18 Apr 2016

Call for inquiry into Niue resort contract

2:14 pm on 18 April 2016

The Labour Party has asked the Auditor-General to investigate the awarding of a resort management contract in Niue to one of the National Party's biggest donors.

Matavai Resort, Niue

Matavai Resort, Niue Photo: RNZI

Businessman Earl Hagaman made a large donation to the National Party two years ago, and a month later his company announced it had secured the luxury resort contract in Niue.

Foreign Affairs Minister Murray McCully said there was no link between the two events, nor $7.5 million in aid funding to expand the resort a year later.

But Labour leader Andrew Little said he had written to the Auditor-General asking for an investigation.

"There is a real issue when you look at the timing of the events, so the donation to the National Party, the awarding of the contract and then some months later a further contribution from the government to upgrade the hotel.

"It just looks murky from the outside, it looks shady, and I just think we need some answers and some assurance that there isn't anything untoward here," Mr Little said.

In October 2014, New Zealand's Scenic Hotel Group announced it had "secured" the Matavai Resort in Niue.

The Niue Tourism Property Trust, whose trustees are appointed by Mr McCully, carried out what the minister said was a fully commercial process to find a company to run the resort.

The month before, Mr Hagaman, Scenic Hotel Group's founder, had donated $101,000 to the National Party, making him National's biggest living financial donor in 2014. Only a man who had died and left his estate to National gave more.

Foreign Affairs Minister Murray McCully.

Foreign Affairs Minister Murray McCully Photo: RNZ

But Mr McCully said there was no link between the contract and the donation.

"No, the Scenic Hotel was appointed as the managers after a international competitive process, conducted I think a year or two ago. This is something that was done on a purely commercial basis - no involvement from me or from my office."

In 2015, the government announced the further $7.5m in funding to expand the Scenic Matavai Resort to help grow tourism in the country.

It had spent more than $10m over previous years developing the resort.

Mr McCully said there was no link between the winning of the contract, the new aid funding and the donation to National.

"Absolutely none whatsover," he said.

"I can tell you that I had no involvement in the appointment process, conducted purely by the trustees and commercial management they appointed - these are reputable professional people who conducted a full international process."

RNZ News asked Mr McCully whether he was worried there could be a perception that financial donors were the recipients of New Zealand aid.

"To be frank, I wouldn't have known he was a financial donor to the National Party but, even if I had, I had no capacity to influence the decision," Mr McCully responded.

Terrence Wood runs New Zealand Aid and Development Dialogues, which analyses and critiques New Zealand's aid programme.

He said the funding could benefit the Scenic Hotel Group more than the people of Niue.

"You'd really need to see a strong case made that the spillovers from the hotel were actually going to benefit the Niuean economy more broadly, and Niuean people more broadly, before you'd feel confident that this was aid really being given to benefit Niue rather than a private company," Mr Wood said.

"It's possible the case could be made, however there's no publicly available evidence that this analysis has been undertaken or that this spending is warranted."

But Mr McCully said the aid funding was requested by the government of Niue.

"Premier (Toke) Talagi challenged the New Zealand government to work with him by channelling a good chunk of the development cash due to Niue over several years into the development of the Matavai Hotel," Mr McCully said.

Political parties' donations records show that Lani Hagaman, Mr Hagaman's wife, also donates to the government's support partner ACT.

In 2013, she was ACT's biggest donor - giving $25,000 to the party.

Repeated calls to the management of the Scenic Hotel Group went unanswered and unreturned.

Get the new RNZ app

for ad-free news and current affairs