Finally, we see the Auditor-General's report on the Saudi sheep deal and it's "significant shortcomings", and if you're not angry, you haven't been paying attention. Because here's the real story...

After a decade close to the action – and longer on the peripheries – there's not much in politics that makes my blood boil any more. At its best it is a contest of ideas and visions, but more often these days it is a poll-driven, often cynical, risk averse, strategic battle for swing voters. C'est la vie. But then, we have events like the Saudi sheep deal.

Occasionally, when it comes down to the abuse of power and a profound disrespect for the fragile system of democracy and governance that has made this country so strong for so long, we see politics at its worst. Or if not its worst, then at least in a very ugly form.

At that point, I can still get angry. And the Saudi sheep deal makes me angry. Angry with a government that, publicly at least, is in denial over its misuse of power and its casual attitude towards our constitutional infrastructure. Angry at the damage done to our global reputation as transparent and honest brokers. Angry with a media that doesn't bother to research and think and critique nearly enough (although this story has been exposed by some top drawer journalism, others have woefully ignored, down-played or misunderstood it). And angry with an electorate that allows complexity to defeat morality.

The Auditor-General has released her long-awaited report into what's become known as the Saudi sheep deal – New Zealand's payment, orchestrated by Foreign Minister Murray McCully, of $11.5m in cash and goods to Saudi billionaire Hamood Al-Khalaf in the hope that he may help smooth the way for a free-trade deal with the Gulf States.

Who knows what her original draft looked like? The length of time it took to be released suggests it may have been challenged in-depth by the government and/or McCully, and pressure applied.

The final findings are that corruption – defined as "an abuse of power for private gain or an offence against the Crimes Act 1961 by a Minister or an official" – did not occur. But it's a spurious finding because no-one has alleged that McCully gained financially from the deal; rather, it was accused he paid off al-Khalaf for political gain.

I can accept that using public money for political purposes of this kind falls below a legal definition of corruption. I just find it repugnant.

What's clear from the rest of the report is that the Auditor-General found "significant shortcomings" in the deal and a grave lack of transparency. She even went so far as to say McCully used a contract with private providers to settle a diplomatic dispute. Further, it's clear from this report – if it wasn't from media reporting already – that cabinet was to a greater or lesser degree in the dark as to what was going on.

That is simply remarkable and should be instantly condemned as an abuse of ministerial power. New Zealand's Foreign Minister took it upon himself to give public money to a private individual in an effort to secure a trade deal.

Think about that for a minute. Think about what would happen to you if you did that with your employer's money. Think about whether you're comfortable with your tax dollars being spent, not on lobbying or government-to-government dealings, but on paying off a disgruntled businessman who simply didn't like the fact that a democratically elected government of this country had changed the law, to his commercial disadvantage.

Al-Khalaf wanted New Zealand to resume live sheep export for slaughter, a policy the Labour government had banned after the disaster of the Cormo Express in 2003 – al-Khalaf's own ship – and the death of 5,000 sheep at sea. It was an economic as much as ethical decision, with the government legitimately concerned that shoppers in our existing markets would react badly and stop buying if we did not protect our good reputation for animal welfare.

New Zealand law, since 2007, has banned live export for slaughter, permitting only export for breeding. And even then, large shipments have been unpopular with the public, as we saw with the export of almost 50,000 sheep to Mexico last year.

National, in its first term, got within a whisker of reversing that law. While John Key and McCully have spent much of this saga blaming Labour, in fact it was their u-turn and decision not to resume live exports for slaughter that added fuel al-Khalaf's initial frustration with Labour's policy decision.

McCully though, desperate for a free-trade deal, went looking for a work around. Read the papers released last year and you can say reports and briefings by MFAT in which all sorts of work arounds were discussed.

Perhaps a half-way farm in Malaysia or Ehtiopia, where we could send sheep for breeding, and then they could be shipped on for slaughter? And hey, if we created that farm for al-Khalaf, perhaps we could use aid money to do so?

What about a good faith shipment of 45,000 sheep in 2015? Maybe a shipment could be dressed up as a "scientific trial"? Incredible options, all.

In the end, we went for a $6m "agri-hub" meant to promote New Zealand agriculture in Saudi Arabia; the infamous farm in the desert. To be fair, some kiwi businesses have won some contracts from that facility. Yet this supposed "showcase" remains off-limits. When I authorised payment for a Saudi cameraman to visit the farm last year, he was denied access. The next day police came to his house, detained him and confiscated his camera cards.

On top of that, al-Khalaf got $4m of our taxpayers' money in cash, for mysterious "services". Even the Auditor-General can't fully make heads nor tails of those. And we spent another $1.5m flying 900 pregnant ewes to Saudi Arabia, where most of the lambs born then died.

In her report today, Auditor-General Lyn Provost wrote, "settlement of a grievance was provided under the guise of a contract for services". She was "unclear", after more than a year of investigation, what benefits came from the deal. She repeatedly spoke of the deal's "significant shortcomings". She said cabinet received poor quality information, lacking robust analysis.

In the House today, National MPs defended McCully, saying that his work may not have got an "A-grade", but something had to be done to thaw trade talks with Saudi Arabia, and McCully got the job done. While we still have no deal, relations are improved.

In other words, they have no qualms with public money being handed to a private foreign businessman for no clear benefit and without clear cabinet understanding. That should be a mark of shame for those MPs.

McCully himself accepted the deal was "problematic". But in a remarkable 'ends justifies the means' argument said he was only doing what he thought best to heal a "poisoned" relationship.

