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Government in for a rough ride

NZ NewswireNZ Newswire 29/04/2016 Peter Wilson, Political Writer
Prime Minister John Key © Getty Prime Minister John Key

The government is in for a fight when parliament sits on Tuesday.

Foreign trusts, the prime minister's integrity, departmental incompetence and a suspect land deal - it's all there and Labour and the Greens are locked and loaded.

It all ties back to the Panama Papers, the millions of documents leaked from Mossack Fonseca, the law firm that specialises in setting up foreign trusts.

It was those documents that led Labour's David Cunliffe to discover the identity of the buyers of Onetai Station in Taranaki.

They were Argentinian brothers Rafael and Federico Grozovsky, operating through a company called Ceol and Muir.

They were Mossack Fonseca clients, which didn't mean they'd been involved in anything illegal but inevitably raised suspicions.

The Overseas Investment Office, which investigates applications to buy big slices of farmland (1320ha in this case) gave the Grozovsky brothers the green light in 2013.

They bought the station in 2014, and made no secret of it. Local beef farmers were taken on as advisors, they aimed to increase production.

So far so good. Prime Minister John Key says the Mossack Fonseca connection was irrelevant.

There's no claim or evidence they used a foreign trust to pay for the station and the deal was handled this end by law firm Kensington Swan.

But there's more.

David Cunliffe. © Hannah Peters/Getty Images David Cunliffe.

Cunliffe investigated further, and discovered that before the application was approved they had been convicted in their own country for owning a tannery that leaked chemicals into a river.

The details are in court papers from 2011 and 2012.

"They've been found criminally responsible for offences of environmental pollution," says Cunliffe.

"How could they have possibly passed a good character test when environmental considerations are built in as part of that test?"

The OIO says they provided a statutory declaration that the individuals in control of the farm were of good character. It accepted the declaration.

Cunliffe says half an hour with Google gave him the details of their convictions, and he's wondering why the OIO apparently didn't do that.

He'll want to know at question time.

Green Party co-leader James Shaw is the mover and shaker on the other attack front.

He's the one who blew the whistle on the email Ken Whitney, Key's personal lawyer, sent to the then revenue minister Todd McClay in December 2014.

James Shaw © Getty Images James Shaw

Whitney is executive director of Antipodes, a company that specialises in setting up foreign trusts.

He was worried about a report he'd seen in the New Zealand Herald that IRD was thinking about changing the rules around foreign trusts.

He talked to Key about it, who told him to contact McClay, which he did.

"I have spoken to the prime minister about this and he advised me the government has no current plans to change the status of the foreign trust regime applying in New Zealand," Whitney told McClay.

Whitney and five of his colleagues in the foreign trust industry subsequently met Mr McClay to discuss their concerns.

IRD had been thinking about reviewing the rules around foreign trusts because they can be used as tax havens and it was concerned about New Zealand's reputation.

Nothing happened and, according to the Herald, five months later McClay wrote to the trust industry telling it: "Owing to wider government priorities, we will not be considering regulatory reform of your industry at this stage".

Shaw says he has a question for Key, and he's sure to ask it on Tuesday: "I want the prime minister to tell New Zealand whether he gave Mr Whitney an assurance that the foreign trust industry would not be reformed, and if so why he hasn't been upfront about the assurances he gave."

Grant Robertson. © Getty Images Grant Robertson.

Labour's Grant Robertson will also be gunning for Key.

"His lawyer and trust advisor got privileged access to a minister on behalf of an industry that officials had identified as a cause of concern," says Robertson.

"After their lobbying, the minister directed officials to drop their proposed review - this kind of insider influence will offend the ethics of middle New Zealanders."

Key has denied having had any influence over the IRD.

He says Whitney asked him about foreign trusts and he told him to go to McClay, which was "absolutely the correct thing to do".

McClay says the assertion that he was influenced by Whitney's relationship to the prime minister is insulting.

Cunliffe, Shaw and Robertson are streetwise politicians, and never forget Winston Peters.

He'll be mixing it as well on Tuesday, here's his take on the situation: "Mr Key has never had any intention of shutting down this murky state of affairs in which the mega wealthy and crims use our loose rules on foreign trusts to evade tax or detection from their own countries."

Todd McClay © Getty Images Todd McClay
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