New Zealand Government Admits to Spying Bungle in Kim Dotcom Extradition Case

SYDNEY -- New Zealand police have been blamed for the Kim Dotcom spying controversy that erupted Monday after Prime Minister John Key called for an inquiry into why the nation’s intelligence agency, the Government Communications Security Bureau, had illegally bugged Dotcom and an associate, Bram van der Kolk, before their arrest.

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Key on Monday announced the inquiry, which is due to report next week, after the GCSB admitted last week that it had acted unlawfully.

The bureau had acquired communications in some instances without statutory authority, Key said.

It is illegal for the GCSB to gather intelligence on NZ nationals and residents. The GCSB is only permitted to monitor foreign intelligence, and Dotcom has held NZ residency since December 2010.  

Court documents released Tuesday showed that the Organised and Financial Crime Agency New Zealand (OFCANZ), wrongly told GCSB agents the pair were foreigners, according to Fairfax NZ.

"What I would say is that I'm very disappointed in the agency. I've made that quite clear," Key said Monday. "I expect our intelligence agencies to operate always within the law. Their operations depend on public trust."

The PM’s admission is the latest misstep in the case surrounding the extradition of Dotcom and his Megaupload colleagues to the U.S. They are wanted by the FBI on charges of racketeering, copyright infringement and money laundering. However, search warrants used on the raid have been ruled illegal, and Dotcom’s legal team wants the FBI to disclose what evidence it has against him.

The extradition case is due to be heard in March. A further hearing on the search warrants is to take place in Wednesday in Auckland.

"I'm now a real-life James Bond villain in a real-life political copyright thriller scripted by Hollywood and the White House," Dotcom tweeted as news of the inquiry broke.

 “We came to NZ to raise our young family in peace. The Government greeted us with unlawful acts, abuse & terror while Mega was totally legal,” read another tweet. A third said: “I welcome the inquiry by @JohnKeyPM into unlawful acts by the GCSB. Please extend the inquiry to cover the entire Crown Law Mega case.”

Referring to the mistakes that are piling up in the case, he said, “Illegal restraining order. Illegal search warrant. Illegal removal of evidence to the U.S. Unlawful surveillance by the GCSB. To be continued.”

Dotcom's U.S. lawyer, Ira Rothken, said Monday that he would not prejudge the investigation but is "interested" to know if U.S. authorities were involved, according to Fairfax NZ.

"I think anytime the prime minister orders an inquiry of the intelligence services potentially spying on residents domestically, there should be a healthy concern," Rothken said.