MP Shane Jones is expected to return to Labour's front bench - but may still face questions over his decision to grant citizenship to a Chinese billionaire.
A draft report by the Auditor-General, Lyn Provost, is understood to clear Mr Jones of any unlawful behaviour in approving a New Zealand passport for Bill Liu, also known as Yong Ming Yan and William Yan.
But sources have warned against assuming he is out of the woods. The report is also said to contain criticisms of process.
Labour leader David Shearer yesterday gave a clear hint that he will again promote Mr Jones to the front bench. He was stripped of his portfolios while the watchdog carried out its investigation.
Mr Shearer said the draft report was "pointing in the direction". Although he has yet to read it, he has discussed it with Mr Jones.
"It looks to him to be reasonably straight-forward . . . from what I understand there is no criminality or anything involved, which we always expected."
But sources who have seen the report warned Mr Jones' exoneration was not straightforward.
"Those matters are a question of degree, and I would refrain from rushing to judgment . . . the arguments are quite complex," one said. Another source said the report was not "unequivocal" in clearing Mr Jones.
The case dates back to 2008, when Mr Jones, as associate immigration minister, granted a passport to Mr Liu, a Chinese national with a shadowy past. Mr Liu was the subject of an Interpol "red flag" notice as Chinese authorities wanted him for alleged embezzlement. He also had aliases.
Officials could not be certain of his true identity and advised that citizenship be declined. Rick Barker, internal affairs minister at the time, delegated the case because he had personal links to Mr Liu.
The scandal blew up again last year when Mr Liu, a Labour Party donor, appeared in court charged with passport fraud. He was cleared but the controversy led Mr Shearer to call in the auditor-general and stand down his MP.
Mr Jones said he was told Mr Liu would be executed and his organs harvested. However, that advice does not appear in pages of documents released by both immigration and internal affairs.
Prime Minister John Key has not seen the report, but waded in anyway.
"Whether he's taken back or not is rather irrelevant. He's had a pretty chequered career. He wasn't exactly known for being an incredibly stellar minister . . . I don't think National will be too worried about it."
Dover Samuels, a former Labour MP and close friend of Mr Liu, confirmed the report had been sent to affected parties - but he had not yet seen it. He expected Mr Jones to be cleared.
A spokeswoman from the Auditor-General's Office said it would be a few weeks before the final report was released. She stressed the circulated document was a draft and "things still could change".
- Fairfax Media
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