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Analysis by Dr Bryce Edwards.

Political Roundup: Another trial over secret political donations

Allegations of political corruption are once again at the heart of a new High Court trial this week. The trial follows straight on from the “not guilty” verdict for those running the New Zealand First Foundation. And this latest trial is once again about whether wealthy businesspeople and political parties have conspired to get around the laws designed to make big donations transparent to the public.

The Serious Fraud Office (SFO) allege, once again, that large donations were given to politicians in ways that breach the Crimes Act. As with the New Zealand First Foundation trial, the prosecution says the public has been “kept in the dark” about the role of big money in politics.

In this trial the donations in question were to the Labour and National parties, and amongst the seven defendants are various businesspeople and three people who at the time represented New Zealand’s two main parties. New Zealand’s biggest political parties are effectively in the dock, via Jami-Lee Ross (who was a National MP at the time, and responsible for fundraising), and two Labour Party people who have name suppression, one of whom is also a parliamentary employee.

Background to the trial

This trial has only come about due to the meltdown in the National Party in 2018, when then National MP Jami-Lee Ross fell out with then leader Simon Bridges. Ross alleged that “Simon Bridges is a corrupt politician”, and released explosive audio recordings of conversations with Bridges about fundraising. He then took the information to the Police, but it was Ross who ended up being charged after the SFO investigated.

The three others charged in relation to these donations are Yikun Zhang, Colin Zheng, and Joe Zheng. Yikun Zhang is a very wealthy property developer who moved to New Zealand from China in about 2000, and the SFO says he is the source of large donations to National. Colin and Joe Zheng are twins alleged to have helped facilitate the donations of about $200,000, which were never public disclosed.

It then transpired that Zhang had also donated to the Labour Party. He was involved in a series of donations to Labour relating to artwork the party had auctioned at fundraising events. The SFO investigated, and again charged Zhang and the  Zhengs. Three other individuals have also been charged in relationship to these Labour donations, two of whom are from the Labour Party. All three have name suppression.

Zhang was given a Queen’s Birthday honour in 2018, being made a member of the New Zealand Order of Merit for services to New Zealand-China relations and the Chinese community. Politicians from both National and Labour lobbied to get him the prestigious honour.

Four years later, the charges against the donors and those alleged to have helped facilitate the donations on behalf of National and Labour are being heard in the High Court of Auckland. Because the three people on the donor side are the same – Zhang and the Zhengs – the two trials are being held together.

The SFO alleges that the Labour and National fundraising operations both used similar techniques to allow the large donations to remain undisclosed to the public. The Electoral Act states that political parties must declare donations over the threshold of $15,000 from any one individual per year. According to the SFO, in both of these cases very large donations over this threshold were split into smaller donations and funnelled to the parties from a number of individuals recruited to be what they call “sham donors”. The “real donor” according to the SFO is actually Zhang.

What we have learnt so far: Labour’s donations

The prosecution case regarding the Labour-related donations is being heard first. The SFO allege that “sham auctions” to sell art and other valuable items were used to disguise donations to the Labour Party.

The prosecution argues that in March 2017 Zhang attended one of the fundraising events and agreed to purchase five paintings for a total of $60,000. But payment was subsequently split into five transfers to the Labour Party from five different individuals. The SFO say the artworks were subsequently all found to be hanging in Zhang’s house.

According to the case against Zhang, one of the defendants with name suppression was one of the people used to funnel the money into the Labour Party as a “sham donor” and he also recruited four others to be “sham donors”. This person later “played an active role in the cover-up” according to the prosecution.

Two other people from within the Labour Party – a man and a woman – both with name suppression, also allegedly helped facilitate the payments, and the woman allegedly aided the cover-up.

The court heard yesterday about how a Labour Party activist was asked by two of the defendants to open a bank account into which the art donations could be funnelled.

Later in the year, in September, Zhang attended another Labour fundraiser, and brought two further artworks and an imperial robe for $100,000. This had been donated to the Labour Party, but the $100,000 is allegedly much lower than its real value of $300,000, meaning Zhang’s payment to Labour cannot be classified as a donation, since he gave the party less than it was worth. Hence this transaction isn’t being prosecuted.

