Jul 9, 2008

Fran Rubs Salt Into the Wound

Fran O'Sullivan reminds us of the PM's blunder last week

Prime Minister Helen Clark has drawn a very long bow indeed by claiming that National's John Key personally profited from the 1993 privatisation of Tranz Rail.
In Parliament last week, Clark noted Key was a former director of Bankers Trust which got the contract to advise the Government on the sale which the records show realised $400 million. "In that same year - the 1993 financial year - Bankers Trust, of which Mr Key was a director, pocketed $39 million in profit," the PM roared.
"Members should ask themselves who benefited from the sale of Tranz Rail. Mr Key and his friends."
Much of the subsequent reporting left the impression that Bankers Trust had enriched itself to the tune of $39 million from the ill-fated sale to the Fay Richwhite-led consortium.
But the truth is a somewhat less flamboyant.
Treasury confirmed yesterday that Bankers Trust was paid two sets of fees for its advice on the Tranz Rail sale. The investment bank - subsequently brought under Deutsche Bank's umbrella, was paid $237,000 in the 1992-93 financial year. Bankers Trust picked up $3,163,000 the following year (1993-94) as the sale was finalised.

The total flowing from the Treasury coffers to Bankers Trust was a mere $3.4 million - not the $39 million in profit that so enraged the PM.
Clark could no doubt claim news media misunderstood her intent (she has left enough wriggle room here) over the $39 million. That any half-way smart journalist (or member of the public) would have deduced the $39 million referred to Bankers Trust's overall NZ profits for that year, not the amount that the investment bank made from the Crown mandate.
But I doubt $3.4 million - less than one-tenth of the $39 million figure that Clark quoted - would have raised eyebrows in quite the same fashion if the Prime Minister had been more specific in her parliamentary allegations.
Was this the intention of Clark's 9th floor spinmeister?
If so he/she needs to improve their institutional and financial knowledge as Key never featured among the scores of investment bankers competing for Crown mandates in the 1980s and early 1990s. He was on the forex side at that time.

So why did they make this blunder?

Clark and her ministers know they have to dent Key's commercial credibility in the run up to the forthcoming election to try to puncture his "honest John" image.