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The Auditor General gave incorrect legal advice on Councillor Fairey's Auckland Airport shareholding

Auckland Councillor Julie Fairey, who is the wife of under-fire Cabinet minister Michael Wood, has been advised by the Auditor-General she doesn't have a conflict of interest arising from her position as trustee & beneficiary of a Trust that owns Auckland Airport shares and so can vote today on the sale of the Council's shares in that company.

"I have now received written advice from the office of the Auditor-General and from [the] council's legal team that, in their view, my situation does not represent a conflict of interest - as I cannot reasonably expect financial loss or gain from these decisions and that I am, therefore, able to participate [in the vote] under the Act".

The Auditor General's advice is incorrect. The argument against the sale of the Council's 19% shareholding is primarily based on the ability of the Council to influence the future direction of the Airport's development, with has huge implications in terms of the value of that company. Sir Barry Curtis, who was Mayor of Manukau from 1983 until 2007 and a former member of the Auckland Regional Authority, wrote a few days ago that:

"The combined leadership of the two pre-amalgamation councils proved that a significant shareholding of around 20 percent does offer the opportunity to nominate directors onto the board [of Auckland Airport] to influence the direction of the company" and due to this fact, "Auckland Council must protect the city’s interest in NZ’s main gateway to the world".

He is stating that the Council's influence over Auckland Airport via its shareholding has direct bearing on how it performs, contradicting the Auditor General that there cannot be expectations of a financial impact coming from the decision to sell the Council's shares.

Take another example to prove the point. The Finance Minister has put in writing that since the government is a large shareholder of Air NZ, there are expectations on the airline which include maintaining a "comprehensive domestic route network that allows people & goods to move across NZ in a timely fashion at a reasonable cost" and "To demonstrate its commitment to environmental sustainability". The reason why the government continues to maintain its shareholding in Air NZ is to influence its decisions, with vast commercial impact.

Maybe the Auditor-General should stick to auditing and stop trying to do economics, particularly on the topic of privatization.



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