Laws around donations to political parties through auctions need to be tightened up quite considerably, a professor says.
The Serious Fraud Office (SFO) today announced it had launched an investigation in relation to donations made to the Labour Party in 2017. In a statement, the SFO said it was one of four investigations it was conducting in relation to electoral funding, with a fifth now before the courts.
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Otago University law professor Andrew Geddis told RNZ's Checkpoint the SFO's statement on the latest investigation was in line with its previous ones regarding ongoing probes.
Geddis said it was important to note the SFO had not yet commented on the specifics, but there was a possibility it could be linked to donors via auctions.
"We have to be very careful that we're surmising ... two of the investigations that the SFO has running are into Lianne Dalziel and Phil Goff - ex-Labour Party Cabinet ministers - in relation to how they raised money or got donations for their local body campaigns.
"What the SFO is looking at with regards to those donations is the way that auctions were used to disguise the identity of donors to candidates. So items would be auctioned, allegedly at an inflated value, and the identity of who had bid on those things was not made clear."
Geddis said questions had been raised over whether this was a tactic employed by the Labour Party at a national level in 2017, though he noted this was mere speculation.
"There have been questions raised as to whether the Labour Party's technique at those auctions was strictly in compliance with the Electoral Act, so it may well be that what the SFO is looking at is the way that the Labour Party used this tactic, given it's already looking at how two ex-Labour Party Cabinet ministers used that tactic."
One of the bigger problems around such auctions was with artwork, which had no inherent material value, he said.
"What it appears the Labour Party did was if they were given an artwork that sold for a certain amount at an auction, they would say that the person who created the artwork was the donor of the full value - even if someone had bid what seems to be quite a large amount of money, more than the painting would usually sell for."
University of Otago law lecturer Andrew Geddis Photo: RNZ / Cole Eastham-Farrelly
If something is sold within the disclosure cap then it usually is not problematic, however, Geddis said a donor could also buy multiple items "so that when you add all that extra value together it becomes [above the non-disclosure cap] and so should be declared."
"And so it's not clear whether that sort of thing was happening in these circumstances."
He said the law needed to be tightened up quite considerably in this area.
"There's no doubt is what we really need to be interested in is not an artist who is giving a painting to the Labour Party, but who is paying tens of thousands of dollars for that painting... and if we don't know that then we don't know who is giving the financial cash that parties are using to run their campaigns."
People who donated via auctions had been used "conveniently to hide the identity of donors for quite a while", Geddis said.
"The Electoral Commission has actually apparently signed off on this and said they regard this as being okay. Now, whether the Electoral Commission knows the full extent of which this is being used, we don't know, because the Electoral Commission only knows what the parties tell them."
While the Electoral Commission has oversight, it is not an investigative body, Geddis said.
"It receives the returns that parties send to it and takes them at face value. It can only look at an issue if someone liaises it with them and then it can only ask the parties for information. It's got no ability to actually dig into behind the party's records and look to see whether they're accurate.
"The Electoral Commission isn't the final arbiter of what the law is in this area, if the SFO disagrees with the Electoral Commission it can take its own independent action."
He said the fact that only two parties were not under investigation by the SFO was something that seemed unexpected in New Zealand.
"It's very likely that we'll go to the September election with an ongoing investigation by the SFO into the Labour Party."