Report confirms dodgy nature of financing

Press, 18 December 1986, Page 1

Report confirms dodgy nature of financing

Speculation that “Marcos money” was behind the $6OO million loan offered the Maori Affairs Department strengthened yesterday with the release of an official interim report.

It was prepared by the chairman of the State Services Commission, Dr Roderick Deane, and refers to telexes received by the Treasury between November 26 and December 1.

It says the telexed information “raised the most serious doubts about the viability and integrity of the funding proposal and its source” and that the Minister of Finance, Mr Douglas, had been advised of these by the Secretary to the Treasury, Dr Graham Scott. This is all Dr Deane says on the matter. Certainly he does not allege that the funds — SUS3OO million — were from the

deposed President of the Philippines, Mr Marcos. He does, however, note that the 4 per cent interest rate being asked was “well below United States rates” while the Treasury, in a letter to Maori Affairs on November 21, observed that the 6 per cent finder’s fee being sought was “a long way out of line with market practice.” This would suggest there were risks attached for the middleman setting up the deal. The Opposition’s spokesman for Maori Affairs, Mr Winston Peters, had earlier released a departmental document which put the finder’s fee at 3.5 per cent. .That figure raised the question of “kickbacks,” Mr Peters said.

The Under-Secretary of Finance, Mr de Cleene, suggested in Parliament yesterday that there might be a Marcos link to the loan.

“I have a suspicion where that stupid loan offer was made from,” he said.

"I am telling you something else that it was not coincidental that the international criminal Marcos lives in Hawaii and it., is alleged that he has. got a lot of money to launder.”

The negotiations were done at the New Zealand end by the Secretary for Maori Affairs, Dr Tamati Reedy. He aborted, them on Treasury advice but not before he had signed a fee agreement.

Dr Deane was ordered to investigate the issue as a matter of urgency by the Deputy Prime Minister, Mr Palmer, on Tuesday evening.

Mr Palmer gave the instruction after a tense two-hour meeting at the Beehive attended by Treasury officials, the Minister of Maori Affairs, Mr Wetere, Dr Reedy,

and senior members of his staff.

Dr Deane apparently worked late into the night on the investigation but the document he presented yesterday was brief and inconclusive and his inquiries are yet to be completed. Mr _p.almer said the Government would await the final report before considering the matter further. At issue is whether Dr Reedy acted without proper authority in negotiating the loan. Dr Deane does not draw any conclusions on this point but says Dr Reedy thought it was his duty to advance the development of the Maori people in an imaginative manner. The identification of business opportunities for that advancement were in his view an important part of his departmental responsibilities and he believed he was simply doing the ground work

before eventual consideration of a proposal by the Cabinet. Dr Deane interviewed Mr Wetere, Dr Reedy, and the two deputy permanent heads of Maori Affairs in the course of his inquiry. He also spoke to Dr Scott and one of the assistant Treasury secretaries, Mr David- Smythe. He traces the course of events from June this year when the department, in the course of promoting a cultural and trade exposition in Hawaii, identified the possibility of a housing venture.

In September, a Mr Cribb was appointed by Mr Wetere to negotiate on the department’s behalf and to enter into agreements <tq enhance trade between the Maori people and the Hawaiian business community. Mr Cribb recommended house building in Hawaii .and mentioned an opportunity to secure a “whole-

some and worthy loan” of SUS2SO million to SUS3OO million. He returned to New Zealand in October with a sheaf of papers relating to both proposals, which he handed to Maori Affairs. On November 7, Dr Reedy called on Dr Scott to discuss the financial proposatand was told that only the Minister of Finance had the authority to raise Government loans. Dr Reedy acknowledged this but said he thought the Maori Trustee also had the power to borrow.

He was advised to investigate the source of the proposed funding.

On November 10, he wrote to a German financier, Mr Max Raepple, confirming his willingness to discuss the funding project with him and detailing what he understood it to be.

A copy of that letter was subsquently taken to Mr Wetere who discussed

it with Professor Ralph Love as consultant to his department on economic matters.

This was the first document Mr Wetere had seen setting out the details of the proposed deal and Professor Love advised him to seek appropriate professional advice before taking the matter any further.

On November 12, Maori Affairs formally sought in writing an opinion from the Treasury on the offer. That was eventually delivered on November 21 in the form of a letter from Mr Smythe. Mr Smythe advised that there should be “no negotiations of any type with the Hawaiian group or any other party” until all necessary information had been gathered and until the views of Messrs Douglas and Wetere had been obtained.

The Treasury would not at that stage support a Government guarantee

for the debt as it was “very sceptical” of the soundness of the financing provision. •Mr Smythe said it was essential to establish the credentials of those making the offer and to identify clearly who would be lending the money and on what terms and conditions.

To avoid embarrassing the Government, he said, it was necessary that this information be obtained. He suggested also that the necessity for such disclosure should be relayed to the Hawaiian group. . In the meantime, Mr Wetere was growing increasingly uneasy about the proposal and at a meeting on-November 17 expressed his concerns to senior staff. He followed this up with an oral directive to break off the negotiations. On both occasions, however, Dr Reedy was absent. On November 26, on the advice of the Treasury, Dr Reedy cancelled a proposed visit to Hawaii on December 2 and informed his Hawaiian contacts by telephone on November 29 that the proposed deal was cancelled.

The cancellation has yet to be formally confirmed in writing, according to the report. It says also that Wetere did hot know until the week-end ..beginning November 28 that ; iDr Reedy had signed the fee agreement. Dr Reedy signed it a full two weeks earlier, about November 11.

Mr Peters yesterday dismissed Dr Deane’s report as “hopelessly inadequate" and repeated Opposition. calls for the resignations of Messrs Wetere and Douglas.

Mr Peters claimed it was now dear that Mr Wetere knew of, and authorised, negotiations involving the agreement signed by Dr . Reedy and a Hawaiian middleman, Mr Michael Gisondi.

Dr Deane’s report showed the negotiations were set up at the behest of a man Mr Wetere had appointed to act as an agent in Hawaii, he said.

Furthermore, • .Mr Wetere must have authorised Dr Reedy’s planned trip early this month to Hawaii for further negotiations before they were called off.