The fundraising controversy over the National Party’s use of the exclusive Auckland restaurant, Antoine’s, raises many questions about the ways in which politicians and political parties can avoid making having their finances scrutinized by political finance transparency laws. The nature of political finance means that inevitably there are attempts made to circumvent the laws, for a variety of reasons. Political finance scholars liken political money to that of high-pressured water, in the sense that you can construct barriers to it, but inevitably the money gets through somehow because there’s always some leaks. [Read more below]
In New Zealand the Electoral Act allows political parties to raise their money privately through business trading ventures. If a party has a good or service to sell, there are no additional restrictions on that commercial activity just because they are a political party. This makes business activities a perfectly legal avenue for the collection of money from private interests, and one that does not need to involve donation regulations.
Legally, therefore, a dinner with politicians can be sold to the public, with large amounts of money exchanging hands without the donation laws kicking in. Any party – or an individual on behalf of the party – could in theory charge, say, $20,000 for a dinner with a Prime Minister or any other politician, and technically this money would not have to be declared to the Electoral Commission. It would simply be a business transaction, which is essentially exempt from the Electoral Act. As the Electoral Commission has said in the part, ‘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.
Of course, the Electoral Act also says that if the money being charged by a party is in excess of the ‘market value’ of the goods or service, then the difference between those amounts needs to be declared as a donation. In reality, this ‘market value’ provision means very little when it comes to the goods and services that political parties can sell. It’s very hard to argue that a dinner with the PM, for example, isn’t worth $20,000 (or whatever amount). For many people – especially those in certain businesses – such meetings could be incredibly value for their commercial interests or lobbying agendas.
In fact, there are many examples of charity auctions raising considerably more money for dinners with politicians. These have the impact of showing that the market value of such goods and services are remarkably high.
Of course it’s intrinsically hard to tell how much business trading activities goes on amongst the political parties, because by its very definition, such activities doesn’t have to be made public.
Nonetheless, there are various known examples (in addition to the Antoine’s saga). For example, in 2010, Matt Nippert investigated Wong’s mysterious $200,000 fundraiser (http://bit.ly/1eig6tz). This is the key part: ‘According to several National Party sources, Mrs [Pansy] 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. “It was announced from the stage to the assembled multitude – she [Mrs Wong] was the star of the show,” one eyewitness recounts. 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’.
I was quoted in Nippert’s story at the time: ‘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 in this particular case study, 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?
All you can do in such examples is speculate – due to the fact that New Zealand political parties are not open about their business activities. The reality could be that there is very little commercial trading carried out by the parties. Nonetheless, it’d be good to have this murky area investigated further.
