Muru Muru Taana-Andrews (34) was jailed for four years and one month for blackmailing a Dunedin man out of up to $250,000.
He was first denied parole in December last year.
The board recommended he take part in a short rehabilitative programme or one-on-one counselling but this month at his most recent parole hearing, it became clear nothing had been done.
Because Taana-Andrews required six hours of dialysis every two days he was deemed unable to take part in one particular course.
Also, psychological services said that individual counselling for the prisoner would deny riskier offenders the opportunity.
Panel convener Alan Ritchie called Corrections’ report "gloomy and unhelpful".
As a solution, the department suggested Taana-Andrews would be better treated in the community.
"That, to our minds, overlooks the statutory obligation on us to be satisfied in terms of risk before release can be directed," Mr Ritchie said.
"The ramifications for Mr Taana-Andrews in his particular situation of not being able to attend group rehabilitation are, essentially, tantamount to a denial of liberty."
The board, he said, would need reassurance in terms of the prisoner’s risk before he was released.
Mr Ritchie said the crimes that landed Taana-Andrews’ behind bars were "cynical, sustained and nasty".
The defendant confronted his victim late in 2016, claiming he had a "compromising photograph" of the man and a young girl from CCTV footage.
Taana-Andrews said $7000 would "make it go away" and stop senior Mongrel Mob members finding out.
For several months, the petrified victim would make weekly $100 payments but the demands increased for tobacco and other products.
Taana-Andrews would also request lump sums he would label as "interest", the court heard at sentencing.
The victim even stole from his employer to keep up with the constant demands.
In February 2018, he told Taana-Andrews he wanted out of their arrangement.
But when they met in a car park, the gang member told him to sign over ownership of his car or he would "end up in a dumpster".
At one stage the victim applied for a personal loan to pay off his blackmailer but was declined.
The extortion was only uncovered in July 2018 when a police launched an investigation targeting the Mongrel Mob.
Taana-Andrews would next see the Parole Board in February.
A psychological report would be completed in preparation for that hearing.
