Although Pansy Wong has survived the investigation into her use of travel perks, the NBR is today reporting another political finance potential scandal based on her fundraising for the National Party. It has been revealed that Wong has raised large amounts of money for the National Party in 2007, including $200,000 from one fundraising event where apparently one Chinese businessman paid $50,000 for one of John Key’s ties. All of this money presumably was passed onto the head office of the National Party. Yet the funds are not easily identified in the donations declared by the party to the Electoral Commission for 2008. Why not? Matt Nippert’s article in today’s NBR quotes me discussing the issue. This blog post elaborates on the issues. [Read more below]
According to several National Party sources, Mrs Wong raised $200,000 at an event held in 2007 at Auckland’s now-closed Ocean City restaurant. It is understood party leader John Key was present at the event and after an auction $50,000 was paid for his tie. Sources said Ms Wong was thanked for this fundraiser at the party’s conference at the Langham Hotel held in August that year.
Nippert explains that the National Party claim that no laws have been broken but refuse to discuss what happened to the money raised by Wong:
Yesterday the National Party hierarchy insisted the donation was handled by the book but several informed party sources told the National Business Review of their concern over the whereabouts of this donation and how it was accounted for…. Donation returns filed to the Electoral Commission show only one payment greater than $50,000 was declared by the National Party in 2007. The Waitemata Trust, known to be used as a half-way-house by donors preferring discretion, donated $424,100. Mrs Wong’s ultimately successful campaign for the Botany electorate seat also does not appear to account for the $200,000.
I’m briefly quoted discussing what could have happened to the money:
Otago University lecturer in politics Bryce Edwards said the lack of sunlight provided by the National Party on Mrs Wong’s fundraising was ironic. Mr Edwards said the funds could be accounted for in a number of convoluted ways without being declared to the Electoral Commission as a technical donation. The Waitemata trust might have been the recipient, he said: “It is quite possible that the money received by Pansy Wong’s fundraising was funnelled through a legal trust and then given to the National Party.” Mr Edwards said the fund-raising venture could also have been organised as a “bogus business venture” with attendees charged market rates to “meet important people with great status”. The $50,000 paid for Mr Key’s tie could be defended in a similar fashion, Mr Edwards said. “How do you determine the market value of what is arguably a piece of iconic political memorabilia from a leader who is now prime minister?”
So was it a business transaction?
Political parties can direct donations through bogus business ventures. For example, according to rules outlined by the Electoral Commission, ‘People who pay to attend a fund-raising event will generally be paying for goods or services rather than making a donation’ and hence are not subject to the disclosure regulations (Electoral Commission, 1998: p.14). Political parties can therefore hold fundraising events, such as a dinner function with the attendance of party leaders, to which entry would require a large amount of money, and this would be deemed a business transaction rather than a political contribution.
It could well be that much of the $200,000 raised in the one night by Wong at the fundraising event was money paid by attendees just to attend the dinner and be entertained and informed by the politicians also attending. It’s quite possible that Wong charged her supporters and friends $1,000 or so to attend and meet influential and powerful people with great status. Although that hypothetical $1,000 entry fee might arguably look like a political donation – and it certainly does to me – legally there is nothing to say it was not a business transaction.
Similarly, with the purported sale of John Key’s tie for $50,000, a explanation could quite conceivable be made for why this was a business transaction and not a political donation. Although it sounds like a donation to me, the political finance laws are very vague on this. They suggest that a donation might make up that portion of the money exchanged that is above the market price of the good that is sold. But how do you determine the market value of what is arguably a piece of iconic political memorabilia from a leader who is now prime minister?
Was the fundraising event organized through a trust?
It is quite possible that the money received by Pansy Wong’s fundraising was funneled through a legal trust and then given to the National Party. This might explain why the money is not easily identified in the Electoral Commission register. The money might be part of the large donations declared to have been received by a legal entity such as the Waitemata Trust.
It is now quite a common scheme to direct political money from donors through other entities. The arrival of such conduits in New Zealand mirrors the development of political action committees (PACs) in the United States. These PACs are connected to parties and candidates but are all legally unrelated to them and therefore are unaffected by the laws relating to donations and campaign expenditure.
Many New Zealand political parties use such legal devices, including the Act, Labour, and National parties. After the donation disclosure regime came into operation in the 1990s, the National Party channelled some of its donations through the supposedly independent New Zealand Free Enterprise Trust, receiving $685,000 from it between 1998 and 2001. But the Waitemata Trust seems to have taken over since then.
Why do some donors not want to be publically identified?
Many people that make large donations to political parties in New Zealand do not want it publically know that they have made the gifts. There are all sorts of reasons for this. Some people wish to assert their ‘right to privacy’. They might be very private figures, are they might not wish to be publically identified as a supporter of a particular political party. There’s some philosophical weight behind such a desire. After all, the principle of the secret ballot is now firmly accepted, as it is believed that if votes were cast in public – as they used to be – this would inhibit free electoral choice. Likewise, if we deem that it is permissible to donate to parties, there’s a good argument that donors shouldn’t therefore be obliged to reveal their payments and therefore declare their political allegiances. In the case of Pansy Wong’s (presumably) Asian New Zealanders who contributed to her fundraising, they might have all sorts of cultural reasons for not wanting to be identified publicly.
It’s also the case that some businesspeople feel that if they are identified as being donors to one particular party – and if that party is not in government – then their business could suffer, especially if the business is involved in any way with seeking government contracts or if it is strongly affected by government regulations that may or may not be altered.
More than this, there is a reluctance to be identified as funding political parties due to the basic unpopularity of parties amongst the public. There is a strong distaste, dissatisfaction and wariness about political parties and politicians in New Zealand at the moment, and therefore it is not particularly fashionable or admirable to be seen as supportive of any particular one. Hence political donors will often be keen to disguise their donation. And although political finance regulations are intended to make such transactions relatively transparent for the public, the truth is that there are inevitably loopholes in any such laws, and these will always be utilized by those that seek to avoid detection.
The main point here is that the political finance regulations actually have a number of loopholes that mean that Pansy Wong may not have actually broken the law in the way that the $200k was dealt with, and she may not even have funneled them through a trust. So the interesting thing about your story is how it potentially shows up the loopholes in the political finance laws (rather than any necessarily law breaking) although all of it is so opaque it's pretty hard to tell.
Also of interest in the Wong situation is that you have a senior National MP that is handling party donations at all. I seem to remember that National claimed that it didn't allow its MPs to handle donations due to potential conflicts of interest etc. and that all money goes through the party headquarters so that there can be no problems of perception. Certainly John Key has said the he deliberately is not told about anyone who donates money to the party. Which is reminescent of the situation of the Labour Party in 1986, prior to the 1987 election, when it was revealed that the vast bulk of corporate donations were not given to the party organisation but to senior government ministers. Roger Douglas and other cabinet ministers admitted receiving donations, and this was later confirmed by party president Ruth Dyson. Allan Hawkins, for example, said he gave his Equiticorp donation of $250,000 directly to Douglas.