Yet more embarrassing information on the Kim Dotcom spying fiasco has surfaced in New Zealand. Documents show that in December 2011 when the spying began, police already had information which stated that Dotcom - codenamed "Billy Big Steps" - was a NZ resident. As those deemed responsible are held accountable, the GCSB spy agency's deputy director has become the first high-profile casualty, and the Prime Minister is warning of more "big changes" to come.

It’s the headache that just won’t go away for New Zealand’s government and its top spy agency.

From December 2011 to January 2012 the spies of GCSB monitored Megaupload founder Kim Dotcom and his associate Bram van der Kolk. Both have New Zealand residency which rendered the surveillance illegal. Last month a High Court judge gave Dotcom permission to sue the government for damages over the incident.

Now, in documents obtained by the Labour opposition and handed to 3News, there is yet more embarrassment for officials tied up in the controversy.

Dotcom – who the papers reveal was given the codename of “Billy Big Steps” – was first subjected to monitoring on December 16 2011. The documents reveal that on this date the police were already in possession of papers which showed that Dotcom was a New Zealand resident and therefore exempt from GCSB spying.

By January 11 2012, just days before the huge raid on Dotcom’s mansion, the whole detailed immigration file was in police possession and by February 22nd GCSB knew that they had carried out illegal spying. Even so, it took until September 2012 for them to admit that to Prime Minister John Key.

Making matters worse and despite the catalog of errors, the papers show a GCSB operative stating that “..people here have been very relaxed about it all.” Perhaps unsurprisingly, high-profile heads are now beginning to roll.

The first casualty is Hugh Wolfensohn. He joined the agency back in 1988 as a legal advisor and was later promoted to Deputy Director of Strategic Policy and Corporate Services. From there he became Deputy Director of Mission Enablement, finally going on to become overall GCSB Deputy Director.

During the month-long monitoring of Dotcom and Bram van der Kolk, Wolfensohn was acting GCSB Director meaning that he was the person with overall responsibility for the illegal surveillance. After 25 years with GCSB Wolfensohn has now stepped down. When Prime Minister John Key was asked whether Wolfensohn was paid off he laughed and said that was something for the former spy to answer.

The news comes in advance of the findings of a high level inquiry ordered by Key into the spying fiasco and set to be published in a few weeks time. When pressed, Key admitted that there are still “big changes” to come at GCSB, which can only be good news for Dotcom.