PM, his lawyer and foreign trusts

John Key
John Key
John Key's personal lawyer cited a conversation with the Prime Minister when lobbying a Minister about a potential crackdown on the lucrative foreign trust industry.

Ken Whitney, the executive director of boutique trust specialist Antipodes, wrote to then-Minister for Revenue Todd McClay on December 3, 2014, over concerns Inland Revenue were sizing up the sector.

"We are concerned that there appears to be a sudden change of view by the IRD in respect of their previous support for the industry. I have spoken to the Prime Minister about this and he advised that the Government has no plans to change the status of the foreign trust regime," Mr Whitney wrote in an email.

"The PM asked me to contact you to arrange a meeting at your convenience with a small group of industry leaders who are keen to engage to explain how the regime works and the benefits to NZ of an industry which has been painstakingly built up over the last 25 years or so."

New Zealand's trust regime recently made international headlines with the leak of the Panama Papers revealing the abuse of trust structures internationally by those seeking to launder money or avoiding tax.

Mr Key subsequently announced a review of the industry and his office downplayed his links to Mr Whitney's firm saying the Prime Minister only held short-term deposits with Antipodes.

But the email from Mr Whitney - and reports from Inland Revenue officials from the time arguing the review should be kept on the table as quirks of our foreign trust regime raised reputation risks which "can only get worse" - were obtained by the Green Party under the Official Information Act.

James Shaw
James Shaw
"The fact remains, IRD wanted to clean up the foreign trusts industry till the Prime Minister's lawyer claimed John Key had promised him nothing was going to change," Green Party co-leader James Shaw said.

The day following the email a meeting was arranged between Mr Whitney, and five other representatives of the low-profile trust industry, and the Mr McClay to take place at Antipodes' high-rise offices on Shortland Street.

Officials at the time noted McClay "expressed some concerns" that the future of the foreign trust regime was threatened.

One industry figure wrote afterwards to say the "Foreign trust industry were very pleased with their meeting with the Minister".

The moves by Mr Whitney, who has long been Key's personal lawyer, sparked concerns from Green Party co-leader James Shaw that preferential access was threatening the integrity of politically systems.

"Ordinary people, those who care about child poverty or about the environment and want the Government to change its policies, do not get this kind of access or this kind of immediate response to their concerns," Shaw said.

Mr Whitney denied any conflict of interest between his role working for John Key and lobbying the government, or any preferential treatment from Ministers.

"As you can imagine, naturally, I do speak to the PM from time to time on personal business. So I just used the opportunity to bring it up, to inquire - and who we should we talk to. And his response was 'Minister McClay,'" he told the Herald.

Mr Key said there was nothing unusual or inappropriate about Mr Whitney raising the issue with him or referring to the discussion with the Prime Minister in his letter to Mr McClay.

"No, because that happens all the time. There's nothing unusual about it. People ask me about particular issues. I don't live in a vacuum. I do what is absolutely the correct thing to do, which is send them off to the minister. There's nothing I wouldn't have done on a million of other occasions which was to direct them to the minister and let the ministers get on to do their work."

Mr Key said his talk with Mr Whitney followed a story which said Inland Revenue was changing its approach to foreign trusts - a report Key said was inaccurate.

"There was a story in the Herald, he asked me about it, I said to go and see the minister. After that I never had any involvement. I didn't even know what he'd done. I just knew there weren't any changes as far as I knew."

The Prime Minister's Office stressed he was not involved in any subsequent discussion about reviewing the foreign trust industry.

Five months after Whitney sent his email, McClay formally put the review on ice and wrote to the trust industry advising that: "Owing to wider government priorities, we will not be considering regulatory reform of your industry at this stage .... I trust that this provides you and your industry with the certainty needed to continue to do business in New Zealand."

Questions sent to Mr McClay were not immediately answered.

Government policy on the matter stayed frozen until earlier this month when Panama Papers thrust the secretive industry into the spotlight.

A large-scale public release of information from the leak by the International Consortium of Investigative Journalists, expected to lift the lid of secrecy from hundreds of New Zealand-registered trusts, is expected to take place on May 10.

Mr Key had initially defended the foreign trust regime, citing fees earned by the sector, before later announcing a review by tax specialist John Shewan.

Inland Revenue briefing papers on the industry prepared on the industry just before Mr Whitney and the trust industry's meeting with Mr McClay noted benefits to government were modest and the scale of the industry unknown.

Roughly 8000 active foreign trusts were known to exists, the report said, "but we understand that this figure may be a significant underestimate because of the existence of structures whose purpose is to defeat the statutory disclosure requirements."

The report said of the $24m in fees estimated to be earned by local firms providing trust services, only $3m made its way back into government coffers through tax payments.