A former top diplomat appointed to investigate how a document was leaked from the Ministry of Pacific Island Affairs has denied allegations of a conflict of interest.

Neil Walter, former head of the Ministry of Foreign Affairs and Trade, came under fire from Labour MPs yesterday because he now chairs New Zealand On Air, which funds Radio NZ.

He was appointed last week to investigate the leak to Radio NZ reporter Richard Pamatatau of a Ministry of Pacific Island Affairs paper.

It warned about the risks involved in a $4 million grant for Pacific economic development awarded in last month's Budget to an Auckland company owned by a single shareholder, JR Pereira.

Labour Pacific affairs spokeswoman Winnie Laban said the appointment was "a clear conflict of interest because he chairs NZ On Air".

"The [NZ On Air] board is responsible for governance. You can't separate governance from operational matters," she said. "At the end of the day it's about accountability for taxpayers' money and he chairs that board."

The accusation is the latest twist in a saga which has exposed conflicting views within the Government on the grant to Mr Pereira's company, Pacific Economic Development Agency.

Yesterday, Pacific Island Affairs Minister Georgina te Heuheu confirmed - in a written answer to questions from Mangere MP Su'a William Sio - that she did not discuss the $4 million Budget appropriation with Mr Pereira.

A former shareholder in the company, Mose Saitala, told the Herald on Sunday from the Solomon Islands, where he is now based, that he, Mr Pereira and Pacific Island Chamber of Commerce chairman Ulu Aiono discussed the proposal with Finance Minister Bill English at a meeting in Auckland last September.

Mrs Te Heuheu told Mr Sio, in another written answer, that she did not take any paper to the Cabinet about the proposal to fund the company before the Cabinet approved it on April 19.

"The Minister of Finance took the overall 2010 Budget package papers to Cabinet which included the financial recommendations for individual Budget initiatives," she said.

But she said she did discuss the proposal with officials in her ministry on March 18, March 31 and April 1, and received the contentious briefing paper from the ministry on March 25.

Mr Walter said in Auckland last night that NZ On Air was merely "the conduit" for funding Radio NZ at levels directed by the Government.

"It never occurred to me that there was a conflict of interest in this.

"The chief executive of the Ministry of Pacific Island Affairs, Dr Colin Tukuitonga, had my full CV, as did the State Services Commission, and I know Colin discussed the choice of someone to lead the inquiry with them. Neither of those saw any conflict of interest."

Mr Walter said he had started interviewing ministry staff and hoped to report within three weeks.