KEY POINTS:
Prime Minister Helen Clark has drawn a very long bow indeed by claiming that National's John Key personally profited from the 1993 privatisation of Tranz Rail.
In Parliament last week, Clark noted Key was a former director of Bankers Trust which got the contract to advise the Government on the sale which the records show realised $400 million. "In that same year - the 1993 financial year - Bankers Trust, of which Mr Key was a director, pocketed $39 million in profit," the PM roared.
"Members should ask themselves who benefited from the sale of Tranz Rail. Mr Key and his friends."
Much of the subsequent reporting left the impression that Bankers Trust had enriched itself to the tune of $39 million from the ill-fated sale to the Fay Richwhite-led consortium.
But the truth is a somewhat less flamboyant.
Treasury confirmed yesterday that Bankers Trust was paid two sets of fees for its advice on the Tranz Rail sale. The investment bank - subsequently brought under Deutsche Bank's umbrella, was paid $237,000 in the 1992-93 financial year. Bankers Trust picked up $3,163,000 the following year (1993-94) as the sale was finalised.
The total flowing from the Treasury coffers to Bankers Trust was a mere $3.4 million - not the $39 million in profit that so enraged the PM.
Clark could no doubt claim news media misunderstood her intent (she has left enough wriggle room here) over the $39 million. That any half-way smart journalist (or member of the public) would have deduced the $39 million referred to Bankers Trust's overall NZ profits for that year, not the amount that the investment bank made from the Crown mandate.
But I doubt $3.4 million - less than one-tenth of the $39 million figure that Clark quoted - would have raised eyebrows in quite the same fashion if the Prime Minister had been more specific in her parliamentary allegations.
Was this the intention of Clark's 9th floor spinmeister?
If so he/she needs to improve their institutional and financial knowledge as Key never featured among the scores of investment bankers competing for Crown mandates in the 1980s and early 1990s. He was on the forex side at that time.
Clark and her ministers know they have to dent Key's commercial credibility in the run up to the forthcoming election to try to puncture his "honest John" image.
But it's a delicate balance.
Whenever Clark rails against privatisation the business community and the public should recall she was a member of the top Labour triumvirate that oversaw New Zealand's largest SOE sale - the $4.2 billion privatisation of Telecom. And yes, this particular SOE also went to another consortium in which Fay Richwhite played a leading part.
The Prime Minister's insinuation that no record could be found of Key disclosing an interest when he raised questions on Tranz Rail in 2003 did not square. Key disclosed the share parcel had been sold (at considerable loss in mid-June 2003) before the period Clark referred to.
But Finance Minister Michael Cullen is on firmer ground by stating Key should have disclosed he was a beneficial shareholder in Tranz Rail in earlier questions relating to the buy-back of the national rail track.
The fact trail is important - but so too is the context. Key's family trust bought a parcel of 30,000 Tranz Rail shares for $108,000 in February 2002 from the former major shareholders.
He came into Parliament after the July 2002 election and raised several written questions in October over the "repurchase by the Government of the rail tracks". The proposed buyback was not a secret.
A Herald series by this columnist revealed on August 22 that the Government would "look at a confidential proposal to buy back the railways". During the 2002 campaign, Cullen commented on speculation the national rail network might be bought back as part of the Government's land transport strategy.
Key's questions went no further than what was already in the public domain.
But it is arguable that he should also have disclosed his family trust's investment to make doubly sure his questions were not seen as having an ulterior motive.
In fact, it was not generally known until very recently that the Key family trust had acquired any shares in Tranz Rail.
That only became public when court documents revealed the trust would be a beneficiary ($30,000) from the settlement the Securities Commission reached with Fay Richwhite over an insider trading case.
The issue is a vexed one.
Parliament has a register so MPs can disclose their financial interests. But many MP's assets are hidden through the widespread usage of trusts.
Only a few MPs have direct share investments. And only one MP - Labour Cabinet Minister Clayton Cosgrove - has indicated his assets (presumably shares) are held in a "blind trust" where the trustees made investment decisions on the MP's behalf. Even this can also prove problematic.
Former Prime Minister David Lange was not happy when he blew into Hawaii for a weekend's R and R after a Commonwealth Heads of Government meeting in Vancouver in October 1987.
On Friday, October 16, the travelling party - which included journalists - had been spooked by headlines in North American newspapers reflecting yet another drop in the Dow Jones on record volumes of share sales.
Lange was fidgety. Predictions of a sharemarket crash had been in the offing for months. Suddenly our lazings in the warm Hawaiian seas were cut short so the PM could get back urgently to Wellington.
Months later Lange put his obvious discomfort down to a premonition that former finance minister Sir Roger Douglas would use the international market disruption as the excuse to introduce the radical (for that time) flat tax package he had begun developing before the 1987 election.
But the back story was even more intriguing. A significant part of Lange's discomfort was due to the inability of anyone to find the late sharebroker Sir Frank Renouf so he could be directed to immediately liquidate the PM's blind trust. Lange was in a classic double bind.
He could hardly be accused of acting on inside information as he was only reacting to newspaper headlines that millions of others perused.
But Renouf was not able to be found and Lange did not have the power to liquidate the trust himself.
The NZ market did not crash until the Tuesday - so if Lange had got his shares out on the Monday, his finances would not have suffered as much.
The question is whether Lange should have taken advantage of the North American vibes given that he would not have been exposed unless he had gone to the Chogm.
The point of this vignette is to illustrate that despite the structures that leading politicians might put in place to remove themselves from temptation can have unintended consequences.
