There's no reason why a candidate wanting to represent Auckland voters in Parliament should have to follow different rules to a candidate wanting to represent Auckland voters as mayor.

In the wake of John Banks escaping legal liability for his mayoral campaign fundraising lapses due to a technicality in the legislation - incidentally, where was the outraged press release from the Sensible Sentencing Trust about how our liberal justice system has once again failed to hold a criminal to account? - there seems to be an emerging consensus that the Local Government Act needs to be amended. I mean, when you have David Farrar and Idiot Savant agreeing on an issue (much less John Key and David Shearer), surely it has to be a good idea ... right?

So as I'm always keen to be on the winning side - go the Chiefs! hooray for the USA Basketball Team! - here's my two cents worth. However, before turning to what should be done about the Local Government Act 2001, it's worth quickly noting the history to this issue.

When the Local Government Act was enacted, it actually represented an increased level of transparency vis-a-vis that which applied in national elections. For while it still allows candidates to accept donations of any amount from "anonymous" sources (and then only have to declare any such donation of more than $1000 as coming from an "anonymous" source), it also defined an "anonymous" donation as being one "that is made in such a way that the candidate concerned does not know who made the donation." At the same time, the Electoral Act (which governs parliamentary elections) had no definition of what "anonymous" meant - which in practice meant that if a donor requested that his or her donation be treated as anonymous, a candidate (or party) could choose to do so even if they full well knew who it came from.

However, when the much-maligned Electoral Finance Act 2007 was enacted, it introduced a significantly greater level of transparency for donations to parliamentary candidates and political parties (following suggestions made by, amongst others, myself). In particular, it prohibited the acceptance of any "anonymous" donation of more than $1500, whilst also defining an "anonymous" donation as being one that:

is made in such a way that the candidate who receives the donation—

(i) does not know the identity of the donor; and

(ii) could not, in the circumstances, reasonably be expected to know the identity of the donor.

Although National (quite rightly) repealed much of the Electoral Finance Act (only to later reenact a watered-down version of it), it kept these disclosure rules in place (albeit while altering the threshold at which they kick in). Now the suggestion is that we should bring the disclosure provisions in the Local Government Act into line with those in the Electoral Act. 

Unsurprisingly, I'm of the opinion that this would be a good thing. If the two pieces of legislation had contained the same rules at the time of the 2010 Auckland mayoral election, it would have severely reduced Len Brown's ability to use a trust to gather together over $500,000 worth of donations and then pass them on to his campaign without any indication to the public of who they came from (even if Len Brown himself is fully aware of that fact). And it also would put an end to the practice of a candidate going around potential donors, pumping them for cash whilst telling them how to donate it anonymously, and then leaving others in the campaign to catch the coins - as John Banks sort-of claimed to have done, when he could remember who he'd talked to and on which occasions ... and no, he wasn't in a relationship with Kim Dotcom ... they are both married men!

It's worth looking at just how the present Electoral Act rules would have impacted on Banks' actions, to get a feel for the difference between the regulatory regimes.

Recall that the police investigation into John Banks' fundraising activities concluded that whilst there was evidence that he knew the identity of donors who had given specific donations declared to be "anonymous" in his post-election return (i.e. the return was a false one, even in terms of the existing disclosure provisions in the Local Government Act 2001), he did not "knowingly" file a false return as he did not bother to check the specifics of his return. So even though he signed the document, the fact he relied on a "volunteer" to fill it out correctly means that he could not be guilty of the more serious charge under the law:

Every candidate commits an offence who transmits a return of electoral expenses knowing that it is false in any material particular, and is liable on conviction on indictment to imprisonment for a term not exceeding 2 years or to a fine not exceeding $10,000.

(Furthermore, the "volunteer" who was responsible for completing the false return cannot be charged under the legislation irrespective of his or her knowledge of the falsity, as the offence provision only applies to the candidate in whose name the return is made.) 

Now, there also is a less serious offence under the Local Electoral Act:

Every candidate commits an offence and is liable on summary conviction to a fine not exceeding $5,000 who transmits a return of electoral expenses that is false in any material particular unless the candidate proves—

(a) that he or she had no intention to mis-state or conceal the facts; and

(b) that he or she took all reasonable steps to ensure that the information was accurate.

