A Crown lawyer says while two defendants in the NZ First fraud trial were not charged under electoral laws, they had deceived not only the party and its donors but the Electoral Commission and the public.
Over three weeks, the trial at the High Court at Auckland has exposed communications from within the party and shone a light on the inner workings of political fundraising.
The closing of the Crown’s case by John Dixon QC to Justice Pheroze Jagose on Thursday painted a picture of a party where the left hand didn’t know what the right was doing, with donations going in and out of the New Zealand First Foundation and other accounts without the knowledge of the party secretary or president.
The defendants, whose names are suppressed, deny Serious Fraud Office charges of obtaining by deception. The SFO alleges the men solicited $750,000, which was donated for the party, and diverted it to an account of one of the defendant’s companies or to the foundation – then spent it without the authority or knowledge of elected party officials. The totals donated were not declared to the Electoral Commission as donations.
One “egregious” example of party funds being diverted involved a $2000 cheque, made out to the party from fishing leader Sir Peter Talley, somehow ending up deposited directly to the foundation bank account.
“They were kept in the dark,” Dixon said, referring to senior NZ First figures such as former deputy leader Fletcher Tabuteau and former party secretary Anne Martin.
Dixon referred to emails between one defendant and party staffer Apirana Dawson in July of 2015, in which the man outlined plans for what he described as a “leader’s fund”.
“We used to loosely call this sort of thing leader’s fund and people were cool with that,” the defendant wrote. “All this should be able to proceed almost in spite of the Board… what’s at stake here is [Winston Peters’] ability to run a knock-em-dead campaign free from interference from the Board.”
That defendant had suggested the fund would “pose” as a part of the party. “Interesting choice of words,” Dixon said.
Although the defence had argued previously the money solicited as donations had been largely used for party purposes, the Crown said exchanges like this showed the board was kept out of the know.
“The Crown accepts the defendants did spend the money on a range of expenses that did have the potential… for the benefit of the party,” said Dixon. “It was the defendants who determined and controlled how that money was spent, not the party.”
Earlier in the trial, a former NZ First MP, Clayton Mitchell, had the broader party structure laid out for him by one of the accused in the form of a diagram.
The diagram showed the party on one side, and the foundation on the other, with a firewall down the middle. Arrows connecting them through the firewall showed the ability for cash to flow, but a strong element of secrecy was able to be maintained by the men on the money side.
That money went to a wide range of expenses, such as a $7500 bill for a tent at the races, around $12000 to send Mitchell to the UK to network with the Brexit Party and a hefty appearance fee for boxer Joseph Parker to be a guest speaker at an NZ First event.
But disquiet grew among board members who were left in the dark, with Dixon saying party members were “deeply unhappy”.
“Why not just tell the treasurer and secretary. Why the subterfuge?” He said. ”They didn’t want to run the risk of what they were doing, they realised the board might not approve it.”
Dixon argued the defendants’ deception had two aspects – first, arranging to have solicited donations deposited into non-party accounts on their side of the ‘firewall’, and then by not transferring it back to the party.
The former was said to be done by providing fund-raisers like Mitchell with foundation bank account details, while the latter was in not alerting the party secretary about the donations received and handing the money over to that person’s control.
One former party secretary, Martin, told the trial she would have expected all donations to be placed into party accounts and declared. She did not know of donations being sent elsewhere. Dixon said: “The non-reporting is what causes the party secretary to believe one thing when the reality is something different.”
Dixon addressed an issue raised by the defence at the trial – that no offence had been alleged under the Electoral Act against the two defendants.
He said the defendants had failed to comply with the legal requirement to transmit the donated money to the party, but that legislation contained no sanction for that failure. Had they transmitted the donations they would then have been required to provide names and addresses for the donors. But as they had not transmitted, they had not breached that section.
While a party secretary could face up to two years in jail for failing to declare donations, there was no sanction against someone who caused the party secretary to fail to do so.
The question at the trial was not whether the defendants had failed to comply with the Electoral Act but whether they had committed the offences they were charged with – obtaining by deception.
The deception was both in misleading donors and in failing to alert the party secretary so that person could assert control over the donated funds.
“That stratagem was intended to and did deceive the party and the party secretary,” he said. “It meant the Board of the party and party secretary did not learn of the donations and so were unable to assert control over them. And that’s what this case was about, control over these donations.”
He said any argument that the money ended up going where it would have anyway was moot, as the charges were about the deception, not whether the money had been used for unsanctioned purposes.
Both men had lied to either or both of the Electoral Commission and the Serious Fraud Office, Dixon said, taking Justice Jagose through a table of statements he said were shown to be untrue by evidence in the case. “Simply not true … didn’t happen … that’s not true … no … a list of untrue statements,” the QC said as he detailed each claim by the defendants.
“The Crown’s contention is there was, here, an intention to deceive.”
Closing arguments for the defence are expected next Monday.
A hearing on the continued suppression of the men’s names is also pending.