Former Immigration Minister Jonathan Coleman was aware of Kim Dotcom's previous criminal convictions but did not intervene in officials' decision to grant him New Zealand residency.
The Herald understands that Immigration NZ officials told Dr Coleman of Dotcom's application and their intention to grant residency on the same day the decision was being finalised, which would have given the minister an opportunity to object. But Dr Coleman, who was the minister when Dotcom's residency was approved in October 2010, did not intervene.
Yesterday Labour leader David Shearer and New Zealand First leader Winston Peters asked the Government to clarify the involvement of ministers, if any, in the residency decision.
"The issue for us here is the question of why Dotcom, with his criminal record, was ever allowed into New Zealand," Mr Peters said.
Dotcom, the founder of Megaupload, who is facing extradition to the United States to face charges including copyright infringement, has been convicted of insider trading, computer fraud and handling stolen goods - though he has reportedly been given a clean slate because the convictions were before 2004.
Prime Minister John Key said Dr Coleman was informed because of Immigration's "no surprises" policy, but his approval was neither sought nor given. "The decision was made by the officials. The minister knew about the circumstances but was not required to make the decision ... He was simply made aware of it."
If Dr Coleman had disapproved, however, it is highly unlikely the residency would have been been granted.
In contrast, Dotcom's attempts to buy three slices of "sensitive land" through the Overseas Investment Office were initially approved, but then overturned by Government ministers.
Mr Shearer said there appeared to be an inconsistency because Dotcom passed the test of good character for residency, but failed it in his application to buy land.
"On the one hand, you have an Immigration Minister prepared to let him come in. On the other hand we've got other ministers looking at it through the point of view of the OIO ... I think there's a need to take a look at it for an inquiry."
Mr Key said the tests for residency and overseas investment were different, but immigration officials were reviewing the Dotcom case to make sure they followed correct processes. He said it was not unheard of to be granted residency despite having criminal convictions.
"Officials were required to look at his history. He fully disclosed that history. Under German law under the clean slate provisions, he effectively had a clean record. Officials went and checked with German authorities who confirmed that."
Land Information Minister Maurice Williamson, who with then-Associate Finance Minister Simon Power rejected Dotcom's application through the OIO, said Dotcom failed the test of good character.
He said that he considered many factors, including Dotcom's previous convictions and the potential business opportunities - but he did not consider any factors that were not already in the public domain.
ROAD TO NZ
The Government changed the immigration rules to attract more business migrants, including a new Investor Plus category which requires an investment of at least $10m in New Zealand over three years.
Kim Dotcom is granted New Zealand residency under the Investor Plus category, for which he must also pass a character test.
Government ministers decline Kim Dotcom's applications to buy about 45ha of land in Coatesville, North Shore, and Doubtless Bay, Northland, on the grounds that he did not pass the good character test. The decision overturns the original Overseas Investment Office decision to approve the applications.