Government underwrote $3m ransom demand

By ANGELA GREGORY and VERNON SMALL

Finance Minister Michael Cullen gave police the go-ahead on Wednesday night to negotiate over a $3 million ransom demand for baby Kahu, Prime Minister Helen Clark said yesterday.

"My understanding ... is that the police would be very reluctant to enter the discussions without having had that approval from the Minister of Finance."

A spokeswoman for Dr Cullen said police needed to know they potentially had access to the money so they could negotiate.

"Police sought the authority to negotiate in good faith, and the Government gave them that authority."

The money would have come out of the contingency fund, overseen by Dr Cullen and used to cover unexpected events between Budgets.

Helen Clark said she had been told of the approval on Thursday, but had not been part of it.

Dr Cullen had authorised the police "to talk about that sum".

"Three million wouldn't in the normal course of events be found out of the police's spare cash."

Asked if she had expected it to be paid, she said: "Probably not."

National's police spokesman, Tony Ryall, said Helen Clark was unwise to make public the Government's approval of the ransom talks money.

"It is an open invitation to every nutter in the country that the Government will write the cheque. The Prime Minister should have been more discreet."

Helen Clark would not be drawn on the policy of negotiating over ransom demands.

"I don't have any knowledge of what the policy is, and I don't want to comment any more on how the police may or may not handle it. It's an operational matter at that point, and I think it's very important we leave them with discretion and some reticence about how that is done."

She said that when she was told of the ransom demand, she did not know whether baby Kahu was alive. It could have been a hoax.

A banking expert said the $3 million ransom would be virtually impossible to make use of in New Zealand without the user being caught.

David Tripe, senior lecturer in banking at Massey University, said anyone who thought he or she could get away with such a huge ransom was in "fairyland".

In $100 notes, the amount would easily fill a large suitcase. In $20 bills it would make a 40m stack.

"To get this sort of money and be discreet would be extremely difficult ... It seems a somewhat futile exercise."

It was revealed late on Sunday that police had been asked for a $3 million ransom to return baby Kahu, the kidnapped daughter of lawyer Donna Hall and High Court judge Eddie Durie.

Mr Tripe said it would take days to physically assemble such an amount to pay a ransom, assuming the funds were available.

"It would be a major logistical exercise ... and very few New Zealanders would be able to quickly access that sort of money."

Thirty thousand $100 notes or 150,000 $20 notes would be almost impossible to assemble without using new notes, which would be serialised.

Mr Tripe said it was a fair comment that the offender in the baby Kahu case had possibly watched too many American cop shows.

In the United States it was easier to both obtain and spend large amounts of cash.

"One of the things about this country is that we tend not to use cash for large transactions. It is somewhat inconvenient and at times attracts cash-handling fees."

Questions would be asked if you tried to buy an averagely priced car with cash, and there was legislation against cash laundering, he said.

The Financial Transactions Reporting Act required trading banks to report any attempts to deposit large amounts of cash.

A spokeswoman for Dr Cullen said the authorised money would have been paid from the Crown's contingency funding set aside in the Budget, but she was not prepared to divulge whether it had been physically assembled.

The Government had not been involved in resolving the recent Auckland kidnapping case involving a $500,000 ransom.

The Reserve Bank said it did not comment on the specifics of its provisions of cash to banks.

A spokesman said that in a situation where the Government needed a large amount of cash, this would be provided through WestpacTrust, which handled the Crown's transactional banking.

Full coverage: Baby Kahu kidnapping


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