Documents reveal that officials were looking at finding ways to pay compensation to a Saudi businessman upset by the government's ban on live sheep exports to Saudi Arabia.
The Labour Party says the official papers contradict the Prime Minister and prove the government paid millions in compensation to the Saudi businessman.
The government paid $11 million to Hamood Al-Ali Al-Khalaf, in cash, sheep and equipment, saying he had threatened legal action over New Zealand's ban on live sheep exports and could have sued for up to $30 million.
David Parker (file) Photo: RNZ / Kim Baker Wilson
Prime Minister John Key has told Radio New Zealand the deal was never about compensation.
But a Ministry of Foreign Affairs paper, dated 27 April 2012, refers to compensation.
It noted officials were working on three work streams related to the Saudi deal. One was about "finding an appropriate mechanism to meet Mr Al-Khalaf's concern for 'compensation' (possibly through the joint venture)", the document said.
Labour's trade spokesperson, David Parker, said the working group came up with the idea of a $4 million cash payment, which was part of the overall package put together to set up an agri-hub in Saudi Arabia.
Mr Parker told Morning Report the documents were clear about the nature of the deal as compensation for the continued ban on sheep exports by both National and Labour.
Listen to David Parker
He said the deal was not what it seemed. Other documents revealed Foreign Minister Murray McCully did not want it described as compensation to avoid getting lawyers and bureaucrats involved.
Then came the document in which MFAT talked about finding an appropriate mechanism to meet Mr Al-Khalaf's concern over "compensation.
"Now when you strip it all back, they've actually paid off Mr Al-Khalaf - and then you say, what for? What was he owed?
"And the answer is he wasn't owed anything because the New Zealand government did not break the law banning the ... export of live sheep for slaughter.
"And the National government who renewed that ban twice didn't to anything illegal either. So it is a facilitation payment, which is effectively a bribe to get this disaffected businesman out of the way of the Saudi free trade agreeement."
Mr Parker said that would be a breach of the law on public spending.
He said the Public Finance Act controlled what governments could spend money on. All spending had to come from a specific appropriation authorised by Parliament.
"I cannot believe that the Ministry of Foreign Affairs has an appropriation that allows this sort of payment...We know that MFAT paid the money. There's no doubt about that. It's just whether they were authorised to spend it in this way and whether they've pretended otherwise to the other agencies that have oversight like the Treasury and the Auditor-General. I think this now shows an orchestrated litany of lies."
Mr Key faced questioning in Parliament yesterday over his insistence the deal was never about compensation and maintained the government's cash payment of $4 million to Mr Al-Khalaf was for a range of reasons.
"Some of them were the FTA (Free Trade Agreement), some of them were our relationship with Saudi Arabia and some of them were to showcase New Zealand products," he told MPs.
But Mr Parker does not accept Mr Key's explanation.
"He's trying to shift the blame for what is a, you know, is a bribe. You know the $4 million payment plus the $6 million to build a farm in the desert has never made sense on its face. Why would you do it?"
The Auditor-General, Lyn Provost, is now considering whether to investigate the matter.
Meanwhile, Mr McCully has been overseas and has not been available to answer more questions about the Saudi deal.