Espiner: Key trust not blind

Written By: - Date published: 1:45 pm, May 31st, 2010 - 39 comments
Categories: accountability, john key - Tags: , , ,

Colin Espiner sums up the central issue of Highwater-gate very well:

“Basically it comes down to this: [John Key] said he didn’t know he had shares in Highwater when he really did… let’s be honest, the only people who don’t know what’s in Key’s share portfolio are the general public. There’s no way Key wouldn’t have a fair idea what was in there.”

This isn’t about whether or not Key had meetings in smokey rooms with alcohol magnates. That’s a ridiculous misdirection being run by Kevin Taylor (you could practically hear him supplying Tracy Watkins’ lines on Saturday). No-one is alleging a conspiracy.

The issue is whether or not Key’s trust is blind like he said it would be. It seems that no-one believes that it was blind any more. It’s another broken promise. Even though Key is still asking us to believe he has never heard of Whitechapel (the company that was set up exclusively to run the Aldgatetrust, which he transferred millions of dollars worth of shares to).

Now, just because Key knows what shares he owns doesn’t mean he is having secret meetings with the alcohol peddlers, leaky home architects, and dairy investors he is in business with to decide government policy. And that’s not the test for a conflict of interest.

As Espiner points out:

“I also made another point on each of those occasions, which I’ll reiterate here: it’s not the actual conflict of interest but the perception of a conflict that counts. It’s not as if Key doesn’t understand this. But it just keeps tripping him up.”

For a country to be confident that its decision makers are not being influenced by personal gain, they are meant to step aside when a decision comes up that has a bearing on their personal or financial interests (like how Chris Finlayson belatedly stepped aside in the Justice Wilson issue because Wilson is his mate).

Given, as now appears to be accepted fact, Key’s trust isn’t blind; he knows he owns large stakes in Highwater, Dairy Investments, and Earl of Auckland. Therefore, when decisions come up that having a bearing on those companies, Key ought to be stepping aside to eliminate any chance of his conflicting interests affecting the decision. It would seem that Key has not being stepping aside when he ought have. And that’s a very serious issue that cuts to the heart of trust in government.

39 comments on “Espiner: Key trust not blind”

  1. ianmac 1

    It does explain the quiet questions being asked by Pete Hodgson at Question Time, which are not being answered. Should be simple enough. Yes or No Mr Key?

    • Jim Nald 1.1

      Err mmm ohh aah
      .. affirmative as a potential role model for the value of a vasectomy
      …. negative as candidate for bilateral orchiectomy which would be redundant

    • zonk 1.2

      I don’t have to answer questions I’ve had a vascetomy and Silvio Berlusconi is my friend. He says he wants to come yachting with me. He’s greaaat.

      • Jim Nald 1.2.1

        Btw, a vasectomy is not when the vocal cords get tied up or tongue cut off.

  2. tc 2

    NACT don’t give a toss about conflict of interest as they run a corporate model not a public service model of gov’t…..sideshow’s been caught lying (again) and watch them (and their msm lackeys) now start running the spin along of the lines of ‘so what….you’re envious…..aww shucks he f’d up and he’s sorry…etc etc’

    I’m getting used to this meryl lynch style (wait till you’re caught matey then we’ll do something) so I expect spin/diversions as they are a big business gov’t and they’ll bully this one through.

    Hodgson will land a few blows but it’ll never be fatal with the msm and a priviledges c’ttee stacked with nats anyway.on their side.

    • Ari 2.1

      The ridiculous thing is, they campaigned on being better at this sort of thing. This is really going to kill their soft support.

  3. SteveR 3

    One thing, in my naivete, I don’t understand, in general, about selling shares to a (blind) trust: why do it at all? Why not just sell them? Is there some “understanding” that the trust will (blindly) sell them back to you at some point? Is there an understanding that the trust won’t, in its turn, sell them on so you *can’t* buy them back? Is it so the trust can still get the dividends—but then since you have no interest in the trust, why would you so that?

  4. Irascible 4

    The reactions by NZ NACT MPS (Dipton & Smile&Wave) to the revelations of somewhat suspect behaviour contrasts very negatively to the behaviour of the recently appointed Lib-Dem Secretary to the Treasury who, on discovering that he may have been rorting the system by renting a room from his partner at about 40.000GBP a year, promptly tendered his resignation on the grounds it would be un-conscience-able to remain in a position of trust after having the situation outlined to him.
    One does wonder when NACT MPs will follow such an example?? Perhaps the lack of a critical media in NZ may answer this?? Or is it simply that in a small country you simply shrug and say “Don’t be envious”?

