Key Points:

The less said, the better. It was as though that was the Labour Government's policy regarding controversial new citizen Yang Liu in the weeks before the election.

Liu's name first made news in New Zealand on Friday, October 17 when it was reported that a Chinese businessman allegedly wanted for fraud in China had been granted citizenship against the advice of officials.

Cabinet ministers Rick Barker and Shane Jones, along with Dover Samuels, a longstanding MP and former Labour minister who retired at the last election, were named in the article which also said Liu had made political donations.

The Herald understands that the story prompted senior Labour figures to agree that only the then Prime Minister, Helen Clark, would comment.

The general election was three weeks away and it was a story with the potential to blow up in the Government's face.

Barker, who as Minister of Internal Affairs had the task of granting citizenship, promptly put a lid on his involvement, issuing a statement that indicated he had delegated responsibility to Jones (who was Immigration Minister) because of "an actual or perceived conflict of interest".

When the Herald asked what the conflict was, Barker's spokeswoman stonewalled: "I can confirm what is in the press statement ... I have nothing further to add."

Barker's statement said he wouldn't comment further because of "an ongoing investigation into the possibility of immigration fraud" which, if established, could result in revocation of residency status and in turn "may provide a basis to deprive a person of their citizenship".

That was the same "ongoing investigation" that Jones did not await the outcome of.

Investigations by New Zealand authorities into Liu are ongoing and it has not yet been determined whether charges will be laid.

Jones granted Liu citizenship against the advice of Department of Internal Affairs (DIA) officials who informed the minister that Liu was suspected of identity fraud, including entering New Zealand and applying for permanent residency and citizenship under a false name, and was subject to an Interpol red notice indicating he was wanted for arrest in China on charges relating to alleged large-scale misappropriation and embezzlement and of stealing another person's identity and using it to obtain two false passports.

Liu had not resolved the matter, either by contacting the Chinese authorities or through the Chinese court system, Jones was told, and "had not fulfilled the onus of satisfying ... that he meets the good character requirement" of the Citizenship Act.

Jones has not publicly explained why he overrode advice to decline Liu's citizenship application and earlier this month declined the Herald's request to do so.

Liu has emphatically denied committing any crime.

In a submission to Jones on Liu's behalf, John Billington, QC, accused officials here of taking a subjective view on unproven allegations and of denying his client natural justice by relying on matters that fell short of proper verification and failing to reveal to Liu all information held.

Clark was left to explain the nature of Barker's conflict - that he knew Liu, that their wives were friends. Liu has made a number of political contacts in short order. Samuels describes himself as a friend.

Chris Carter, Minister of Ethnic Affairs in the previous Labour Government and via whom Liu donated $5000 to Labour before the 2005 election, wrote in support of Liu's citizenship application in February last year.

National MP Pansy Wong also wrote to Barker in support of Liu - though neither she nor Carter were aware of allegations against him.

Prime Minister John Key, then a senior figure in the Don Brash-led Opposition, received a $5000 donation from Liu which he passed on to the party before the 2005 election.

"It appears to me that he was reasonably active in getting to know politicians across the political spectrum," Key said, in an October 19 statement in which he recalled meeting Liu three times.

Samuels, who believes Liu is innocent, twice wrote to Barker vouching for Liu's good character. Other politicians from across the parties have held fundraisers at Liu's popular restaurant, Jade Terrace in Manukau.

Samuels says Bill Liu (as he's known) had been hounded for years and wanted a decision about citizenship. "He's a good fella," he told the Herald. "He's got a beautiful wife, beautiful children [New Zealand-born, aged 4 and 1]."

China's true interest in Liu, Samuels suggested, was because the Communist regime saw him as an opponent. Liu, Samuels claimed in a letter to Barker, is known for his "advocacy of open democracy, social justice and Human Rights".

Charmaine Deng, a spokeswoman for the Falun Gong movement in Auckland, told the Herald that Liu had been a supporter "for many years" and had spoken at events. "Any person, at this time, who stands out to speak for Falun Gong will face the persecution from the Chinese Communist regime."

Samuels says he has known Liu since soon after he settled in New Zealand in December 2001. In a letter to Barker, he said, "Over the years

Bill has developed a constructive and meaningful relationship with tangata whenua, he has also made investments into the fishing and hospitality industry."

He appears to have plenty of money. According to property records, Liu paid cash for both the apartment he bought in 2002 in the Metropolis building (2005 valuation of $2.4 million) and a $5 million Bayswater property, bought in 2007.

However, Samuels, does not know how Liu made his fortune. "Wouldn't have a clue," he told the Herald. "I know he was in business in China. I wouldn't say he's made his fortune."

SAMUELS was aware of a dispute between Liu and the Australian Government but did not know that A$3.37 million ($4.28 million) in bank accounts controlled by Liu and frozen under Australia's Proceeds of Crime Act had been sent to the Chinese Government.

According to the 2006-07 annual report of Australia's Commonwealth Director of Public Prosecutions, the money was transferred on June 7, 2007. It had been frozen because Liu was suspected of operating bank accounts in a false name, namely Yang Liu - the name in which he has been granted New Zealand citizenship.

Liu (as Yong Ming Yan) was first defendant. Desant Group Ltd, a company registered in the British Virgin Islands, a tax haven, was second defendant. Liu was not convicted of any offence. The file on the case held by the New South Wales Supreme Court records that the matter was settled when Liu consented to the money being forfeited to the Commonwealth without any admission of liability.

The Commonwealth DPP annual report says: "Yongming Yan, a citizen of the People's Republic of China, was wanted by law enforcement authorities of China for alleged large-scale misappropriation and embezzlement offences committed in China.

