Prime Minister John Key says Act Party leader John Banks has assured him he complied with the law with respect to donations he received during his 2010 campaign for the Auckland mayoralty.
Labour leader David Shearer has called on Mr Key to stand Mr Banks down from his ministerial portfolios while allegations that he didn't properly disclose donations from Kim Dotcom and others are investigated.
"I've sought an assurance from Mr Banks that he complied with local government law. He's given me that assurance," Mr Key said while attending a National Party regional conference in Dunedin.
"I accept him at his word. If people don't believe that they are free to test that with the police," Mr Key told Radio New Zealand.
Kim Dotcom, the Megaupload founder facing copyright infringement, money laundering and racketeering charges in the United States says he made two $25,000 donations to Mr Banks' campaign.
Mr Banks asked for a $50,000 donation to be split so it could be recorded anonymously, Dotcom told the New Zealand Herald.
Mr Banks told TVNZ's Q+A programme on Sunday that he had "nothing to fear and nothing to hide", and he welcomed an inquiry into the matter.
"I think you think I came up the river on a cabbage boat. I can tell you that when I signed my declaration for the mayoralty I signed it in good faith in the knowledge as justice of the peace as true and correct."
Political candidates are required by law to declare donations if they know who made them. Breaches are punishable by up to two years imprisonment and a fine of up to $10,000.
University of Otago Faculty of Law professor Andrew Geddis told the Herald on Sunday candidates were allowed to meet potential donors and advise them how to give anonymous donations.
If the candidate subsequently learns a large anonymous donation was made in the days after the conversation, the candidate can claim not to know who it came from, Mr Geddis said.Mr Banks is small business and regulatory reform minister and is an associate minister for the portfolios of commerce and education.
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