The Dim-Post

May 27, 2010

Okay now I see it

Filed under: Politics — danylmc @ 11:32 am

All this talk about wine and vineyards is really just an irrelevant tangent. This story by Vernon Small explains the allegations made by Labour:

In Parliament yesterday Mr Key agreed he did not know and could not know what was in his Aldgate Trust listed in the MPs’ register of pecuniary interests.

The Cabinet Manual recommends the use of blind trusts to ensure a minister can never be sure what his holdings are at any given time so there can be no conflict of interest.

But Mr Hodgson said investigations by Labour showed Mr Key’s assets began to be transferred to a company called Whitechapel Ltd shortly after the 2008 election. That included his shares in Dairy Investment Fund Ltd, an interest in Highwater Vineyard in Central Otago and – later – a property company Earl of Auckland.

The directors of Whitechapel include Mr Key’s lawyer from his family trust.

Mr Hodgson said it was easy for Mr Key to know he still owned those assets because they would show up in a search of Whitechapel at the Companies’ Office register. It was clearly a vehicle used by the trust managers to manage Mr Key’s assets.

So the allegation is that Key transferred his assets into a company managed by his blind trust – but that he had visibility of the assets owned by that company. This contradicts his previous statements to Parliament. So they might have something there.

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46 Comments »

  1. This is an outrage.

    Comment by goonix — May 27, 2010 @ 11:42 am

  2. Anyone know who owns Whitechapel Ltd – the blind trust?

    (I’m too lazy to search the companies office and work out if the shareholders are the same trustees of the blind trust)

    Comment by Pat — May 27, 2010 @ 11:42 am

  3. “…he had visibility of the assets owned by that company…”

    By this, do you mean he read the annual financial statements? Maybe so, but it seems like an un-provable allegation.

    Or that he attended the shareholders meetings of Whitechapel Ltd? This would be a more damning allegation if you could prove it. It might need Pete Hodgson donning a skin-tight black suit and doing a Mission Impossible number to get a copy of the minutes.

    Comment by Pat — May 27, 2010 @ 11:49 am

  4. Pat – it is owned by a company called TGT Ltd, which is in turn…. wholly owned by 3 of the 4 partners in the firm that (apparently) conducts Key’s business. The Aldgate Trust is neither charitable, nor registered as an incorporated society, so there are no public records of its trustees (that I can find in a brief search). Labour and the media have got it into their heads that at least 1 trustee is also a partner at that law firm, and it seems unlikely (though not impossible!) that they’d simply make this up.

    Comment by Eddie C — May 27, 2010 @ 11:50 am

  5. Pat – visibility of those assets because a shareholder search on the companies office website will reveal which companies Whitechapel ltd has an interest in.

    Comment by Eddie C — May 27, 2010 @ 11:50 am

  6. But Eddie C – can you prove JK knows how to turn on a computer? This seems to me to be the crucial question …

    Comment by Andrew Geddis — May 27, 2010 @ 12:03 pm

  7. Eddie C – therefore it is plausible that TGT Ltd is actually owned by The Aldgate Trust (the trustees being the same as the shareholders listed for TGT).

    So therefore the ownership structure would be Whitechapel–>TGT–>Aldgate Trust. Perhaps a little confusing but he does have reportedly $50M and I have SFA yet I still don’t fully understand the trust ownership of my own company.

    IN SUMMARY – is Key guilty of his vineyard shares not being directly owned by The Aldgate Trust? If so, forgive me for being underwhelmed.

    Comment by Pat — May 27, 2010 @ 12:05 pm

  8. Pat – Trusts aren’t owned. The property in trust is legally owned by the trustees to be dealt with for the benefit of the beneficiaries – in this case Key and his family. So there’s no real conspiracy theory to be had there.

    The issue is that it is supposed to be a BLIND trust. By vesting, or arranging to vest, the shares in trust in a company that is known to Key and is required to publish its shareholdings on the companies office website, Key is arguably avoiding the blind nature of the trust. As far as I know this isn’t unlawful in any way, but it does look bad. He’s trying to look cleaner-than-clean by setting up a blind trust all proper like, then using sneaky evil lawyer tricks (us evil lawyers get well paid to think these up!) to ensure that he can, in fact, see where the trust assets are going.

    Comment by Eddie C — May 27, 2010 @ 12:10 pm

  9. so you’re saying that every other politician in NZ who has ever put assets into trusts to void conflicts of interest never knew or guessed those assets were still held by the trust?

    Isn’t the primary objective a “blind” trust to take away any power to control the assets?

