British company Serco has temporarily had management of the prison taken off it after allegations of violence between inmates, drug use and the use of banned items including cellphones.
Last week Corrections Minister Sam Lotu-Iiga was told of a separate police investigation that resulted in the three inmates' arrest today.
Police have also revealed they are investigating a former Mt Eden prison guard as part of the operation targeting the alleged large-scale production and supply of methamphetamine by members and affiliates of the Head Hunters gang.
Mr Lotu-Iiga said the Head Hunters case did not contribute to the decision by Corrections chief executive Ray Smith to take control of the prison from Serco, but the latest allegations would be taken into account by a wider review.
"It is not for me to comment on a police investigation. We have a review underway, and the review will take into account any police investigation and any allegations around prisoner violence or contraband," Mr Lotu-Iiga told media.
Five men arrested and charged during Operation Sylvester have appeared in court today. All have been granted interim name suppression.
Another three people, inmates at Mt Eden Corrections Facility, have also been charged as part of Operation Sylvester but will appear in court at a later date.
Police have also said they were "speaking with" two men and a women - one a former Mt Eden prison guard - and investigating three NZTA-certified vehicle testing companies. No NZTA staff were involved.
Asked if today's arrests worried him, Mr Lotu-Iiga, who has come under intense pressure in the past week, said they did not.
"I am always concerned when there are [police] operations. I'm always concerned. But, no, it didn't worry me, no.
"I don't want to pre-empt the findings of that police investigation. That is not for me to comment on that investigation. It is not for me to comment on it. I want to see the facts...until we can make some decisions and go forward from there.
"I am disturbed about what went on this morning, but in terms of finding out the facts, we need to wait for the police investigation to end."
Labour's corrections spokesman Kelvin Davis said the arrests should be the final straw that leads to the cancellation of Serco's contract.
"Serco has no control over their prison...criminals are sent to prison to serve their time, not to run drug rings," Mr Davis said.
"The Government needs to stop being soft on Serco and cancel their contract. If the Minister doesn't have the guts to do it he needs to go."
Police Minister Michael Woodhouse said he was also told last week of the police investigation and that it could soon lead to arrests of inmates at Mt Eden prison.
"It was a pretty high level heads up. Obviously Mt Eden was in the news last week, and the Commissioner [Mike Bush] had said to me that it was an investigation that could involve Mt Eden, and that has what transpired."
Mr Woodhouse said he was told it involved organised crime.
"I can't recall the exact words that were used, but it could well have included prison officers and gang members...I kept it at a very high level."
By Nicholas Jones of the New Zealand Herald
