New Zealand's Prime Minister has apologised after an official report revealed that a spy agency illegally carried out surveillance on Megaupload found Kim Dotcom, which may affect a US bid to extradite him.
The report released on Thursday by Prime Minister John Key found that the Government Communications and Security Bureau (GCSB) had spied on Dotcom, despite a law prohibiting it from spying on New Zealand citizens and residents.
Dotcom attained New Zealand residency in 2010.
"It is the GCSB's responsibility to act within the law, and it is hugely disappointing that in this case its actions fell outside the law," Key said in a statement, adding the blunder was the result of "basic errors".
Key also apologised to Dotcom and all New Zealanders, saying they were entitled to be protected by the law and that it had failed them.
The illegal surveillance may deal another blow to a US extradition case after a New Zealand court ruled in June that
search warrants used in a raid on Dotcom's home in late January that saw computers and hard drives, works of art, and cars confiscated were illegal.
Washington wants the 38-year-old German national to be sent to the US to face charges of internet piracy and breaking copyright laws for leading a group that netted $175m since 2005 by allegedly copying and distributing music, films and other copyrighted content without authorisation.
US authorities are currently appealing a New Zealand court decision that Dotcom should be allowed to see the evidence on which the extradition hearing will be based.
The extradition hearing has been delayed until March 2013.