Read more in tomorrow's NZ Herald, plus exclusive online audio of Key's 2007 interview

Key Points:

John Key faces accusations of misleading the public about his knowledge of one of New Zealand's most notorious white collar crimes.

The allegations centre around the so-called H-Fee - two payments totalling A$66.5 million to Equiticorp funnelled via sham foreign exchange transactions in 1988 - and an interview Mr Key gave the Herald last year.

Labour, which has planned to target Mr Key over the issue tomorrow, has taunted the National Party leader about his involvement in the saga for more than two years.

During the interview in August last year, Mr Key confirmed to the Herald that he worked as a foreign exchange dealer at Elders Merchant Finance, part of Elders IXL which made the payments to the Allan Hawkins-controlled Equiticorp. But he said he had left Elders in 1987, before the transactions were processed.

"[Labour is] sitting there thinking ... 'We've got this guy because John Key has done the foreign exchange deal with Elders IXL that transferred the money to Hawkins'," he told Herald political staff. "Small issue - three months before any of these deals got decided I left Elders [on gardening leave]. I was never involved in them.

"I guess I'm telling you because I'd rather be on the front foot. I don't really care. There's absolutely nothing I've got to hide. Everything is totally correct and honest and transparent."

The comments were quoted in a story the next day.

Checks by the Herald of court documents made public by Labour have raised questions about several aspects of the version he told, including his memory of when he left the company. He resigned from Elders in June 1988, six months after the first payment. There is no evidence that he was involved in handling the sham transactions.

Mr Key said this afternoon that he did not know about the first transaction until told about it by the Herald today. The court documents show that it was handled by Elders staff in Australia. "That's why I've never known about it because it never went through our [Elders Merchant Finance] books," said Mr Key.

"It's all part of this smear campaign [by Labour]. I've got nothing to hide."

This week, Labour and its allies have been dropping hints about a bombshell set to hit Mr Key and it is understood the party has been strategising about how to make an impact on the campaign trail tomorrow.

But Prime Minister Helen Clark tried to distance herself from the story this afternoon, saying: "This is not a story that I am handling at all."

When asked if Mr Key had misled the public, she said: "I don't know but in the mind of the Herald there are questions to answer."

In a drive to pin down Mr Key's involvement in the case, Labour Party president Mike Williams took time out from the heat of the election to fly to Melbourne last week to search documents relating to a court case over the H-Fee.

Asked about Mr Williams' involvement, Helen Clark said: "He believes there are questions to answer but that would mean nothing if a major paper didn't think there were questions to answer."

The 13,000 page court file, which the Herald searched in Melbourne this week, contains a statement Mr Key made to an investigator with the Australian National Crime Authority in May 1991.

In the statement, Mr Key says he resigned on June 24, 1988, and was immediately placed on leave because he was going to a rival, Bankers Trust. "For the next two and a half months until I finally left Elders I travelled to Australia to meet with Elders people, took holidays, spent time at home and worked on the takeover of a stockbroking firm," he said.

The first H-Fee payment of A$39.5 million was made on January 11, 1988. It was handled by Australian-based executive Ken Jarrett, who went to prison after confessing to his role in the deal.

The second H-Fee payment of $27 million was made on September 7, 1988. Mr Jarrett told the court that because auditors had raised a query about the first payment, he needed to take more care with the second payment. He travelled to Wellington and attended a meeting which included trader Paul Richards, a friend and former colleague of Mr Key's who took over as the head of foreign exchange in Wellington when Mr Key resigned.

Mr Richards told the court that the meeting took place on the same day that he and Mr Key went to lunch at Wellington restaurant Plimmer House to mark his last day with the company, August 31. Mr Richards and Mr Key told investigators that Mr Richards was called away to the meeting during the lunch.

Mr Key told the Herald last year that Mr Jarrett had denied being in the country when that meeting took place. He said in the interview last year he was able to back-up Mr Richards' story that Mr Jarrett was in the country because he - Mr Key - had paid for the lunch and had the credit card bill to prove it.

In fact, the court records show that Mr Richards paid for the lunch, not Mr Key.

Neither do any of the records show that Mr Jarrett denied attending the meeting with Mr Richards, though he did say it was several days earlier, on August 26. Mr Jarrett was not in the country on August 31, the court was told.

Mr Key said today that he always held the belief that the credit card used was his, but conceded it could well have been Mr Richards'.

As for his recollection of the lunch and Mr Richards' account of being called away to the meeting, Mr Key said he stood by what he said at the time.

"I remember it absolutely clearly. If Jarrett wasn't there or [Mr Richards] got his facts wrong, I don't know. But that is what he said to me and that was my only involvement in it."