In terms of the non-disclosure of the payments for the artwork, Zhang blames the Labour Party, saying it was their mistake and it was their responsibility to declare it, not his. The prosecution allege that both sides had some responsibility, and that on the Labour side a “cover-up” occurred when the party launched their own investigation in the wake of the Jami-Lee Ross allegations about National donations.

What we have learnt so far: National’s donations

Two months after Zhang first gave donations to Labour, he met with then National MP Jami-Lee Ross in May 2017. Ross was National’s designated “bagman” for collecting donations, and for liaising with the Chinese New Zealand community.

At a dinner with Ross, the prosecution alleges that Zhang agreed to make a donation, but to do this in a way that wouldn’t be disclosed to the public. Ross also arranged for Zhang to meet with then leader Simon Bridges.

Subsequently, about $200,000 was given to National, allegedly all from Zhang, but split into smaller donations from different individuals. The first part of this was a $100,000 in the form of eight different smaller payments of about $14,000 each in June 2017.

Subsequently in June 2018, according to the prosecution, Zhang gave another $100,050 to National, relating to profits from the export of 480 boxes of wine to China. This was also transferred to National in the form of seven separate donations. The SFO has traced the money being shifted to the “sham donor” bank accounts from Zhang’s sister ($50,000) and father ($98,000) using an online site called I.E.

This money was eventually deposited into the National Party’s bank account in the Botany electorate, for which Ross was the electorate MP. Ross then provided the names of the alleged “sham donors” to the National Party General Secretary for their records. The prosecution alleges that Ross did this despite knowing that the “real donor” was Zhang.

It’s not yet clear how strong the prosecution’s evidence is for this. They have put forward evidence of a message from Colin Zheng to Ross agreeing that “they will all follow the law” followed with a smiling face emoji. There are also communications from Colin Zheng to the “sham donors” explaining why they were being used to facilitate the payments because Zhang couldn’t make one large donation because “registration would be required”.

However, Zhang’s lawyers dispute this, maintaining that neither of the two $100,000 gifts were “donated by him or on his behalf”.

The prosecution also say that they have audio recordings that Ross made of conversations with Bridges, in which Ross states the donations made to National have not been made legally. Talking about a $100,000 donation from Zhang, Ross tells Bridges: “That donation has not been declared properly… those donations have not been handled in a way that’s in accordance with the Electoral Act.” In another covert recording, Ross tells his leader: “I was asked to be involved in significant donations and Chinese interests that haven’t been declared properly.”

The prosecution says the audio recordings indicate Ross had “knowing involvement in the deception”. But Ross’ lawyers deny that he helped them, and point to the fact that Zhang had already used donation-splitting techniques in his dealings with Labour earlier in that year, so it clearly wasn’t Ross that introduced the idea to them. Furthermore, Ross has claimed that it was Simon Bridges who asked him to handle these donations.

Political impact of the trial

The trial has the potential to have a much bigger political impact than the NZ First Foundation trial. It involves New Zealand’s two biggest political parties, both of whom are still in Parliament, unlike New Zealand First. Along the way, there are going to be significant revelations about the relationship between money and politics in New Zealand.

The trial is also large in scale. It is expected to go for ten weeks, and involves 20 lawyers, including six QCs.

The prosecution is calling 54 witnesses, including some of New Zealand’s best-known political figures. These include cabinet ministers Andrew Little and Michael Wood, the Prime Minister’s chief press secretary Andrew Campbell, the former National leader Simon Bridges, National’s general manager Greg Hamilton, former Labour Party president Nigel Haworth, New Zealand’s ambassador to Jakarta Trevor Matheson, and corporate lobbyists and former Labour Party officials Andrew Kirton and Hayden Munro.

Prime Minister Jacinda Ardern will inevitably be a part of the court discussions, as many of those involved in the case are close to her. What’s more, she attended at least one of the fundraising auctions where Zhang purchased art. Inevitably the question will arise as to why so many politicians are allowed to have an active role in soliciting and collecting donations to their party organisations.

