The Department of Conservation (DOC) is investigating Napier's Marineland, which is accused of illegally keeping wild seals that had been found in the wild.
The tourist attraction, which closed to the public in April, is supposed to only raise marine animals that have been born in captivity.
A DOC spokesperson says Marineland had implied three seals had been bred in captivity when in fact they had been found in the wild and not returned.
Napier mayor Barbara Arnott told Nine to Noon the council, which owns the tourst attraction, is holding its own separate investigation.
She says it appears there are inconsitencies in records that point to where the seal pups came from.
Barbara Arnott says the case could affect whether the council upgrades Marineland or closes it.
Save Animals From Exploitation campaign director Hans Kriek said one of Marineland's key roles is looking after injured animals and returning them to the wild and if it is not doing that it should be closed.
The fine for breaching the Marine Animals Protection Act is $10,000.