Dotcom Spars With N.Z. Prime Minister at Spy-Law Hearing founder Kim Dotcom accused New Zealand Prime Minister John Key of lying as the two clashed at a parliamentary hearing on new spying laws.

Dotcom came face-to-face with Key today for the first time since armed police stormed his Auckland-suburb mansion in January last year and his cloud-storage Internet site was shut down by the U.S. on piracy charges. He sparred with Key, who denied knowing about the Internet entrepreneur before the raid.

Key knew of him “well before the raid,” Dotcom said. “You know I know,” he said, turning to the prime minister and drawing laughter from the gallery. “Why are you turning red prime minister?”

“Why are you sweating?” Key replied.

“It’s hot,” Dotcom retorted.

The confrontation took place at a hearing into new legislation that was prompted by Dotcom’s arrest in what the U.S. calls the biggest copyright infringement case in its history. New Zealand’s foreign intelligence agency, the Government Communications & Security Bureau, was revealed to have illegally spied on Dotcom as part of the U.S.-led operation.

The proposed law changes would allow the GCSB to carry out domestic spying on New Zealanders under certain circumstances, including intercepting phone calls and e-mails and tracking electronic communications. The current legislation restricts the agency’s operations to monitoring “foreign” communications, organizations and people. While Dotcom was born in Germany as Kim Schmitz, he has New Zealand residency and had legally changed his name.

Cyber Security

Key argues that New Zealand’s Security Intelligence Service can already collect information on citizens, and that the laws governing the GCSB need to be clarified and brought up to date in a rapidly changing cyber-security environment.

The new law is “morally indefensible” and would set New Zealand on the same path as the U.S., which is facing accusations of mass cyber surveillance after leaks by former national security contractor Edward Snowden, Dotcom said.

“We should avoid blindly following the U.S. into the dark ages of spying abuse,” he said.

Key apologized to Dotcom in September for the GCSB’s activity. Dotcom, 39, has sued the GCSB for intercepting his communications. He is scheduled to face a hearing on his extradition to the U.S. next month.

Dotcom was indicted in January 2012 in Virginia on charges of racketeering, money laundering, copyright infringement and wire fraud.

Helicopter Raid

New Zealand police used helicopters and an assault team during the raid on Dotcom’s home, seizing 18 luxury vehicles, including a 1959 pink Cadillac, art, cash, computers and hard drives.

A New Zealand judge ruled in June the search was illegal because police used overly broad and invalid warrants. Dotcom marked the anniversary of the raid this year by unveiling a successor file-storage and sharing site called Mega, which uses encryption code to protect content. He has also become a celebrity commentator on Internet freedom.

Dotcom said today he intends to stay in New Zealand and become more involved in politics.

The New Zealand case is Between Kim Dotcom and Attorney General. CIV2012-404-001928. High Court of New Zealand (Auckland). The U.S. case is: USA v. Dotcom. 12-cr-00003. U.S. District Court for the Eastern District of Virginia (Alexandria).

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