In 2014 there is a huge murkiness about how politicians and political parties raise and spend their money. Numerous recent scandals highlight the problems of transparency about money and politics in New Zealand. The various donations and relationships of Donghua Liu have been particularly illuminating about the problem. And although some of these scandals relate to historical transactions, they are still relevant to the 2014 situation, and the public should continue to be vigilant about the relationship between money and politicians. The Electoral Act, in particular, appears to still be wholly inadequate for providing a proper picture of how and where parties raise and spend their money. So below are a few quick thoughts about the current situation. [Read more below]
The Opaqueness of the Liu-Labour donations
One of the explanations for the fact that the Liu donations to Labour were not disclosed can be found in the loophole for party business transactions. It is possible that Labour has categorised the money from Liu not as a donation, but just a business transaction. It has long been the convention that parties sell products to fundraise, and that these transactions can be categorised in a way to avoid disclosure, because commercial transactions are not caught by the Electoral Act.
I recently explained this in much more detail in the blog post about National’s apparently undisclosed donors – see: Using restaurant dinners and other business activity to get around donation disclosure. Or for a similar account from 2010, see my post, Pansy Wong’s dubious solicitation of political funding.
Some commentators seem to believe that the current rules are so different to those of pre-2008 that this is no longer a problem. I don’t share that confidence. Yes, some changes were made in Labour’s Electoral Finance Act 2007 – and these were later adopted by the National Government as well – that clarified some of the messiness about anonymous donations and about party business transactions. But it’s far from clear that these have made the donation disclosure regime robust. It would be complacent or naive to believe that all donations are declared and that parties and politicians don’t find ways to get around the rules anymore.
It is not clear that the changes about business transactions have been extensive enough to stop commercial transactions being used to circumvent the Electoral Act. As long as the party can argue that the product that is being sold has been brought for a market price, then it doesn’t need to be disclosure.
Yes, it’s true that the rules now say that if the purchase price is above the market rate, then the difference needs to be disclosed as a donation. But this is a very vague rule. Who decides the market price? At the moment it is the parties that decide, with little chance for their decisions to be challenged.
For instance, if a book is signed by the NZ Prime Minister, is it worth $15,000? It’s arguable, and under the current rules Labour can get away with that. Is a dinner table with the PM sold for $6000 over the market rate? Not necessarily, and National can get away with not declaring this. Essentially the parties under the current rules have a huge amount of wiggle-room.
Lots of murkiness is raised by the recent example of the Liu purchase of four bottles of wine, supposedly for about $100,000. If these bottles were extremely valuable ones – Andrew Geddis has cheekily suggested they could be the rare Armand de Brignac Nebuchadnezzar Champagne, then its very easy for the Labour Party to argue that the auction deal with purely a commercial transaction at market rates. However, if such expensive wine was donated to Labour by Helen Clark, or whoever, then that original donation should have been declared instead.
Complacency about donation disclosure should be avoided
There’s a lot about the Liu donations that stinks. We shouldn’t simply believe those parties and commentators that say ‘It was all within the rules of the time’. It’s not clear that this was the case – just as it’s not clear that the rules would prevent this from happening in 2014. Similarly, even if such transactions were within the rules, it’s not clear that the public shouldn’t condemn the parties for getting around the rules.
It’s also entirely feasible that the Liu donations to Labour were funnelled through a law firm trust. As Geddis points out, there was certainly one law firm trust donation made in 2007 by Papakura firm ‘Palmer Theron, Solicitors’ of $150,000 that could conceivably be the Liu money. But this is far from clear.
What’s more, the wine auction in question was apparently carried out in the open, and Labour would have known who the bidders were. So for the Labour Party to claim no knowledge of Liu making those successful bids seems somewhat surprising.
We can all agree that there isn’t necessarily a crime here. We can also agree that the Electoral Act’s 6-month statute of limitation means that this legislation can’t be used to trigger any investigation. So it’s not necessarily a legal problem.
Although it’s also the case that many people are suggesting that the Liu donation might not have actually ended up with the Labour Party as intended. In fact even the Labour Party is giving credence to this idea. This would be a matter under the Crimes Act. Others have pointed out that the Serious Fraud Office could still be involved.
More scrutiny is needed – Open the books!
New Zealand’s political finance rules are now too discredited. Increasingly the public appears to be losing confidence that the rules work. There has now been a lot of signs that the rules are subject to many irregularities.
In terms of the Labour-Liu scandal, the allegation still needs to be substantiated. The onus is on both Labour and Liu to clarify the situation. Neither can just put the responsibility on the other. It’s not good enough for Labour to just call on Liu to provide further information. The party has been the benefactor of millions of dollars in donations – sometimes categorised as ‘anonymous’ – and that party needs to show that it’s clean. It’s a matter of public interest that such parties prove their trustworthiness.
The upshot is that we shouldn’t be too complacent about the Electoral Act being an effective means of keeping tabs on big money coming into political parties. The legislation appears to be incredibly leaky. Some sort of inquiry or extensive public debate could look at the ways that the legislation is failing. But in the meantime, it’d be incredibly helpful for the public if all the political parties voluntarily chose to the open their books and allow the public to see how they raise their money and how they spend it. That would produce more public confidence than any trivial electoral rules. The public should demand maximum transparency.
