Bryce Edwards: The Troubling report into Stuart Nash’s conflicts of interest

Maybe we’ve all got scandal fatigue.

This is the best explanation for why there’s not more public and media concern in the wake of the disturbing report into former Minister Stuart Nash’s relationship with donors. There have been so many integrity violations lately from Government politicians and officials – including Michael Wood, Kiri Allan, Jan Tinetti, and Meng Foon – that it seems hearing about a minister’s dodgy communications with donors barely registers.

The results of the investigation released on Friday morning – in what seems to be something of a calculated government news dump (along with news of Meng Foon’s forced resignation) have largely been ignored or downplayed.

The investigation was undertaken by the Cabinet Office following Nash’s most recent integrity violation, in which he had breached ethical standards, including the Cabinet Manual, by providing sensitive Cabinet information to wealthy businessmen. The leaking was bad enough, but it was made worse because the recipients of Nash’s information had also donated money to the Minister to help him get re-elected. An inquiry was launched to see if other conflicts of interest had occurred.

Minister deletes text messages to donors

The investigation came up against a major problem, contributing to the delay in the report being completed. It found that the Minister had made a habit of deleting his communications with his financial donors, making it impossible for the Cabinet Office to do its job investigating any wrongdoing. Cabinet Secretary Rachel Haywood protested about the deletions in the report, stating “I am not able to give an assurance that I have seen all information relevant to the review”.

The Herald’s Adam Pearse explained what had occurred: “there were some time periods when there were no text message exchanges with some donors. Nash had told those coordinating the review that he did, at times, delete messages from his phone – a protocol he said he developed well before his career as a minister.”

On this, Hayward also states, “I have drawn no conclusions, adverse or otherwise, about the presence or absence of texts on Hon Nash’s phone”. But the clear conclusion to be drawn is that the investigation was undermined by the Minister’s actions. The public should be troubled about such practices by Ministers and MPs. Similarly, the use by Nash of a personal Gmail account as well as Whatsapp to correspond with donors is also suspicious and hardly best practice, especially in terms of the need to abide by the Official Information Act.

Another limitation dogged the Cabinet Office’s attempts to uncover what had gone on. In initiating the investigation, the Prime Minister said he hoped the process would give the public confidence in the integrity of the political system, but he decided not to give the Cabinet Office any real powers of investigation. Therefore, the Cabinet Secretary simply had to accept that there was nothing she could do about the destroyed evidence, as she was not empowered to do anything to dig deeper or recover the material.

Furthermore, the investigation was limited by the PM’s decision to reduce its scope. The Cabinet Office was asked not to look at the donors themselves, or the lobbying that they carried out, meaning the original lobbying and exchanges of Cabinet information were deemed outside the terms of reference.

A Further conflict of interest discovered

Although it has been glossed over, the investigation discovered that Nash had been guilty of another breach of the Cabinet Manual – once again involving one of his major business donors. Phil McCaw is a “close friend” of the politician, having gone to school with him. He’s worth an estimated $180m, and was appointed by the Cabinet to chair the Startup Advisors Council, which had the job of supporting Nash as Minister for Regional Economic Development.

Nash had recommended to officials that McCaw be appointed. But then, because of the donations and their friendship, Nash put some separation between him and the appointment. The investigation found that the measures taken were entirely insufficient, and Nash breached the Cabinet Manual by not following four crucial aspects of “good practice in managing this conflict”.

The minimal efforts that Nash made to separate himself from the appointment, such as getting another minister (Megan Woods) to make the decision, were not nearly enough. The biggest problem was that, once another minister made the decision to appoint McCaw, Nash effectively took back responsibility for managing his friend.

The Cabinet Office report explained: “The relationship between the chair and Nash as minister was an ongoing one, and the terms of reference stated that Nash continued to have responsibility for further decisions around McCaw’s reappointment or dismissal. Nash’s friendship with, and the donation from, Mr McCaw conflicted with this ongoing responsibility.”

To make matters worse, the report uncovered that Nash’s friend and donor also lobbied government ministers to be removed from the scrutiny of an IRD study into New Zealand’s mega-wealthy. The businessman sent an email to Nash’s ministerial email address last year saying that, although he was willing to commit his time to Nash’s business group, he was also having his time taken up by IRD questions about his assets. He made it clear what he wanted: “In order for your project to have my full attention, I kindly request that you arrange for me to be removed from this project.”

