Mr Shearer said Dr Smith's actions were "incredibly unwise, incredibly stupid" and "highly inappropriate".
"He's clearly stepped over the line in terms of a conflict of interest."
If the facts as they appeared with regard to Dr Smith applied to a minister in a Government led by Mr Shearer, "he would step down", Mr Shearer said.
At this point the full facts were not available, "but what I do know is that he made a statement on radio this morning saying he'd done nothing wrong. Now he's apologising to the Prime Minister. Clearly there was something wrong there."
Mr Shearer said the public deserved a full inquiry into the matter including how Ms Pullar was accidentally sent information about 6700 other ACC claimants, including data which identified some as making "sensitive claims" for injuries resulting from rape or other forms of sexual assault.
The letter followed a long string of emails from Ms Pullar to Dr Smith seeking his help with claim, including one in late 2010 where she warned him she intended exposing corruption and policies at ACC intended to reduce costs at the expense of claimant's entitlements.
ACC alleges Ms Pullar tried at a meeting with senior managers in December to secure benefit entitlements for two years as a trade-off for returning the information.
Her friend, former National Party president Michelle Boag, was her support person at the meeting.
The Herald was told of the reference from Dr Smith by a woman who said she was an ACC claimant, and who said she was resentful at what appeared to be preferential treatment.
"Why did Dr Nick Smith ever write her a letter in his capacity as ACC Minister on Parliamentary letterhead?
"Us claimants who do have problems and issues over a long period of time, we don't get to use high powered people, we don't get to have meetings with senior managers or the board."
Dr Smith said he did not seek to influence any ACC staff member in relation to her case but this morning accepted that anyone reading the letter would be mindful of his role as ACC Minister and may have been influenced by it for that reason.
"In hindsight, even providing that was inappropriate and if I had my time again I would have not have sent that letter."
He said Ms Pullar was a friend and the only information he provided in the letter was in relation to her condition prior to her cycling accident.
APOLOGY TO PM
Dr Smith has apologised to Prime Minister John Key.
Mr Key said he agreed it was an error of judgment but he had accepted Dr Smith's apology.
"It's important ministers act in a way that can't be construed as a conflict of interest."
He said Dr Smith had otherwise dealt with his potential conflict of interest well. He had consistently disclosed his friendship with Ms Pullar in all ACC dealings and otherwise distanced himself from her case.
Asked if Ms Pullar had used her National Party connections to boost her case with ACC, Mr Key said if she had it clearly hadn't worked given Ms Pullar was unhappy with the level of support ACC provided her.
LETTER WRITTEN AS A 'FRIEND'
Dr Smith said the letter was written last July in his capacity as Ms Pullar's friend.
"Ministers still have friends and providing there is no inappropriate influence, it is quite appropriate for them to provide information or evidence for medical assessments and other legal processes."
Last night he'd told the Herald his "best recollection" was that the letter was written on plain paper.
Dr Smith said Ms Pullar had emailed him many times seeking his intervention in her case after he became minister in 2008 but he had declined saying it would be inappropriate.
'CONFLICT OF INTEREST' - LABOUR
Labour deputy leader Grant Robertson said that as Dr Smith was ACC Minister at the time he wrote the letter, he was was "hopelessly conflicted".
"It would seem to me to be highly inappropriate for the minister to be providing a reference such as this."
Earlier yesterday Mr Key confirmed he, too, knew Ms Pullar and met her when he entered politics, shortly after the bicycle accident in which she suffered head injuries.
"For a number of years she had mentioned to me, when I was at events, her frustration with ACC, so it was well known."
Mr Key did not believe it was inappropriate for Ms Boag to act as Ms Pullar's support person during the December meeting with ACC officials Philip Murch and Hans Verberne.
ACC's account of the affair has been disputed by Ms Pullar and Ms Boag.
MATTER REFERRED TO POLICE
ACC has now given its files on the matter to the police.
A spokesman confirmed the matter was now under investigation, but could give no timeline on when any assessment would be completed.
Ms Pullar yesterday denied ACC's allegations.
"I made no threats and no demands of ACC," she said. "I made no threats and no demands for return of the information. I did not threaten ACC that I would inform the media of the alleged privacy issue. I did not threaten ACC to get my own way in any way.
"ACC were advised the file had been sent by one of their staff.
"The purpose of the meeting was to discuss how ACC could most effectively support my rehabilitation and return to work."
