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Winston Peters told Parliament's privileges committee last night he could not be in breach of the laws around disclosure of debts owed by MPs, or their payment, because his lawyer never sent him any bills.
Mr Peters and his lawyer, Brian Henry, argued that without bills being rendered for legal work, no debts existed and therefore could not be declared.
The committee was hearing a complaint, laid by Act New Zealand leader Rodney Hide, that Mr Peters was in contempt of Parliament by not disclosing a $100,000 cheque from expatriate billionaire Owen Glenn.
Mr Peters had two defences against that - the cheque was paid into Mr Henry's account to help meet his legal costs after the 2005 election, and Mr Henry did not tell him about it until July this year.
MPs have to declare donations, debts and gifts in the annual Register of Pecuniary Interests.
Mr Peters told the committee he could not have disclosed the cheque or the debt because he did not know about the cheque and no debt existed.
The evidence given by the New Zealand First leader and his lawyer revealed what appeared to be an extraordinarily loose arrangement between them.
Under it, Mr Henry did not send any bills, did not discuss how much he was owed for the work he had done, did not tell Mr Peters how much of it had been paid by third parties and never disclosed the identities of those who paid the money.
Mr Henry told MPs on the committee he had solicited the money from Mr Glenn, and had clearly explained what it was going to be used for.
He refused to say who suggested he should call Mr Glenn, although he said it was not Labour Party president Mike Williams or Mr Peters.
The National Party has suggested it was Mr Williams, because Mr Glenn has donated large sums to the Labour Party in the past.
Mr Glenn's payment was revealed in a series of emails, published in The New Zealand Herald earlier this year, between Mr Glenn and his New Zealand public relations consultant.
It appeared from the emails Mr Glenn thought he was donating the money to NZ First, and there was no explanation of that apparent misunderstanding last night.
The legal costs were payment for Mr Henry's work on an electoral petition launched by Mr Peters after the 2005 election, when he tried and failed to overturn the result.
Mr Peters lost the seat to National's Bob Clarkson, who was awarded costs of $40,000.
Mr Henry told the committee he had personally paid the $40,000.
MPs on the cross-party committee questioned Mr Peters closely about Mr Henry's claim, saying he must have known it had been paid.
"I thought I had paid it myself," Mr Peters said, explaining that he paid amounts of money into a solicitor's fund to take care of such expenses.
The committee will now decide whether it wants to hear evidence from anyone else before it prepares a report to be debated in Parliament.