Rather than entirely rebuff the donor or tell him this wouldn’t be ethical, Nash’s ministerial adviser, Andrea Black, informed the businessman that Nash didn’t have the capacity to deliver his request, and she then passed it on to David Parker, the Minister of Revenue, who was apparently the more appropriate minister to lobby for the favour. Ultimately the lobbying was unsuccessful, and McCaw continued to be part of the IRD study.

The Prime Minister has batted away concerns about the donor seeking favours, saying simply that “everyone has the right to make representations to ministers on matters that concern them, and second, ministers cannot control the communications others send to them.” But this ignores the fact that Minister Nash had put himself in this situation by accepting donations from the businessman, and continued to cultivate a close relationship and communications with the donor about policy. While it might be true that Nash hadn’t broken the law or even breached the Cabinet Manual, many voters might well feel that such an ongoing relationship of lobbying and donations stinks and that Hipkins is minimising the problem.

Hipkins has also sought to minimise the failure of the Beehive to release Nash’s communications with the donor when requested under the Official Information Act. He has tried to explain the obfuscation was just a “cock up” and not “a conspiracy”, downplaying that a significant breach of public trust occurred which advantaged the Government by keeping (at least initially) embarrassing information from the public.

In fact, Nash himself continues to say that he has done nothing wrong. Even after he was fired from Cabinet, he gave a radio interview saying that his donors didn’t benefit from being given Cabinet information, and he would do it again.

What happens now?

The investigation into Nash’s communications with his donors was meant, according to the PM, to help restore public confidence in Government MPs and processes. And although headlines such as “Stuart Nash cleared in cabinet report” have helped assuage the public, a more careful reading of the report reinforces the big problems of integrity in the system.

Political donors still have special access to decision-makers, and there are not sufficient safeguards in the system to prevent corruption and abuse. Unfortunately, this doesn’t look like it will change anytime soon.

Even though Labour’s Independent Electoral Review has been set up to look at donations to politicians, it won’t deal with any of these problems. The terms of reference established for it by the politicians have pushed the panel away from dealing with donation scandals like the Nash one. And the panel has accordingly provided no significant recommendations that might usefully deal with these conflicts of interest with donors. This is a real missed opportunity.

We need better rules and procedures for when wealthy donors are being promoted by their friends for appointments. And although the Cabinet report doesn’t criticise Nash for putting forward his donor for appointment, most people will see a problem with that. Yes, the decision to appoint the donor may have been made by people other than Nash, but the Minister’s recommendation for appointment would have carried a lot of weight, and officials understandably feel the need to back up the Minister on such issues.

A proper overhaul of appointments and donation rules required

The appointment of cronies and donors by governments, therefore, needs an overhaul quickly. And those Labour supporters who see this as no big deal should ask how happy they would be if the same thing occurs once a National government is back in power.

Progress also needs to be made on the record-keeping of ministerial communications. Ministers deleting messages to and from donors, or in fact from anyone, should be highly suspicious, if not illegal. This is an OIA issue. Even though Nash has previously said that when he was discussing Cabinet issues with his donors he was doing this while wearing his parliamentary hat rather than in his ministerial role, such cynical absurdity can’t be allowed to continue.

In fact, we are still waiting for the Ombudsman to report on whether or not the Beehive and Nash were legally able to withhold communications with donors under the Official Information Act. If it turns out that Ministers get a free pass – or indeed just a smack over the hand with a wet bus ticket – then calls for a major reform of the OIA should escalate quickly.

Major issues of the integrity of our political system now deserve urgent attention. Commenting on the Nash report, as well as other scandals – the Meng Foon conflict of interest resignation in particular – Stuff political editor Luke Malpass said in the weekend, “It is now the time to ask – if it wasn’t before – whether there is something a bit rotten in the political system where falling short of the highest levels of probity are treated with a shrug. Or, where they are treated seriously, those who fall foul of the rules don’t see what is wrong.”

Malpass is right. And he’s also correct in saying that these episodes are giving the Labour Government and its appointees “an entitled, arrogant and slightly smelly vibe”. However, he’s probably far too kind about that whiff – the troubling Nash report shows that the whole system really stinks.

Dr Bryce Edwards is the Political Analyst in Residence at Victoria University of Wellington. He is the director of the Democracy Project.