Political donations: Justice Minister Kiri Allan offers solution to NZ First Foundation loophole

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A new amendment to the Elections Act promises to close the loophole revealed in the recent lawsuit against the NZ First Foundation, which allowed an entity independent of the NZ First party to receive donations without disclosing the donors.

Justice Minister Kiri Allan announced changes to the Election Amendment Bill this morning. She said they are designed to provide “greater transparency around political donations” in the wake of the court case.

In July, the Auckland High Court acquitted two people accused of donations received by the NZ First Foundation which had not been disclosed as party donations.

The court ruling said this was because the donations had never been forwarded to the party, and therefore did not meet the definition of a “party donation” under election law.

Last month, the Serious Fraud Office requested leave to appeal the decision.

“The Deputy Solicitor General has consented to the filing of an application for leave and today Crown Law filed notice of leave to appeal to the Court of Appeal,” a statement from SFO press of 19 August.

“No further comment will be made while the matter is in court.”

Allan, who told the Herald last month she would address the issue, said today the loophole allowed third parties not involved in the governance and management of a political party to receive donations for the party without having to declare it.

The amendment clarified the definition of a party donation as “when a person makes a donation to a political party or any other person with the intention that the donation be for the benefit of the party”.

“Change confirms the [Electoral Amendment Bill’s] original goal of improving transparency and disclosure of political donations,” Allan said.

“Without this change, an opportunity may exist for political parties to structure their financial affairs in a way that allows them to legally avoid having to disclose their political donations.”

A report on the bill to the House was due by December 5.  Photo/Mark Mitchell
A report on the bill to the House was due by December 5. Photo/Mark Mitchell

A maximum fine of $40,000 was also proposed for those who failed to “return” a donation from a candidate or party to that candidate or party within 10 business days.

Those charged with the offense could argue that they had a “reasonable excuse” that led to the non-compliance.

Allan said she asked the bill’s select committee to consider reopening submissions and encouraged election law experts and political parties to provide input.

With a report on the bill due in the House by December 5, Allan said the loophole needed to be closed before next year’s general election.

“Donations are a legitimate form of political participation, but it is also important that there is transparency and that the public knows who is making significant donations to political parties.”

Green Party spokesman for electoral reform Golriz Ghahraman welcomed the amendment but said it should go further.

“The law always protects donations from disclosure if they are first turned over to the electoral commission. When this happens, the commission is able to turn over the donations – regardless of the amount – anonymously to the political parties,” she said.

“My Strengthening Democracy Bill would fill this gap – and if the Government does not support it at first reading, we will seek to fill the remaining gaps by tabling an amendment to the Government Bill.”

Ghahraman’s bill, which had yet to make it to the House, would lower the donation disclosure threshold to $1,000 and cap annual donations at $35,000.

The Herald reported earlier this month that the bill looked set to be defeated and Labor was unlikely to back it.

Labor had been lukewarm on the bill, noting that its own electoral law reforms had already implemented or would consider implementing many of Ghahraman’s proposed changes. He restored the right to vote for some prisoners and banned overseas donations over $50.