations into smaller bundles to avoid them being disclosed to the public: "Documents seen in the investigation show a legal letter accompanying a large donation of $50,000 split up into four smaller donations of $12,500."
Also, rather curiously, "The foundation simply loans money to NZ First. But the records show these 'loans' are issued and them immediately repaid by the party the following day."
Yesterday, Shand followed this up with an article detailing some of the other things the foundation was spending money on. This is important, because if an individual or organisation is spending money on helping a party, or helping them campaign, then this essentially must also be classed as a donation to the party, and generally requires declaration to the Electoral Commission.
Shand reports: "Invoices, seen by Stuff, reveal the foundation spent $325,000 in about 18 months to March 2019 — with most of the money appearing to directly benefit the NZ First Party. This included renting and furnishing the party's campaign office for the 2017 election as well as advertising material, reimbursements for travel, internet bills, legal advice and consultancy work. About $28,000 was spent with Prime Property to rent campaign headquarters" — see: What NZ First slush fund was spent on: Campaign HQ, staff overtime, and a shredder.
One former NZ First MP is quoted suggesting that it made a mockery of party volunteers who worked hard to fundraise: "For many, many years a lot of elderly people have baked cakes, stitched quilts and contributed pay to the party… All the while this foundation has been receiving significant donations… I think the supporters will be incensed."
Today, Shand has published two follow-up pieces. The first, Who are the donors behind the NZ First Foundation? is very important, as it raises questions about whether wealthy donors were receiving favours from the party.
For example, "The racing industry feature heavily within the donations, with at least $80,000 identified. One investor, who Stuff has decided not to name, has connections with the mānuka honey industry, and has spoken out about the need to protect the brand's copyright. The Provincial Growth Fund, overseen by NZ First minister Shane Jones, has granted $5.7m granted to the Mānuka Honey Appellation Society to help protect its trademark. There is no information saying the two are linked."
Similarly, "there were other large donations, many of which are from companies and individuals who work in industries that have benefited from the $3 billion Provincial Growth Fund. Stuff is not suggesting any wrongdoing on the part of the donors, and it may be that those industries would have benefited regardless."
The article also reports that, despite Winston Peters characterising the Foundation as being entirely separate from the party, the "bagman" collecting the money was Tauranga-based list MP Clayton Mitchell. The article states: "Many sources, on and off the record have confirmed that Mitchell solicited donations for the party, but would often give out the NZ First Foundation's bank account details." See also, Clayton Mitchell NZ First donations bag man, as donors kept in dark.
A second article by Shand today sheds more light on the role of the Foundation in carrying out campaigning and fundraising for the party, as well its connection to a company owned by Brian Henry — see: QComms: the mysterious firm revving NZ First's campaign engine.
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The role of these arrangements is analysed very well by Danyl Mclauchlan, who argues that the public would be quite right to raise questions about corruption and integrity in the current government: "When you have companies and individuals making secret donations to a party that holds the portfolios in those industries, there is every reason for the public to ask questions about whether their government is corrupt" — see: The NZ First donations scandal is very serious, and won't let Jacinda Ardern hide.
As an example, Mclauchlan points to NZ First's apparent vetoing of the Labour-Green capital gains tax proposal, which many in the property sector were so opposed to, and says in light of this, "The public has a right to know that they were being funded by property developers." He points out that while in government, NZ First has "taken very strong policy stands on behalf of specific industries and companies".
Andrew Geddis suggests that New Zealand's political donations regulatory system is therefore broken — see his opinion piece: The NZ First Foundation: A story with no happy ending.
Here's his main point about possible corruption: "We have a political party that is a keystone of the current government. Its members are Ministers, with responsibility for (amongst other things) distributing $3 billion in government largesse around the country's provinces. And now we are told that a legally-opaque Foundation intimately connected to the party has raised hundreds-of-thousands of dollars from 'primary industry leaders, wealthy investors and multi-millionaires'. That Foundation allegedly has used the money for the benefit of the party and its MPs. And no-one outside of the party and those that gave the money are made any the wiser. If this is legal, then there's no way that it should be. You can't have a country's political system run in this way and be considered the second least corrupt nation on the planet."
Finally, New Zealand's system of political finance regulation of donations and political expenditure is extremely complicated. But to help with the details and intricacies, Henry Cooke has put together a useful backgrounder — see: Explainer: How New Zealand's convoluted electoral law works.