    • Carol 4.1

      As I understand it, the Tory media (Telegraph?) really laid into the Lib-Dem Secretary to the Treasury. It so happened that he was aiming to increase capital gains tax. I guess the Torygraph now is hoping Cameron will back of the CGT.

      anti-spam word: zero

  5. Adrian 5

    The wine company is a red (excuse me) herring, the real conflict of interest is the Dairy Investments holdings, DI owns Open Country and Kaimai Cheese. Open Country has Wyatt Creech as a director and I think he started it. When the coup occured at ECan Creech was the man Key sent down to set it up for the takeover. Has DI or OC got any sneaky connections to Canterbury water, i.e.. options to buy farms, nominee holdings in existing water rights etc. I bloody bet so. DI would be badly run if it did not have plans to expand into Canterbury with all it’s likely advantages like privatised water and cheaper land. This is the smoking gun if it has already been fired. 10% of a loss making Central Otago vineyard ( theyr’e all broke) is not the key ( excuse me again) investment but 100,000 shares in a big dairy concern is a money spinner. The key ( oh no) to Watergate and Highwatergate is that old line ” Follow the money”.

    • frustrated 5.1

      Aren’t his old dairy industry investments with open country/talleys ? From memory you will find that there is a little thing called the cook straight between that and canterbury.Also unless there is aproval from 75% of fontera shareholders he cant currently invest in fontera.

      Apparently both the synleight and the waimate plant are both loseing money more water/cows wont help them much

      • Adrian 5.1.1

        Synlait is not part of Open Country. Cook Straight has nothing to do with it neither has Fonterra, Dairy Investments ( Keys shareholdings ) own Open Country and Kaimai Cheese and have farms and factories in both islands as any wise dairy company should have, This is the scam, the theft of Canterbury water to make Key and Creech and their mates wealthier. If they haven’t been incredibly careful this is going to be the biggest scandal NZ has seen. Key only got into politics to make money.He’s a greedy bastard!

        • Marty G

          yup and look who also has a large slice of open country dairy? The man Key appointed to get rid of democracy in Canterbury to suit dairy interests – Wyatt Creech

  6. Craig 6


    A blind trust manages your assets on your behalf. The blind is supposed to ensure you don\’t know what you own and therefore can\’t be accused of conflict of interest.

    The selling up option doesn\’t work as if you held just cash you could be accused of conflict of interest in regard to monetary policy.

    Aside from that, it would be quite penal to ask people to cash up all their assets if they want to enter government.

    • ianmac 6.1

      Craig. Or maybe declare your interest each time “your” shares interferred with decision making. Then absent yourself from the discussions. Honorable thing to do?

      • Tigger 6.1.1

        This would be my preferred way of doing things. Declare everything upfront and manage any conflicts or perceived conflicts.

      • Bright Red 6.1.2

        Not just the honorable thing to do, it’s the rules in the Cabinet manual.

        All Key had to do was not pretend his trust was blind and not partake in decisions where he was conflicted by those shares (or anything else). He failed on both counts.

        • Jim Nald

          Key sets a new ambitious rotten standard?

          All Cabinet ministers from now can set up blind trust that they themselves can see but the public can’t see?

          Oh, that includes Ministers of future Governments, Right or Left, right or wrong?

          After all, Holmes got away with it, so Haden should. If Key gets away with this now, so …

    • SteveR 6.2

      Craig. Thanks.

      So, the trust *has* to sell you the things back again when you want them (e.g. your conflicts of interest are no longer)? Or you *have* to buy them back? Either way, they’re obviously still *really* yours (up to a legal fiction).

      And while the trust owns the shares, do you get the dividends? Or does the trust *have* to save those for you?

      And lots of people have money, so it’s hardly a conflict of interest, surely, to have some more?

      • Name 6.2.1

        My understanding is that you set up the blind trust and then transfer the assets to it. The trustees of the trust then have full power to sell or otherwise deal with the assets without your knowledge. Thus although there may have been dairy or vineyard shares transferred into the trust you have no idea if they are still there or have been sold and the proceeds re-invested in something entirely different.

        What happens to dividend income or capital gains is set out in the trust deed – there might be provision for re-investment, regular or ad hoc on request payments to the beneficiaries, or even from asset sales. However these are simply cash payments with no reference to the source, or which particular assets were sold if necessary as this is purely up to the trustees.

        The trust deed should contain no limits, directions or prescriptions on the powers of the trustees (ie “don’t sell the shares in XY Co.”) so clearly you want to be able to trust them not to blow it all away on junk. Clearly the situation should not be one where the relationship between beneficiary and trustees is one where they can have secret or informal communication about what’s in the trust and what to do with it!

