Key Points:

Labour has gone to extraordinary lengths to derail John Key's election campaign and uncover his knowledge of a notorious 1980s white-collar crime.

It pulled back from what it believed was a "neutron bomb" blast against the National leader, but has pushed on with a concerted effort to tarnish his reputation.

Allegations centre around the so-called H-Fee - two payments totalling A$66.5 million ($75m) to Equiticorp funnelled via sham foreign exchange transactions in 1988 - and a Herald interview with Mr Key last year.

Labour president Mike Williams spent several days last week reading court documents in Melbourne, backed up by Wellington-based members of the party research unit.

Last weekend, the party believed it had a smoking gun - a signature on the A$39m first H-Fee cheque bearing a striking resemblance to Mr Key's. Senior party figures advocated making the document public immediately.

Within days, though, court documents proved that what would have been the campaign's most explosive allegation was wrong. The January 11 cheque was actually signed by an Australian-based executive of the firm Mr Key worked for.

Mr Key said last night he had nothing to hide and accused Labour of a smear campaign.

'Catwoman'

Addressing the Kapiti branch of grey Power today he made a brief reference to the issue at the start of his speech, saying that while Helen Clark couldn't work out what she had signed - a reference to the Paintergate scandal - she was now trying to work out what he hadn't signed.

Speaking to reporters afterwards he referred to one of the sources of the H-Fee story who calls himself Batman.

"Maybe Catwoman will have something to say this afternoon," he quipped - a possible reference to the fact that Labour appears to have gone to ground over the story.

He earlier told Radio New Zealand he was "absolutely not" involved with the H-Fee transactions and had made no attempt to mislead anyone when talking to the media about it.

"What we have seen is the Labour Party going on a dirt digging exercise, sending their research unit and their president to Australia. It's just more of a smear campaign from Labour.

"There's been a pattern of behaviour by the Labour Party. They have spent the last two or three years focused on scandals and trying to dig dirt."

Prime Minister Helen Clark distanced herself, saying: "This is not a story I am handling at all."

Labour minister and campaign strategist Pete Hodgson was more forthcoming: "Either [the Herald] have been misled or the Serious Fraud Office has been misled - I don't know. If the SFO has been willingly misled, issues of perjury arise, but I'm a veterinarian, not a lawyer."

Former head of the Serious Fraud Office Charles Sturt, who interviewed Mr Key about the transactions told Radio New Zealand this morning the National party leader was never involved.

"John Key was simply one of scores of innocent people interviewed by the SFO in this investigation."

There was "not a scintilla of evidence" linking him to anything untoward, Mr Sturt said.

During last year's interview, Mr Key confirmed he was a foreign exchange dealer at Elders Merchant Finance, part of Australian-based Elders IXL, which made the payments to the Allan Hawkins-controlled Equiticorp. But he said he left Elders in 1987, before the transactions were processed.

"[Labour is] sitting there thinking ... 'We've got this guy because John Key has done the foreign exchange deal with Elders IXL that transferred the money to Hawkins'," he said. "Small issue - three months before any of these deals got decided I left Elders [on gardening leave]. I was never involved in them."

The comments were quoted in a story the next day. A Weekend Herald profile of Mr Key this year correctly reported he left Elders in 1988.

Checks by the Herald of Melbourne court documents have raised questions about several aspects of his version last year, including his memory of when he left. He resigned from Elders in June 1988, six months after the first payment, though there is no evidence he was involved in the shams.

Mr Key said yesterday he did not know about the January 11 transaction until told about it by the Herald. The court documents show it was handled in Australia by Ken Jarrett, who confessed to his role. "That's why I've never known about it because it never went through our [Elders Merchant Finance] books," Mr Key said.

In a statement to the Australian National Crime Authority in May 1991, Mr Key said he resigned on June 24, 1988, and was placed on leave because he was going to a rival, Bankers Trust. "For the next two-and-a-half months until I finally left Elders I travelled to Australia to meet with Elders people, took holidays, spent time at home and worked on the takeover of a stockbroking firm," he said.

The second H-Fee of A$27 million was on September 7. Mr Jarrett told the court that because auditors had raised a query about the first payment, he needed to take more care with the second. He travelled to Wellington and attended a meeting which included trader Paul Richards - Mr Key's friend and former colleague who took over as the head of foreign exchange in Wellington when Mr Key resigned.

Mr Richards told the court the meeting was on the same day he and Mr Key went to lunch to mark Mr Key's last day with Elders, August 31. Mr Richards and Mr Key told investigators Mr Richards was called to the meeting during lunch.

Mr Key told the Herald last year Mr Jarrett denied being in the country when that meeting took place. He said he was able to back up Mr Richards' story that Mr Jarrett was in the country because he - Mr Key - had paid for the lunch and had the credit card bill to prove it.

In fact, the court records show Mr Richards paid for the lunch, not Mr Key.

Neither do the records show that Mr Jarrett denied attending the meeting with Mr Richards, though Mr Jarrett did say it was on August 26 as he was not in the country on August 31.

Mr Key said yesterday he always believed the credit card used was his, but conceded it could have been Mr Richards'.

- Additional reporting NZPA