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PoliticsMarch 4, 2020

A brief history of New Zealand donations scandals

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We live, supposedly, in the most open era in New Zealand history. Yet right now scandal swirls around donations to National and New Zealand First. The other large party, Labour, also has form. As part of our week-long series on electoral funding, Money Talks, Max Rashbrooke asks: how has it come to this?


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The reason that donations to political parties matter so much, and are the subject of so much current debate, is simple: money talks. Or, at least, it can. Election campaigns cost a lot of cash to run, often in the millions of dollars. Communicating with voters outside of elections also costs money. So politicians need funders.

If political parties rely on very large numbers of very small donations, none of those donations is likely to buy undue influence. But if parties, conversely, rely on very large donations from a very small number of people, the obvious danger is that those donations allow the giver an influence over politicians not open to the rest of us.

Of course one has to be careful here. Unlike in other countries, where bags of cash clearly buy favours, it is rare that an individual New Zealand donation can be connected to a particular policy or decision. But it does happen. And the wider concern is that reliance on a small group of wealthy individuals, even if it does not influence one specific law, will still orient policy in their general direction.

And it is noteworthy that the two current national scandals concern alleged attempts to conceal the identity of donors, in the case of donations to National by pretending that the funds from one person came from several, and in New Zealand First’s case by questionable use of a foundation to gain anonymity. (In both cases the alleged perpetrators deny wrongdoing.)

Like many stories, this one is partly old, partly new. The pace of the scandals appears to be accelerating, like a train running downhill and out of control. But the scandals themselves are hardly unique to this century.

What we know about donations to political parties is, of course, a function of how much scrutiny they receive – which until the 1980s was very little. The 1956 Electoral Act, for instance, asked only candidates, not parties, to disclose their spending and donations – and in practice the donations disclosure was often dodged. So it is entirely possible that the old establishment subtly exerted undue influence over New Zealand political parties. Nonetheless, the 1986 Royal Commission on the Electoral System felt able to claim that the system “shows no sign of corruption … and no excessive reliance by parties on a few special interest groups or institutions.”

But this rosy picture soon grew bleak. In 1987, as the pro-business fourth Labour government sought re-election, corporate donations poured into the party. Totalling around $3 million, they represented a colossal sum at the time, far greater than donations from unions or members. Businessman Allan Hawkins openly acknowledged that he alone had given Labour $250,000. (Hawkins has recently been in the news again after receiving his second jail sentence.) While a controversial 1990 Frontline documentary went far too far in implying that such donations directly bought favourable policies and discounted asset sales, there were certainly legitimate questions to be raised about such donations and the relative lack of any controls, or indeed transparency, around them.

These concerns also existed against a wider backdrop. Though sanguine about donations, the Royal Commission had noted the increasing cost and complexity of election campaigns. Meanwhile membership of political parties, which in all likelihood had been an important source of funds, was dwindling.

Since then, both trends have only intensified: the need for more cash, combined with having fewer members to tap, has led to greater reliance on wealthy individuals. “The thing that makes concerns about the donations model greater,” says Otago law professor Andrew Geddis, “is the fact that parties have to some extent been hollowed out. With the membership falling away, the question is, what goes in its place?” The increasing professionalisation of parties only exacerbates these issues. “Things that used to be done by volunteers, you are now hiring companies to do for you. So you need to have more money.”

Responding to such concerns, the 1993 Electoral Act required parties to disclose every donation over $10,000 and the identity of its donor. (Anything under that threshold was the party’s business alone.) Although the law did not seek to curb how much could be given, it did enshrine a belief that the public had a right to know about large donations, in order to check whether they were leading to undue influence.

The threshold was, however, easily circumvented. Most famously, National used the Waitemata Trust, described by the Herald as “a secretive organisation which has showered [the party] in cash”, to channel hundreds of thousands of dollars in donations from figures who wished to remain anonymous. Labour also received significant sums from “undisclosed clients” channelled through law firms.

These concerns were addressed in the 2007 Electoral Finance Act, although the donation provisions were largely overshadowed by enormous controversy about the parts of the law that sought to restrict campaigning by third-party organisations. After National won office in 2008, the law was repealed, but a compromise between the major parties largely preserved the restrictions on donations, including the crackdown on the anonymous channelling of large sums and the introduction of real-time reporting of the very largest ones.

What we have now is essentially a result of that compromise. Parties do not have to declare donations worth less than $1,500. They do have to report donations – but not the identities of their donors – that are worth between $1,500 and $15,000. Above $15,000, they have to declare the donations and the identities of donors. And above $30,000, they have to declare the donations and the identities of the donors in real time on the Electoral Commission website.

