Court evidence reveals secrets were kept within different parts of the New Zealand First Party, it had trouble getting information for the Electoral Commission and was "a horrible mess" administratively
A life member and two former vice presidents have told the NZ First fundraising trial of being blindsided, including being stonewalled at board meetings by leader Winston Peters, by the set-up of a separate foundation, private fundraising and its spending of donations.
Evidence at the trial at the High Court at Auckland of two men for obtaining by deception via the NZ First Foundation shows the foundation had been set up well before the party's board met to vote to approve further work on it. A foundation trust deed was presented to and stamped by the ASB Bank on February 20, 2017 even though the board approval to develop the concept was on March 13 of that year.
Board members, whose interviews with the Serious Fraud Office were read to the court, said they were unaware of that fact until controversy about the foundation and its fundraising activities broke in the media, in 2019-20, prompting the SFO investigation.
At one point a $73,000 loan was made between the foundation - which had received big donations from people intending to back Winston Peters and NZ First - and the party, but key party officials knew nothing of the loan. When one found out about it, she questioned the Electoral Commission whether it should be declared as a donation, and eventually suggested the commission follow up direct with the foundation as details were not known to her.
The former party senior officials detailed how a tech business run by one of the defendants and a family member was proposed to do work for the foundation and to take 10 to 15 percent of the monies the party raised on a new membership and donations computer system. That defendant had even asked if the foundation should pay the operating expenses of his company, a witness said.
The SFO alleges the two men, whose names are suppressed, obtained around $750,000 for the foundation when it had been intended for the party and they used its proceeds without the knowledge or direct authority of elected board officials. This money had not been registered with the Electoral Commission as it would be by political parties.
The defence says no crime occurred, there was no charge laid under the Electoral Act, and monies raised for the party were spent on party causes and bills. It pointed out that party leader Peters was "significantly absent" from the prosecution's list of witnesses.
The defence objected to evidence being entered into the record from party board member and northern vice-president Julian Paul.
It told the court it had been clear from earlier evidence from southern vice-president at the time John Thorn, and from former party president, secretary and life member Anne Martin (mother of former NZ First MP, deputy leader and minister Tracey Martin) that internal workings of the party had been "a horrible mess".
The defence said: "It has got nothing to do with the charge. The charge is obtaining by deception donations to the New Zealand First Party. Both [other] witnesses have said orally it was a horrible mess. That's not the foundation or [the defendants'] problem."
But the defence view that Paul's evidence of internal party matters was "irrelevant " was rejected by Justice Pheroze Jagose, hearing the judge-alone trial.
Paul was a NZ First board director in 2017, and again in 2019. He seconded the board motion on March 13 of 2017 to develop the concept for the NZ First Foundation as a capital protected fund, modelled on a National Party version, to raise funds for the party. But he only became aware years later that it had already been set up and taken to the ASB to open a bank account the month before. He did not know who the trustees were until media reports on the foundation.
"The board never received any reports from anyone of what the foundation was up to, how it derived income or what it would do with funds," he said in evidence read by prosecution lawyer James Carruthers. "We were not told the bank balance. They would move the expenses that needed to be paid but not provide the balance."
The firm set up by one of the defendants, involving Peters' partner Jan Trotman, was suggested in a meeting attended by Paul, the then NZ First chief of staff Jon Johansson and MP Clayton Mitchell, to pick up website and communications responsibilities, some of which had been run by the party's parliamentary research unit. "We had an issue with the level of detail," Paul said.
A proposed Service Level Agreement between the firm and the party, to be agreed by one of the defendants and Johansson, was not eventually signed, the witness said. "As far as I knew there was not a contract, either. I did not question Fletcher Tabuteau [NZ First deputy leader and MP] about how they got paid. As far as I was concerned, it was up to him and the board. But it did not come to the board."
Former South Island vice-president John Thorn, who held the role of interim treasurer from mid 2016 until 2018, said it had become clear to him that while he had been preparing a paper for the board in 2017 on establishing the foundation, "it had already been created and was operating with the knowledge of people who attended the board meetings to which I presented my proposal.
"And I felt I had been used and manipulated."
Asked by Crown lawyer John Dixon QC who were the people he had specified who had attended the board meetings, Thorn said: "Winston Peters."
He said in 2016-2017 "at no time did I know of anything going to the NZ First Foundation or [the defendant's company]."