    I suppose the wine world is more interesting than the world of amateur art.

    Comment by Neil — May 27, 2010 @ 12:16 pm

  10. Pat,

    I think there’s two separate questions. One, can JK do anything with regard to the assets in his blind trust? Answer … no – and this isn’t changed if they are shifted into Whitechapel ownership. But the second question is can he discover what assets are in the blind trust at any given time? And this is changed if the assets are shifted into Whitechapel – ’cause you can find out from the companies office what it owns.

    Irrespective of whether or not JK did bother to find this out, the problem is that he can no longer say “I have no potential conflicts of interest because I can’t know what assets I am the beneficiary of”. As he (apparently) has done. Which is why Labour are going after him for being misleading (in the House and outside it) rather than actually acting in a way that potentially benefits himself.

    Comment by Andrew Geddis — May 27, 2010 @ 12:16 pm

  11. “…to ensure that he can, in fact, see where the trust assets are going.”

    Your last bit is pure speculation. There are other reasons that the structure could have been set up like that, by his trust lawyers.

    Comment by Pat — May 27, 2010 @ 12:19 pm

  12. Neil: I think you’re misunderstanding. The allegation isn’t that he “guessed” that he still owned part of the vineyard, the allegation is that he arranged so that the “blind trust” wouldn’t be blind at all, and he would be able to look up what he had shares in whenever he pleased. They are meant to be “blind” so that a politician cannot play politics for their own personal benefit (and cannot be perceived to be doing so) – the lack of knowledge is meant to complement the lack of control.

    Comment by derp de derp — May 27, 2010 @ 12:24 pm

  13. You’re saying that if you put an asset into a trust then you don’t know the asset is in the trust?

    Comment by Neil — May 27, 2010 @ 12:28 pm

  14. Andrew’s post seems to nail down the crux of the issue. Which is an acheivement, because you sure as hell can’t work out what the real facts are from KB or The Standard.

    It will be interesting to see how far Labour can take this politically, because they really can’t prove Key intended to mislead the house, but they can prove that technically he did mislead the house. How much political capital is there on catching Key on a technicality. I’m not sure.

    Comment by Pat — May 27, 2010 @ 12:35 pm

  15. Pat, srlsy. Are you the same person as patX?

    Regardless, I’m not ascribing any motives to Key. Perhaps I wasn’t clear, but I wasn’t intending to ascribe any motivations to Key. I’m suggesting a reason why Labour and TV3 might be slavering all over this, and trying to explain how, in the context of company disclosure laws in NZ, Key’s current structure might give rise to Labour’s allegations.

    Comment by Eddie C — May 27, 2010 @ 12:38 pm

  16. Gah! Pat – I said exactly the same thing as Andrew. Yet you approve of his comment and make a snotty remark in response to me. WTF?

    Comment by Eddie C — May 27, 2010 @ 12:39 pm

  17. Presumably the media and opposition are now going to be checking every five minutes to see what Key (= his trust) owns. So the trustees can hardly act independently, and buy up some bargain shares in Nukes.Com, or anything else that could cause political bother (because the PM can’t now convincingly claim ignorance).

    So he either has to change the trust’s status, or get rid of the assets altogether. Otherwise it’s just going to continue to cause him problems.

    Comment by sammy — May 27, 2010 @ 12:46 pm

  18. Eddie C – my remark was not snotty. You have assumed there was a tone in the comment, when in fact it was just short since my lunch was burning. But unlike Andrew you were speculating that Key’s intention was to deliberately set up the structure in that way, so that he can keep an eye on his investments. Its equally possible he simply left it in the hands of his trust lawyers.

    And no, I’m not patx.

    Comment by Pat — May 27, 2010 @ 12:55 pm

  19. Pat – fair enough. Apologies.

    I not infrequently get the tone of people’s written remarks on the internet wrong. It is odd having what is essentially a dialogue with people (i.e via blog comments) with no body language or intonation clues.

    Comment by Eddie C — May 27, 2010 @ 1:01 pm

  20. Andrew’s post seems to nail down the crux of the issue. Which is an acheivement, because you sure as hell can’t work out what the real facts are from KB or The Standard.

    Or indeed any of the MSM stories to date. Vernon Small’s is the most helpful but even then I had to edit it down until it made enough sense to C & P into the blog.

    Comment by danylmc — May 27, 2010 @ 1:07 pm

  21. Eddie – no apology needed. Better to misinterpret tone than stoop to using emoticons.

    Comment by Pat — May 27, 2010 @ 1:11 pm

  22. I’m concerned that a brief comment on a thread on an obscure and, frankly, quite disreputable blog site is thought to provide superior information to the giants of our journalistic enterprise.

