By Tim Murphy for Newsroom
As the New Zealand First fraud trial enters its third week, the Serious Fraud Office spells out how party donations were diverted to a second account outside the control of elected officials.
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Money donated to support the New Zealand First Party was going to an account of a company owned by one of two men now charged with obtaining funds by deception - even before the NZ First Foundation was established and started taking funds beyond the reach of party officials.
The Serious Fraud Office has outlined the extent of funding taken in by the company in 2015-2016, and its spending, and then the foundation's establishment in 2017 and receipt of $677,885 which donors thought was to back the NZ First political party.
Two men, whose names are suppressed, deny two charges each of obtaining by deception and are on trial at the High Court at Auckland before Justice Pheroze Jagose. The SFO alleges the money taken in by the company and foundation was used without the authority of party officials and was not declared to the Electoral Commission as political donations as would be the case for money into an official party account.
Prosecution witnesses have set out how they were approached to donate and who supplied them with the account numbers for the company and the foundation, and party officials have given evidence of their lack of knowledge of the accounts, the funds raised and how they were spent.
A picture has emerged of a party struggling to pay its bills and modernise its databases, of strong divisions among board members and officials over the secrecy covering the foundation and the company, and warnings internally as early as 2018 that the set-up was putting NZ First at political and investigative risk. One prosecution witness had written to the party's president and secretary that year:
"The political risk and legal liability here is unnecessarily high", and "We have spent years fudging things... We get one chance to set the standards and do things above board."
The defence has noted NZ First leader Winston Peters is not among the prosecution witnesses and has suggested Peters knew of the background to some donations and supported the spending by the foundation.
The SFO case is expected to wind up on Monday or Tuesday, with the defence set down for the rest of this week and a further fortnight if needed.
A former SFO senior investigating accountant, Fiona Reid, told the court she worked on the case from February 2020, after news media revelations about the foundation and donations.
The SFO executed a search warrant at the home of at least one of the defendants, obtained detailed bank transactions, emails and text messages between party officials, the defendants, MPs including Peters and his partner Jan Trotman, and interviewed more than 40 people who had donated money between 2015 and 2019.
Reid said: "I did not find any of the donations received by [company name suppressed] and the foundation accounts were declared to be party donations to the Electoral Commission."
However, she said: "From my analysis the funds were used to benefit the party."
She outlined the history of the company, of which one defendant was the sole director, and listed the total deposits linked to NZ First in 2015-2016.
Its accounts took in $42,000 from party MPs in donations or loans, $28,600 from one defendant, $8,000 from the other, $4614 from party official Apirana Dawson, $15,000 from a NZ First Party bank account and $68,996 in donations or pledges.
It spent $154,466 in that time, with $92,000 on a political party database system known as Nation Builder which remained under the control of that company or its successor, $41,000 on website and digital consultants, $10,000 on graphic design projects and $4,190 for an NZ First 2017 campaign contractor's work.
The donations lodged in the account of the company included three donations from an earlier prosecution witness, Ron Woodrow, of $9998, $4999 and $4999 between 2016 and 2017, $14,000 from Peter Kraus in 2015, a monthly $1000 from horse breeder David Ellis over 10 months in 2016-17, and $15,000 from racing figure Sir Peter Vela in March 2017.
Earlier evidence in the trial showed some key party officials did not know at the time the background to the company whose bank account received the money or who controlled it.
Reid showed that for one payment made by the company to Nation Builder, Winston Peters had emailed a party official directly in April 2017, when the software multinational had suspended NZ First's access because of non-payment of fees, confirming that a payment had been made.
She said when the NZ First 'executive committee' had authorised the party's agreement with the defendant's company in 2015, it had stipulated that NZ First would "open a specific bank account" for money to be lodged into. However, Reid found no evidence for this account.
The SFO found no standard business records for the company in question - "no typical records like financial statements or ledgers or business activity [it] had been conducting. The only thing we identified were bank statements with some handwritten annotation. There were no GST returns or income tax records located."
Reid then outlined the total monies received and spent by the New Zealand First Foundation, which earlier prosecution evidence showed had been established in February 2017 - weeks before the party board had approved a motion to develop the concept.
The SFO had trawled the foundation's bank account dealings with ASB. An early email from the second defendant to the bank seeking a credit card said: "This account is a standalone account for the purpose of furthering the interests of the NZ First Party." But as it was classified as a 'society' the credit card could not be issued.
The foundation took in $899,220 in the time under investigation, Reid said.
A total of $677,885 was from donations and pledges supporting NZ First, and $213,335 was deposited from accounts of NZ First Inc. Vector, the power lines business, paid in $8000 (for political briefings on the MMP environment to senior company officials by the NZ First Foundation, arranged by Vector's government relations manager Nicholas Albrecht).
Withdrawals from the foundation account included $190,461 for Nation Builder, $79,000 to one of the defendants through his business, $80,000 to that defendant's family member, $64,000 to a party official who worked on the Nation Builder database business for the defendant's company and $14,000 in tax to Inland Revenue for the defendant's family member.
MP Clayton Mitchell had $18,363 in expenses reimbursed and Peters' partner Trotman received $4685 in reimbursements for airline flights.
The foundation paid $9643 for the boxer Joseph Parker to address its convention, $7453 for a Wellington Cup day party hospitality event, and $430 a fortnight in rent for the defendant's family member to work from home on foundation business.
Reid's evidence is set to continue after another prosecution witness, whose identity is suppressed.
The story was first published on the Newsroom website.