From the perspective of a lawyer, among the words most misused in the news media may be "loophole". It tends to be used to describe almost any piece of law that a journalist, or an interviewee, thinks is inconvenient. I often think, after hearing it used, "that's not a loophole, that was a design feature - a deliberate choice made because the alternative would be stupid". I think once I even thought "I submitted on that bill, and the reason that is that way may be because I asked them to change it!". It happens a lot, but one that particularly stands out was an occasion on a TV news show where the fact that someone's past conviction couldn't be clean-slated was a loophole. The person had received a sentence of imprisonment, and Parliament made an explicit decision to exclude such sentences from being clean-slated. Not listing sexual violation/rape in the list of sexual offences to which the Clean Slate law may never apply may be a loophole, but that wasn't.
But sometimes "loophole" is a perfectly appropriate to a law, and the donation regime in the Local Electoral Act is a wonderful example.
The rationale for allowing anonymous donations is pretty simple. If a politician doesn't know who gave them money, they can't do that person (or business, or union or whatever) any favours.
The problem arises when a donation isn't so much anonymous, as secret: known to a candidate, but kept from the public. This was the case with donations, for example, that National used to arrange through the Waitemata Trust. Someone would talk to someone in the National Party - perhaps even the leader - about making a donation, and that donor would be advised to give the money to the Waitemata Trust. Every so often, the Trust would give a bunch of money to National, and it would be declared as the donor. Party leadership often knew who was going to give the Trust money. The Trust could even tell the Party exactly who had given it money, but the donation would still properly be declared as coming from the Trust.
Problems like this one have been fixed at a National level, first with the Electoral Finance Act, and then amendments to the Electoral Act that largely copied over what that now-defunct legislation did.
Election spending and donation rules at the local government level haven't gone through that process however, and the obligations on candidates are either derisory, or unclear. I've re-read the Local Electoral Act a few times over the last few days, and reached a different conclusion each time over what obligations it actually imposes.
What follows explains what I believe is the generally-accepted approach to the obligations on candidates under the Local Electoral Act 2001 to donation disclosure:
- If a candidate knows who made a donation over $1000, they must declare it, and the donor's name and address.
- If the candidate receives a donation over $1000, and doesn't know who gave it to them, they must declare it, and record that that donation was anonymous.
- The candidate must actually know, it is not enough that they suspect a donation came from a particular person.
- That the campaign manager of a candidate knows who made a donation, but they don't tell isn't enough, because the candidate does know.
- If the bank statements of a campaign lists the drawers of various cheques, so that anyone who looked at it would know who made particular donations, but the candidate never looks, this can still count as anonymous, because the candidate doesn't actually know. This still applies even though the candidate could look at their bank statement after they filed their return, as the return would still be accurate.
- If a candidate knows a person made a donation but does not know how much that donation was, the donation will still be anonymous. A candidate could be told by someone who does know "Ring up Sam, and thank her for the donation", and still be able to lawfully declare Sam's donation as anonymous.
- If a person tells you they're going to make a donation of $40,000, and you tell them to send you some money the next week, and you receive a bank cheque for $40,000 the following week, that donation can still be listed as anonymous, because while you may be almost certain that that money came from that person, you do not actually know it did. You just suspect.
I have no idea about how much John Banks knew about the donations his mayoral campaign received from Kim Dotcom. The police will be able to investigate and get some idea. Hopefully.
It may be that they reach a pretty firm conclusion that something has happened, but still not feel they can prove actual knowledge. If so, that will be the end of it. There are two offences: the serious one - which John Banks will certainly wish to avoid - involves filing a return knowing that it is false - this carries a maximum term of imprisonment of two years, which is enough (whatever any actual sentence may be) for an MP to lose their seat. The other offence involves filing a false return without knowing it was false. Such a charge seems unlikely in these circumstances. If Banks can legally claim that the donations are anonymous, his return will be accurate, and if he can't, then it will likely be because he knew who made them. And even if such a charge could be made out, there is a six-month time limit to lay the more minor charge.
As I suggested earlier, the above interpretation isn't the only one that can be applied to the obligations in the Local Electoral Act. The disclosure obligation is:
every candidate must [set] out ... the name and address of each person who made an electoral donation [over $1000] to the candidate and the amount of each electoral donation [over $1000]...
You could read this as an absolute requirement. If Kim Dotcom was a person who made an electoral donation donated to your candidacy, he must be listed. That would be a pretty big re-interpretation.
Alternatively, you could read this as requiring:
- a list of all donors and their addresses; and
- a list of all donations, but cross-referenced in no way to those donors (Nancy, Peggy, John and Susan donated to me, and I received donations of $1500, $3000, $4500 and $1.1m)
It could even be interpreted as really lax. It's possible to read this as allowing a person who received four $25,000 donations, and who knows the names of the four people who made those donations, but who doesn't know which person made which donation to declare them all as anonymous: "Was the donation on the 12th from Sam, or Max? I don't know, I could not tell you, without checking, which I haven't done, who made that donation.".
So yeah. A loophole.