Foreign Minister Murray McCully wanted to set up his deal over the Saudi Arabian farm so lawyers and bureaucrats would not be involved.

He did not want the payments to the Al Khalaf Group called “compensation” for the losses they suffered as a result of New Zealand’s ban on the export of live sheep for slaughter.

And his aides were busy instructing the Al Khalaf Group what wording to use on their invoices even before the Cabinet had approved the project.

All of this is contained within the hundreds of papers released by Mr McCully on Tuesday afternoon as he flew off to meetings in Malaysia.

One paper, an official report on a 2012 meeting between Mr McCully and Saudi live sheep exporter Hmood Al Khalaf makes it clear that Mr McCully set up a New Zealand investment in a Saudi Arabian farm owned by Mr Khalaf in lieu of “compensation” for his losses caused by New Zealand’s ban on live sheep exports.

Mr McCully has always maintained it was an investment designed to showcase New Zealand agricultural expertise and technology.

But in an official report of a meeting involving Mr McCully and the Al Khalaf company he says not to call any payments compensation because that  would mean having to bring lawyers and bureaucrats in.

The report was on a meeting in March, 2012, Auckland involving Mr McCully, Mr Al Khalaf; Mr Al Khalaf’s Australasian CEO, George Assaf and their New Zealand partner, David Brownrigg.

There were also two officials from the Ministry of Foreign Affairs and Trade.

From its election in 2008 the Key Government  had kept telling  Saudi Arabian Ministers and officials that New Zealand was working on a bilateral agreement which would allow live sheep shipments to resume.


But as Trade Minister Tim Groser was later to say, they were being duplicitous.

In confidential notes included in one of the papers officials say that they had proposed conditions for the agreement which Saudi Arabia would never be able to meet.

Thus live sheep shipments were effectively banned altogether.

Then   in December 2010 the Key Government simply renewed the existing export ban on live sheep for slaughter.

The Government could no longer pretend and Mr McCully went to Saudi Arabia and told them that the New Zealand Government could not consider  the reinstatement of the trade.

But in the background through all this was Trade Minister Tim Groser, anxious to get a free trade agreement with the Gulf States co-operation Council chaired at the time by Saudi Arabia.

The issue of the ban on the sheep shipments and the Free Trade Agreement was linked by Saudi Arabia.

Meanwhile Graeme Leversha, who was linked to the Al Khalaf Group, proposed that they simply move the Hawkes Bay offshore and supply the Saudi Arabian market for live sheep from the offshore farm.

It was against these events that the Auckland meeting took place.

The main discussion was the proposal to establish a joint venture farming operation in Saudi Arabia which would receive breeding sheep from Mr Al Khalaf’s New Zealand operation.

The export of breeding sheep is legal.

The report quoted Mr Assaf as saying that if the Government also proceeded with the MoU “the issue of compensation would therefore be less costly.”

It goes on: “The Minister noted that he would not want any financial contributions to be treated as compensation as this would involve a plethora of lawyers and bureaucrats. Rather he would prefer an investment in a partnership.”

But in a Cabinet paper on the project from February 2013 Mr McCully set out a different spin on the negotiations.

He was asking for four million dollars to acquire the “components  of the platform to conduct a three year pilot’ and another six million dollars for a project to use the platform.

He said the four million dollar figure had been established after negotiations with the parties who have invested in the trade in live sheep between New Zealand and Saudi Arabia.

“While the Saudi parties would have preferred to enter discussions on the basis of seeking compensation for commercial loss as a result of Government decisions (and indicated that they had received legal advice suggesting they pursue a claim for between $20 and $30 million) the Government has made it clear we would not be a party to such discussions.

The Cabinet Paper did not say that the reason Mr McCully didn’t want to use the word “compensation’ was that that would mean he would have to involve lawyers.

That was probably just as well because a month before the Cabinet meeting an aide to Mr McCully had already told Mr Al Khalaf to send his invoice in.

This advice was contained in an exchange of emails between Mr Assaf, an unnamed official and Alex Matheson who had been appointed as Mr McCully’s special envoy to manage the deal.

Mr Assaf was advised to state on his invoice for $4 million “that it is for services set out under our contract” even though that had not been ticked off by Cabinet.

The semantics around the payments to Mr Assaf continued into 2013.

The New Zealand Embassy in Riyadh reported that in meeting with the Saudi Minister of Agriculture in January 2013, the Ambassador said we were not simply paying Mr Al Khalaf to walk away – we wanted to engage and build a closer partnership.

But the problems continued

Alex Matheson emailed Penelope Ridings in MFAT’s legal section: “Are (sic) you please also to provide me advice as to what the invoice for the four million should say.

“George (Assaf) made it clear he wouldn’t want his first invoice returned for alterations.”

Replying to that email, Ms Ridings, also offered some advice on how the $6 million was to be billed “as an investment in the partnership be disbursed as agreed between the parties to fund proposals to develop technologies to facilitate trade  flows to Saudi Arabia and the Middle East”.

She it was important that it was worded that way so that it fitted within the appropriation. (In other words that it was legal).

All of this smells of a cover-up; that Mr McCully was “compensating” Mr Al Khalaf but he just didn’t want to call it that because that would have attracted too many lawyers and bureaucrats.

Ministers don’t want them around generally when they are bending the rules.

But what Mr McCully appears not have bargained on was that all these papers would become public.

At this stage POLITIK understands the Opposition will confine itself to asking questions in Parliament next week but a privilege complaint alleging Mr McCully has misled Parliament cannot be out of the question.