US embassy cable - 04WELLINGTON889

C O N F I D E N T I A L SECTION 01 OF 02 WELLINGTON 000889 
 
SIPDIS 
 
DEPT FOR EAP/ANP 
 
E.O. 12958: DECL: 10/21/2014 
TAGS: PGOV, PREL, PHUM, NZ 
SUBJECT: NEW ZEALAND POLITICAL SCANDAL MAY LOSE THE 
GOVERNMENT ITS PARLIAMENTARY MAJORITY 
 
 
Classified By: POLITICAL COUNSELOR KATHERINE B. HADDA, FOR REASONS 1.5( 
B,D) 
 
1. (C) Summary: Recent allegations concerning New Zealand 
Labour Government Minister John Tamihere's relationship to 
his former place of employment could result in a by-election, 
whose loss would end Labour's single-vote Parliamentary 
majority.  This would force the Government to revise its 
political agenda in a pre-election year, in order to attract 
another coalition partner.  Tamihere took leave from his 
Ministerial portfolios October 15 amidst allegations related 
to illegal payments he received from the Waipareira Trust, 
where he was CEO until entering Parliament in 1999. 
Opposition politicians are demanding Tamihere's dismissal. 
The Government has instead appointed a Queen's Counsel to 
investigate the allegations, a six-week process no doubt born 
of a wish to avoid having a non-Labour candidate take his 
seat.  This may well be postponing the inevitable, however. 
Labour's relatively slow response to the allegations, 
probably due to the absence of Prime Minister Clark, has 
compounded the Government's woes.  End summary. 
 
2. (U) ACT party leader Rodney Hide, well-known for his 
"perk-busting" persona, unveiled allegations October 14 that 
Tamihere accepted a NZ$195,000 "golden handshake" from his 
former employer, the Te Whanau o Waipareira Trust in 2000, 
despite a public statement a year earlier that he would not 
accept the payment.  Further allegations claim Tamihere did 
not pay tax on his "handshake" funds and also received 
questionable auto insurance and other personal payments by 
the Trust while he was in Parliament.  No one in Government 
has denied that Mr. Tamihere took the initial payment after 
stating that he would not.  However, Tamihere has denied any 
wrong-doing, pointing to investigations into the payment in 
2000 by the Serious Fraud Office, NZ Police, Audit Office, 
Prime Minister's Department and a Maori Affairs select 
committee over trust affairs, none of which found evidence of 
wrong-doing.  Both he and the Trust maintain that the 
payments were delayed compensation for work done prior to his 
entry into Parliament, not for his services while in 
Parliament.  Tamihere also maintains that he believed the 
Trust had already paid tax on the sum. 
 
The Players: Waipareira Trust 
----------------------------- 
 
3. (U) Tamihere was CEO of the Waipareira Trust for ten 
years, prior to entering Parliament in 1999.  The Trust was 
established to provide economic, social and employment 
support to the high number of Maori who relocated to West 
Auckland in the 1950s.  Ironically, the audit of the Trust's 
finances that uncovered the payment originated with a letter 
from Tamihere to auditing firm Deloitte, accusing the Trust 
of mismanagement and corruption, and demanding 
accountability.  As a result of the letter, Deloitte extended 
the initial audit to cover seven years, which included a 
portion of Tamihere's tenure as CEO. 
 
The Players: John Tamihere 
-------------------------- 
 
4. (SBU) Tamihere enjoys a reputation as a live-wire, and is 
seen as a "bloke" in a largely female, intellectual, and 
politically-correct Government.  Prior to entering 
Parliament, he received four DUIs, and has had three speeding 
tickets while in Parliament.  Tamihere is widely regarded as 
being the voice of urban and modern Maori, and his political 
views, which focus on the need for Maori to improve their 
economic status through hard work and not handouts, resonate 
with more right-wing audiences.  He has often been touted as 
a possible first Maori Prime Minister for that reason. 
 
Direct Political Consequence 
---------------------------- 
 
5. (SBU) Tamihere's potential resignation would not just be a 
blow to the Labour Government's standing: it could have a 
direct effect on its ability to govern.  Tamihere's Tamaki 
Makarau seat is one of seven in Parliament designated 
specifically for Maori.  Public polling puts the newly-formed 
Maori Party, whose candidate is likely to be Party co-leader 
Pita Sharples, within 4 points of Tamihere if a by-election 
were held. The Labour coalition currently governs with a 
one-vote majority: Labour (51 seats), Progressive Coalition 
(2) and United Future (8).  Without Tamihere, Labour would 
need either the Greens (9 votes) or NZ First (13 votes) to 
maintain a majority.  Neither Party's quid pro quo for 
confidence votes fits comfortably with Labour's agenda. 
 
Opposition Reaction 
------------------- 
 
6. (C) The Opposition National Party, after a long silence 
and disjointed statements, has focused on attacking Labour in 
Parliament - repeatedly questioning the absent Prime 
Minister's (Clark is on a trip to India) confidence in 
Tamihere.  Revisiting the race relations issue that shot his 
Party up in the polls, Opposition leader Don Brash has also 
accused Labour of a "double-standard" in its treatment of 
allegations against Maori versus non-Maori MPs. Labour MPs 
and staffers, including acting PM Cullen, have responded with 
a nasty offensive - offering theories that Maori Party 
sympathizers in the Trust have worked to undo Tamihere, and 
trying to focus attention on similar National Party scandals 
of past years.  NZ First Party leader Winston Peters, quick 
to attack Tamihere over the scandal, has also been quick to 
assure his constituency that should Labour lose the 
by-election, the Party should still serve the remainder of 
their three-year term.  (Note: Peters has been open in his 
dislike of National, and is likely hoping to resume his 
king-maker persona and throw his party's 13 votes behind 
Labour.) 
 
7. (C) Comment: Prime Minister Helen Clark's absence may have 
slowed Labour's reaction to the scandal, compounding the 
beating the Government has taken in Parliament and the media. 
 Clark has demoted Ministers for lesser offenses, and is 
respected for her ability to achieve Party discipline. 
Tamihere's reputation as a rebellious MP makes it likely that 
Clark will at a minimum bump him to the backbenches, rather 
than sustain continued Opposition attacks.  Should Tamihere 
be cleared of the charges, his widespread popularity as a 
Maori leader could see him rehabilitated at the 2005 
election.  Given the mounting allegations against him, 
however, we regard that as unlikely. 
Swindells