The Taxpayers Union is alerting the Serious Fraud Office (SFO) to an aspect of the Government's controversial Saudi sheep deal.

Photo: OFFICE OF AUDITOR-GENERAL

The Government paid $11 million to Hamood Al-Ali Al-Khalaf, in cash, sheep and equipment, saying he had threatened legal action over New Zealand's ban on live sheep exports and could have sued for up to $30 million.

Earlier this month the Government was finally forced to release all the documents related to the deal and bit by bit, as journalists and opposition parties trawled through the roughly 900 pages, new information emerged about what went on.

Today, Auditor-General Lyn Provost announced she is launching an investigation into public spending on the deal.

Jordan Williams from the Taxpayers Union, which has been lobbying for an inquiry, told Checkpoint it had found another issue within the documents which the SFO should look at.

"Officials decided ahead how much we're going to pay. They then wrote to the MFAT lawyers and said 'how do we describe this on an invoice so that it fits within the appropriation' and then emailed the Saudi party to say 'we can pay you the money as long as you describe it in this particular way on the invoice'," he said.

"Well that is a prima facie fraud."

Mr Williams said the union wrote to the Auditor General in May.

"There's many unanswered questions in relation to this deal," he said.

"A few weeks ago, the Government released 900 pages of heavily redacted documents around the deal and yet we still have very basic questions that remain unanswered."

Several requests to AG

Mrs Provost said she had received several requests, including from two members of Parliament, the New Zealand Taxpayers' Union and in a petition from more than 10,000 New Zealanders, to inquire into aspects of the Saudi Arabia Food Security Partnership.

She said she had decided to conduct an inquiry, and her office did not usually make any public comment on the substance or progress of an inquiry while work was under way.

"We will report publicly on our findings once we have concluded the inquiry," she said.

Foreign Minister Murray McCully said the Government was comfortable with its involvement and would co-operate with the investigation.

"We have said from the outset that the Auditor-General is entitled to scrutinise any spending of public money, whenever she chooses, and we welcome her decision to carry out an inquiry into the Saudi Food Security Partnership," Mr McCully said.

Inquiry welcomed

Labour Party MP David Parker welcomed the investigation, saying many aspects of the Government's Saudi sheep deal were disturbing.

Mr Parker said he hoped the investigation would restore New Zealand's international reputation for fair dealing.

"Spending over $11 million for the Al Khalaf group - including for a $4 million cash payment, a model farm in the desert and over $1m on flying sheep - has never made sense," he said.

Green Party co-leader James Shaw said Prime Minister John Key should stand Mr McCully down while the inquiry was carried out.

Mr Shaw said he was convinced the Government paid a bribe to try to get a free trade deal with the Gulf States.

"The taxpayers sent 900 sheep and $11 million into the desert and it is now finally time to find out why," Mr Shaw said.

Mr Shaw called for an investigation in May and said the Government had some serious questions to answer.

"There are just holes, and that's why we're so delighted that the Auditor-General is going to be investigating because this thing, it's going to take a lot of sunlight to disinfect this particular deal."