Labour Party leader David Shearer has asked the Auditor General to investigate Shane Jones' handling of the citizenship application of Chinese businessman William Yan in 2008 and stood him down while the inquiry takes place.
Mr Shearer wrote to the Auditor General today to ask for an inquiry into the decision Mr Jones made to grant citizenship to Yan, against officials' advice that he should decline it because of questions about Yan's multiple identities and a warrant for his arrest in China.
Mr Shearer said Jones supported the decision to refer it to the Auditor General because it was the only way to clear his name.
"Shane has encouraged me to take this action because he has been left in the impossible position of not being able to clear his name. An inquiry will enable him to do so."
Mr Jones told National Radio he had been involved in the decision to stand him down while the Auditor-General investigated.
"David is our leader and obviously he's put out this statement ... but I'm more than willing to stand with him and acquiesce in standing down etc. In terms of details of the case and what has been said about me, I look forward to the Auditor-General giving me some space to answer those allegations.''
Mr Jones said he would wait and see whether he was given the opportunity to correct what had been said about him in court, which he described as "malignant''.
Yan is currently facing charges of making false declarations on immigration documents and a decision in his court case is expected tomorrow.
Mr Shearer said he still believed Mr Jones had followed proper processes, but the differing statements made inside and outside of court, adn the questions raised publicly had prompted him to refer it to an independent agency.
"New Zealanders must be able to have confidence in the processes of government and that is why Labour believes it is important for the Auditor-General to provide reassurance that the appropriate action was taken in this case,"
Mr Jones will stand down from the front bench and his portfolios while an investigation takes place.
"I stand by my decision not to stand Shane down earlier because I believe that everyone has the right to natural justice and to be given the opportunity to answer questions."
A judgement in Yan's case is expected tomorrow.
Mr Jones has defended his decision, saying it was based on humanitarian grounds because a hig-level Government official had told him Yan faced execution if he returned to China.