"Yan travelled to Australia on a number of occasions, first as Yan, and later under the name 'Yang Liu'. On these later occasions Yan is alleged to have produced a Chinese passport in the name 'Yang Liu', and failed to advise Australian immigration officials that he had previously travelled to and entered Australia in the name 'Yongming Yan'.

"While present in Australia, Yan opened and operated a number of bank accounts. Some of the bank accounts were opened and operated in the name 'Yang Liu', in circumstances where Yan allegedly failed to advise that he was also known by the name 'Yongming Yan', contrary to section 24 of the Financial Transaction Reports Act 1988.

"On August 22, 2005 a civil restraining order under the Proceeds of Crime Act 2002 was obtained over bank accounts held in the name of Desant Group Ltd ... The accounts in the name Desant Group Ltd were able to be restrained on the basis that they were suspected of being under the effective control of Yan, who was operating the accounts in the name 'Yang Liu'.

"The basis for the restraining orders was that Yan was suspected of having committed offences of opening bank accounts in a false name in Australia.

"Yan later made an application seeking revocation of the restraining order.

"The DPP's proceedings were ultimately resolved by orders of the Supreme Court of New South Wales on November 15, 2006, by consent, forfeiting the sum of A$3,374,236.19 to the Commonwealth.

"On June 7, 2007, pursuant to the equitable sharing provisions of the POC Act 2002, the Australian Government repatriated a sum of more than A$3.37 million to the Government of the People's republic of China."

The Interpol red alert referred to in the advice to Jones is in the name of Yong Ming Yan. The passport in the name of Yong Ming Yan records his date of birth as June 15, 1969, which would make him 39. The date of birth on the passport in the name of Yang Liu is October 20, 1972, which would make him 36.

According to Chinese reports, Yan was born in Tonghua and founded Tonghua Sanli Chemical Industry Company in 1992, a business that prospered through sales and acquisitions until 2000 when it made a huge loss. Yan is said to have fled to Australia and New Zealand and to have been subsequently charged with fraud and embezzlement.

According to the DIA's report to Jones, it is alleged in China that Liu:

Misappropriated a significant sum of money in China by entering into a false contract in 2000 using one of his companies.

In 1999 stole another person's identity [Yang Liu] by falsely registering his birth. He then used this deception to obtain two false Chinese passports in that false identity.

In his submission on behalf of Liu, Billington told Jones that the allegation of fraud was "nonsensical" and that there were no false passports - Liu was legitimately also known as Yong Ming Yan and passports in that name were genuine.

Liu had two names, two birth dates and two passports, Billington said, because he had been fostered out by his birth parents for a short time and both sets of parents registered his birth. His birth parents had since died.

It is unclear whether Liu provided the explanation to the Australia's Commonwealth Director of Public Prosecutions. There appeared not to be an affidavit in the name of Liu or Yan on the NSW Supreme Court's file of the case.

Provision had been made for Liu to give evidence by video link from Auckland at a two-day hearing but that did not go ahead as a result of Liu giving consent for the money to be forfeited.

YANG Liu has lived in New Zealand since December 2001. He applied for permanent residency the following January and it was granted in June 2002.

Liu soon became a person of note at SkyCity casino. He lived for long periods in one of the associated hotels and would gamble up to 15 hours at a stretch. He favoured table games, blackjack and baccarat. It was his turnover that first attracted attention.

"He would, on some occasions, gamble up to the maximum bet of $100,000," the Herald was told. "Very few people did this. His turnover was easily in the top three casino customers."

When Liu lost, management privately cheered, that source said, because it meant the casino was doing well. "That's how important he was."

On one occasion Liu had a winning streak that caused SkyCity to miss its profit targets and was referred to obliquely in its financial reporting (SkyCity's Interim Report of 2007) as "unfavourable outcomes in Auckland VIP commission play".

The report said gaming revenue, "particularly table games and international VIP commission play", was down 8 per cent, which equated to more than $3 million.

Liu was also of concern because of what was described to the Herald as "volatile behaviour". This included rudeness to staff and clients but also an incident in which Liu fought with another customer and another so-called "begging" incident in which Liu, having surpassed his daily credit card limit, asked another gambler for money.

Liu was considered a high-risk gambler by the DIA's casino monitoring division because of his volatility, high-stakes gambling and history of self-barring, the Herald was told.

A DIA spokesman confirmed that Liu was of interest. "Mr Liu is one of a number of gamblers of significance whom the department has discussed in its interaction with SkyCity".

Liu's gambling also attracted the attention of the police. That interest was at times intense and included surveillance, a source told the Herald. "The focus was to see whether evidence of money laundering could be detected." No charges have been laid.

An assault complaint was made to Auckland police last October against a Yang Liu. It was alleged to have taken place in an Auckland karaoke bar.

Police spokeswoman Noreen Hegarty told the Herald the complaint had not progressed.

The Immigration Service was also aware of Liu's gambling but its interest in him was heightened in 2005 when, in May of that year, Liu applied for citizenship.

The following month China's national police posted the Interpol red notice, indicating that he was wanted for arrest in China, and, two months later, in August, Liu's bank accounts in Australia were frozen - the first step towards repatriating A$3.37 million to China.

By 2007 Immigration officials recommended Liu's permanent residency be revoked on grounds that he had allegedly provided false information.

The Immigration Minister of the time, David Cunliffe, did not act on the advice, instead recommending further investigation and noting that he did not "discount the possibility of reconsidering it in the future".

As part of those further investigations, Immigration last April obtained a search warrant to seize from the DIA identity documents Liu had provided as part of his citizenship application.

Two weeks later Samuels wrote to Barker again, condemning the delay and urging Liu's citizenship application be given urgent attention.

Delegating for Barker, Jones granted citizenship to Liu on August 6, 2008.

Five days later, Liu had a citizenship ceremony at Parliament, in the Maori Affairs select committee room. Samuels officiated.