None of the post-1993 reforms, however, has halted the growing pace of donations scandals. Any list of the scandals in this millennium alone would have to include the following:

  • Late 2000s – Labour ministers lobby for, and approve, citizenship for Bill Liu, a donor, against the advice of officials
  • 2008 – New Zealand First’s Winston Peters is censured by parliament for failing to declare a $100,000 donation from Owen Glenn, following a firestorm of controversy
  • 2010s – Both National and Labour develop schemes (named the Cabinet Club and the President’s Club, respectively) in which donors gain access to ministers
  • 2014 – National minister Maurice Williamson loses his portfolios after intervening in the police investigation into party donor Donghua Liu
  • 2018 – National MP Jami-Lee Ross alleges a $100,000 donation to the party was split into a series of smaller donations to illegally avoid disclosure, sparking an investigation in which four people, including Ross himself, have now been charged by the Serious Fraud Office
  • 2019 – Chinese citizen Lin Lang avoids curbs on donations by non-residents by (legally) routing a $150,000 donation to National through a New Zealand-based firm, the Inner Mongolian Rider Horse Industry
  • 2020 – The operation of the New Zealand First Foundation, which, as above, appears designed to avoid donor disclosure requirements, is now under investigation by the SFO.

(Meanwhile, at the local level, the SFO is also investigating donations to the Labour mayor of Christchurch, Lianne Dalziel, as well as Auckland Mayor Phil Goff’s expenses.)

These scandals persist partly because nothing in the law curbs the amounts that can be given or – as a result – the potential for influence. At best, the law provides some transparency, and frequently it does not even do that. Because the threshold for disclosing a donor’s identity is set as high at $15,000, a donor can donate $45,000 over a parliamentary term. And they can straightforwardly split, say, $60,000 into four chunks of $15,000, pass those chunks onto friends to donate on their behalf, and thus give a huge sum in complete secrecy. The fact that this is illegal does not mean it doesn’t happen. Nor does it help that the supposed watchdog, the Electoral Commission, has to rely on parties’ declarations and cannot meaningfully investigate their donation records.

Past reformers have contemplated fixing all these weaknesses, but have ultimately shrunk back from the task. In the light of the accelerating pace of scandals, that stance is increasingly untenable.

Democratic presidential candidates (L-R) former New York City Mayor Mike Bloomberg as Sen. Elizabeth Warren (D-MA), Sen. Bernie Sanders (I-VT) and former Vice President Joe Biden participate in the Democratic presidential primary debate at Paris Las Vegas on February 19, 2020 in Las Vegas, Nevada. (Photo by Mario Tama/Getty Images)
Democratic presidential candidates (L-R) former New York City Mayor Mike Bloomberg as Sen. Elizabeth Warren (D-MA), Sen. Bernie Sanders (I-VT) and former Vice President Joe Biden participate in the Democratic presidential primary debate at Paris Las Vegas on February 19, 2020 in Las Vegas, Nevada. (Photo by Mario Tama/Getty Images)

PoliticsMarch 4, 2020

Super Tuesday: The day that could decide the Democratic challenger to Trump

Democratic presidential candidates (L-R) former New York City Mayor Mike Bloomberg as Sen. Elizabeth Warren (D-MA), Sen. Bernie Sanders (I-VT) and former Vice President Joe Biden participate in the Democratic presidential primary debate at Paris Las Vegas on February 19, 2020 in Las Vegas, Nevada. (Photo by Mario Tama/Getty Images)
Democratic presidential candidates (L-R) former New York City Mayor Mike Bloomberg as Sen. Elizabeth Warren (D-MA), Sen. Bernie Sanders (I-VT) and former Vice President Joe Biden participate in the Democratic presidential primary debate at Paris Las Vegas on February 19, 2020 in Las Vegas, Nevada. (Photo by Mario Tama/Getty Images)

In a few hours polls will begin closing in states participating in Super Tuesday, the mega-primary when 14 states vote on the Democrat nominee to meet President Trump in the general election this November. Korey Te Hira explains why Super Tuesday matters, and breaks down the complicated rules that govern which candidate emerges a winner.

The Democratic presidential primary could effectively be over today if front-runner Senator Bernie Sanders amasses a delegate lead so large it would be practically impossible to erase. On the other hand, a drawn-out political death match between two opposing visions for the future of the Democratic party could just be getting started. Which path the primary takes and who President Trump’s general election opponent will be depends on which campaign can best take advantage of the arcane rules that govern how delegates are apportioned on Super Tuesday.

Following former Vice President Joe Biden’s strong win in South Carolina (the final of the four so-called early-voting states), the Democratic nominating race has winnowed out most of the poorer performing candidates just as the race expands from a sequential state-by-state battle to a quasi-national one on Super Tuesday. Today 14 states (and one territory) are voting in the primary, including delegate-rich California and Texas. With more than one third of all delegates awarded on this single day, Super Tuesday is a crucial step on the way to amassing the 1,991 delegates needed to become the Democratic nominee.

