Sir John Key's story of how and why he canned a "mass surveillance" programme are at odds with official papers detailing development of the "Speargun" project.

The issue blew up in the final days of the 2014 election with Key claiming the programme was long-dead and had been replaced by a benign cyber-security system called Cortex.

Key always claimed the Speargun project to tap New Zealand's internet cable was stopped in March 2013.

But new documents show development of Speargun continued after the time he had said he ordered a halt - apparently because the scheme was "too broad".

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Instead, they show Speargun wasn't actually stopped until after Key was told in a secret briefing that details were likely to become public because they could be in the trove of secrets taken by NSA whistleblower Edward Snowden.

With days to go until voting in 2014, Key found himself accused by some of the world's most high-profile and outspoken surveillance critics of secretly developing a mass surveillance system with the United States' National Security Agency.

It was high stakes for Key, also Minister of the GCSB, as he had previously promised the public he would resign as Prime Minister if there was ever mass surveillance of New Zealanders

At the Kim Dotcom-organised "Moment of Truth" event, journalist Glenn Greenwald and Snowden claimed our Government Communications Security Bureau spy agency had developed the "Speargun" project to tap New Zealand's internet cable and suck out masses of data.

Pulitzer prize-winning journalist and author Glenn Greenwald speaks at The Moment of Truth event, held at the Auckland Town Hall in the final week of the 2014 election. Photo / Brett Phibbs
Pulitzer prize-winning journalist and author Glenn Greenwald speaks at The Moment of Truth event, held at the Auckland Town Hall in the final week of the 2014 election. Photo / Brett Phibbs

Key denied it, saying Speargun had been canned in March 2013 because it was too intrusive.

He said: "We made the call as government and I made the call as the Minister and as Prime Minister, that actually it was set too broadly.

"What we ultimately did, when it comes to Speargun, in my opinion, I said it's set too far. I don't even want to see the business case."

The NZ Herald has found - after three years of refusals and information going missing - that the former Prime Minister's version of events doesn't match that of documents created at the time.

The plan to develop Speargun began in April 2012 under the guise of "Initiative 7418" when Cabinet asked the GCSB to develop an advanced cyber protection strategy.

The GCSB has confirmed to the Herald that a warrant was sought and granted for "Phase 1" of Speargun between July 2012 and June 2013.

GCSB director Andrew Hampton said in one response: "This warrant was sought to ensure GCSB would be able to undertake any preliminary work as part of the business case Cabinet asked GCSB to prepare."

Details released through the OIA show there was a meeting with the GCSB over Speargun in March 2013.

This was the point at which Key claims Speargun was canned with a press release issued between the Snowden claim and election day saying: "March 2013: PM tells GCSB not to bring business case forward. Informs GCSB it is too broad. Budget contingency funding will be rolled over and used for something else in cyber security."

But new GCSB documents tell a different story, backed up by documents from the Prime Minister's office.

Prime Minister John Key in Rotorua during the closing days of the 2014 campaign. Photo / Ben Fraser
Prime Minister John Key in Rotorua during the closing days of the 2014 campaign. Photo / Ben Fraser

Hampton's response to a recent OIA request stated that on March 28 2013 there had been a meeting with someone - not Key - from the Prime Minister's office and GCSB staff, including the assistant director responsible for Speargun.

"While there is no written record of the discussion, the understanding of GCSB officials who attended the meeting is that (the Prime Minister's office) considered that the (detailed business case) should not be brought forward to Ministers at that time until broader questions about legal authorities and the policy framework had been answered."

At the time, Key was aware of the findings of then-Cabinet secretary Rebecca Kitteridge, whose inquiry found the GCSB had little understanding of its own legal obligations and had been operating outside the law for years.

Hampton said there was an extract from a "project highlight report" which supported the recollection. The dates the report covers - from March 1 2013 to April 28 2013 - also support the recollection, having gone beyond the date which Key previously claimed was the end of Speargun.

The report stated that there was a "decision taken to delay submission of the (detailed business case) DBC until legislative change confirmed/enacted".

Hampton said: "Officials continued to prepare the DBC conscious of the above legislative dependency."

He said officials met with staff from the Prime Minister's office to talk about finalising the business case although it was not, ultimately, presented to Ministers.

Cabinet documents from April 2013 then show Speargun - or Initiative 7418 - had its funding extended through to June the following year.

Wikileaks founder Julian Assange, left, speaks via video link with, from left, Laila Harre, international human-rights lawyer Robert Amsterdam, Pulitzer prize-winning journalist and author Glenn Greenwald and entrepreneur Kim Dotcom. Photo / Brett Phibbs
Wikileaks founder Julian Assange, left, speaks via video link with, from left, Laila Harre, international human-rights lawyer Robert Amsterdam, Pulitzer prize-winning journalist and author Glenn Greenwald and entrepreneur Kim Dotcom. Photo / Brett Phibbs

And there was further information which challenged Key's set of events although his Chief of Staff Wayne Eagleson initially said it did not exist and then insisted the information that did exist was wrong.

When the Herald sought details of Speargun through the OIA, Eagleson passed the request straight to the GCSB, saying "it is the long-standing practice of this Office not to retain copies of sensitive security and intelligence documents".

But three years later, after the intervention by the Office of the Ombudsman, Eagleson admitted there were two sensitive security and intelligence documents which had been kept by the Prime Minister's office.

Eagleson said passing the request to the GCSB to handle meant those documents were overlooked - a fact he said was "regretted".

When the information was eventually released, it appeared to show the Speargun project was still active when part of a critical briefing given to Key in July 2013.

At that meeting, Speargun was raised with the Prime Minister during a "briefing on leaks of alleged intelligence documents" - information taken by Snowden from the NSA.

It means that Key knew more than a year before the "Moment of Truth" event that it was possible Snowden would release details of a project intended to scan all internet traffic coming into New Zealand.

The briefing document - presented by the Department of Prime Minister and Cabinet's director of intelligence coordination - stated: "The implementation of Speargun is currently on hold pending clarification of the legislation."

Prime Minister John Key a few days before polling day in 2014. Photo / Mark Mitchell
Prime Minister John Key a few days before polling day in 2014. Photo / Mark Mitchell

When providing the information to the Herald, Eagleson argued that the record created at the time must be wrong because it contradicted Key's claim Speargun had been canned.

However, funding for Speargun was not actually pulled until September 2013 - after the new GCSB Act had passed.

At a Cabinet meeting on September 2 2013, it was decided to halt funding for Speargun and that Ministers would return to Cabinet to seek that funding to support a new plan.

In April 2014, a business case for the Cortex system had been developed and was approved.

It was a big step-down from Speargun, which was intended to sit across the undersea cables carrying New Zealand's communications with the world and scan data.

Instead of capturing everything, Cortex provided narrow protection for those organisations that requested it.

Key was approached for comment on a story about Speargun and has not responded.

New GCSB minister Andrew Little has been asked for the current Government's position on mass surveillance.

There has been no response in the five days since the question was posed.

NSA whistleblower Edward Snowden speaks at The Moment of Truth event in 2014. Photo / Brett Phibbs
NSA whistleblower Edward Snowden speaks at The Moment of Truth event in 2014. Photo / Brett Phibbs