The Prime Minister's explanation of why he sent a text message saying National MP Todd Barclay had secretly recorded a staff member suggests a cover-up, Labour says.
Bill English is under pressure after it emerged he had sent text messages to former Clutha-Southland electorate chairman Stuart Davie.
In those messages, English said Barclay had recorded his former electorate agent Glenys Dickson, who had previously worked for English for 17 years.
After an employment dispute, a settlement was eventually paid to Dickson from then Prime Minister John Key's leader's fund, which is taxpayer money.
It is illegal to intentionally intercept by means of an interception device private communications you are not party to. Police investigated after a complaint from Dickson, but concluded there was insufficient evidence after Barclay declined to be interviewed.
English was interviewed by police but today refused to discuss what he told them.
The text from English to Davie on February 21 last year read: "He left a dictaphone running that picked up all conversations in the office. Just the office end of phone conversations. The settlement was larger than normal because of the privacy breach."
After the text exchange was reported by Newsroom, English confirmed the text message was his, but repeatedly said he could not recall who told him about the alleged recording. However, he said it was possible that information had come from Barclay.
"It's possible. But at the time we weren't going through some forensic examination of anything. There were a series of conversations. I don't know if it has ever been established whether there was [a recording]."
Facing his own media huddle a couple metres away, Barclay categorically stated he had not told the Prime Minister about any recording.
Asked directly if he used a dictaphone to record Dickson, he said, "I've seen the allegations and I totally refute them".
"Police have investigated quite thoroughly. I have gone through quite a robust local transparent process too, which was my re-selection. Which I won quite convincingly. My people and supporters down there clearly see it for what it is."
Barclay declined to be interviewed by police, despite earlier telling media he would fully cooperate. Yesterday, he said he did that on advice from his lawyer.
On March 1 last year, media asked English if he knew the reasons for staff resignations in Barclay's office, or if he had spoken to them, and said no: "These are issues between them and their MP, I keep pretty clear of the electorate. It's not my job to run it."
Labour leader Andrew Little said those comments were made after English had texted Davie about the recording.
"People are right to ask if there's been a cover-up. Mr English knew a lot more than he was prepared to tell the New Zealand public about."
The secret recording allegation led to division within the previously united Clutha-Southland National Party, which has a membership said to be 1500-strong. It led to Barclay facing - and surviving - a selection challenge from Simon Flood, a former Merrill Lynch banker.
The leader's fund is allocated by taxpayer-funded Parliamentary Service to help meet "the operational needs of each party in fulfilling its parliamentary responsibilities". It must not be used for "anything that is not for a parliamentary purpose".
Use of the fund has had a controversial history. Former Prime Minister John Key backed away from a plan to pay a defamation settlement to "teapot tapes" cameraman Bradley Ambrose from the fund.
That came after backlash from opposition parties, and Speaker David Carter confirmed the fund could not be used for legal settlement. MPs can apply to use the fund for legal advice and representation, but not for damages.
A spokesman for Carter today confirmed his statement was accurate. Employment settlements are different to the settlement of civil proceedings, he said.
English said he was advised using the fund to settle employment disputes was usual process. He did not know how much had been paid, and said that would be confidential anyway.
Electorate agents are employed by Parliamentary Service but work closely with MPs and often act on an MP's behalf during a politician's absence.
Police documents previously released under the Official Information Act (OIA) showed there was a hope Barclay would provide any dictaphone voluntarily.
Todd Barclay came in on a landslide
Todd Barclay entered Parliament as a National Party MP in 2014 with a landslide victory in one of the safest seats in the country.
Aged just 24, Barclay seemed certain to enjoy a Parliamentary career as long as he was willing to stand as the successor to English in the Clutha-Southland electorate.
Barclay was born in Gore in 1990, the first of the country's MPs to be born in that decade, and then raised in Southland's Dipton.
The small town was also the seat of English's support for many years, before he moved to Wellington. Barclay was born the same year English entered Parliament.
Barclay's parents Maree and Paul Barclay ran the local Four Square and post office before the family moved to Gore.
After finishing Gore High School, Barclay went to Victoria University in Wellington to study for a Bachelor of Commerce, majoring in commercial law.
His first stint at work gave him the opportunity to see how a country was run with work experience for then-Prime Minister John Key, English and Cabinet ministers Gerry Brownlee and Hekia Parata.
He left those roles for a job with the public relations firm SweeneyVesty before becoming corporate affairs manager for the cigarette company Philip Morris.
He told Fairfax after his election: "The company's a legal company selling a legal product. No smoker, or non-smoker in the country can say they're not aware of the consequences of smoking and that they didn't know where to go to seek assistance if they want to quit."
Entering Parliament, Barclay took on the role of deputy chair of the law and order select committee.
He also created controversy following selection with a casual dig at Campbell Live on social media after it was announced the show was under review. He later deleted his comment: "No surprises that it's only Labour Party MPs scrambling to keep Campbell Live running... #goodjobmikehosking."
But the upset he caused Campbell Live supporters was nothing compared to that which beset the 1500-strong membership of the National Party in his electorate when it emerged police were investigating claims he had recorded staff working in his office.
First Dickson left the electorate office after working there for 18 years. Her departure was followed by the resignation of electorate chairman Stuart Davie. Other staff members also resigned.
Davie, who stepped down as electorate chairman a year ago because of differences with Barclay, resigned as chairman of his local branch, Waikaka, because of the divisions in the electorate.
"I backed away because I wanted to move on, there's other things more important in life.''
Davie emphasised it was time to "move on" from the row, and he did not want to comment on Barclay's police file.
Over the 10 months police investigated, Barclay had claimed he had not been spoken to by police. It was eventually announced no charges would be laid because of insufficient evidence.
"After consideration of all relevant information and the Solicitor-General's prosecution guidelines, police has determined that there is insufficient evidence to prosecute," police said.
Barclay said: "I welcome this decision and [am] pleased that we can move on. I'm looking forward to continuing to engage with National Party members about what my team and I have been working on over the last three years, and my plans to keep up the momentum for Clutha-Southland into 2017."