But this particular offence can only be prosecuted within six months of its commission, meaning that the Police did not consider whether to charge John Banks under it (because they were not able to do so). Which somewhat undermines any claim that the Police investigation "cleared" Banks of any breach of the law ... but that's another story.

Now, what would the position have been had the present rules on disclosing donations to parliamentary candidates been in place for the Auckland mayoral election in 2010?

Well, to start with, the Banks campaign wouldn't have been able to treat the donations in question as "anonymous" at all - or, rather, if they had tried to do so, they would have had to pass over all but $1500 of each "anonymous" donation to the Crown. That's because for parliamentary elections, candidates and parties can only accept individual donations of up to $1500 where they don't know the identity of the person giving the money.

So if Banks wanted to keep the full amount of each individual donation in question, he'd have to accept he "knew" who gave it to him. (Of course, the Police investigation appears to suggest that in fact he actually knew the identity of each donor, but let's just note that there's far less wriggle room on this issue under the Electoral Act's rules for parliamentary elections.) And he'd then have to declare publicly the identity of all donors who gave him more than $1500 - up, note, from the $1000 under the Local Electoral Act - towards his campaign.

All of which seems to provide more transparency (quibbles aside over where the disclosure requirement should kick in), so is worth supporting.

Furthermore, let's say you have a candidate whose campaign gets given a donation of more than $1500 from a "known" source, but somehow that donation fails to show up on the candidate's post-election return. What then?

Well, under the Electoral Act:

A candidate who files a return ... that is false in any material particular is guilty of—

(a) a corrupt practice if he or she filed the return knowing it to be false in any material particular.

This "corrupt practice" is punishable by a prison term of up to 2 years and/or a fine of up to $100,000, as well as immediately resulting in an MP losing her or his seat in Parliament. So it's a big deal.

Note, however, that the wording of this offence is virtually identical to that in the Local Electoral Act ... meaning that the candidate still can use the Banks defence in relation to it. Or, to put it another way, if the candidate claims complete ignorance as to what actually is in her or his donation return (despite it being submitted in his or her name, and despite having signed it), then he or she will not be liable under this offence for any mistakes a "volunteer" or other willing fall guy may make when filling the forms out.

However, there also is the "lesser" offence in the Electoral Act:

A candidate who files a return ... that is false in any material particular is guilty of:

(b) an illegal practice in any other case unless the candidate proves that—

(i) he or she had no intention to misstate or conceal the facts; and

(ii) he or she took all reasonable steps in the circumstances to ensure that the information in the return was accurate.

I call this "illegal practice" a lesser offence in comparison with the former "corrupt practice". But it does carry a fairly hefty potential penalty in itself - a fine of up to $40,000. What is more, under the Electoral Act, prosecutions for this offence must commence "within 6 months of the date on which the prosecutor is satisfied that there is sufficient evidence to warrant the commencement of the proceedings". So a candidate can't completely escape liability for a false return where the error is not picked up until some months after the election is over (as long as it is picked up within 3 years).

It seems to me that this "lesser" offence and its potential punishment is enough to ensure that candidates will make sure to actually check their donation returns for themselves. After all, a candidate's failure to check means that any error in the return will almost automatically result in a potentially five-figure fine (if detected at any point in next 3 years). That's a pretty big risk to run - or, rather, that's an awful lot of trust to repose in your campaign volunteers. And if a candidate does check the return and somehow fail to spot that it is missing a donor's name and donation, then they risk prosecution for the more serious (and potentially career ending) offence.

So, as I say, I think the proposal to harmonise the law here is a good one. I just hope there's space on the order paper to let it happen - and that the opposition parties are prepared to help the Government move it through the process. 

Comments (1)

by danniel on July 06, 2013
danniel

I still believe that a good share of our law need to be revised as they are the result of subjective thinking. It's disgusting really but nothing ever seem to change. A Nebraska bankruptcy lawyer opened my eyes on this matter, this thought has been haunting me ever since.

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