Now, I’m no big city lawyer, but it seems to me that John Key may be walking on some mighty thin ice by telling prospective investors in Mighty River not to worry about the Maori Council’s water claim. If it goes wrong, isn’t he exposing himself (actually, us taxpayers) to some major law suits and very expensive damages payouts?
Here’s the scenario:
The Waitangi Tribunal does its thing and, in a month or two, finds that certain iwi have rights akin to ownership over water used (for free, at the moment) by Mighty River to make its profits.
Key says the Government will ignore that finding and presses ahead with asset sales, repeating his comments yesterday that investors have nothing to fear from the water rights issue.
49% of Mighty River is sold. About 90% of us get nothing, while a handful win out – they buy with the price reduced because of the risk created by the water claim hanging over Mighty River and then win out twice again from a reduced issuing price for retail customers and a loyalty bonus.
But the Maori Council has taken its case to court. The High Court finds in favour of the Maori Council. Mighty River is going to have to pay for its water – enough to knock a sizeable hunk off its profits. The share price drops 20%, and stays down as the appeals wind on for years.
Investors say, ‘hey, wait a minute, that Nice Man Mr Key, told us that this wouldn’t happen before we bought these shares off him. In fact, he said “I think the Government’s position will be upheld, and that is that no one owns water. I’m the Government’s major spokesperson and I need to spell out the Government’s position, and the Government’s long held, and very strongly held, view is that nobody owns water”
Like I say, I’m no big city lawyer but that looks a lot like an implied promise that Mighty River won’t have to pay for water. Isn’t that breach of contract?, let alone the much tighter rules around issues of securities? Would it expose the Crown to action under trade agreements? The experts giving evidence at the Waitangi Tribunal think so.
And what if it then comes out that the major shareholder, the Crown, had official advice on the likely results of a court battle that it hadn’t shared with prospective buyers and, later, its fellow shareholders – would there be insider trading issues there? Would that be analogous to the Facebook IPO, where information about Facebook’s deteriorating growth outlook was allegedly hidden from retail investors, leading to a multi-billion dollar law suit?
Key’s really making a mess of this. If he goes ahead, the rest of us are going to pay big time.
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