Cablegate: Winston Peters' Greatest Political Crisis?

VZCZCXRO3924
OO RUEHNZ
DE RUEHWL #0227 2050749
ZNR UUUUU ZZH
O 230749Z JUL 08
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5334
INFO RUEHGP/AMEMBASSY SINGAPORE IMMEDIATE 0525
RUEHNZ/AMCONSUL AUCKLAND 1707
RUEHBY/AMEMBASSY CANBERRA 5219
RUEHDN/AMCONSUL SYDNEY 0698
RHHMUNA/CDR USPACOM HONOLULU HI

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

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