The "very close relationship" between the government's exploration regulator and private security firm Thompson & Clark led the agency to become involved in surveillance activity involving two political parties - the Green and Mana parties, an inquiry for the State Services Commission found.
Releasing the report of an inquiry into the use of private security firms by government agencies during the past decade, State Services Commissioner Peter Hughes said it was "never acceptable for an agency to undertake targeted surveillance of a person just because they are lawfully exercising their democratic rights, including their right to freedom of expression, association and right to protest".
"That is an affront to democracy," said Hughes. He said he was asking the Ministry of Business, Innovation and Employment to consider discontinuing 'Operation Exploration', which was set up in 2013 after legislation was passed making it an offence to be within 500 metres of offshore oil and gas infrastructure. The law was intended to stop protesters impeding the work of seismic survey ships and oil and gas recovery platforms.
MBIE's New Zealand Petroleum and Minerals unit had demonstrated "poor regulatory practice" by adopting an "uncritical" and "problematic" approach to surveillance of environmental activists, the inquiry led by Doug Martin of consultancy Martin Jenkins and Simon Mount QC concluded.
In particular, Operation Exploration's adoption of the concept of monitoring 'issues motivated groups' guided the design of enforcement activity "in a manner that was problematic".
Operation Exploration involved NZP&M, the New Zealand Police, Thompson & Clark and various private sector oil and gas companies involved in offshore Taranaki exploration and production.
A Minerals Exploration Joint Intelligence Group - MEJIG - was established "to consider intelligence and highlight activities that might potentially lead to interference with offshore petroleum and minerals exploration".
The MEJIG was under police leadership, but "the operating tempo of when that group met was often determined by Thompson & Clark", the investigation found.
In the course of participating in Operation Exploration, NZP&M uncritically accepted the labelling of the Green Party, represented in Parliament at the time, as what Thompson & Clark called an "issue-motivated group" for surveillance purposes, along with Greenpeace and other activist groups.
Greenpeace New Zealand's executive director Russel Norman, who was co-leader of the Green Party at the time, issued a statement condemning what he said was "Stasi-like" surveillance, referring to the pervasive surveillance of the lives of all citizens in pre-1990 Communist East Germany.
Greens co-leader Marama Davidson called the inquiry's findings a "wake up call".
"We already know that big business has a heavy influence on politics through donations and corporate lobbying, but the collusion between government departments and private security firms with links to the oil and gas industry is a shock that must lead to culture change from the top down," she said.
The inquiry found that at least some of the information provided to the MEJIG had been gathered by surveillance undertaken by Thompson & Clark, "particularly surveillance of Greenpeace".
"It was clear to the inquiry that Thompson & Clark has undertaken significant and sustained surveillance of Greenpeace", including monitoring the training and state of readiness of the direct action groups that have long defined the global environmental activist movement's publicity activity. Norman was arrested in April last year and eventually discharged without conviction in September this year after protesting in the water within 500 metres of a seismic research vessel in April 2017.
The inquiry also noted that, compared to the close relationship with oil sector participants and with Thompson & Clark, NZP&M showed "limited evidence of any relationship" with environmental groups opposed to offshore exploration.
"It is with the benefit of hindsight that a failure to establish and maintain a relationship with diverse sector interests has been a misjudgement on MBIE's part," the inquiry found.
It found no evidence that David Smol, the MBIE chief executive at the time, had any relationship with Thompson & Clark "at all" and found that, judged individually, "the interactions between MBIE employees and Thompson & Clark were low-level and not sufficient to constitute a breach of the Code of Conduct".
However, the way Operation Exploration was set up was "more challenging".
"The enforcement approach enabled Thompson & Clark to embed itself as a crucial participant within the regulatory and enforcement function, despite the fact that they represented private economic interests," the report found.
In all, the inquiry looked into the use of private security consultants by 131 government agencies and found other breaches, including allowing Thompson & Clark access to New Zealand Transport Agency vehicle ownership records without effective oversight; secretly taping meetings relating to Canterbury earthquake victims' dealings with Southern Response, leading to a police complaint being laid by the SSC; and secondary employment undertaken by two ex-Ministry of Primary Industries employees for Thompson & Clark, which is now the subject of a Serious Fraud Office investigation.
"The inquiry uncovered system-wide failings across the public service, including a pattern of behaviour where public servants developed inappropriately close relationships with Thompson & Clark and some evidence of poorly managed relationships with other providers," said the SSC's Hughes. The commission had referred complaints about some of the security firm's practices to the police and the Private Security Personnel Licensing Authority.
These included evidence of Thompson & Clark using an unlicensed private investigator, covertly attending and taping public meetings without disclosing their purpose or client, taping private or 'closed' meetings, and advising clients not to advise police of the source of inappropriately obtained information.