Māori loan affair
[6] At the beginning of 1987 a Television New Zealand report from Hawaii claimed a link with the CIA and suggested an American attempt to destabilise the Labour government because of its anti-nuclear policy, although Palmer thought the matter involved incompetence in the department.
[8][9] Roderick Deane, the Chairman of the State Services Commission, was asked to investigate, and when he uncovered evidence of departmental incompetence, produced a fuller report on Christmas Eve.
Sometimes working through the night, he found that "some ministers" had known about the negotiations but failed to stop it, and Reedy's signing of a document headed "Unconditional and Irrevocable Fee Agreement" was unauthorised and contrary to Treasury advice.
[10][11] The terms of 4% interest over 25 years were not believable; the money according to a telex from the embassy in Washington was probably laundered, fraudulent or non-existent; and the supposed source of the loan, one Achmed Omar of the Kuwaiti royal family, did not exist.
Raepple had arrived in New Zealand in January, and on 21 January Lange took a swipe at "some of the Māori whingers and activists (with) something of a cargo cult mentality which is an utter betrayal of what Māori enterprise is about" and "self-appointed activists in international finance ranging from undischarged bankrupts to lapsed priests and all sorts of people who accept the bona fides of (Raepelle) who will not allow his credentials to even be read by a newspaper".
Bassett commented that "the likes of Eva Rickard, Sonny Waru, Ken Mair and Eru Potaka Dewes who were strutting about, knew little about business".
[15] Journalists investigated (Rocky) Cribb, the supposed Hawaiian bankers, the shadowy Europeans Max Raepple and Michael Gisondi, and their Māori connections.
Deane discovered through his international bank contacts that "Both the Europeans, it transpired, were specialists in phoney money schemes, and at Cabinet on 20 January 1987, Lange entertained ministers with lurid accounts of Gisondi's activities".
[17] Gerald Hensley, the head of the Prime Minister's Department, wrote that a small group from the Reserve Bank, Police, Ministry of Foreign Affairs and intelligence agencies helped by the FBI and Washington's currency protection office investigated the people involved and uncovered "a convoluted rat-run of money-launderers, criminals, and snake-oil salesman who had descended on the Pacific and our own Māori Affairs Department in the wake of the petrodollar boom".
The Arab connection was said to be a former Kuwaiti finance minister, plus other rogues like a retired Air Force general who was a "playboy and drunk", someone hinting of links to the CIA, a fashionable interior decorator and other "convicted fraudsters, bankrupts and promoters of collapsed companies".
[18] Raepple "was regarded by overseas currency and fraud protection services with a marked distaste increased by the fact that in a series of dubious operations no one had been able to fasten a criminal conviction on him".
So Cabinet on 9 February held a lengthy discussion and the resignation proposal was rejected, with only four ministers in favour (Lange and Palmer plus Russell Marshall and Margaret Shields).
Douglas told Wētere at the Cabinet meeting that "I don’t want to see you on television every night for the next four weeks of a by-election campaign talking about Māori loans that weren’t raised when there are ever so many more important matters before us in election year".