There also might even be international links, with some suggestion already made that a defendant will be accused of being an “operative” of a foreign government attempting to influence the Labour and National parties. One of the defence lawyers has commented on this, warning such evidence would be “inflammatory” and cause “irretrievable damage”.

Notably, before the trial began, Yikun Zhang put out a media statement saying he was not a member of the Chinese Communist Party and had renounced his Chinese citizenship.

A critical focus on how governments award royal honours is also likely. It’s long been suspected that parties in government hand out the gongs to their supporters, including financial ones. In this case, there will be evidence provided that Jami-Lee Ross encouraged other National MPs to lobby for Zhang to receive his honour. It is already known that then Labour and National party presidents Nigel Haworth and Peter Goodfellow lobbied for this, as well as Labour’s Auckland mayor Phil Goff.

The prosecution allege the behind the scenes machinations of this honours decision drove the donation cover-up. They suggest that the motivation behind keeping Zhang’s large donations to both parties secret was that the public shouldn’t be able to connect the two things, lest they came to the conclusion that a “Cash for honours” takes place here.

Inevitably the trial will also kickstart further debate about fundraising and electoral rules. There is just so much in this trial that is likely to show not just that the current laws are entirely inadequate, but also that the Government’s current reform efforts on political finance have been designed in a way that is not up to the necessary job of cleaning up New Zealand politics.

Further reading on political donations

Tim Murphy (Newsroom): Alleged art buyer: ‘I’d rather burn money than donate to Labour’
Catrin Owen (Stuff): Labour Party volunteer asked to open bank account connected to ‘sham’ auction
Tim Murphy (Newsroom): SFO reveals more covert recordings of Ross and Bridges
Toby Manhire (Spinoff): ‘Sham donors’ and ‘fairy dust’ on opening day of donations fraud trial
RNZ: Crown opens case over donations to Labour, National
Catrin Owen (Stuff): Paintings, wine, cover-ups and a royal honour – Crown’s case in party donations trial
Catrin Owen (Stuff): Trio accused in Labour Party donations case continue to seek suppression ahead of trial
Lucy Thomson (Newshub): High Court trial over Labour, National donations begins
Maria Slade (NBR): Scheme of ‘sham donors’ set up to deceive, Crown says (paywalled)
Catrin Owen (Stuff): Trio accused in Labour Party donations case continue to seek suppression ahead of trial
Sam Hurley (Herald): Labour and National donations trial: Spy allegations and damage to ‘stellar’ reputation cited as reasons for accused’s secrecy
——
Graeme Edgeler (Spinoff): How to close the donation loopholes exposed by the NZ First Foundation judgment
Thomas Manch (Stuff): Government ‘taking a close look’ at law after NZ First Foundation case opens donations ‘loophole’
Anneke Smith (RNZ): Govt seeks advice on changing party donation laws
Anneke Smith (RNZ): Call to change political donation law after NZ First Foundation case
Newstalk: NZ First donations: Defendant reacts to the not-guilty verdict

Other items of interest and importance today

GREEN PARTY
Thomas Coughlan (Herald): Green Party MP Teanau Tuiono ‘considering’ a tilt at co-leadership
Audrey Young (Herald): Jacinda Ardern’s mistaken insistence with James Shaw’s Climate Change role (paywalled)
ODT: Editorial – Green battle confused
Nandor Tanczos (Daily Blog): Greens leaders must learn from leadership vote
Gareth Hughes (Spinoff): The Greens’ leadership tumult was 50 years in the making
Pat O’Dea (Daily Blog): Dear James

Chris Trotter (Daily Blog): Tu Ingrate Vireta! Stabbing The Green Caesar
Liam Hehir (Blue Review): The upside of a post-Shaw Green Party
Amelia Wade (Newshub): Greens leadership challenge: Teanau Tuiono doing a lot of thinking, James Shaw wants to know how to do better

