PM says Doctom case complex

Prime Minister John Key says the case against internet entrepreneur Kim Dotcom is more complex than it appears, but is refusing to provide any more detail.

Mr Dotcom is at the centre of a debacle involving the Government's spy agency, which acted illegally in a police operation against the businessman who is fighting extradition to the United States to face copyright, money laundering and fraud charges.

The Government Communications Security Bureau (GCSB) is being investigated and its actions will also be discussed when Mr Dotcom returns to the Auckland High Court on Wednesday morning as his lawyers fight to see evidence against him held by the FBI.

High Court documents show that police assured the bureau that Mr Dotcom and his co-accused were foreigners, so it did not require a warrant to spy on them - which was incorrect.

Mr Dotcom is a New Zealand resident and it is illegal for the agency to spy on people who live in the country.

Mr Key says the matter is more complex than it appears, but will not go into any detail about the case until the inquiry releases its report, expected at the end of this week.

The Attorney-General has confirmed that the Government could be liable for damages related to the freezing of Mr Dotcom's assets.

Embarrassing for NZ - Shearer

Labour Party leader David Shearer says the big question is why the spy agency did not tell the Prime Minister it was spying on Kim Dotcom.

Mr Shearer told Radio New Zealand's Morning Report programme on Wednesday as the story is being reported around the world, it is embarrassing for New Zealand and undermines public confidence.

"I wouldn't allow GCSB to be operating more or less as a rogue agency doing what it wants to do without complete ministerial control over it.

"John Key had 15 meetings with GCSB in 2012 alone - 15. In none of those meetings it appears the subject of Kim Dotcom and spying on Kim Dotcom came up."

Mr Shearer says Mr Key wants to hide behind the investigation.

The Green Party says it is astonishing that police got simple information so wrong when they were advising the bureau. Co-leader Russel Norman says clearly, police provided very poor advice.

"It's unbelievable that they told GCSB that Kim Dotcom wasn't a New Zealand resident ... but GCSB themselves needed to double check it. At the end of the day, they're the people that gather intelligence."

New Zealand First leader Winston Peters says the "comedy of errors" around the surveillance is an embarrassment for the Government.

Mr Peters says Kim Dotcom even held a big party to celebrate his residency.

"This is a three ring circus where the person has actually held a massive celebration in Auckland spending $500,000 on skyrockets - every Aucklander knew about it - and the head of our intelligence services do not know. This is extraordinary."

Mr Peters says the mistakes could cost taxpayers tens of millions of dollars in compensation.

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