Hon Dr Michael Cullen
Minister of Finance

23 September 2008 Media Statement

Answer the real question Mr Key – why did you lie?

John Key must explain why he failed to declare his conflict of interest in regard to Tranz Rail as it is clear from his own words in 2003 that he knew he had to, Finance Minister Michael Cullen said.

“The defence put up by Mr Key is pathetic,” Dr Cullen said. “At best he is trying to explain the cover up rather than the crime.

“The truth is that Mr Key was required by the standing orders at the time to declare his conflict of interest in Tranz Rail at any point when his role as an MP conflicted with his role as a shareholder.

“But Mr Key already knew that. When speaking in the debate on the Pecuniary Interests legislation he raised the issue of Tranz Rail as what appeared to be a hypothetical, but what we now know was an attack of guilty conscience.”

On 16 October 2003 John Key and Richard Prebble had the following exchange in Parliament:

John Key: “May I say that, prior to my coming into Parliament, I was on the record publicly as supporting this legislation.. But I, for one, will not be hiding my assets…. If a few people run through my balance sheet and take delight in it, I say "Good on them!". I am not going to back away from it. I am proud of it, and I am going to stand up and defend it….

“...whether or not parliamentarians want to accept it, in taking on this position we have a huge amount of influence in the change of public policy in this country. It might be a bit uncomfortable, but if I am a shareholder of Tranz Rail and I want to get up in this House and start talking about that company, then my shareholding is relevant.

Hon Richard Prebble: You have to declare that, anyway.
Key: Yes, under Standing Order 165 I have to declare it; I accept that, but within that Standing Order is a whole lot of things for which that would not be the case. I simply say there are risks, and they are genuine risks.”

…transparency is an important part of the society we live in. We, as members of Parliament, have a great deal of responsibility, and even if it is uncomfortable to do some things, we nevertheless sometimes have to do them” [1]

[1] 9280 Members of Parliament (Pecuniary Interests) Bill 16 Oct 2003

Attached: Updated Timeline of Key’s Tranz Rail share conflict

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Timeline of Key’s Tranz Rail share conflict

15 February 2002

Through his family trust John Key buys 30,000 shares in Tranz Rail, owners of New Zealand’s rail system (dates for share purchases reflect appearance in register)

19 February 2002 –

Family Trust purchases an additional 20,000 Tranz Rail shares

July 2002 –

John Key elected to Parliament

30 and 31 October 2002 –

Key asks series of Parliamentary Questions relating to Tranz Rail and the future of the rail track. Ministers reply to questions. His shareholding interest is not disclosed.

9 April 2003 –

In Parliament at Question Time, Key asks detailed question of Finance Minister seeking information about ‘secret meetings’ between the government and Tranz Rail. His shareholding interest is not disclosed.

14 April 2003 –

Key asks Written Parliamentary Questions to Finance Minister seeking dates and details of government meetings with Tranz Rail

23 April 2003 –

Key writes to Finance Minister seeking copies of minutes from government meetings with Tranz Rail. Request declined on commercial secrecy grounds.

7 May 2003 –

John Key purchases an additional 50,000 Tranz Rail shares, this time in his own name
20 May 2003 –

In his Parliamentary role as Associate Transport Spokesman Key meets with Rail America to discuss their views on Tranz Rail. Shareholding not disclosed.

27 May 2003 –

Key complains to Ombudsmen Anand Satyanand over Cullen’s refusal to release commercial information on Tranz Rail

10 June 2003 –

John Key sells the 50,000 Tranz Rail shares he purchased in his own name

11 June 2003 –

John Key ‘intensely’ questions (Key’s own words) Finance Minister Michael Cullen on Tranz Rail issue. Cullen expresses his view that Tranz Rail is carrying hundreds of millions worth of liabilities.

13 June 2003 –

John Key sells the 50,000 Tranz Rail shares purchased through his family trust

18 June 2003 –

Key attacks government over Tranz Rail and plans to buy back the track. Recent shareholding interest is not disclosed.

16 October 2003 –

Key raises Tranz Rail in what appeared at the time to be an apparent hypothetical reference in the debate over Pecuniary Interests Legislation:

"It might be a bit uncomfortable, but if I am a shareholder of Tranz Rail and I want to get up in this House and start talking about that company, then my shareholding is relevant." [John Key, 16 Oct 2003 Members of Parliament (Pecuniary Interests) Bill ]

13 October 2004 –

Securities Commission files insider trading proceedings against Fay Richwhite and associates for the sale of Tranz Rail in February 2002.

28 September 2005 –

High Court rules New Zealand has jurisdiction over United States-based defendants in the Tranz Rail insider trading case. Court however accepts Fay and Richwhite’s claim that too much time has passed to allow actions seeking millions of dollars of penalties. [Dom Post, 29 Sep 2005]

29 November 2006 –
The Court of Appeal upholds the earlier High Court ruling that Mr Richwhite and his investment vehicle, Midavia should not face financial penalties, which could have potentially been worth tens of millions of dollars. It confirms the claim against the defendants exceeded the two-year time limit from when the trading took place. [Radio NZ, 29 Nov 2006]

18 June 2008 –
Richwhite and Midavia Rail Investments agree to pay $20m to settle the five-year-old case taken by the Securities Commission, without admitting liability. [Dom Post, 19 Jun 2007]

26 June 2008 –

Businessday.co.nz reveals publicly for the first time that Key had at least 30,000 Tranz Rail shares – those shares were up for compensation as part of an insider trading payout.

1 July 2008 –

Labour-led government buys back New Zealand’s Rail System – launches KiwiRail. Key attacks purchase.

2 July 2008 –

Prime Minister highlights Key’s shareholding in Parliament. Key claims he never made public comments on rail while holding shares. Calls on Prime Minister to apologise

3 July 2008 –

Key admits his shares were sold on the 9 June and 12 June 2003.

Marie McNicholas: Mr Key confirmed tonight that the shares were sold in two parcels on June 9 and June 12 - making the last sale just six days before he issued the statement about the Tranz Rail negotiations. [Newsroom Story, 3 Jul 2008]

4 July 2008 –
John Key tells Fran Mold of TVNZ: “In 2002 I bought shares, but sold them in 2003 prior to making any statements.”

8 July 2008 –

John Key’s office still denied Key had done anything wrong. Extra shareholding interest not disclosed.

Dom Post: A spokesman for Mr Key said yesterday that Miss Clark had made serious allegations about him in Parliament last week and been proven wrong. [Dom Post, 8 Jul 2008]

1 September 2008 –

Securities Commission grants $36,000 in compensation to Key for the first 30,000 shares.

ENDS

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