THE SLEAZE HITS THE FAN: AN INCREASINGLY WORRIED

C O N F I D E N T I A L SECTION 01 OF 03 WELLINGTON 000566

SIPDIS

STATE FOR D (CASTRO),EAP/FO, EAP/P AND EAP/ANP
STATE PASS DEPT OF AGRICULTURE
NSC FOR VICTOR CHA AND MICHAEL GREEN
SECDEF FOR OSD/ISA LIZ PHU
PACOM FOR J2/J233/J5/SJFHQ
USDA FOR SECRETARY JOHANNS AND FAS/MIKE CONLON

E.O. 12958: DECL: 07/22/2015
TAGS: PREL PGOV EAGR NZ
SUBJECT: THE SLEAZE HITS THE FAN: AN INCREASINGLY WORRIED
LABOUR CLAIMS NATIONAL IS U.S. PAWN


Classified By: Charge D'Affaires David R. Burnett,
for reasons 1.4 (b) and (d).


1. (C) Summary: Facing rapid losses in the polls, the ruling
Labour Party has apparently decided to play the anti-American
card, telling New Zealanders that a vote for the National
Party means a vote against New Zealand's independent foreign
policy. Embassy Wellington is in general keeping a low
profile on this and other election-related issues. However,
we released a press statement in response to veiled Labour
allegations that U.S. interests are funding and controlling
the National Party's campaign. We have also quietly warned
the Government that we will similarly respond to any further
baseless allegations. Labour's actions are not without risk
to its own interests: more than one media report has
expressed suspicions that the Government is trying to divert
attention from its problem-plagued domestic policies. In
light of Labour's actions, Ambassador Swindells strongly
recommends that Washington reconsider whether Agriculture
Secretary Johanns should visit New Zealand just weeks before

SIPDIS
the general elections (see para 13). End Summary.

--------------
THE MITTS COME OFF
--------------


2. (SBU) After months of appearing invulnerable to a series
of scandals and controversies, the Labour Government's armor
is apparently beginning to crack. A series of polls
conducted in recent weeks has shown support for the
opposition National Party is increasing at the same time as
Labour's is falling. The most recent polls, conducted over
the weekend, have shown National now leads Labor by between
three and five percentage points, although neither party has
majority support. (A One News/Colmar Brunton poll issued
July 18 showed National's support at 42 percent vs. Labour at
39 percent; a July 16 Fairfax New Zealand/AC Nielson poll
showed 42 vs. 37 percent, respectively.)


3. (C) It is now almost certain that elections will not be
held until mid-September rather than late August, and
Labour's worry over its recent slide is at least partly
responsible for the later date. But although the Prime
Minister is not likely to announce the election date formally
before August 20, campaigning is already well underway and is
becoming more personal and vicious. In a recent speech, Dr.
Brash called PM Clark "a petty, spiteful, deceitful leader
whose government was 'rotten to the core.'" Meanwhile, an
apparently worried Labour has made the decision to play the
anti-American card: senior Labour officials have begun to
imply that a vote for National would mean a vote against an
independent NZ foreign policy, and a vote for a U.S.-run NZ
government.


4. (SBU) On Tuesday, PM Clark and Michael Cullen each
claimed in separate speeches that the question of National
leader Don Brash's credibility would be a cornerstone of
Labour's campaign. At the same time, Labour began to run
advertisements in local newspapers and on buses that include
a statement Brash made about the Iraq War some time ago --
that given the evidence surrounding Saddam and weapons of
mass destruction, he too would have "done the same thing as
President Bush" i.e., sent New Zealand troops to participate
in Operation Iraqi Freedom. Young Labour also put up posters
showing side-by-side photos of Brash and the President,
together with the accompanying slogan "Can you spot the
difference?" Cullen also questioned in his speech where
National was getting it's money, claimed that the party had
much more money than Labour, and implied that some funds were
coming from overseas.


5. (SBU) In response, Brash told the media that Labour was
just trying to divert attention from the Government's
domestic policies. Obviously wishing to avoid the question
of the Iraq war, which remains deeply unpopular here, Brash
also stressed that the past was the past and it makes no
sense to talk about what he would have done two years ago.
Undaunted, Foreign Minister Goff issued an official statement
claiming that Brash's Iraq policies were a legitimate
question: Australia has recently decided to send more troops
to Iraq; would Brash as PM make a similar decision? After
repeated questions by the media, Brash later fleshed out his
stance, "In some circumstances we (i.e., a National-led
Government) might certainly go with the United States but we
make that judgment in the light of what's in New Zealand's
best interests."

--------------
CROSSING THE LINE
--------------


6. (SBU) On July 23, Education Minister Mallard upped the
ante. During a press conference that was ostensibly on the
Government's education policies, he alleged that "the lead
bag man" for Brash "is an American..." and that "we will name
him at the appropriate time." Mallard then went on to say
that "..if you say nukes gone by lunchtime and you have very
close relations on Iraq and may or may not have made promises
to send troops to Iraq the fact that an American is
collecting cash for you is I think pretty interesting." He
also said that "...Brash has indicated that he will act on
American lines more than any government in New Zealand ever
has in the past," and added that National's campaign is being
written by Americans. While claiming that his remarks were
not directed at Americans or the Bush Administration, Mallard
clearly meant to hint at U.S. Government connection to
National's financers, remarking, "...I think New Zealanders
expect our policies...to be written in Wellington not
Washington."


