A wealthy Auckland businessman was given New Zealand citizenship against official advice after a Government minister lobbied the colleague who made the decision.
Maurice Williamson, the Minister of Building and Construction, and Prime Minister John Key then opened the first stage of a $70 million construction project launched by the Chinese-born developer after he became a citizen.
The following year, one of his companies made a $22,000 donation to the National Party.
The Department of Internal Affairs (DIA) recommended that the citizenship application of Donghua Liu be declined on the grounds that he did not spend enough time in New Zealand or meet English language criteria.
However, one of Mr Liu's business partners approached Mr Williamson and John Banks — the Mayor of Auckland at the time — and they wrote to the Minister of Internal Affairs, Nathan Guy, asking him to grant citizenship against the official advice.
"Invested in NZ and a lot of support", was a file note for the case released under the Official Information Act.
Mr Guy, who is no longer the Minister of Internal Affairs, told the Herald that he made the final decision on more than 800 citizenship cases and regularly received correspondence from family and supporters of applicants.
He considered all of the evidence and said of Mr Liu's application: "I considered at the time that, on balance, the potential benefits to New Zealand warranted the granting of citizenship."
The official recommendation of whether citizenship should be granted was ignored in 61 of the 1011 cases between 2009 and 2011.
But the 2010 case was one of several that caused concerns among DIA staff, who raised the possibility of favouritism with the Office of the Auditor-General during an inquiry into a citizenship decision made by Labour MP Shane Jones.
Mr Jones was criticised in the report last year but cleared of any corruption over his decision to grant citizenship to a wealthy businessman who had strong links to Labour.
The Auditor-General was also told of other citizenship files involving support from MPs.
An in-depth investigation of those files was beyond the scope of the original inquiry but nothing was found to suggest that decisions were made "as a result of improper influence".
"However, it is clear that the apparent links between different applicants and their agents, or supporters, coupled with strong support from various MPs and subsequent questions from the minister or ministerial officials caused disquiet among some citizenship officers," according to the inquiry report.
The Auditor-General said there was nothing wrong or improper with MPs advocating on behalf of constituents in citizenship cases, or ministers considering those representations.
"However, advocacy of this kind, in particular where the advocate is a fellow MP or known to the minister, clearly presents risks to the integrity of the decision-making system and to the reputations of those involved," the Auditor-General wrote.
No MPs or supporters were named in the report but Mr Williamson and Mr Banks were identified through Official Information Act requests by the Herald.
Mr Williamson and Mr Key opened the first stage of a $70 million property development project in Newmarket in 2011, the refurbishment of the Boulevard Hotel, described as the "brainchild" of Mr Liu.
Both Mr Williamson and Mr Banks declined to comment on their support for Mr Liu's citizenship because it was a "constituency matter".
Others who supported Mr Liu's bid for citizenship were lawyer Jeremy Goodwin and Roy Mottram, who are listed as directors in different companies with him.
Electoral donation records show that Roncon Pacific Hotel Management Holdings Ltd — of which Mr Liu and Mr Goodwin are directors — made a $22,000 donation to the National Party in 2012.
Mr Mottram confirmed he approached Mr Williamson and Mr Banks to support Mr Liu's citizenship bid as he was making a very significant contribution as a businessman in Auckland, particularly in the construction industry.
"John's support was just a matter of course because the activity was in Auckland City, he was the mayor and he was supportive of things that were good for Auckland," said Mr Mottram.
"Obviously, if you're the Minister of Building and Construction, you would want to promote building and construction, which we have been involved with for a long time."
Mr Mottram said the requirements for New Zealand citizenship, which include the amount of time spent in the country and language requirements, were out of date.
"A lot of active, global businessmen are never in one place for any length of time ... People who have global businesses are global citizens."
The National Party has been accused of cronyism by Labour deputy leader Grant Robertson over the party's dealings with businesses.
Mr Robertson told Radio New Zealand today he was concerned at the way the National Party related to business.
"I think David Cunliffe said yesterday the National Party sees politics as business, well actually it's a bit different from that, and the way that National is going about its relationships with business leads to accusations of cronyism.
"It seems that if you know the National Party you're going to be treated differently than if you were another business in New Zealand.
"What I think people want from this Government is that they treat all businesses fairly and equally."
Green Party Co-leader Russel Norman said the links between National and Mr Liu were "very troubling".
Referring to a previous scandal that followed Shane Jones going against official advice to approve another Chinese businessman Bill Liu's citizenship application in 2008, Dr Norman said: "This is the second round of donations citizenship scandal that the New Zealand Government has been involved in recent years".
"It really is a bad look and very troubling for ordinary New Zealanders."
While no one was claiming that any Government figure had personally benefited from approving Donghua Liu's citizenship, "clearly we have two political parties that have received donations in these circumstances, so I think we do have to look at measures around it".
He believed that where there were specific circumstances where officials had advised against approving someone's citizenship and a minister has overridden that, "there should be some constraint on the minister's political party receiving donations from that person".
"I'm not saying that's our policy, but we need to consider options like that because it's a pretty serious issue."
NZ First Leader Winston Peters "It's just more evidence of the way the National Party does business in modern times."
"It's part of a pattern that's been emerging for some time, that's what the National Party has become. There's no way in the old days the National Party would have tolerated that sort of thing but today it's just cronyism and backhanders."
Labour Deputy Leader David Parker said it seemed that "businesses that have links with the National Party are treated different from other businesses."
"We've had two recent instances which raise concerns, firstly the very blatant Oravida example and now this one.
"The simple principle is that we should be a country that rails against cronyism and protect our traditional standards of conduct and I fear that those standards are being eroded."
Prime Minister John Key said there was nothing wrong with the National Party receiving a $22,000 donation from Mr Liu two years after a senior National MP supported his citizenship bid.
"We live in a democracy and people are free to give donations to political parties that they want to support.
"I'm not responsible for donations for the National Party, I don't engage myself in that. But the party rightfully, so appropriately, recorded that donation and made sure it was public. There was nothing the party was trying to hide.
"[Mr Liu] happens to be a business guy and obviously believes in the agenda the government is carrying out. He was granted residency under Labour so honestly you can see shadows if you want to but I wouldn't.
Mr Key dismissed a suggestion that Ministers should not have the discretionary power to grant citizenship against official advice.
He said many ministerial waivers were granted for citizenship, by both National and Labour goverments, most recently interpreters from Afghanistan who helped New Zealand's armed forces.
"We have to set rules in a pretty strict place but when people come to New Zealand and want to become resident or a citizen they sometimes don't perfectly fit the rules.
"We have language tests to a certain level and the amount of time spend here is sort of two tests, but there are lots of people who get granted exemptions in that area. There's nothing unusual here."
How it unfolded
• 2010: Businessman Donghua Liu granted NZ citizenship by Nathan Guy, the then-Minister of Internal Affairs, against official advice after being lobbied by Maurice Williamson, Minister of Building and Construction, and John Banks, the Auckland Mayor at the time.
• 2011: Mr Williamson and Prime Minister John Key attend the opening of the first stage of Mr Liu's $70 million redevelopment in Newmarket, Auckland.
• 2012: Roncon Pacific Hotel Management Holdings Ltd — of which Mr Liu is a director — makes a $22,000 donation to the National Party.