Thomas Manch and Laura Walters (Stuff): Green Party MP Teanau Tuiono considering co-leadership bid
Anna Whyte (1News): Shaw acknowledges ‘dissatisfaction’ of Green party members
Russell Palmer (RNZ): A firm maybe: Greens’ Teanau Tuiono reflects on leadership
Brent Edwards (NBR): Pragmatism vs principle: the Green Party’s dilemma (paywalled)
Morgan Godfery (Stuff): Shaw ‘a good guy’, but compromises put him at odds with party base
Peter Dunne: “Only the Impotent are Pure”
Irra Lee (1News): Rival MP praises Shaw as the ‘sanest’ amid Greens leadership saga
Tova O’Brien (Today FM): The Green conundrum: Sit with the power brokers or hustle from the sidelines?
Damien Venuto (Herald): Why Labour will be watching Greens leadership stoush closely
Herald: Editorial: Bumpy approach to next year’s general election (paywalled)
No Right Turn: The Greens, the media, and democracy
Michael Neilson (Herald): Green Party co-leadership race: Chlöe Swarbrick says she is ‘not in the running’ to replace James Shaw
Brigitte Morten (NBR): Blindsided James Shaw rejection really bid for stronger activism (paywalled)
Martyn Bradbury (Daily Blog): Green Party coup: Winners, losers & predictions
Mike Houlahan and Grant Miller (ODT): Dunedin Greens to revisit leadership views
RNZ: Chloe Swarbrick rules out bid to be Greens co-leader
Marc Daalder (Newsroom): Soul-searching for Shaw and would-be mutineers
Richard Harman: How the Greens are changing and why Shaw may be losing support (paywalled)
Lloyd Burr (Today FM): What the heck is wrong with the Green Party?
1News: Candidates who could replace Shaw as Greens co-leader stay silent
The Standard: James Shaw and the Green Party co-leadership
David Farrar (Patreon): Why Chloe should have stood (paywalled)
Michael Neilson (Herald): Green Party co-leader battle: James Shaw current sole contender as Elizabeth Kerekere pulls out
Jamie Ensor (Newshub): Greens’ Dr Elizabeth Kerekere not running for vacant co-leader spot
Luke Malpass (Stuff): Green Party MP Elizabeth Kerekere isn’t running for party co-leadership
Whatitiri Te Wake (Māori TV): Former Greens chief of staff says the leadership spat is ‘shocking but healthy’
Thomas Coughlan (Herald): Green Party fights over plot to oust James Shaw, and the long run plan to install his replacement (paywalled)
Luke Malpass (Stuff): James Shaw likely to co-lead again, but worth remembering lessons form Green School fiasco
Amelia Wade and Imogen Wells (Newshub): Dr Elizabeth Kerekere emerges as potential Greens leadership contender
Bernard Hickey (Interest): Shaw’s ejection exposes Green rift
Jayden Holmes (Today FM): Former Green Party leader ‘never believed’ in James Shaw
Brent Edwards (NBR): James Shaw quietly confident about regaining Green co-leadership (paywalled)