    Even more concerning is that anyone thinks I know what I’m talking about.

    Comment by Andrew Geddis — May 27, 2010 @ 1:20 pm

  23. “Even more concerning is that anyone thinks I know what I’m talking about”

    Don’t worry, you’re safe. :^)
    [Apologies for the emo-thingie, I didn't want to offend anyone: I needed readers to be sure that this was just a humorous aside. Shit: perhaps I am patx!!!??? :^( ]

    Comment by Clunking Fist — May 27, 2010 @ 2:14 pm

  24. I said ANYONE, CF … not “smart folks”! :=?& (Not quite sure what that collection of random punctuation is meant to represent – maybe a querulous grimace, as interpreted by Picasso?)

    Comment by Andrew Geddis — May 27, 2010 @ 2:22 pm

  25. No, CF, I’M PatX :0~ (I’m struggling here). You’re spartacus.

    Comment by Eddie C — May 27, 2010 @ 2:39 pm

  26. Irrespective of whether or not JK did bother to find this out, the problem is that he can no longer say “I have no potential conflicts of interest because I can’t know what assets I am the beneficiary of”. As he (apparently) has done. Which is why Labour are going after him for being misleading (in the House and outside it) rather than actually acting in a way that potentially benefits himself.

    Comment by Andrew Geddis

    Which is a really stupid thing for Labour to do. Blind trusts aren’t structured specifically for the Prime Minister, and Labour’s strategy team is again either powerless to the wonky thinking of the executive, or possessed of its own wonky thinking.

    So they’re either in danger of being caught out as being hypocrites, or in danger of being caught out doing something similar to John Key. And probably half of the National MPs in there.

    Comment by dontsurf — May 27, 2010 @ 3:16 pm

  27. So they’re either in danger of being caught out as being hypocrites, or in danger of being caught out doing something similar to John Key.

    Those are 2 options another is that they identified as venal stupid liars (as we have come to know and love our politicians of all colours).

    Comment by steve'n'sons engine — May 27, 2010 @ 4:58 pm

  28. So they’re either in danger of being caught out as being hypocrites, or in danger of being caught out doing something similar to John Key.

    Countdown to this being a story about Chris Carter in 5… 4… 3… 2…

    Comment by George D — May 27, 2010 @ 5:37 pm

  29. easy for Mr Key to know he still owned those assets because they would show up in a search of Whitechapel at the Companies’ Office register.
    In that case no trust can ever be blind as you can always trace the ownership of any assets up to the trust through shareholding? Or am I missing something…

    Comment by garethw — May 27, 2010 @ 6:22 pm

  30. Except the professional trustees (the lawyers) are likely to be trustees for numerous other trusts. The name of the trust is never registered as a shareholder or on a property title, only the name of he trustees.

    Comment by Pat — May 27, 2010 @ 6:33 pm

  31. I checked TV3′s site to see how they were developing the story. From what I saw they’re now emphasising a potential conflict of interest with liquor reforms. Can’t see that a going very far.

    Perhaps if it was a question of shares in a mining company this would have the necessary emotional resonance but shares in the sort of company everyone agrees we should all be investing in doesn’t have quite the same degree of malevolence.

    Comment by Neil — May 27, 2010 @ 6:42 pm

  32. The name of the trust is never registered as a shareholder or on a property title, only the name of he trustees.
    Right – so how can Whitechapel be shown as a shareholder then? Or is the point that Key isn’t even using a trust here and Whitechapel is a regular company?

    Comment by garethw — May 27, 2010 @ 6:44 pm

  33. Is this all about the difference between Blind Trusts and Wilfully Blind Trusts?

    I think with the latter you can put something into the trust and everyone can believe they don’t know what’s in the trust.

    Comment by Neil — May 27, 2010 @ 7:03 pm

  34. @gareth

    Whitechapel Limited is a limited company with the purpose of a trusteeship. It’s not a charitable trust, which is what you’re thinking of and which would give it certain benefits. It’s more like a self-interested trust, because it’s run for the interest of an individual with no benefit to the community except that which trickles down.

    Except the professional trustees (the lawyers) are likely to be trustees for numerous other trusts. The name of the trust is never registered as a shareholder or on a property title, only the name of he trustees.

    Comment by Pat

    Well, that’s not true. Mainly because the trustee can change, whereas the name of the trust and the beneficiary of the trust will remain the same. The trustee is not the legal owner, he just exercises fiduciary control over the assets. The trust is the legal entity which is perfectly allowed to hold shares for the benefit of its trustor. If you do any number of shareholder searches on companies house, you’ll find trusteeships listed as the legal owners of shares.

