Ars Technica | Sept. 23, 2012

New Zealand's Prime Minister John Key announced on September 24 that he has requested an inquiry into illegal spying on Kim Dotcom and other employees of Megaupload by New Zealand's Government Communications Security Bureau, the country's counterpart to the US National Security Agency. The revelation is just the latest in a series of exposed missteps by New Zealand authorities in their eagerness to assist the US government in apprehending Dotcom and his colleagues, and throws even more uncertainty on the ongoing efforts by the New Zealand and US governments to extradite Dotcom to the US for prosecution.

According to a government statement, Key was informed by GCSB Director Ian Fletcher on September 17 that the GCSB had "acted unlawfully" while assisting New Zealand's police in locating Kim Dotcom and the other three suspects for arrest.   "The Bureau had acquired communications in some instances without statutory authority," the Prime Minister's office said in its statement.

The GCSB is New Zealand's electronic intelligence-gathering agency, and part of ECHELON, the worldwide communication interception network that also includes the NSA and security agencies of the United Kingdom, Australia and Canada. It operates two communications interception stations in New Zealand, as well as the government's Internet and network security operations. But the GCSB's role, like that of the NSA, is supposed to be focused on foreign intelligence—not spying on the country's own residents.

“I expect our intelligence agencies to operate always within the law," Key said in a prepared statement. "Their operations depend on public trust. I look forward to the Inspector-General’s inquiry getting to the heart of what took place and what can be done about it.”  Because of the bearing of the investigation on the Megaupload case, he said he could not comment further.

In response to the announcement by Key, Kim Dotcom tweeted, "I welcome the inquiry by @JohnKeyPM into unlawful acts by the GCSB. Please extend the inquiry to cover the entire Crown Law Mega case." Dotcom's extradition hearing, originally scheduled for August, had already been pushed back to March of 2013 after revelations of illegal and improper warrants and other missteps by police in the arrest of Dotcom.