WINSTON PETERS' GREATEST POLITICAL CRISIS?

UNCLAS WELLINGTON 000227 SENSITIVE SIPDIS SINGAPORE PASS TO SECRETARY'PARTY, STATE FOR EAP/ANP, EAP/FO, PACOM FOR J01E/J2/J233/J5/SJFHQ E.O. 12958: N/A TAGS: PGOV PREL NZ SUBJECT: WINSTON PETERS' GREATEST POLITICAL CRISIS? Reftel: Wellington 71 ¶1. (SBU) Summary. As Prime Minister Helen Clark and Foreign Minister Winston Peters prepare to welcome the Secretary of State to New Zealand, they find themselves preoccupied with an ugly domestic political battle. FM Peters is fighting off press allegations that he failed to disclosure to authorities two separate large donations from wealthy supporters. Clark could sack Peters, but will be very reluctant to undermine her slim parliamentary majority. More likely, the controversy will simply drag on, weakening Clark's government without forcing an early election. End Summary. The Accusations -------------- ¶2. (SBU) Foreign Minister Winston Peters is embroiled in two separate political donation controversies that threaten to hurt him and his New Zealand First Party politically and perhaps even legally. After years of attacking others for alleged fund raising improprieties and after months of denying press accusations, Peters admitted on July 19 to receiving a large donation from New Zealand businessman Owen Glenn, a controversial expatriate billionaire (reftel),to a legal defense fund established in Peters' name. Subsequently, the press has accused Peters of receiving additional large donations from the wealthy Vela family, prominent in New Zealand's horse racing industry, which he oversees as Minister of Racing. The size and nature of these political donations may have breached both New Zealand parliamentary ethical and legal restrictions. The Consequences -------------- ¶3. (SBU) If these press accusations are borne out by evidence, Peters could face legal action that may force him to resign from Parliament or even face criminal charges. But that prospect is at best months or years away. In the near term, PM Clark faces a difficult choice. If she sacks Peters, she protects her Labour Party's hard-won reputation for ethical politics, but she loses her governing majority, which is contingent on New Zealand First's seven seats. If she retains FM Peters and his party's support, she opens Labour to claims of sleazy impropriety as the election looms with the opposition National Party leading in the polls. Peters has put her in a very uncomfortable position. She has sacked Labour Party ministers for far less. Clark Temporizes -------------- ¶4. (SBU) While Peters has been in Singapore for the Post Ministerial Conference and ASEAN Regional Forum, PM Clark has borne the brunt of the questions about Peters conduct in Parliament. She has protected him but also sought to deflect any collateral damage to the Labour Party by its association with Peters' New Zealand First Party as a Government support partner. Asked whether she had confidence in her Foreign Minister and whether he can credibly continue in this role in light of the funding allegations, Clark has continued to offer support, albeit cautiously. She also stated that there is an established process to follow in which allegations of wrongdoing are investigated and urged that judgment be suspended until that process is concluded. However, if the Peters predicament continues to grow then Labour runs the risk of getting dragged down by association. If it comes to this, Clark may be compelled to cut Peters loose and ask for his resignation from his ministerial responsibilities. Short-Term Forecast: More Mud -------------- ¶5. (SBU) We do not expect either Peters or his media accusers to retreat. Both political sides have been spoiling for such a fight for many years. Clark will avoid making a choice as long as she can. The National Party will enjoy the opportunity to raise further questions about the Labour Government and its willingness to honor the standards it proclaims. The most immediate victims of this bitter dispute will be substantive discussion and civil discourse. MCCORMICK