    If what you said was true, then the trustee would become the legal owner of the assets. And they’re not. The trust owns them, for the benefit of the trustor, and the trustee just looks after them.

    Comment by dontsurf — May 27, 2010 @ 7:14 pm

  35. None of this is going to put even the tiniest dent in Key’s popularity ratings or the National governments. Labour needs more than this to do any damage.

    Comment by radar — May 27, 2010 @ 7:17 pm

  36. Quite.

    Comment by peterlepaysan — May 27, 2010 @ 9:05 pm

  37. don’t surf – then companies office must disclose trust ownership differently thsn the land transfer office. You never see the name of a trust listed on a property title, only the names of the trustees.

    Comment by Pat — May 27, 2010 @ 11:04 pm

  38. Eddie C:

    Oh God, I’m really confused now… so, Key’s problem is that a trust he’s connected to is actually meeting it’s statutory reporting obligations? I don’t know about you, but I’m very relaxed about that.

    Comment by Craig Ranapia — May 28, 2010 @ 10:20 am

  39. Confused too – some conflicting responses there. Basically, how is Whitechapel different to any other MPs blind trust?

    Comment by garethw — May 28, 2010 @ 12:01 pm

  40. Because Whitechapel isn’t the trust. The trust is called Aldgate. Labour are alleging that Whitechapel is a separate entity – a limited company with the purpose of a trusteeship – set up to take on the investments of the Aldgate trust, because whereas Aldgate’s investments aren’t publicly available, being private investments, Whitechapel’s, as a company, will be.

    Whitechapel and Aldgate are tube stations next to each other on the same line.

    @Pat

    Yes, the rules are different for shareholdings and monetary assets.

    Comment by dontsurf — May 28, 2010 @ 12:21 pm

  41. Thanks dontsurf, that’s what I was getting at originally until Pat said otherwise. So he’s put his assets into a company that he can track, rather than a trust that he can’t – agree that there is something there then.
    Although it’s drawing an extraordinarily long bow to say the wine investment is colouring decisions on alcohol laws when he also put property investments in there and just screwed himself over in the Budget…

    Comment by garethw — May 28, 2010 @ 2:10 pm

  42. @Pat – unless it has been incorporated (which if I recall correctly only Charitable Trusts can do) as an incorporated society, a trust is not a legal person. So it can’t buy or sell property, only the Trustees can. A company, by virtue of the Companies Act, counts as a person for most legal purposes (yes, companies only work because the gummint supplies the legal fiction that they’re people), including buying and selling property.

    @Craig – what dontsurf said.

    I think I/S has the core of any potential problem down: http://norightturn.blogspot.com/2010/05/mere-speculation.html

    Whether you think this is a big issue is of course a matter of intepretation. But this is the issue that it seems to me Labour is going after. Not that Key is messing with an independent trust – he’s not. Not that he’s been obsessively tracking his assets – he probably hasn’t been. But the reason for a blind trust is to ensure that the beneficiary cannot know how the assets are being dealt with. The way this one has been set up, he can.

    Comment by Eddie C — May 28, 2010 @ 2:28 pm

  43. Eddie C.:

    You’ll pardon me if I don’t go as far as Idiot Savant’s rather post hoc conviction of Key?

    Comment by Craig Ranapia — May 28, 2010 @ 2:39 pm

  44. Oh quite. I wouldn’t either. But if you peel back the rhetoric, I think that post quite neatly sums up the issues. As I said, you mileage may vary as to whether you think it is actually a big deal or not.

    Comment by Eddie C — May 28, 2010 @ 2:41 pm

  45. So they’re either in danger of being caught out as being hypocrites, or in danger of being caught out doing something similar to John Key. And probably half of the National MPs in there.

    Well, remember when Labour tried to make an election issue out of the Helensville MP living in a Parnell “mansion” — one to get hit with a fairly impressive list of their MPs who didn’t live in their electorates either. (I particularly enjoyed David Cunliffe’s rather adorable prune-face upon being asked when the ghettos of Freeman’s bay became part of New Lynn.)

    Comment by Craig Ranapia — May 28, 2010 @ 6:46 pm

  46. Eddie C “But if you peel back the rhetoric, I think that post quite neatly sums up the issues.”

    Personally I find it difficult to divorce rhetoric and other components of a message as rhetoric is usually an integral component of an often derisory message.

    Comment by Funny nose — May 28, 2010 @ 6:51 pm


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