The Israeli Embassy has broken its silence over the spy controversy issuing a statement today rejecting allegations, while the Security Intelligence Service (SIS) is looking for who leaked information of the investigation.
The Southland Times yesterday reported a SIS inquiry was triggered by the rapid departure of three Israelis after a colleague was killed in the February quake in Christchurch.
It also alleged suspicions of an attempt to hack police computers.
The SIS investigation reportedly focused on a group in a van driven by Ofer Benyamin Mizrahi, 23, who was killed instantly while the other three escaped the wreckage and left the country within 12 hours.
Prime Minister John Key initially refused to comment on the story yesterday saying it was a matter of national security but later revealed the investigation found no evidence of a link between the group and Israeli intelligence and also said police systems were not hacked.
Now the focus had moved onto how the newspaper obtained the information about the investigation.
"The New Zealand SIS is investigating the suggestion that information was provided to the media by an SIS officer," a spokeswoman for Mr Key said.
Mr Key told reporters with him in Washington that security intelligence officials in his office were instantly suspicious of the Israelis when they realised they had fled.
As SIS minister he had to sign off the warrants to search the Israeli man's gear.
Mr Key also told the reporters intelligence officials were in a high state of excitement when the Israelis fled and suspected Mossad (intelligence) involvement.
However, he was satisfied with the investigation's findings.
The embassy today issued a brief statement.
"The Embassy of Israel in New Zealand completely rejects the media-reported claims and allegations made against Israeli nationals, who were victims of the tragic earthquake that occurred in Canterbury on February 22, 2011.
"We would also note that New Zealand officials have reaffirmed that none of these individuals were involved in wrongdoing of any description.''
The Government has been criticised for how it handled the controversy by allowing to pick up steam all of yesterday before revealing the results of the investigation.
"The Government's handling of this continues to leave doubts over what actually happened and whether there is substance to allegations that have been made through the media,'' Labour leader Phil Goff told NZPA.
"It's been a shambles and it leaves New Zealanders, I think, uneasy and unconvinced about what the Government might know.''
Foreign Affairs Minister Murray McCully today defended Mr Key's initial response, and his reference to national security.
"He was clearly making reference to the fact that some of these inquiries were conducted by the SIS,'' Mr McCully told Radio New Zealand.
Mr Key had been more forthcoming in his second statement, ``but I think it's entirely appropriate that the Prime Minister would always be very careful about commenting on national security matters'', Mr McCully said.
With regard to the inquiry, Mr McCully said the Government did not know all of the facts.
"There were a number of things, as the Prime Minister said, that caused us to treat the matter with some caution,'' he said.
"If there had been anything untoward, if there had been any suggestion of improper behaviour by foreign nationals, we would take the matter up regardless of the country they came from.''