The Government and its foreign intelligence agency sat on the knowledge it may have illegally spied on New Zealanders for months.
Questions were first raised by security services watchdog Paul Neazor last May, and Prime Minister John Key was informed in July that there may be a problem.
And when the Kim Dotcom spying scandal blew up, the Government Communications Security Bureau asked Acting Prime Minister Bill English to sign a warrant covering up its role in the operation to snare the internet tycoon.
Key was in the US, watching his son play baseball.
The Government was forced yesterday to hastily release a critical report by Cabinet Secretary Rebecca Kitteridge on the GCSB, after it was revealed that the report found 85 other people may have been snooped on illegally from 2003 to 2012.
The GCSB is barred from spying on New Zealanders and those with permanent residence.
Key first revealed in September last year that the bureau may have acted unlawfully in the Dotcom case. But he did not reveal the other cases - in which the GCSB acted on behalf of the SIS - until yesterday.
At a post-Cabinet press conference on September 24, Key was asked if he could give an assurance this was an "isolated incident".
He replied: "That's my belief. I've never had advice in the four years that I've been minister that they've in any way ever acted unlawfully outside of the advice I received last Monday, which was that they possibly acted unlawfully."
Labour has called for a full inquiry into the intelligence services. Leader David Shearer said last night: "John Key has misled New Zealanders about what he knew about the unlawful spying. I struggle to believe Mr Key because his story has changed so many times."
GCSB director Ian Fletcher insisted last night that the illegal spying on Dotcom was "very promptly disclosed" when it became clear to the agency. "It was a really unacceptable mistake, but a mistake," he said.
The bureau's work with other agencies was not immediately frozen because government lawyers, including Mr Neazor, the Inspector-General of Intelligence and Security, and the Crown Law Office, believed it was a question of legal interpretation, he said.
A ban on assisting other agencies was put in place in September and will continue until legislation covering the GCSB is amended. Key has pledged to do this on his return from China next week.
Fletcher explained that after deputy director and sole legal adviser Hugh Wolfensohn left last year, government lawyers began to revise their opinions.
Wolfensohn previously dismissed fears about Dotcom's residency in February. Key and Fletcher say they were not told about this at the time.
Key said the report was "sobering reading". Police have determined no arrests or prosecutions were laid in the new cases identified in the Kitteridge report, he confirmed.
Neazor has now been asked to review the new cases. He was originally tasked with investigating how the blunder over Dotcom's residency status occurred.
His six pages of conclusions, published last year, make no mention of concerns he raised about joint SIS-GCSB work.
Fletcher said the GCSB was "pressing on" with recommendations from the Kitteridge report on organisation and culture. It has already begun recruiting new staff, including an associate director.
"The scale of the reorganisation and cultural issues is probably more than I initially expected," he said.
"The Government has accepted the recommendations and off we go."
SURVEILLANCE THAT WENT WRONG
The Government Communications Security Bureau was acting on behalf of police. It wrongly assumed Dotcom was not a New Zealand resident and did not check his status with police. His status was first questioned at a joint police-GCSB debrief in February, but Hugh Wolfensohn mistakenly concluded the surveillance was legal because Dotcom's status, under the investor-plus category, meant he was not a permanent resident.
The bureau has admitted it acted illegally and apologised to Dotcom.
GCSB was acting for the SIS in 55 instances. It believed it was covered by warrants obtained by the SIS.
There was a long-standing belief the bar on spying on New Zealanders did not apply when the bureau was acting under the legal authority of the SIS warrants.
It also assumed the law allowed it to intercept "metadata" - information such as that which appears on a telephone bill. It was judged not to be a "communication".
The bureau now believes metadata would probably constitute a communication.
- Fairfax Media
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