Megaupload's Dotcom gains access to NZ spy records

Megaupload founder Kim Dotcom talks to members of the media outside the New Zealand Court of Appeals in Wellington September 20, 2012.

WELLINGTON (Reuters) - A New Zealand government spy agency was ordered on Thursday to provide records of its illegal surveillance and involvement in the unlawful raid on Megaupload founder Kim Dotcom's home, which may bolster the internet tycoon's fight against U.S. extradition for online piracy, fraud and money laundering.

The High Court also ruled the flamboyant tycoon and three Megaupload operators can seek damages from the Government Communications Security Bureau (GCSB) related to its part in the January raid, when New Zealand police helicopters swooped into Dotcom's mansion compound at the request of U.S. authorities.

The Federal Bureau of Investigation (FBI) accuses Dotcom, who founded the file-sharing site which housed everything from family photos to blockbuster films, of leading a group that netted $175 million since 2005 by copying and distributing copyrighted content without authorization.

Dotcom maintains that Megaupload, one of the world's most popular websites before it was shut down in January, simply provided online storage services, and should not be held responsible for stored content.

William Akel, one of Dotcom's lawyers, said that the court decision had been expected, given the GCSB had already admitted in September its surveillance on Dotcom was illegal.

"We can now determine the extent of the GCSB's involvement, and we'll be able to claim for damages," he told Reuters.

The court ruled that Dotcom's lawyers can access information about the New Zealand police's request to the GCSB for information, documents the agency holds about his residency status, and which other agencies, including U.S. federal authorities, it shared its information with.

"Plainly most of what is sought by the plaintiffs is relevant," High Court Judge Helen Winkelmann said in a written judgment.

"The plaintiffs are entitled to discovery of the items."

Dotcom, who also goes by the name of Kim Schmidt, is a German national but with residency in New Zealand, which made it illegal for the GCSB to spy on him.

Prime Minister John Key has already publicly apologized to Dotcom for the illegal spying.

U.S. authorities are currently appealing a New Zealand court decision that Dotcom should be allowed to see the evidence on which the extradition hearing will be based.

The High Court's latest decision is a further setback for New Zealand authorities acting on behalf of the FBI.

Since the initial raid, the courts have ruled that search warrants used in the raid were illegal, freed Dotcom on bail, unfrozen some of his assets to pay living and legal expenses, relaxed restrictions of travel and association, and ordered extensive evidence disclosure.

Dotcom is also selling some of his car collection, which includes a pink 1959 Cadillac convertible and 1957 Cadillac El Dorado, to raise funds.

The extradition hearing for Dotcom and the other three defendants is now scheduled to be held in mid-2013.

(Reporting by Naomi Tajitsu; Editing by Michael Perry)