The Prime Minister is under renewed pressure after admitting he was told about a government spy agency's role in the Kim Dotcom case as early as February this year.
Despite that, John Key still says a review of the Government Communications Security Bureau's files shows that he was not briefed on the matter until September.
Mr Dotcom, a German national who has New Zealand residency, is fighting extradition to the United States to face copyright, money laundering and fraud charges. He was arrested during a raid at his mansion near Auckland on 19 January this year.
John Key says he asked GCSB director Ian Fletcher to review all the files related to the bureau's unlawful surveillance of the internet entrepreneur, and that was completed on Tuesday night.
In a statement on Wednesday, Mr Key says the review found that he was not briefed by the bureau on its role in the Dotcom matter, nor any issues of potential illegality, until 17 September.
The statement goes on to say Mr Key visited the GCSB's offices on 29 February for a briefing on the broader capabilities of the bureau and to meet staff.
During that visit, a paper prepared as talking points for the staff member conducting a presentation contained a short reference to the Dotcom arrest as an example of cooperation between the GCSB and police.
Mr Key says while neither he nor Mr Fletcher can recall the reference to Dotcom being made, he accepts it might have happened. As a result, he will correct an answer he gave Parliament on the matter in September when the House resumes sitting in two weeks.
Opposition asks is PM up to the job
Labour Party leader David Shearer says the whole affair has led to distrust of the competence of New Zealand's intelligence agencies and of John Key.
Mr Shearer questioned how the name Dotcom would not ring any bells with Mr Key during the security presentation in February, saying the name should have been notable given the internet millionaire's high-profile arrest in January.
"It seems incredible to me that he would have sat through a briefing where Dotcom came up and he would not remember this. He was pinning the blame last week on low members of the GCSB - calling them people who had a brain fade."
Deputy leader Grant Robertson told Radio New Zealand's Checkpoint programme on Wednesday the Prime Minister's forgetfulness raises the question of whether he is able to do the job.
"You have to wonder if his memory and recall is sufficient to hold an office like Prime Minister. I think what we're seeing here is the unravelling of the story that's been created around this.
"The whole country was aware of Kim Dotcom in January and February - and the Prime Minister's now having to admit that he was too."
Mr Robertson says it is clear that John Key misled Parliament over the matter.
Greens co-leader Russel Norman says it appears the Prime Minister dropped the ball in February.
"John Key has been the minister responsible since the election in 2008, so it's hardly like an introductory briefing to a new minister.
"If he's getting ongoing briefings as to (the GCSB's) work in which they raise the issue of Kim Dotcom in the context of a major raid that has just happened, I would expect the Prime Minister to pay attention and to ask questions."
Dr Norman says it is John Key's duty to control the functions of the security agency and his hands-off approach is not working.
Cases in doubt
The Prime Minister's statement on Wednesday says an audit of the Government Communications Security Bureau's assistance to law enforcement agencies since January 2009 shows the legal position of three cases are in question.
"In three of 58 cases ... the GCSB cannot assure me that the legal position is totally clear. More legal work is being undertaken and the GCSB will issue a further public statement when that work has been concluded."
A report released last Thursday by the Inspector-General of Intelligence and Security, Paul Neazor, found the GCSB relied on incorrect police information about Mr Dotcom's residency status and did not check further before intercepting his communications.
The Government announced on Monday that Cabinet Secretary Rebecca Kitteridge will oversee a review of the GCSB and the following day Police Commissioner Peter Marshall confirmed that police were investigating the illegal surveillance.