The Police have referred their investigation into $100,000 in donations to the National Party to the Serious Fraud Office. It's hard to know just what that means, except that it's the quintissential political "bad look".

On its face, today's news that the Police have referred Jami-Lee Ross' now-five-month old allegations about Simon Bridges, the National Party and $100,000 in donations to the Serious Fraud Office (SFO) looks like a very big deal. After all, it's the first time that this elite law enforcement agency has been asked to look at an electoral law matter, let alone one allegedly involving the leader of the opposition having some role in illegally funnelling six figures worth of cash to his party.

And it may well turn out that this is a very big deal in fact. But, as I'm by nature a cautious and careful character (references available on request), let's just put a few caveats in place before we get too excited.

First of all, we don't really know why the Police have taken this step, because their statement on the issue doesn't say anything more than that "[the SFO] hold the appropriate mandate to look further into matters raised by the investigation to date." This might mean that the Police started investigating, realised any criminal offences they might uncover look like ones the SFO can deal with, and so have sought to hive the whole politically-charged problem off onto someone else's plate.

Alternatively, it may mean that the Police investigation into the matter has caused them to believe there is evidence of potential offending which the SFO is better placed to investigate, and so are giving them the opportunity to use their expertise (and extensive legislative powers to require cooperation) to take the matter further. 

I don't know which is the case; indeed, no-one outside the investigation ought to know this. All I will say is that I hope the Police haven't taken five months to decide that they don't want their fingerprints on this particular trainwreck and so simply are trying to make it someone else's problem.

That then leads to a second caveat. Some reporting has stated that the SFO is now "investigating" the issue. That isn't necessarily the case.

The SFO is an independent agency - it isn't a part of the Police. So, just because the Police refer a matter to it does not mean that it has to take it on and investigate it. That decision is one that the SFO's Director must take independently, after considering if the case meets the organisation's purposes and if there is sufficient evidence to warrant its attention. All the SFO has said so far is that having "received a referral" from the Police, no further comment on what happens next will be forthcoming.

It may be that in time the SFO politely say "thanks for thinking of us, NZ Police, but we don't really see anything here that need involve us".

Which raises the third caveat. Let's remember what Jami-Lee Ross alleged took place. He told the Police that Simon Bridges was complicit in a $100,000 donation to National being broken down into smaller amounts under $15,000 in order to avoid disclosing the true donor's identity as required by the Electoral Act 1993. If true, then that's a quite serious offence.

But as I wrote at the time of Ross' original accusations, the evidence produced to date does not conclusively prove that any such offending took place. Indeed, that evidence actually appeared to show the National Party's officials trying to ensure the law was complied with by verifying the identity of the various donors concerned.

Furthermore, if National's officials didn't manage to connect each donation to a real, flesh-and-blood donor, then they would have been required to treat it as coming from an "anonymous" source. In that case, they can only retain $1500 of the donation and are required to pass over the rest to the Electoral Commission.

But when a party does that, it must say it has done so in its annual financial return.  Meaning that when National's annual return for 2018 is released in May this year, we'll be able to see whether or not they regarded these donations as being "anonymous" (from a source they could not identify as being a real flesh-and-blood person).  Although, of course, if they did not regard them as being "anonymous", we won't see who they came from, as they fall under the $15,000 disclosure threshold - as apparently was intended.

Ultimately, of course, questions about the true source of the donation(s) in question can only be resolved by tracing back to where that money originated. As doing so may involve tracking funds through a complex set of accounts, the SFO's expertise may have been thought more suitable to deal with the matter. If, that is, they take the matter on.

So, until we hear what the SFO finds (if anything), we're really no nearer to settling what went on than we were back in October of last year. Which doesn't help Simon Bridges or his National Party any, given that now they face headlines involving the words "donation" "Serious Fraud" and "investigation" for the foreseeable. Which is, as any political commentator worth their salt will tell you, not a good look. At all.

Comments (6)

by Kat on March 12, 2019
Kat

The lone ranger and tonto were riding down the line..........

"Oh look Kemo Sabe there is smoke over yonder hill, must be nice hot fire going, we go warm up......"

"Not so fast Tonto, thats National country, just cos there is plenty of smoke doesn't mean there is any fire, and in any case I ain't seen nothing........."

by Pat on March 12, 2019
Pat

"But when a party does that, it must say it has done so in its annual financial return.  Meaning that when National's annual return for 2018 is released in May this year, we'll be able to see whether or not they regarded these donations as being "anonymous" (from a source they could not identify as being a real flesh-and-blood person).  Although, of course, if they did not regard them as being "anonymous", we won't see who they came from, as they fall under the $15,000 disclosure threshold - as apparently was intended."

Hmmm....March...timing is everything

by Dennis Frank on March 13, 2019
Dennis Frank

Is gaming the donations system serious fraud?  I doubt it. But the cops were right to refer the situation to the SFO, since the donation was obviously deliberately broken down into components to circumvent the law.  Intent to break the law is obvious, but the whether the law was broken is arguable.

The Nats advised the Chinese donor how to provide the donation in a form that would not break the law, the donor complied by getting members of his association to individually donate the small parts of the whole.  Isn't that analogous to a tax lawyer advising a client how to channel money in a bunch of different ways to make it avoidance rather than evasion?

I think it looks like serious fraud produced by the collusion between the Nats & the Chinese, but I suspect intent to finesse the law may not suffice to prosecute.  Pat's point about whether the individual donors are recorded as anonymous could be critical to the viability of prosecution.

by Andrew Geddis on March 13, 2019
Andrew Geddis

@ Dennis:

The Nats advised the Chinese donor how to provide the donation in a form that would not break the law, the donor complied by getting members of his association to individually donate the small parts of the whole.

If this is what happened, then you are correct that there has been no breach of the law (irrespective of the ethics of such actions). But I suspect the SFO is being asked to find out whether this is indeed what happened, or whether the apparently separate $15,000 donations from different people actually were all funded from the same source. Because that would be illegal.

Also note - despite its name, the SFO doesn't just investigate "fraud":

The Investigations team deals with all matters of serious or complex financial crime which the Director has decided to investigate. These might include: general fraud, mortgage fraud, employee theft, procurement fraud, financial markets fraud, bribery and corruption.

by Ian MacKay on March 13, 2019
Ian MacKay

Remember the trouble caused by the Banks V Dotcom allegedly splitting donation into smaller amounts and the Court case being unable to prove beyond reasonable doubt, guilt or otherwise. (I think it was for Council Elections but the case does illustrate the difficulty in untangling Donations.)

by Dennis Frank on March 13, 2019
Dennis Frank

I recall media reporting the Nats advised the Chinese donor that they could only receive the $100k if it was subdivided sufficiently.  If JLR testifies to the SFO that he passed on the legal requirement specs to the donor, as provided to him by the Nat party secretary, that would probably suffice to establish collusion to break the law in the minds of the SFO decision-makers.  The decision to prosecute may hinge on any obtainable evidence of the identity of the component donors. 

If the SFO establishes that they are all members of the donor's association, and all the individual amounts add up to a total of $100k, and the NP secretary testifies that he instructed JLR to negotiate this outcome, it will seem persuasive evidence of intent to circumvent the law.  Perhaps, then, their decision to prosecute would be based on precedent established in any similar cases?

If no such precedent is ascertainable, evident collusion may not be a sufficient basis to prosecute - given the dual political targeting involved.  The institutional learning that would result from a decision not to prosecute would be that the intent of the current law can be defeated via the method used in this case.  Using legal loopholes to defeat the intent of parliament's legislation seems a reputational risk for the Nats.

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