John Key's Government yesterday sustained its most significant casualty to date with the loss of senior Cabinet minister Nick Smith who resigned over his interference in an ACC claim by his friend and National Party activist Bronwyn Pullar.
A 21-year veteran of Parliament, Local Government, Environment and Climate Change Minister Dr Smith announced his resignation in an emotional statement to the House.
Commenting later on the events that led to his resignation, Dr Smith did little to dispel speculation that his relationship with Ms Pullar was more than platonic.
He said the Herald's revelations this week - that as ACC Minister last year he had written Ms Pullar a reference - had brought him to the brink of stepping down on Tuesday.
But early yesterday he'd reviewed all of his correspondence relating to Ms Pullar, who suffered injuries in a 2002 cycling accident.
That review had uncovered three additional letters, and though he was satisfied he had managed any conflict of interest in two of those, he said he had failed to declare his conflict of interest in the third.
"It was that letter, in which having not erred once but erred twice, that has brought about my resignation."
In the March 2010 letter to National's Maungakiekie MP Peseta Sam Lotu-liga, who was advocating on behalf of Ms Pullar, Dr Smith noted that former Associate ACC Minister Pansy Wong and Auckland Central MP Nikki Kaye had declared their conflict of interest with regards to Ms Pullar.
However, Dr Smith did not.
"Bells should have rung. I honestly can't recall why I signed that letter out."
Ms Pullar is the woman at the centre of a huge privacy scandal at ACC. Last year she was accidentally sent information on about 6700 other ACC claimants, including data which identified some as making "sensitive claims" for injuries resulting from rape or other forms of sexual assault.
Her alleged attempt to trade the information for benefits at a meeting late last year with ACC - where she was supported by former National Party president Michelle Boag - is the subject of a police investigation.
She began pressuring Dr Smith to help her with her claim when he became ACC Minister in 2008.
However, Dr Smith yesterday denied that he had bowed to that pressure in writing the reference, and did not believe Ms Pullar had gained anything from ACC as a result of his actions.
Prime Minister John Key said he was disappointed with Dr Smith for writing the reference, which was "pretty close to the line", but that was offset by his long and distinguished service. The second letter, however, made his position untenable. "Maybe one error would have been okay, but two errors is one too many."
Labour leader David Shearer said the second letter was a convenient excuse for Mr Key to force Dr Smith out. "I think he's using it as a smokescreen. He had enough information and enough cause to sack Nick Smith yesterday but he failed to do so. This is not living up to his high standards."
But though Dr Smith didn't think the second letter was "particularly damaging" it has pointed to earlier and potentially more significant interference in Ms Pullar's case than his reference. In the letter, Dr Smith says he had asked ACC for information relating to Ms Pullar's case
The Herald has asked for a copy of that request, which would have alerted ACC staff to Dr Smith's interest in the case, but had not received it last night.
Mr Key said he'd had a brief discussion with Dr Smith about his friendship with Ms Pullar.
"I don't need to know the details of that friendship. You either have a conflict of interest or you don't, and he clearly did ... and the nature of the relationship is not really material."
It was possible Dr Smith would be reinstated as a minister within the current term, Mr Key said.
Ms Boag would not comment other than to say it was a sad day for Dr Smith and the National Party.
Dr Smith's Local Government, Climate Change and Environment portfolios are to be handled by Gerry Brownlee, Craig Foss and Chris Finlayson respectively until formal appointments are made.