The 18 people arrested during the Urewera police raids are likely to face fines if they are convicted of firearms charges, a leaked US embassy document says.
The cable, published by the website WikiLeaks, is from the US embassy in Wellington to State Department officials in Washington.
The cable was sent by the then US ambassador William McCormack in November, 2007, and provides a background and some limited commentary on the Urewera police raids a month earlier.
"New Zealand police have told post that they expect those charged to escape incarceration and likely to pay only a fine," Mr McCormack said.
Lawyer Moana Jackson was the co-author of a letter to Solicitor General David Collins QC last week. The letter asked for a stay in proceedings and was signed by 150 prominent Maori, academics and activists.
Mr Jackson said the cable shows the tragedy of police allowing the case to go on for four years.
"It shows that they realised very early on that once the terrorism charges were thrown out, that all they had left were Arms [Act] charges and those are run of the mill, day-to-day charges."
Lawyer Charl Hirschfeld is representing one of the accused.
Asked whether the accused would face a fine if they were convicted of firearms charges, Mr Hirschfeld said: "There is a view that if there were any worth in the case at all, it wouldn't rise much above that, if indeed it could reach that at all."
Human rights lawyer Michael Bott had represented one of the Urewera accused but has now pulled out from the case to focus on a political career.
He said the American embassy appears to have "got its facts wrong".
"The New Zealand police have spent millions in relation to the case and have been advised by the Crown and a private law firm in prosecuting the case.
"You don't throw a $10,000 saddle on a $50 horse."
He said the police are not just looking for convictions on firearms charges.
"The police are wanting heads on plates."
Mr McCormack's cable, classified "for official use only" also makes mention of Solicitor General David Collins QC finding that the accused could not be prosecuted under the Terrorism Suppression Act.
Mr McCormack said some politicians, journalists and activists have argued that the Terrorism Suppression Act had been "merely passed into law to appease the United States' Global War on Terror".
"In the post-9/11 world, one would expect that New Zealand would have an adequate law to deal with foreign as well as domestic terrorism - it does not."
He said the then Labour-led Government - "many of whom are veterans of Vietnam War-era street protests" - are uncomfortable with legislation that undermines legitimate political expression.
"We hope the Law Commission, which will review the law and make recommendations, will find a way to preserve peaceful political dissent and civil liberties without leaving the country vulnerable to those - foreign or domestic - who would do it harm."
Meanwhile, lawyers for the 18 accused are in the Supreme Court and will continue legal arguments about the case today.
The arguments have been suppressed by the court.
Lawyers are also seeking leave to appeal against a High Court decision that denied the accused a trial by jury.
The trial for 15 of the accused is set down for the end of this month at the High Court in Auckland. Three others will be tried separately.