Wednesday, February 25, 2015

The latest election donation scam

Back in 2007 the then-Labour government passed the Electoral Finance Act. One of the key provisions of the Act was to end the National Party's practice of laundering party donations through trusts. While supposedly hugely contentious, this provision - and the rest of the Electoral Finance Act structure - was retained when National "repealed" it in 2009.

Why is this relevant? Because 2014 election candidate returns were released yesterday. And they show that the practice hasn't really ended. Instead, its shifted to the candidate level, with the National Party as the laundry.

Take a look. National candidate after National candidate gets tens of thousands of dollars donated by the National Party. Often, these are their only donations. These donations are clearly made up of contributions from donations to the National party. But no contributors are identified. Clearly National thinks that these donations have not been made specifically to be passed on to specific candidates - or that no-one can prove it. But Jami-Lee Ross's $25,000 returned donation from Donghua Liu - declared in his return, and indeed the only donation he declares from outside the National Party - shows that "Cabinet club" donations are in fact given to specific candidates, and that they do know where the money comes from. Which makes all those large donations from the party look very dodgy indeed.

The scam here exploits the declaration threshold between parties and candidates. Candidates must declare any donation over $1,500, but parties only have to declare donations over $15,000. So, donate to the party, six months later it gets passed on, no-one has to declare anything, and no-one knows who an MP is beholden to or how much for. It may be entirely legal - because MPs with no interest in transparency wrote the law to suit themselves - but its not transparent and doesn't provide confidence in our electoral system or that our MPs are not secretly doing favours for donors.

As for how to fix it, its simple: lower the party donation threshold to $1,500, the same as the candidate threshold. Then no-one will be able to escape scrutiny for large donations.

(I should note: the Internet Party did this too, but its pretty clear where their money come from. Labour's local electorate committees also donate to their candidates, but in much lower amounts; it seems to be a case of localised fund-raising from small donors rather than centralised funding from big ones).