Thorn said he asked one of the defendants two or three times about the NZ First Foundation and was referred to the other defendant.
He heard back from the first defendant that the foundation was operating, and "that's all you need to know".
"When I asked ... whether the foundation had been registered with the corporate societies registrar, he couldn't answer that but undertook to find out." Thorn said he heard back: "Tell Mr Thorn to trust that's all he needs to know."
Former president and secretary (2007-13 and 2015-18) Anne Martin gave evidence in person. She said as secretary she was responsible for reporting donations to the Electoral Commission. "Basically, I did my best to conform with their requirements."
She said in 2015 Winston Peters proposed a new fundraising database "tool" to be privately funded (up to $100,000) which would set NZ First on a more professional footing. Martin quoted board minutes of Peters saying: "For us, certain people have asked what would we use it for and the answer is A) you cannot buy NZ First policy and B) the most important thing is we think we will be major players at the next election and we do not think you cannot afford to talk with us. They said they would be in."
Peters added: "It's a straight donation under the amount that is declarable and it is confidential..."
But the notes in the minutes of the board meeting summarise Peters as saying: "Don't want to answer an (sic) questions. A totally proven model, highly successful."
On the set-up of the foundation, Martin supported the development of the concept but did not know it already existed at that time, did not know who the directors were, but became aware of a loan from the foundation to the party of December 2017.
As the party prepared an Electoral Commission return for the year to April 30, Martin asked one of the defendants for details on the loan and was told that information had been sent indirectly via John Thorn. "In my capacity as party secretary, this information should be readily available for me to fulfil my obligations to the party," she wrote.
Martin raised the loan with the Electoral Commission which advised any loan over $15,000 needed to be declared and had to be approved by the party secretary. After a series of emails and discussions in May 2018 the loan was re-entered, with Martin's knowledge, to meet the commission requirements.
One of the defendants told Martin if the commission had any further inquiries to refer them to the foundation and advise: "you don't necessarily know the foundation structure as it is separate to the party."
Martin then told the commission: "The loan is in the name of the foundation trustees, it is not a loan from the two individuals. I have no knowledge of the foundation structure. The foundation has no association with the party."
In November 2019, after media reports, the Electoral Commission wrote to Martin telling her of the alleged discrepancies between donations to the foundation and what had been in two party annual donation declarations. It advised her to get media advice.
Martin forwarded it to one of the defendants, plus Jan Trotman. Martin replied to the commission with a letter written by one of the defendants. In evidence she said the letter came with instruction that he wanted her to say she always understood the foundation was a separate entity to the party, controlled by [the defendant] and to say she had no involvement with the foundation. Asked about the purpose of the foundation, she was to say she had no knowledge of its purpose and was unaware of any donations being directed to the foundation.
In court, Martin said anything given for the party ought to have been held in a party account.
Asked about money being held in non-party accounts, she said: "In my experience, it didn't happen."
And if it had happened?
"It would have been passed on to a party account."
Was she aware of Electoral Act requirements?
There was no exception, "Party donations needed to be declared ... If the donor believed they were donating to the party, then that's where the donation should have gone."
What if that money was now sitting in another account?
"I'd have to ask the questions of the account holder. 'I'm doing a return for the Electoral Commission, do we have any donations that need to be included in the return'?"
She added she would have thought "it would have been best in the party's account so that we could get some interest on it and use it to pay accounts if needed."
Asked by defence lawyer Tudor Clee if she was one of those who referred to Peters as "The Boss", Martin told the court: "I don't call him The Boss. It's not a term that women use. I've heard men use it a lot, but I didn't see him as the boss."
Clee asked her view on the process to re-issue the $73,000 loan to meet Electoral Commission needs. "I would say they always had the party's interests in mind ... if anything I felt that I had been left out of the loop."
It appears bills from two media companies could have been the reason for this loan - which led to such toing and froing later in the party and commission.
The defence asked Martin about an email to her from John Thorn over that $73,000 loan and her earlier 'approval' for it.
An email before the court has Thorn saying to Martin: "The loan is certainly documented.
"I am a little surprised that you feel that you had not approved the loan. I recall when you sent to me with urgency the two accounts (NZME and Fairfax) back in late November..."
He had sought assistance from the foundation. "I can also remember advising you after settling them that I had paid the two accounts with the help of the foundation. Given the nasty surprise that the bills gave us, we had no option. We could not have met them otherwise."
