The chief executive of Kāinga Ora has been called out in the House of Parliament over emails appearing to defend running an ad with a Labour candidate in it, despite being admonished publicly by the minister responsible for the agency. 

Following an investigation the Public Services Commission last week said the agency had failed to act politically neutral, after it ran an advertisement featuring Arena Williams, then a Labour Party candidate. 

Williams told staff at the time she was running, but they assured her it would be fine and even conspired internally about how to "pretend" they didn't know and handle any political fallout. 

The advertorial ran in June 2020 on real estate website OneRoof, run by NZME, which is publisher of the Herald. 

Housing Minister Megan Woods said she first became aware of the issue in August last year and told chief executive Andrew McKenzie she was not happy and that the agency's conduct had not met her expectations. 

Andrew McKenzie Chief Executive Kāinga Ora. Photo / Supplied 

Woods then asked the Public Services Commission to investigate in November after a series of internal emails were released showing staff discussing how to cover up the issue. 

"I assured her it wasn't a problem in my view and we could proceed as though we didn't know about her impending announcement," said one email about Williams' candidacy. 

Other emails included comments such as "we can just act as though we don't know anything", and discussing removing mention of Williams' candidacy, saying it "keeps Kāinga Ora's powder dry too!". 

Despite Woods' comments, McKenzie continued to defend internally the actions of his staff, as revealed by National Party deputy leader and housing spokeswoman Nicola Willis in the House today. 

"As I am sure you will have been told, the judgment call you made was fine, I am happy to stand behind you on it," an email sent on November 11 read. 

"This little maelstrom will pass quickly, I just hope it doesn't make you too risk averse!" 

Nicola Willis Deputy Leader of the National Party. Photo / Alex Burton 

He added: "The key issue for the Minister is the comments in your emails rather than the decision per se". 

The emails also revealed how the agency planned to continue denying any wrongdoing and downplay the investigation in media responses. 

"I don't like the implication of apology from us when we did no wrong," general manager Mark Fraser wrote in an email the same day. 

Emails from other staff discussed not referring to the investigation as an investigation. 

"Their statement refers to it as an investigation but we can keep it simple," one email read with their example mentioning "the process". 

Willis said the emails showed Kāinga Ora ignored Woods' criticism, "thumbing their nose at the Minister when these issues were raised publicly". 

Under questioning in the House about why McKenzie had kept his job, Woods said she retained confidence in him as chief executive. 

She did not directly address questions over comments in the November 11 emails but said she was confident in the Public Service Commissioner's findings. 

"Who notes that there is clear evidence that there has been an improvement in processes. 

"He notes that the chief executive and the management team have owned that this was not handled properly and – importantly for me – that they are focused on fixing this." 

Housing Minister Megan Woods. Photo / Mark Mitchell 

Kāinga Ora has been approached for comment. 

Willis said she was "astonished" no staff at Kāinga Ora had been held accountable. 

She said she would write again to the Public Service Commissioner over the comments made in the newly-released emails. 

- Michael Neilson, NZ Herald