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Gordon Campbell on the Audit Office report on SkyCity deal

Gordon Campbell on the Audit Office report on the SkyCity deal

by Gordon Campbell

This is how we do political business in New Zealand. First, Prime Minister John Key told the relevant officials to stop their scoping process for a convention centre in Auckland because a “broad awareness” had arisen in his mind that SkyCity had plans for just such a development. Key seems to have attained this insight from a meeting with SkyCity on May 14, 2009 - but subsequently, there seems to have been an onset of John Banks Helicopter Sickness and neither he nor SkyCity executives could “recall an awareness” (for the benefit of the Audit Office) as to who said what to who at that meeting. Luckily though, someone must have remembered to diary in a follow up – because on June 17, 2009, Key’s chief of staff Wayne Eagleson met with SkyCity and got further details from them of their proposal.

Moving right along….once the scoping exercise had been stopped, SkyCity met yet again with the PM’s staff in September 2009 and told them of a potential hurdle. Basically, SkyCity wanted the Gambling Act changed, in order to remove the limit that the Act placed on how many poker machines and other sources of gambling income it could install onsite. Hey, no problemo. In early November 2009, Key attended a dinner with SkyCity executives – at which reportedly, he told them ‘to think outside the box’ when it came to devising options for the convention centre. (Make him an offer he won’t refuse? It sounds like this may have been the message being conveyed.) At which point, Treasury began to voice some concerns about the process and probity of this budding relationship. According to this week’s Audit Office report, Treasury put those concerns into writing just over a week after the SkyCity/PM dinner: “Warnings about process were conveyed to Mr Key in a briefing note on November 12, 2009.”

The Audit Office report – fascinatingly - puts the entire onus onto the officials for keeping the PM on track about the need to observe proper due process, and how to go about doing it. Supposedly, Key and his ministers are to be regarded as babes in the wood when it comes to observing the boundaries of propriety. Woe unto the officials who failed to take their political masters in hand: "We have concerns about the apparent readiness of officials to support those discussions developing into more substantive negotiations without preparing to give advice on the Government's procedural obligations and options." You mean some hapless official needed to tell the Beehive not to have side meetings with one particular bidder, and not to quietly pass on relevant info to them?

Get real, Audit Office. In the current public service climate, officials would have to be either very brave or foolhardy to fly in the face of the clear signals they were getting from the Beehive heavyweights, and they would also need to have alternative job options. Because the Beehive preference could hardly have been more clear: at a meeting with officials in the wake of calling for expressions of interest from firms interested in bidding for the convention centre contract, Key told officials that the SkyCity had put forward a “good proposal.” When the boss says a particular proposal is “good” what conclusion is an official supposed to draw?

The Audit Office report’s own conclusion? The process “fell short of good practice in a number of respects” including the fact that more meetings between Cabinet ministers, officials and SkyCity continued to occur, in order to further develop the SkyCity proposal – even before the casino had officially won the contract. Talk about an inside track. This looks more like an eight lane highway. As the Audit Office report points out, the casino was privy to information not known to other bidders – e.g. that the government wasn’t putting any money into the convention centre, thus allowing the casino to configure its sums and its specifications accordingly.

Moving right along, as the Herald story (linked above) points out…In September 2010, the casino suggested some further changes it wanted in our gambling laws, and advised the government to buy some land owned by TVNZ, on which parts of the centre would be sited. In June 2011, SkyCity – surprise! – was named as the preferred bidder by the government, which solemnly promised the public there would be a extensive public submissions process before the changes to the Gambling Act being sought by SkyCity become law.

Oh, but what the heck. The Audit Office managed to convince itself that none of the above would have materially affected the outcome, anyway. “No other submitter appears to have been likely to be able to adapt their proposal to enable them to fund the full construction costs.” Sure, the flawed process may have been a symptom of a "lack of attention to procedural risks and therefore to the fairness and credibility of the process", but…that’s isn’t that all the fault of those darn officials? The Audit Office thinks that must be the case. Faceless officials and not the very identifiable politicians can cop the blame.

Leaving aside the dodgy process for a moment….As today’s NZ Herald editorial very usefully points out, nowhere in the report does the Audit Office address the basic propriety/impropriety of the SkyCity deal itself. Is it really OK in New Zealand for our government to put our gambling laws on the auction block to get a convention centre out of the transaction? Well, the Audit Office report leaves us none the wiser:

The report has nothing directly to say on the subject. It finds nothing wrong with the Prime Minister's dealings with SkyCity casino and it reserves its criticism for officials handling the procedures of evaluating the bid. It calls the gambling extensions sought by the casino "politically sensitive" and "unusual" as a form of government purchasing. It was surprised to find no advice from officials on how the proposed deal could be tested against the usual procedure for competitive bidding and commercial negotiations, and on ways to "manage the difficult relationship between the commercial issues and the policy and political decisions that were needed ..."

All of this - and much, much more - is a mealy mouthed way of saying the office does not know, and the public service does not know, whether it is right and proper to extend the casino's licence and enlarge its gambling operation in return for a $350 million international convention centre at no direct cost to the taxpayer.

So a shonky process in the service of a dubious transaction. Hey, but that’s perfectly OK, isn’t it? The Key government claims to have emerged scot free from the Audit Office investigation, and any lingering concerns are mere spin by the Opposition. Ah huh. In the United States, I wouldn’t mind betting that similar behaviour in the course of a competitive contract bid would either (a) land some of the relevant parties in jail or (b) see them sued for millions. Evidently though, this is how we do things now in New Zealand:

Business groups in Auckland want the Government to move forward quickly to get the SkyCity convention centre built…Negotiations can now resume on a deal that looks set to grant SkyCity more gaming machines in exchange for building the centre.

ENDS

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