Money, politics and scandal in New Zealand’s election

New Zealand Prime Minister John Key, pictured here in 2008. Photo credit: kelvinhu/Flickr

Not normally on the world’s political radar, the recent parliamentary election in New Zealand put the small island nation on par with far more populous democratic countries — and not in a good way. Money and scandal rocked the election season. After the votes were counted, New Zealand’s National party garnered an unexpected 48 percent of the vote, securing a third term for Prime Minister John Key. And while those results may suggest, as they did to Labour leader David Cunliffe, that “wealthy individuals cannot buy politics,” the election indicates that country will have to address weaknesses in its political finance system if New Zealand wants to hold on to its squeaky clean reputation and its first place position as the least corrupt nation on Transparency International’s corruption perception index.

Hacks, leaks and a campaign finance scandal

The first money in politics scandal played out when John Banks, an MP of the government-allied Act party, resigned after being found guilty of making false declarations about donations he received from Kim Dotcom, the founder of Megaupload, a now defunct file sharing website. Running for mayor of Auckland in 2010, Banks reported NZ$50,000 ($40,269 U.S. dollars) in anonymous donations. In reality, the contributions came from Kim Dotcom’s company. According to Dotcom, Banks asked him to make two separate contributions of NZ$25,000 ($20,134 U.S. dollars) each so that they could be classified as anonymous under the law in effect at the time. (The law has since been amended to impose a lower threshold for identification of donors, although it does not eliminate the possibility of large anonymous contributions.)

Another Member of Key’s cabinet, justice minister Judith Collins, was forced to resign amid allegations that she leaked personal information about political opponents to a right wing blogger known as Whale Oil. The revelations — which resulted in the book, Dirty Politics — resulted from Whale Oil’s computer having been hacked, allegedly by none other than Kim Dotcom. Dotcom denies involvement, but he can’t deny that the U.S. is seeking his extradition from New Zealand to stand trial for money laundering and copyright violations.

Parliament for sale?

Not content with making suspect contributions to individual MPs, Dotcom in 2012 decided to spend NZ$3.5 million ($2.9 million U.S. dollars) — the largest personal contribution to a political party on record in New Zealand — to launch the Internet party. Since he is not a citizen of New Zealand, Dotcom cannot hold a seat in Parliament, but he allied his Internet party with the small Mana Party, which, prior to last week’s election, held one seat in Parliament. It was suspected that if his effort had been successful, the coalition Internet-Mana would try to block Dotcom’s extradition to the U.S.

Dotcom’s money and efforts (including a last minute event featuring Edward Snowden and Julian Assange) backfired. Not only did Internet-Mana fail to gain seats, but Mana’s representative in Parliament lost his seat.

It’s unclear whether Dotcom will have the chance to shape another election in New Zealand, especially if he is locked up in a U.S. prison, but another millionaire who funneled money into the election promises to be back.

Colin Craig, a conservative, has poured NZ$3 million ($2,416,155 U.S. dollars) into the last two elections. This time, most of the money was used for nationwide leaflet drops, and while it did not secure the 5 percent threshold needed to gain a seat, the expenditures resulted in an increase in the share of the vote that went to the Conservatives, from 2.65 percent in 2011 to 4.12 percent. That increase gives the party more credibility going forward, according to Laurence Day, another big conservative donor who, along with his wife, supported Craig’s effort with $675,000 of their own money.

Political finance transparency law

New Zealanders may take some comfort in the failures of Craig and Dotcom to buy seats in Parliament, but they shouldn’t assume they will be so lucky during the next election. New Zealand’s law has no limits on contributions by corporations or individuals (although it does have expenditure limits) and has weak, limited disclosure requirements for political parties. A 2013 Transparency International National Integrity System (NIS) report highlights a number of concerns with New Zealand’s money, politics and transparency regime. Generally strong, the country’s national integrity system falls short when it comes to politics.

On the specific issue of transparency of political finance, the NIS report notes that New Zealand law lacks sufficient ,“transparency of political party financing and of donations to individual politicians…and a lack of full transparency of public funding of the parliamentary wings of the parties. These concerns interact also with the refusal to extend the coverage of the Official Information Act 1982 to the administration of Parliament.”

While clearly lacking in the significant area of party financing, the law contains somewhat more progressive disclosure requirements when it comes to disclosure of advertising expenditures by outside groups.  The election law requires outside groups, so-called “promoters,” to register if they intend to spend more than NZ$12,000 ($9,664 U.S. dollars) on election advertising during the designated election period; they are required to document their expenses if they spend more than NZ$100,000 ($80,538 U.S. dollars); and spending is capped at NZ$300,000 ($241,615 U.S. dollars). In addition, there are requirements that promoters identify themselves in ads (what we in the U.S. would call stand-by-your-ad mandates) and require certain authorizations before ads can be run.

Outside of the specific area of transparency, the NIS report points out other areas of the political finance regime that may be in need of reform. Registered parties are provided public funding and given allocations for radio and television time, which they may not exceed. The report notes that that the allocation of election broadcasting time creates barriers to small parties, as does the distribution of other public funds to the parties. The Conservative Party’s Craig has stated that he believes his personal contributions to the party were crucial because Conservatives are ineligible for Parliamentary funding and because they receive far less air time than the two major parties.

Momentum for Reform?

The secrecy inherent in New Zealand’s laws, the scandals surrounding Members of Parliament and the efforts of Kim Dotcom and Colin Craig suggest that Kiwis may want to reflect on whether their political finance system is in need of reform. The issue of transparency of money in politics will remain in the spotlight, with the Green party calling for revisions the law to provide for more openness and accountability in politics and Labour leader David Cunliffe pointing out that, “A lot of New Zealanders are becoming increasingly concerned about what they are learning about the influence of big money in politics — whether single donors like Colin Craig and Kim Dotcom, or the pervasive influence of large corporates.”

A recent poll supports that concept, with 68 percent of New Zealanders saying they believe the law should be changed to make all political donations public.

Kiwis did not sell their election to the highest bidder — this time — but the election gave reformers plenty of ammunition to address some of the most opaque and loophole ridden provisions of the country’s election law.