Once again Foreign Minister Murray McCully has  escaped from an investigation into an ethical matter.

This time it is the Auditor General’s report on the Saudi Food Security partnership which saw the Government pay $4 million to Saudi businessman, Hmood Al Khalaf, to set up a feed lot and abattoir in the Saudi desert.

At least part of that payment was to compensate him for the refusal of the New Zealand Government to allow him to export live sheep to Saudi Arabia from a farm he had established in the Hawkes Bay.

McCully was quick yesterday to claim that the report vindicated his actions.

“The Auditor-General’s report states categorically that there is no evidence of bribery, corruption, or facilitation payments, as claimed by the Opposition,” Mr McCully he said.

Others were not so definitive.

ACT Leader, David Seymour said, “wasteful deal-making like this is the natural consequence of a culture of corporate welfare.”

“The Saudi sheep deal only escapes being labelled ‘corrupt’ by how common these arrangements are across all New Zealand Governments,” he said.

The report found that the payment addressed Al Khalaf’s sense of grievance over New Zealand’s change of policy on live sheep exports and it “facilitated the removal” of the Saudi Arabia Agriculture Minister’s opposition to a Gulf Free Trade Agreement with New Zealand.

The report added: “Importantly, neither the contract for services nor any later agreement achieved some things that might have been expected.


It does not:

•   provide a formal legal settlement of the “long-running dispute” with the Al Khalaf Group;

•   put in place clear and specific contractual obligations;

•   give the Ministry or New Zealand companies any formal legal rights to access the Agrihub (nor does it provide a mechanism for them to gain these);  or

•   give the Ministry or New Zealand companies any formal legal rights to install or demonstrate New Zealand equipment at the Agrihub (nor does it provide a mechanism for them to gain these).

While the situation surrounding the establishment of the unit in Saudi Arabia is vague, the point at issue is what was told to Parliament.

On June 3 last year John Key was answering questions in Parliament about the $4 million to Al Khalaf.

Key told Parliament that “if you look at the Cabinet paper (to approve the expenditure), it spells it out quite clearly that there was the threat, potentially, of legal action.”

And he made it clear that the $4 million was compensation for Mr Al Khalaf dropping that action.

“People do set aside, by negotiation, legal claims that they might want to take,” he said.

But the Auditor General could not find any evidence that the Go vernment had received a threat of legal action.

Ministry legal advisers were not asked for input into the Cabinet paper.

“We saw no evidence of internal or external legal advice being sought on the extent of the risk of a claim for compensation from the Al Khalaf Group against the Government,” said the report.

Instead, she found that although evidence indicated that the Al Khalaf Group did take legal advice, “our interviews indicate that Sheikh Hmood wished to maintain a long-term trading relationship with New Zealand and considered legal action to be a last option.

“We are not aware of any application, or challenge to a decision made, under the Customs Export Prohibition Order.”

However, Al Khalaf’s Australasian representative explained to an official that, the Al Khalaf Group would seek financial compensation for the eight years that they had been unable to export, which amounted to about $24 million.

That rather than a formal legal request appears to be the basis for the whole exercise along with the desire to progress the Free Trade Agreement.

Labour’s David Parker, who has doggedly pursued the issue in Parliament last night said the record was clear that the Government, and Murray McCully tried to hide the $4m payment and blame others.

“Whether he should resign, is for the Prime Minister who should be asked: Have we reached the point in New Zealand that his standards are so low that Ministers will only be sacked if they end up before the courts rather than for incompetence, wasting millions, hiding it, and misleading Parliament and the public? “

Greens Co-Leader James Shaw, who has also raised the matter several times in Parliament said the report made it clear that McCully had misled the New Zealand public and Cabinet, and for that reason John Key should ask him to resign.

“This report is a damning indictment of Minister McCully’s rogue behaviour and his total disregard for transparency, due process and the respectable use of public funds,” said Green Party Co-leader James Shaw.

“Minister McCully has got to go.”