So National's spin is that "something had to be done", so because McCully did something – however dodgy – he retains the Prime Minister's confidence.

That makes me angry. The buck stops nowhere. And his cabinet colleagues who were misled by this rogue operator should be furious with him too. Instead, their silence is a stain on them all.

Indeed, it's worth pausing to reflect in cabinet's collective failings in this, which may explain their silence. It's clear from the report they didn't demand the quality information and robust analysis that they should have. They let McCully roam wild.

Provost stresses that the dodgy deal got sign off from the executive: "The use of a contract for services to resolve these [diplomatic] matters was a decision made by Cabinet". Fail.

But at the heart of this is a level of dishonesty that makes me angrier still. What the infamous 2013 cabinet paper that Provost found so lacking implied, and what McCully has repeatedly claimed since, is that he needed to pay-off al-Khalaf to avoid a lawsuit by the billionaire, that could cost us $20-30m. So, a clever deal then, to spend $10m (which went up to $11.5m) to save up to $30m, right?

That was the spin. Except he has never offered a jot of evidence to show that legal threat was real. He and MFAT have refused to release the supposed legal advice he relied upon. We as the public have no way of judging just how clever McCully was.

Yet we do have al-Khalaf's side of the story, from his right-hand man in this part of the world, George Assaf. Because Assaf told TV3's The Nation earlier this year that, while they took legal advice over the deal, they had "no intention" of ever suing New Zealand. Any suggestion that they would sue, was a fantasy.

In other words, McCully misled cabinet, parliament and the public, by claiming he had done a clever deal that saved taxpayers' millions. The very people he's long said were after us for money, insist they had no such plan.

One of them is lying. If it's McCully, he got played. There was no threat and he paid for nothing. If it's Assaf, and the threat of the lawsuit was genuine, McCully still got played. He blinked first. Because no-one has been able to suggest under which law or in which court we would be sued. And what court would find against a government for simply changing – and not changing back – the law of its land?

When asked about Assaf's comments, McCully said he would not comment while the Auditor-General was investigating. Well, now he is free to explain. He is free to release the legal advice and spell out the degree of the threat. If there is a failure in law on New Zealand's part that has been missed, this is his chance to clear his name.

As Provost writes:

"To date, explanations from Ministers or officials have not resolved those public concerns. Without transparency, people will speculate. This report is an opportunity for the complete story to be told."

Over to you, Minister.

Comments (9)

by Graham Adams on November 03, 2016
Graham Adams

In an age when immoral or unethical (but technically legal) behaviour by politicians is usually reduced to merely "a bad look" or a "beltway issue", your anger seems quaint. Call me old-fashioned, but I'm outraged as well (not least by Audrey Young and Mike Hosking passing it off as nothing to be concerned about). 


by Graham Adams on November 03, 2016
Graham Adams

I've just listened to Matthew Hooton talking to Rachel Smalley. He’s incandescent about the Saudi sheep deal; you can sense his anger erupting over the airwaves.

by Ian MacKay on November 03, 2016
Ian MacKay

We do not not know what was in the legal advice since it is well locked out of sight. It is implied that all was Okay since advice was given, or so the say.

But what say that the legal advice was to "cease and desist. Do not do what you propose Mr McCulley!" The legal advice could have been the opposite of what McCulley then did. That would be a good reason to with-hold the advice eh?

by Tim Watkin on November 03, 2016
Tim Watkin

That's exactly right, Ian. We're not being allowed to make our own judgment over a crucial piece of government management. Maybe it said 'he might sue, you'd better settle'. We should know one way or the other. The cynic in me reckons if it did, we'd be allowed to see it. But at the moment we're not trusted with transparency.

I'm still furious. Glad you are too Graham.

by Peggy Klimenko on November 04, 2016
Peggy Klimenko

Tim Watkin: "I'm still furious."

As am I. It's an utterly shabby and shameful story. I note the number of journalists who appear to have abandoned any pretence at objectivity and have cast their lot in with the current government on this issue. And on countless others, of course.

I'm guessing that many more people are infuriated than the number of responses you've got here would suggest. But perhaps they don't see it as pointful to respond, especially when we have rah-rah media types backing up McCully and the PM. Of course, it's all Labour's fault....

by Antoine on November 06, 2016

> I'm guessing that many more people are infuriated than the number of responses you've got here would suggest.

I am, but didn't bother to chime in with a "+1"


by donna on November 07, 2016

I'm furious, too. Even more so after listening to our PM wittering in defence of McCully on RNZ this morning.

What annoys me even more - and this seems to be something the media have let slide - is that al-Khalaf is a serial briber of governments and pulled exactly the same nonsense on the Australians.

But let's not get too precious: we've patched it up with a medieval regime bombing civilians in Yemen. It's all good.

by Peggy Klimenko on November 07, 2016
Peggy Klimenko

donna: "But let's not get too precious: we've patched it up with a medieval regime bombing civilians in Yemen. It's all good."

How the hell did we as a country end up here? Is there no depth to which this government won't sink in the interests of trade?

Despite the abasement and dirty dealing, NZ still doesn't have a free trade agreement with Saudi Arabia. And in the unlikely event of an agreement being signed, it certainly won't have been "free". We've paid a very high price: as Tim has pointed out, it is the loss of our international reputation as fair and honest brokers. Grrr....

by Bruce Rickard on November 08, 2016
Bruce Rickard

Its, not it's

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