Prime Minister John Key is refusing to accept there was a link between his office and right-wing blogger Cameron Slater, despite the Security Intelligence Service (SIS) watchdog finding his official passed on information.
Intelligence and Security Inspector-General Cheryl Gwyn this morning released the findings of her investigation, prompted by allegations in Nicky Hager's book Dirty Politics.
It criticised the way it released inaccurate and misleading information that was embarrassing to the then Labour Party leader Phil Goff in 2011.
The report also reveals one of Mr Key's staff passed the information on to right-wing blogger Cameron Slater for political purposes.
Ms Gwyn inquiry's found Mr Key's deputy chief of staff, Phil de Joux, sought and received confirmation from the SIS that Mr Goff had been briefed by the agency on Israeli spy allegations, despite Mr Goff's claims to the contrary.
The SIS provided details of documents and dates about the briefing, which Mr de Joux passed on to senior adviser Jason Ede.
Mr Ede tipped off Mr Slater, who used that information to make an Official Information Act (OIA) request about the meetings.
But the Prime Minister told Radio New Zealand's Checkpoint programme today that he did not accept the link.
"That point is highly contested. Now I have absolutely no doubt that Jason Ede had a conversation with Cameron Slater," John Key said.
"Actually what the report ... makes absolutely clear is they're quite within their rights, if they wanted to pass the information. It was not confidential."
Phil Goff demanded that John Key apologise or resign for his role in what he called a smear campaign and said Mr Key had continuously misled the public by denying that occurred.
"The Prime Minister should resign, everybody else has ... look, I think it's a very serious matter if he can't own up to it, if he can't apologise, if he can't give the guarantee, then my belief is that he ought not to be Prime Minister of New Zealand."
But Mr Key said he would not be apologising to anyone.
"Look at the claims made by Phil Goff prior to the election. Those claims were very serious claims and not a single one of those has been stacked up by the report," he said.
"I had no involvement, as I'd always said. I did not direct the SIS, as they claimed I did."
Greens co-leader Russel Norman said Mr Key's actions had brought the country into disrepute.
"The Prime Minister needs to step aside so we can have a Royal Commission into the dirty politics that is endemic to the prime minister's office," he said.
"It is a disgrace. He is an embarrassment to New Zealand."
SIS boss apologises
SIS director Rebecca Kitteridge this morning apologised to Phil Goff.
Ms Kitteridge said she was worried this might have jeopardised relations between the Opposition and her department.
"That has lessened the trust and confidence that existed between the (then) Leader of the Opposition and the service.
"So I've apologised to Mr Goff, unreservedly. I've also apologised to the new Leader of the Opposition, so I've provided an apology to Mr Little. It was really important to do that."
Mr Goff said Ms Kitteridge told him she deeply regretted the SIS fell short of its obligations to him, and that the events had had adverse consequences for him.
The SIS released a briefing note which purportedly confirmed Mr Goff had been fully briefed about alleged Israeli spies being caught up in the Christchurch earthquake in February 2011. Mr Goff had denied he had been briefed, sparking a political row between him and John Key.
The note was then released to Mr Slater within days of the latter requesting it.
While Ms Gwyn's report is damning, it also finds no SIS officer acted in collusion with Mr Slater, who got the information under the Official Information Act.
Her report said a staff member in Mr Key's office, Jason Ede, had provided relevant details of the documents relating to the-then SIS head Warren Tucker's meeting with Mr Goff and was speaking on the phone to Mr Slater as Mr Slater made his request to the SIS.
The report reveals that when the argument between Mr Key and Mr Goff flared, Mr Key's then deputy chief of staff, Phil de Joux, said to Mr Ede that the office needed to get the briefing note into the public domain using the Official Information Act.
Tucker regrets 'errors of judgement'
Warren Tucker, the former SIS head, said he took full responsibility "not only for my decisions but for the systemic errors made by NZSIS at the time".
In a statement, Dr Tucker said he "felt caught between a rock and a hard place" trying to meet his obligations under the Official Information Act and those under the NZSIS Act.
"As the Inspector-General has concluded, the unique consultation obligations of the Director of Security gave rise to "controversial" questions and, further, the prospect of disclosing consultation records was "unprecedented".
"I fully accept the finding that my ability to both navigate these issues and discharge my obligations of political neutrality - of which I was well-aware - was compromised by my view that my credibility had been placed in issue concerning events that I could well recall.
"In trying to meet both my obligations under the Official Information Act and those under the NZSIS Act, I felt caught between a rock and a hard place.
"As the Inspector-General has stated, meeting that challenge required more than "mechanical even-handedness" and I should have sought greater assistance. I sincerely regret the errors of judgement this failure caused. As the report notes, none of these were the result of any "political collusion" of any sort, whether on my part or on the part of NZSIS more widely."
SIS 'has made changes'
Rebecca Kitteridge said she accepted all recommendations from the inquiry.
"In particular, I take my obligation for consultation with the Leader of the Opposition, and the responsibility for political neutrality, extremely seriously. I have personally met with the Leader of the Opposition and with Mr Goff, who was leader at the time, and apologised.
"I have also apologised to the Prime Minister for providing his office with inaccurate, incomplete or misleading information.
"Since 2011, when the events described in the report occurred, there have been several important changes in the way we manage the release of information. These changes will address some of the recommendations and I am confident that we are already in a stronger place than we were in 2011.
Ms Kitteridge said there was a seconded adviser from the New Zealand Intelligence Community in the minister's office.
"We also work much more closely with GCSB and DPMC in our corporate functions, including consultation and management of Official Information Act requests, and there is central coordination for media interaction," she said.
"There is a question about whether any of the IGIS's findings should have consequences for current staff, and I have commissioned independent advice on this. I won't be commenting further on staffing issues."