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Less than a week after Davison told the court of the illegality, the GCSB acknowledged it had got it wrong.

Inexplicably, Key wasn't told by English or GCSB director Ian Fletcher — an old schoolmate he had approached and invited to apply for the job — about the spying or the ministerial certificate. Instead, he remained insulated from the knowledge until 17 September when the illegality of the spies' actions was about to be exposed in court. Key immediately ordered an inquiry by the GCSB's sole oversight at the time, the Inspector-General of Intelligence and Security, Paul Neazor.

Key revealed the spying on 24 September and released Neazor's report three days later with an apology to Dotcom. "Of course I apologise to Mr Dotcom. I apologise to New Zealanders. These are basic errors. The organisation should be able to get these things right."

Neazor's report, if anything, only revealed the weakness of the oversight system. It appeared to pin the blame on changes in the Immigration Act — an explanation the Prime Minister embraced publicly. On a number of occasions, Key blamed a change in immigration law which happened just as Dotcom arrived in New Zealand with his residency. In one example of the inaccurate excuse, he said: "Had he come to New Zealand at the time without changes to the other laws, particularly GCSB's law, then his activities would not have been protected." He was wrong — and it wasn't what Neazor had said at all.

In fact, the report by the retired senior judge simply said the spies got it wrong because nobody bothered checking. There was no law change which made a difference — no complicated technical or legal reason. Neazor had floated a sequence of events and a law change which had no impact on the GCSB. All his report appeared to do was obscure the real reason Dotcom was spied on illegally — a basic failure of process and lack of care.

It didn't end there. Key ordered an inquiry into the GCSB, which was found to have illegally spied on 88 other New Zealanders since 2003 while helping the Security Intelligence Service and the Police. It was found to be a bunkered organisation, in which few staff knew what the others were doing.

But there was no inquiry that dug into the basic question — how did the GCSB get it so wrong when they had all the pieces of the puzzle in February at the latest? How did Wolfensohn, who helped write the law, get it so wrong? And how did that failure to understand persist for at least six months — right up to the point he helped arrange a special certificate which would have covered up the illegal spying.

The legal advisor was placed on gardening leave shortly after the spying became public. He finished with the bureau in February. A spokesman said: "Mr Wolfensohn has not received an exit payment, leaving function, dinner or present."

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