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Senator Sanders’ core of passionate, progressive supporters and strong performances in the early states makes him the favourite to build a delegate lead today over Biden and former New York City Mayor and billionaire Michael Bloomberg. If he can open up a 200 or so delegate lead, the nomination will be his to lose by virtue of the golden rule of the primary process: It’s hard to get delegate lead, but it’s also hard to catch a delegate leader.

So, why is this the case? The number of delegates offered by each state is roughly based on their population. And in each state, there are two types of delegates awarded: about one-third are awarded at-large (AL) (that is, statewide) and about two-thirds of delegates are awarded by congressional district (CD). In order to be awarded a share of the AL delegates, candidates must clear a 15% threshold in that state. Similarly, candidates must get at least 15% in a congressional district in order to win any CD delegates.

This means there is a strategic imperative to cross the 15% threshold in as many states and districts as possible. This gives a clear advantage to candidates like Sanders who can count on their loyal supporters turning out for them no matter what. The cost of missing out on AL delegates is obvious – California alone is awarding 144 this way, so not getting above 15% statewide would be a major lost opportunity and a gift to other candidates who are viable.

But CD delegates are arguably more important due to roughly two-thirds being awarded this way (271 in California). There are hundreds of districts across the U.S. and on Super Tuesday any given district will have around 2 to 10 CD delegates to award. To build a lead over their opponents, candidates must net CD delegates by winning by big enough margins such that the resulting proportional allocation of delegates means they are entitled to more than other campaigns.

Here’s a quick example: say a medium sized district has five CD delegates to award, and out of field of four candidates only Sanders and Biden clear 15% of all votes cast. In order for Sanders to get a favorable 3-2 split (and net one delegate over Biden) he would need to win a simple majority of the combined vote total he and Biden (that is, only the viable candidates) got in that district. But to really begin separating himself from Biden with a 4-1 delegate split, Sanders would need to win more than 70% of his and Biden’s combined vote. And simply due to the maths, getting favorable delegate splits is even harder in districts with an even number of delegates and when multiple candidates meet the 15% threshold.

So when thinking about delegates, the name of the game is to be viable in as many states/districts as you can and to try to put together landslide performances where possible to begin separating yourself from the pack. Consistently doing this across 50 states, in more than 400 districts, and over many months of a campaign is a daunting challenge. Add in hundreds of millions of dollars in attack ads and a current President laser-focused on re-election and it gets even tougher. But the very fact it is so hard to do is why if anyone can generate a big delegate lead on Super Tuesday, it may be impossible for others to catch them.

Left-wing Democrat Bernie Sanders waving his arms around (Photo by Ethan Miller/Getty Images)

You now know why there is such a freak out from establishment Democratic politicians and officials over Sanders’ chances at winning the nomination. He has a loyal, core group of supporters that will likely propel him above 15% in many states and districts. And although former Mayor Pete Buttigieg and Senator Amy Klobuchar have dropped out of the race and endorsed Biden, likely helping push him and possibly even Bloomberg over the viability threshold in more districts and states, the fact that both Biden and Bloomberg are drawing on a similar pool of moderate Democratic voters still makes it more difficult for each to consistently reach 15% of the vote. And even if they do cross the 15% threshold, they may not win by enough to net significant delegates over Sanders.

On the other hand, if Sanders’ lead is kept narrow, then it’s game on. This is especially true with Biden staking a claim to be the main Sanders alternative following his blowout South Carolina win. For those not wanting a Sanders vs. Trump general election to start on Wednesday March 4th, there are three more reasons it mightn’t be all over yet. First, there’s billionaire Bloomberg’s unprecedented war chest of money to spend on ads, field staff, or anything else he could conceivably want between now and the end of the primary, either promoting himself or tearing down Sanders. Until now Bloomberg has been treated like the Night King from Game of Thrones – an ominous and inevitable threat that everyone has yet mostly ignored due to the focus on their immediate political squabbles. He may be about to make his money’s presence felt.

Then there’s one-time front runner Senator Elizabeth Warren, who also appears determined to stay in the race until the convention, accumulating delegates to hopefully use as leverage over whoever the nominee ends up being. And seeing as she shares many voters with Sanders, many of the delegates going to her are lost opportunities for him. But, most importantly, the news media loves a dramatic horse race, with come-from-behind performances and dramatic final stands. Sanders being declared the de-facto nominee Tuesday would deny them months of ongoing juicy speculation and commentary, so they are incentivised to pump up a challenger – and Biden can play the role well.

But forget the spin. Whether Sanders can all-but win the nomination on Super Tuesday – or whether the primary is set for a long slog – all comes down to hard maths and delegate apportionment rules.

Korey Te Hira graduated from the Harvard Kennedy School of Government in 2019 with a Master in Public Policy. He writes a weekly newsletter on US politics.