ECONOMY, INEQUALITY, COST OF LIVING AND IMMIGRATION
Class and Race (Daily Blog): We are still getting things the wrong way round
Daniel Smith (Stuff): Workers who don’t receive salary bump face a ‘virtual pay cut’
Julia Gabel (Herald): Soaring cost of living hits many New Zealanders hard, study shows
Esther Taunton (Stuff): Cost of living: Survey finds financial strain taking a toll on Kiwis’ wellbeing
Thomas Coughlan (Herald): Carmel Sepuloni receives review into Working for Families, but some worried focus is not on poverty
Bernard Hickey (Interest): Why Covid windfall taxes make sense
Bernard Hickey (Spinoff): Reserve Bank facing consequences of printing ‘tidal wave of cash’
Jenée Tibshraeny (Herald): David Seymour: Govt shouldn’t have backstopped the RBNZ’s money printing programme (paywalled)
Richard Harman: Did Orr get it wrong? (paywalled)
Molly Swift (Newshub): Small business wages see largest rise on record to near inflation rate – Xero
Susan Edmunds (Stuff): Inflation: How much is really the Reserve Bank’s fault?
Luke Malpass (Stuff): Political fight over Reserve Bank interest rates and cost of living heats up
Susan Edmunds (Stuff): Criticism of Reserve Bank’s Māori engagement ‘racist’
Chris Schulz (Spinoff): Feeling sad? Depressed? Angry? Sore? Inflation could be to blame
Richard Prebble (Herald): Why will inflation end in recession? Because it always does (paywalled)
Geraden Cann (Stuff): Fuel retailers are making massive margins – should we have a windfall tax?
Cushla Norman (1News): Fact-checking claims about inflation
Mike Hosking (Newstalk): When Reserve Bank Governors are openly disagreeing, you know there’s a problem
John Weekes (Herald): Labour crisis: ‘Severe’ talent shortage as job candidate numbers fall on both sides of Tasman (paywalled)
AAP: Reserve Bank admits inflation ‘regret’ as it reviews Covid response
Dita De Boni (NBR): Corporate profits muddy the fight against recession (paywalled)
Rebecca Stevenson (Interest): Business is booming for New Zealand’s cartel buster- but will it make any difference for consumers?
RNZ: Former Reserve Bank governor criticises central banks’ performance during pandemic
Jenny Ruth (BusinessDesk): Reserve Bank will learn from remit, policy review: Orr (paywalled)
Jenée Tibshraeny (Herald): Crown starts recapitalising the Reserve Bank to the tune of $8.8 billion (paywalled)
Helen Harvey (Stuff): As cost of living increases, more people are needing the help of food banks
Brenda Harwood (ODT): Foodbanks under increasing pressure
Duncan Garner (NBR): 100,000 workers on dole and work ready – yeah right! (paywalled)
Jem Traylen (BusinessDesk): Scepticism over Immigration NZ’s faster residence visa promise

NATIONAL
Julie Johnston (Newsroom): Judith Collins’ deputy chief: The real story behind Nick Smith’s resignation
Stuff: Editorial – In the shadow of Captain Hindsight
Claire Trevett (Herald): Labour’s Grant Robertson pillories Christopher Luxon as a cheap, knock-off John Key after Te Puke to Hawaii travels
Thomas Coughlan (Herald): Unforced errors hurting Christopher Luxon and the Greens (paywalled)
Steven Cowan: Where in the world is Christopher Luxon?
Jacqui Van Der Kaay (Democracy Project): Te Puke is not Hawaii
Jane Patterson (RNZ): Luxon’s gaffe, Shaw dumped as co-leader, economic woes evident
Martyn Bradbury (Daily Blog): Here’s why Aloha Luxon’s Hawaii holiday is so politically damaging
Thomas Coughlan (Herald): Christopher Luxon’s social media suggested he was in Te Puke – he was actually overseas on holiday
1News: Luxon defends holiday in Hawaii despite Te Puke social media post
Liam Hehir (Blue Review): Dear National Party delegates…
Thomas Manch (Stuff): National Party MP Ian McKelvie will stand down at 2023 election
1News: Two National MPs to retire ahead of next election
Greg Presland (The Standard): The inside story of National’s civil war

PARLIAMENT, GOVERNMENT AND ELECTIONS
Audrey Young (Herald): Who will replace Jacinda Ardern? Whispers begin about the next Labour leader contest (paywalled)
Dileepa Fonseka (Stuff): The consultancy machine needs repairing – but who will do it?
Imogen Wells (Newshub): Government’s billion dollar spend on consultants under attack from National
Martyn Bradbury (Daily Blog): Guess who’s back, back again, Winston’s back, tell a friend
Mike Hosking (Herald): It’s the size of the mess that counts (paywalled)
Michael Bassett: The gradual collapse of Jacinda’s New Zealand
Martyn Bradbury (Daily Blog): The Māori Party is where 2023 election will be won or lost
Mike Hosking (Newstalk): The Government are digging a deeper financial hole
Michael Bassett (The Platform): We are experiencing the worst government of my lifetime

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