The National Party's treatment of Donghua Liu's donation is strikingly at odds with with how it treated all the other donations it received. That's not only wrong, but it may even be illegal.

The release of individual candidate donation returns following the 2014 election has revealed something interesting about the National Party's financial practices. As the NZ Herald reports, some $1 million of the $1.2 million in reported donations to National Party candidates came from the National Party itself (as opposed to an identifiable individual or outside organisation).

(A quick background primer on financial disclosures for the uninitiated: political parties are required to file annual returns with the Electoral Commission including the names of all "party" donors who give more than $15,000, while individual candidates have to file a return with the Commission following each election including the names of all "candidate" donors who give more than $1500.)

Here's how the National Party's President, Peter Goodfellow, explains the situation:

He said the practice had more to do with time-frames around candidate selection and a longer-term fundraising cycle. "National is fundraising pretty actively throughout the three-year election cycle. People are donating to support a race before there's even a candidate selected," he said.

Mr Goodfellow said these donations were therefore impossible to tag to candidates and, "as our people often really give to the party", were not be subject to the $1,500 declaration thresholds for candidates.

Mr Goodfellow actually is misstating the law slightly here. A candidate must record and disclose all amounts over $1500 given in the form of:

a donation (whether of money or of the equivalent of money or of goods or services or of a combination of those things) that is made to a candidate, or to any person on the candidate's behalf, for use in the candidate's campaign for election.

There is thus a distinction drawn in the Act between a candidate's fundraising activities and the party's. If money is solicited/given specifically to help elect a candidate in an electorate, it must be given over to the candidate and recorded as a "candidate donation". Otherwise it's a "party donation".

And the definition of a "candidate" (for the purposes of this part of the Act) does not rest on whether a person has been "selected" by the party, but includes "a person who has declared his or her intention of becoming a constituency candidate".

But let's assume for the moment that Mr Goodfellow's account of National's practice is correct. If money was given to National before it had selected its candidate in an electorate, then the party treated that money as being a "party donation" even if it was given for (say) the purpose of helping National win the local seat.

That meant that even if the donation was over the $1500 threshold for candidate disclosure, the party did not need to disclose it in its annual reports unless it was over $15,000. The party could then bundle together all those donations and give them back to the individual candidate in one big chunk of cash, which would then be reported by the candidate in her or his post-election return.  

Let's now turn our attention to the somewhat curious candidate return of Jami-Lee Ross for his campaign in the seat of Botany. It shows the receipt of a $25,000 donation from "Roncon Pacific Hotel Management Holdings Ltd" on the 15 August 2013, along with an asterisked notation that "this donation was subsequently returned to the donor". Also shown is a donation from the NZ National Party of $24,296.21 on the 19 September 2014.

We know from this NZ Herald story that (somewhat curiously) appeared three days before the release of candidate's returns that the first donation was from Donghua Liu - the Chinese-born businessman whose financial connections with political parties became something of an issue in the run-up to the last election. And we also know from that story the official explanation for the decision to refund the money:

[Jami-Lee Ross] said the Liu donation was given to be used in the local Botany campaign, but was not spent as a $24,000 donation from the National Party covered his expenses.

"So when the [donation and expense] returns were being put together after the election, it was decided the $25,000 should be returned to the donor because it was not used."

Now, if you believe that a politician will give back $25,000 to a donor just because "we don't really need it", then I have a large covered stadium in Dunedin to sell to you. It's quite clear that given the controversy around Mr Liu, National did not want to be associated financially with him. Even David Farrar says so.

And here's where things then get really interesting. Because notice the date of the candidate donation by Mr Liu to Mr Ross - 15 August 2013. Mr Ross was not selected as National's candidate until early January 2014, some four months after Mr Liu's gift was received.

So you see the problem. On Mr Goodfellow's account of how National was running its finances, Mr Liu's donation was made "before there's even a candidate selected" and so the donation was "therefore impossible to tag to [a] candidate". Meaning that Mr Liu's donation ought to have been treated as a party donation and so included in National's financial return for 2013, released on April 30, 2014.

(Mickey Savage over at The Standard alleges that the decision to treat Mr Liu's donation as a "candidate donation" to Mr Ross rather than a "party donation" to National was designed to avoid an embarrassing disclosure at a time when National was under some political heat for its relationship with him. I have to say that he's pretty convincing.)

Alternatively, if the claim is that the donation from Mr Liu was a candidate donation because by mid-August 2013 Mr Ross had "declared his ... intention of becoming a constituency candidate" (even though he hadn't been formally selected as such), then that raises questions about National's wider fundraising and reporting behaviour.

Because how was Mr Liu's donation different to all those other donations made at Cabinet Club gatherings to sitting MPs who also had said they would be running again in 2014? Applying the Jami-Lee Ross test would mean that if any of these were given to one of those MPs to fund their electorate campaign and was greater than $1500, then it needs to be reported as a candidate donation.

Or, are we meant to believe that out of all the National Party's candidates in 2014, Mr Ross was the only one who, before he was officially selected but after having somehow declared his intention to be a candidate (in a way different to his colleagues), was given money in excess of $1500 that was specifically intended to help him get reelected? And that this money just happened to come from a donor that proved to be politically embarrassing for the National Party?

In short, it looks to me like National are playing fast-and-loose with the rules here. It is trying to say that some sorts of donations can be treated in one way when that suits them, and in another way when that suits them better. I wonder if the Electoral Commission might not like to send a "please explain" letter to clarify exactly what went on ... and consider whether perhaps someone has done this or this.