        The trust doesn’t sell the shares back to you – they just transfer whatever assets are in the trust back to you when it is terminated according to the terms of the deed. If the trustees have done a good job it’s worth more than it was – or at least no less than it would have been had you managed it. If they screwed up, tough.

    • Bright Red 6.3

      It would be pretty crazy to claim that having money was a conflict of interest. Anyway, monetary policy is dealt with by the reserve bank, not the govt.

      Having a conflict of interest isn’t the problem, it’s a normal event, ahppens all the time. it’s failing to withdraw from decision-making when conflicts arise that is the problem.

  7. Chris Finlayson did not belatedly step aside. He stepped aside at the earliest opportunity – when the matter first impacted upon his role as Attorney-General.

    • Draco T Bastard 7.1

      Really? So the post on here that showed up his conflict of interest before he stepped aside was…? Oh, that’s right. Accurate. He really should have stepped aside sooner.

  8. Fisiani 8

    This will bring down the government…Phil might rise above 6% even.
    Please please keep up this good work.
    Cannot type anymore tears of laughter might damage keyboard

    [lprent: Please take more care of the keyboard. I worry about it with the constant hammering you give it – banging out these rather pathetic missives. And please avoid doing a Barnsley Bill to the poor keyboard.

    Which reminds me, I need to retrospectively apologise to burt for wrongly attributing this feat to him in 2008.

    😈 ]

    • RedLogix 8.1

      No-one, but no-one has said it will bring down the govt.

      And Leaders of the Opposition rarely rise above 10% in these polls…and certainly not in mid-electoral cycle.

      Take a cold shower fisi…

      • Inventory2 8.1.1

        Oh really RedLogix? Your memory is failing:

        Prime Minister Helen Clark and her Labour Party would be thrown out of office under the results of the latest ONE News Colmar Brunton poll.

        The poll shows a massive swing to National, and its leader John Key has not only gone ahead of Clark as preferred prime minister, he is well out in front.

        Source: – 27 May 2007 (mid electoral cycle!)

        • I dreamed a dream

          To be fair to RedLogix, he said “rarely rise above 10% in these polls”. Some wiggle room there 🙂

        • RedLogix

          I did say rarely…for most of HC’s nine years in office the Leader of the Opposition languished in single/teen digit territory. Of course the example you give is the kind of thing that can easily happen in the third or fourth term of a govt, but not necessarily. It’s a volatile poll in my recollection that reflects the amount of media attention more than anything else.

          Overall the ‘preferred PM poll’ is pretty meaningless. What counts is the number of seats in the House and that is a lot closer race than you care to admit to. After all even Mathew Hooten on Nat Rad this morning admitted that National only just won the last election, the result not being at all obvious until very late in the night.

          • I dreamed a dream

            I concur with RedLogix entirely. It’s the party vote that counts. Bugger the preferred PM polling.

    • “might damage keyboard”

      Back to crayons, then?

  9. Max 9

    There are many ways to skin a cat.

    Two questions to be asked of Mr Key:

    (i) Does he trust lawyers to be satisfactory investment managers? Why does he not have a fund manager running his trust?

    (ii) Has he ever sought investment advice while he was P.M?

    • Crashcart 9.1

      I would imagine anylawers with experience in this area would either empliy an investment manager or consult regularly with one. The lawyers are used to set u pand ensure the trust is managed to the stirctest legal terms.

      The second question is interesting. If he has it speaks to the fact that he still had a direct hand in his investments.

  10. Memo

    From Crosby Textor

    To John Key

    Regarding furore over Blind Trust

    John it appears that you have made a significant mistake. The reason for having a blind trust is that you need to be able to say that you do not know what is in it even if you do know what it in it.

    Your bragging about your vineyard and your handing out JK Wine has well and truly undermined your “blind trust’.

    Can we suggest that you adopt one of the more extreme methods of deflecting public attention by doing the following:

    1. Get a vasectomy
    2. Brag about it to the Press corps.

    Urgently now

    • I dreamed a dream 10.1

      I heard someone said on the radio that he may well be heading down the track to Castration! 🙂

    • Draco T Bastard 10.2


    • I dreamed a dream 10.3

      And I just read this gem of a followup question to Key’s revelation of his vasectomy:

      “TVNZ then wanted to know if it was a budget cut.”

  11. Daveski 11

    Riding a motorbike to a media-friendly event could be a goer too.

    • Eddie 11.1

      oh, yeah, I remember when Goff did that after being caught with a blind trust that wasn’t really blind. No.. wait…

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