7. (SBU) Despite the fact that the Charge had hosted Mallard
to dinner the night before, the Embassy first learned about
the Minister's claims from a journalist who was reporting on
the story and wished to know the Embassy's response. (The
Charge had actually raised concerns about Young Labour's
poster campaign over dinner; the Minister did not respond but
looked very uncomfortable.)

--------------
THE EMBASSY (VERY QUIETLY) WEIGHS IN
--------------


8. (SBU) After learning of the press inquiries concerning
Mallard's innuendoes, the Charge called Ministry of Foreign
Affairs (MFAT) and Trade CEO Simon Murdoch, who was unaware
of Mallard's comments. (We then faxed the transcript to
him.) Murdoch contacted Minister Goff, who was on travel
within New Zealand and about to board a flight. Goff agreed
that a line had been crossed, and said he would call the
Charge once he returned to Auckland.


9. (SBU) Brash, meanwhile, was telling the media that this
was a low blow. National's policies are not for sale, he
said, and are written by New Zealanders for New Zealanders.
Although the media has speculated the financial backer in
question is Julian Robertson, a wealthy US property developer
who has been a part-time resident here for years, Brash
denied that National has gotten truly significant funding
from any single donor. TVNZ, in reporting the flap, implied
that Mallard's comments were driven by National's
hard-hitting criticism of Labour's education policies. TVNZ
also ran old footage of an obviously pleased Prime Minister
Clark meeting with President Bush, commenting that Clark
clearly relished the attention of the U.S. President. Radio
NZ said that Mallard will have to soon prove his accusations
or he will completely lose credibility.


10. (C) When, as promised, Goff called in, the Charge told
him that we recognize that New Zealanders have the right to
debate issues of substance during their election campaign,
even when the issues involve the United States. The Embassy
had not, for example, commented on Minister Goff's remarks on
Labour's vs. National's Iraq policies. But by hinting that
Washington was interfering in the elections and cutting
secret deals with National, Mallard's statements had gone

SIPDIS
over the line. Goff agreed, noting that "Mallard's wording
was not as careful as it should have been." The Charge
countered that, on the contrary, Mallard's words seem to have
been very carefully chosen to imply that there was U.S.
Government involvement without actually saying so. Goff was
silent at this.
The Charge also reminded Goff that Ambassador Swindells had
spoken in his July 4 speech of the failure of both
governments to deal with the legacy of mistrust that exists
between us. He added that Labour's tactics seemed designed to
increase that mistrust rather than to reduce it.


11. (C) The Charge told Goff that the Embassy would have
appreciated a head's up that Mallard would be making these
remarks. Goff said that as was well known, he (Goff) has
very favorable feelings towards the United States and close
family connections there. (Goff's sister is an Amcit and has
two sons serving in the U.S. military (one of who is in Iraq)
with a third on his way to West Point.) But, he went on, the
Government believes that these issues do resonate with the
New Zealand public and it would therefore be foolish not to
pursue them. There will be more campaigning on issues
related to U.S. policy in the weeks ahead, he cautioned. The
Charge said that was Labour's call to make, but if further
false claims were made the Embassy would respond. Goff
agreed that it was in the Embassy's right to do so, and
endorsed the idea of our making a press statement refuting
Mallard's claims. The Charge then released to the media the
following statement, which has also been cleared by
Washington:

"Our position is that the outcome of the upcoming election is
entirely a matter for the people of New Zealand to decide.
The U.S. Government has neither asked for nor received
assurances of any kind from any political party in New
Zealand. As Ambassador Swindells mentioned in his farewell
speech, we stand ready to work with whomever New Zealanders
choose to represent them in order to make this important
relationship all that both countries want it to be."

--------------
COMMENT
--------------


12. (C) The tepid media reaction to Mallard's comments shows
Labour's strategy might be a risky one. Many journalists are
questioning the accuracy of the claims and have picked up
with some sympathy National's view that this is a
diversionary tactic. (Embassy has e-mailed a summary of media
reports to EAP/ANP and others in Washington.) In addition,
we understand that our MFAT contacts have been counseling the
Government that there will be long-term impact on our
bilateral relations if Labour continues its baseless
diatribes and hints that a close relationship with the United
States is in general not in New Zealand's interests.
Meanwhile, we continue with our behind the scenes talks with
MFAT and other key decision makers in government, the private
sector, and the media about ways we can improve the bilateral
relationship after the elections (septel).


13. (C) But if Labour wins, its campaign may impact our
ability or desire to build bridges. Ambassador Swindells,
who is on travel but has been kept abreast of the latest
flap, also strongly recommends that Washington reconsider
whether or not late August is a good time for Agriculture
Secretary Johanns to visit New Zealand. Ordinarily such a

SIPDIS
visit would be a positive message of support for bilateral
ties. However, we question whether a Cabinet-level visit
just weeks before the elections might not be seen as
interference in domestic politics or be used to undermine
broader U.S. interests.


Burnett