State Services Commissioner Peter Hughes has issued a damning report into the use of private investigators by government agencies, calling the actions of some "an affront to democracy" and laying a complaint with police in one instance.

Hughes detailed a list of breaches of the State Service Code of Conduct, including potentially illegal recordings of insurance claimants, public sector employees accessing the New Zealand Transport Agency database for private investigation firm Thompson and Clark, paying for informants and spying on the Green Party and iwi.

Hughes today released his 80-page report into the use of external security consultants today. The inquiry was sparked by revelations of government agencies including Southern Response, MBIE, the SIS and Ministry for Primary Industries.

He took responsibility for what had occurred, as head of State Services. "I apologise unreservedly to those individuals whose privacy has been intruded on by state servants or their contractors."

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Hughes said he had laid a complaint with police today over potentially unlawful recording of meetings by private investigators Thompson and Clark of closed meetings held by insurance claimants on behalf of Southern Response.

The inquiry found that Southern Response acted inconsistently with the Code of Conduct from March 13 2014 to December 31 2014 and was in breach of the code from January 1 2015 to May 12 2016 when the code formally applied to the company.

Thompson and Clark (TCIL) attended and recorded several closed meetings that discussed options for legal action against Southern Response. They were made by a contractor who was not a licensed contractor and the recordings may have been unlawful. "It was not possible to make findings because the recordings were not retained – itself a breach of the code," Hughes said.

He said Southern Response was a Crown company with a board responsible to shareholding ministers and the State Services Commission had little jurisdiction over how the matters should be dealt with. But he had written to Ministers Megan Woods and Grant Robertson with his concerns to enable them to take further action.

In the case of the Ministry of Primary Industries, Hughes found that two former employees had carried out secondary employment with TCIL in breach of the Code of Conduct.

Those employees accessed the NZTA database on behalf of TCIL, breaching individual privacy and in breach of the Code of Conduct.

MPI, when it was formerly the Ministry of Agriculture and Fisheries, also breached the code by using TCIL to attend two conferences of interest to the animal rights movement in 2005 and 2006.

"At the first conference, MAF paid for TCIL to 'monitor' activists, likely involving surveillance, and to liaise with a paid informant."

A Serious Fraud Office investigation into the actions of the two MPI staff, who are no longer in the public, is ongoing.

Hughes also criticised the NZTA for allowing unauthorised access to its motor vehicle database.

Hughes also looked at the Ministry of Business, Innovation and Employment and found that its service "as a whole" breached the Code of Conduct by failing to maintain an appropriate level of objectivity and impartiality.

"MBIE's management of its regulatory responsibilities in the petroleum and minerals areas through the creation of Operation Exploration, showed evidence of poor regulatory practice," Hughes said.

He had requested the MBIE's chief executive consider ending Operation exploration, an inter-agency grouping involved in the Crown Minerals Act.

He also took aim at the Crown Law Office and Ministry of Social Development. Crown Law, he said, breached the code by providing broad instructions to another private investigator in a 2007 civil case alleging abuse in state care.

On email exchanges between the SIS and Thompson and Clark, Hughes said he was satisfied that the SIS had looked into it and resolved it as an employment matter.

He was scathing in his criticism of government agencies' actions against New Zealanders exercising their democratic rights through TCIL reporting on the activities of groups such as Greenpeace, the Green Party, the Mana Movement and some Northland East Coast and Taranaki iwi groups., which he said were treated as a "security threat".

"This is an affront to democracy, and government agencies should have challenged TCIL's definition and treatment of issue-motivated groups," he said.

"I am clear that it is never acceptable to classify a person or group of people as a security threat just because they lawfully exercise their democratic rights, or use that as justification for gathering information."

Hughes said he had issued his expectations on this in the new Model Standards which agencies would need to comply with by April 30 next year.

The inquiry also found evidence of a lack of professional distance between some public servants and TCIL.

"I am disappointed that some public servants have lost sight of the fact that they are exercising powers of the State and that they are dealing with an organisation outside the public service."

In relation to Thomson and Clark's conduct, Hughes said that in addition to laying a complaint with police around the potential unlawful recording, he had also lodged a formal complaint about TCIL's conduct with the Private Security Personnel Licensing Authority outlining his concern.

He had also written to MBIE's chief executive asking her to consider removing TCIL from the Government Procurement Panel, which had been done.

The inquiry was provided evidence that while working for government agencies, TCIL:

• Used an unlicensed private investigator.

• Covertly attended meetings without disclosing their purpose or the identity of their client.

• Produced electronic recordings of meetings, some of which were closed, without the knowledge or consent of attendees.

• Approached public servants, who had access to sensitive information, for secondary employment with TCIL.

• Accessed the Motor Vehicle Register for potentially improper purposes.

• Advised a client not to disclose the source of information obtained inappropriately to the police.

• Likely provided information provided by surveillance for private sector clients to government agencies without disclosing the source and the nature of the information supplied.

Hughes said he was disappointed that the inquiry had uncovered shortcomings across the state sector, and while many matters were historic, seven government agencies had breached the Code of Conduct.

"All public servants must be vigilant in how they exercise the significant responsibilities and powers entrusted to them by New Zealanders.

"Using third parties is not a way to contract out of the State Services Code of Conduct – a government agency should expect the same behaviour from contractors working on its behalf, as it does of its own staff," he said.

"Today's report from the State Services Commission shows Government departments colluded with private security firms working for oil and gas companies to spy on New Zealanders," Green Party Co-leader Marama Davidson said today.

Green Party co-leader Marama Davidson said the findings should be a wake-up call for the Government and public sector about the dangers of contracting services from private firms with links to the oil and gas industry.

"The culture of collusion undermines our precious democracy, and we are especially concerned at the targeting of communities defending and protecting their local environment," Davidson said in a statement.

Thompson and Clark director Gavin Clark said it would consider all aspects of the report into work the security industry has carried out with government departments.

"We have had the final report for less than 24 hours and will take some time to consider it in detail," Clark said.

Clark said he accepted the findings that some processes around how and when some work was carried out could have been more stringent.

"An internal review of this is already underway but we maintain that there is a legitimate place for the work that we do, to help agencies keep their people safe.

"There are some findings we do not agree with, as noted in the report, as they don't reflect the understanding that our industry and its code operated to in years gone by.

"We will explain our disagreement with those findings to any future investigations that may result from this report," Clark said.

Clark said Thompson and Clark would cooperated fully with the inquiry and won't be making further comment at this point.