Solid Energy withheld financial information from Treasury when challenged on its business plans in what an independent report says was a pattern of disrespect the company showed to officials monitoring its performance.
Treasury yesterday released a review by accounting firm Deloitte of its monitoring of Solid Energy which appears likely to be broken up and sold off after overextending itself and almost failing under the weight of $390 million in debt and low coal prices.
Deloitte said it did not believe "that the failure of Solid Energy has highlighted a material failure in Treasury's monitoring processes".
However, the report goes on to raise questions "whether Treasury's response was forceful enough or occurred soon enough given that the company provided cause for concern over an extended period".
Deloitte said several Treasury staff it interviewed "identified a sense of tension from the chair and chief executive particularly when challenged on more fundamental aspects of their business and strategy".
While there was no single event requiring "fundamental action" with respect to chairman John Palmer and chief executive Don Elder, there was a series of small events which over time created "an impression of an entity that was not as respectful of Treasury's role/responsibility as ministers would expect of an SOE".
The report gives a series of examples where Solid Energy showed "tardiness and efforts to push the boundaries of the monitoring process".
Deloitte was also given examples of the company's "lack of respect for commercial expertise that set the scene for difficult interactions, particularly surrounding core issues with Solid Energy's governance".
The first written evidence of this was in April 2011 when a Treasury analyst requested financial information underpinning Solid Energy's evaluation of one of its projects.
Deloitte understood Mr Palmer told Treasury the request was unprofessional and Solid Energy would not provide the information.
"Following robust disagreement from Treasury, the chair instructed the Solid Energy management team to provide the analysis. It is our understanding it was never provided."
The Deloitte report comes just a few weeks after Treasury released documents showing Mr Palmer fought against Treasury's wish to have an independent advisor appointed to the company's board last year as the state owned coal miner's problems mounted.
Deloitte's report concludes that the removal of Mr Palmer and Dr Elder "may have been warranted."
However it noted that for Treasury to initiate such action "would have required it to effectively form the view that it lacked confidence in a board and executive with a sound track record in a technically complex industry".
Labour's State Owned Enterprises spokesman Clayton Cosgrove said the report reflected poorly on shareholding ministers Tony Ryall and Bill English who were " too slow to act and too weak to sack the board".
Mr Cosgrove has written to Auditor General Lynn Provost asking her to reconsider her decision not to investigate events leading to Solid Energy's near collapse.
Prime Minister John Key said the report showed there was room for Treasury to improve its monitoring of state owned enterprises. He also said the report showed his Government's mixed ownership model was "the right way to go because actually the oversight will be greater as a result".