German internet tycoon Kim Dotcom says Prime Minister John Key is lying about what he knew about him before police raided his Coatesville home in January 2012.
Mr Dotcom made the claim to reporters after appearing before a Parliamentary hearing into controversial new GCSB legislation where he outlined his concerns the new law would undermine New Zealanders' privacy.
In his submission he told the committee chaired by Mr Key that he had "the misfortune of experiencing what happens when surveillance powers are abused".
"These abuses should never happen again that's why I'm here to speak out against the proposed spy law."
Mr Dotcom also told the committee he knew that Mr Key knew about him and his activities before a January 19, 2012 briefing which Mr Key says was the first he knew of the MegaUpload founder and alleged internet pirate.
That briefing took place the day before Police raided Mr Dotcom's Coatesville home.
Facing reporters outside the committee room, Mr Dotcom said he had proof Mr Key had earlier knowledge of him.
However he could not provide the proof until he and his business associate Bram van der Kolk and two other colleagues appeared in court over a US bid to extradite them on internet piracy charges.
"That has to come out in court and not here today."
"He lied to all New Zealanders when he said he didn't know about me."
Accompanied by Mr van der Kolk, Mr Dotcom's face off with Mr Key in the committee room was at times testy, with the German businessman taking issue with the 15 minutes allocated for his presentation rather than the 25 minutes he thought he had.
The verbal jousting between the two escalated when Mr Dotcom made his claim about Mr Key's prior knowledge of him.
"He knew about me before the raid", Mr Dotcom said in response to a question from Labour Leader and committee member David Shearer.
"I didn't," Mr Key replied.
"You know I know," Mr Dotcom said.
"I know you don't know actually, but that's fine", Mr Key said, drawing laughter from those gathered in the packed out committee room.
"Why are you turning red, Prime Minister?" Mr Dotcom asked.
"I'm not. Why are you sweating?" was Mr Key's response.
"I'm hot", Mr Dotcom said.
Earlier, Mr Dotcom pointed to the recent reports of widespread monitoring of internet communications and spying on EU allies by US intelligence agencies.
That was not a model that New Zealand should be trying to emulate he told the committee.
Mr Key had failed to explain why greater powers for the GCSB were needed.
"We should avoid blindly following the US into the dark ages of spying abuse."
He said that in 1980s New Zealand had "stood up to the United States" by banning nuclear ships.
Former Prime Minister David Lange's "great stand" had given New Zealand "true independence and the moral high ground" albeit at the cost of billions of dollars in trade with the US.
He questioned whether that "heroic stand" should be repeated over with regard to surveillance issues.
Mr Key is the chairman of Parliament's Intelligence and Security Committee which is having rare open sessions this week to hear submissions on the Government Communications Security and Related Legislation Amendment Bill.
Arriving at Parliament for the hearing this afternoon after travelling to Wellington by helicopter, Mr Dotcom was asked whether New Zealanders could trust this country's spy agencies. His reply was "no".
Earlier this afternoon Mr Key said he didn't believe Mr Dotcom was responsible for the legislation being overhauled.
"The truth is the GCSB legislation actually was not the issue when it came to Kim Dotcom, actually the people in GCSB simply got it wrong and no changes we're making to the law would actually have made any difference to that."
However, Mr Key conceded issues around GCSB's role in monitoring Mr Dotcom and his associates before his home was raided, "certainly sparked off the inquiry that led to a strengthening of the whole organisation".
Asked whether he was concerned about facing Mr Dotcom, Mr Key said he was "not bothered in the slightest".
"He's another submitter isn't he? He's here to talk about the bill, I'm sure he'll try and do his own set of grandstanding... if he wants to talk about anything else he's free to do that but it's not going to make any difference."
Asked whether he was prepared to compromise over the bill, Mr Key downplayed the prospect of material alterations but "there will definitely be changes" as he sought to build a parliamentary majority to pass the legislation.
Earlier today, the Intelligence and Security Committee was told the new GCSB bill should specifically address the issue of metadata.
At present the bill makes no mention of it.
Mr Key has refused to answer questions, not only about the collection of metadata (information about communication) by the GCSB, but Herald questions about whether he sees some part of the bill as authorising its collection.
Thomas Beagle of Tech Liberty, an affiliate of the Council for Civil Liberties, said "metadata" should be subject to the same controls and limitations as "communications" in the bill.
That would mean that the GCSB would not be able to collect metadata on New Zealanders or permanent residents without a warrant or an access authorisation.
Section 14 of the bill says that nothing can be done by the GCSB for the purpose of collecting private communications of New Zealanders or permanent residents.
Mr Beagle wants that protection to be extended to metadata.
He referred to the fact that the collection of metadata at Parliament had played a role in the resignation of an MP - Peter Dunne as a minister as the chief suspect in the leak of the Rebecca Kitteridge report into the GCSB.
Mr Beagle also said the bill should ban the GCSB from creating databases of information about New Zealanders who are not actively under investigation.
The GCSB is New Zealand's foreign intelligence agency but it has been spying on New Zealanders for over a decade when helping other domestic agencies such as the police, the SIS domestic spying agency, and the defence force.
The bill will explicitly authorise that sort of spying and also allow the GCSB to spy on New Zealanders in carrying out its function of protecting Government and private cyber systems from threat.
Mr Beagle said the GCSB was not the right agency to be responsible for cyber security.
"It will be difficult to trust an agency that has the dual role of both spying on systems while ensuring that they are protected from others."
Former Green MP Keith Locke was the first submitter today.
He said the bill should not proceed while "we are a long way from finding out how much intrusion there is on our privacy by the manner in which the GCSB and its Five Eyes partners [Australia, USA, UK and Canada] collect information on people's communications.
The disclosure about the systems of mass collection and processing of millions of email and internet communications by the US National Security Agency raised questions about whether New Zealanders were being caught up in the "dragnet."
Mr Locke also said any help New Zealand was giving to the NSA to help spy on China was not in New Zealand national interests.
Mr Key asked Mr Locke if he believed that China might be collecting information on New Zealand. Mr Locke thought that New Zealand was an open society and there wouldn't be much information it would be interested in.
Mr Key also asked whether he believed that the Chinese telecoms equipment company Huawei was spying on communications - as Labour and the Greens have claimed - and he didn't believe so.