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The Saudi Sheep Files – Updated

New documents published today show Minister McCully appears to have breached the Public Finance Act by dressing up the cash payment paid to Hmood Al Khalaf as a joint venture.

In a briefing to Murray McCully on 19 April 2012, MFAT officials said they would find a way to meet Al Khalaf’s previously stated desire for compensation ‘possibly through the joint venture’. They did this after Mr McCully had earlier insisted the $4 million payment not be called compensation because that would cause “a plethora of layers and bureaucrats” to become involved.

In a sign of how ridiculous the subterfuge was they even put the word “compensation” in quote marks. The $4 million payment was then turned into a joint venture contract for services with Al Khalaf Group, with no mention of compensation and the pretence it was for intellectual property and services.

There were no ground for any compensation in the first place, because Al Khalaf had no legal claim against New Zealand. This was a facilitation payment to pay off a Saudi businessman getting in the way of the Gulf FTA.

It seems at least some of those involved knew this was an illegitimate ‘compensation’ payment, but Mr McCully insisted it be called a joint venture so he could get around ‘bureaucrats and lawyers’ and avoid the law.

Treasury said a compensation payment would require a new appropriation under the Public Finance Act. Mr McCully’s duplicity in dressing up the compensation as a joint venture deceived the Treasury and could well be a breach of the Act.

This stinks.

You can read the latest documents for yourself:

1. In March 2012 a meeting brief refers to Minister McCully's comment that “he would not want any (financial) contributions to be treated as compensation as this would involve a plethora of lawyers and bureaucrats.”

2. A month later Minister McCully directed officials to “finding the appropriate mechanism to meet Al Khalaf’s concern for “compensation” (possibly through the joint venture)”

3. Treasury advice was that the $4m payment would require a new appropriation.