In an extraordinary turn of events the head of New Zealand’s Labour Party has been in Melbourne poring over a 13,000 page court file of one of Australia’s most explosive white collar crimes in an effort to destroy Opposition Leader John Key.

Party president Mike Williams spent several days last week investigating the 1980s case. Labour had planned to hit Key over the issue, after taunting him about his involvement in the saga for more than two years.

The charges centre on a so-called H-Fee — two payments totalling $66.5 million to Equiticorp funnelled via sham foreign exchange transactions in 1988 — and a newspaper interview with Key last year.

Labour thought a signature on the $39m first H-Fee cheque bearing a striking resemblance to Key’s, but the documents showed the cheque was signed by an Australian-based executive of the firm for which Key worked.

This is what the New Zealand Herald newspaper printed today:

The records show Key told an investigator for the Australian National Crime Authority in May 1991 that Key he resigned on June 24, 1988, and was immediately placed on leave because he was going to a rival, Bankers Trust. “For the next two and a half months until I finally left Elders I travelled to Australia to meet with Elders people, took holidays, spent time at home and worked on the takeover of a stockbroking firm,” he said.

During last year’s newspaper interview, Key confirmed he was a foreign exchange dealer at Elders Merchant Finance, part of Australian-based Elders IXL, which made the payments to the Allan Hawkins-controlled Equiticorp. But he said he left Elders in 1987, before the transactions were processed.

“[Labour is] sitting there thinking … ‘We’ve got this guy because John Key has done the foreign exchange deal with Elders IXL that transferred the money to Hawkins’,” he said. “Small issue – three months before any of these deals got decided I left Elders [on gardening leave]. I was never involved in them.”

Checks by the Herald of Melbourne court documents did raise questions, however, about several aspects of Key’s version last year, including his memory of when he left. He resigned from Elders in June 1988, six months after the first payment, though there is no evidence he was involved in the shams.

Key said yesterday he did not know about the January 11 transaction until told about it by the Herald. The court documents show it was handled in Australia by Ken Jarrett, who confessed to his role and went to prison. “That’s why I’ve never known about it because it never went through our [Elders Merchant Finance] books,” Key said.

The first H-Fee payment of $39.5 million was made on January 11, 1988. It was handled by Jarrett.

The second H-Fee payment of $27 million was made on September 7, 1988. Jarrett told the court that because auditors had raised a query about the first payment, he needed to take more care with the second payment. He travelled to Wellington and attended a meeting which included trader Paul Richards, a friend and former colleague of Key’s who took over as the head of foreign exchange in Wellington when Key resigned.
Richards told the court the meeting was on the same day he and Key went to lunch to mark Key’s last day with Elders, August 31.

Key told the Herald last year he could back Richards’ version of evcents because he – Key – had paid for the lunch and had the credit card bill to prove it.

Key now says that he always held the belief that the credit card used was his, but conceded it could well have been Richards’:

“I guess I’m telling you because I’d rather be on the front foot. I don’t really care. There’s absolutely nothing I’ve got to hide. Everything is totally correct and honest and transparent.”

Key told Radio New Zealand he was “absolutely not” involved with the H-Fee transactions and had made no attempt to mislead anyone when talking to the media about it.

“What we have seen is the Labour Party going on a dirt digging exercise, sending their research unit and their president to Australia. It’s just more of a smear campaign from Labour.

“There’s been a pattern of behaviour by the Labour Party. They have spent the last two or three years focused on scandals and trying to dig dirt.”

Prime Minister Helen Clark, who is fighting for her political life, backed off, saying: “This is not a story I am handling at all.”

A former head of the Serious Fraud Office Charles Sturt, who interviewed Key about the transactions, told Radio New Zealand today Key was never involved.