But Gallagher and Nikoloff have released a joint statement claiming the report has cleared them of any wrongdoing.
"We maintain that the CERA legal team, leadership and CERA's external legal team were aware of what we were doing with our outside business interests," Nikoloff and Gallagher said in their statement. "Coming from a business background, we have pursued various business interests since before joining CERA, and these interests were fully disclosed to CERA.
"In fact, CERA hired us because they needed our extensive private business networks, knowledge and commercial expertise - expertise and connections that CERA did not have. They chose not to advise us there was a potential conflict. We acknowledge we should have declared what we were doing in writing.
"We were expected to introduce investors, including our own networks, to private property opportunities in the city and we did so. We value our networks and always acted properly and professionally.
"We relied solely on publicly available information and knowledge. We did not invest in any properties nor did we earn any fees as falsely reported by some media.
"We have worked with many local and overseas investors and we have been highly effective in promoting the Central City Recovery Plan and attracting and securing investment that has advanced the rebuild and recovery of the CBD."
They said they disclosed information of their private transactions to CERA's in-house lawyers and to their own lawyers, who also acted for CERA.
"We were open about the business we were doing amongst staff and management at CERA and we trusted these people to counsel us if we needed to take any further steps in respect of our roles at CERA."At no time have we obtained personal gain for CERA-related activities."
Former solicitor-general and Crown prosecutor Michael Heron QC was appointed to lead the investigation into any potential conflicts of interests.
Heron maintains in his report Nikoloff and Gallagher had a conflict of interest by September 2014, and that they were aware of it but did not disclose it.
Gallagher and Nikoloff were both working with the Crown Company Otakaro Ltd when CERA was disestablished, but were stood down from their roles when the investigation began.
Cleverley stepped aside from his duties as South Canterbury and Canterbury District Health Board chair while the investigation was underway. He was not found to have breached any standards, but had made a "significant error of judgment" in not declaring a conflict of interest.
In his report, Heron found Nikoloff and Gallagher were using a private company, Project and Investment Ltd (PIML) to try make a business deal for personal gain. The deal related to the same property and parties they were dealing with in their roles as CERA employees, and they did not disclose their personal interest to either the parties or their employer.
Heron said the parties involved thought they were dealing with CERA employees, but were actually dealing with the two men in their roles with their private business.
"I consider their actions to be serious misconduct that is unacceptable in the New Zealand Public Service," Hughes said.
"If these two individuals were still employed by CERA I believe there would be strong grounds for terminating their employment.
"I am unable to direct State sector employees when making employment decisions, however based on what I have seen in Mr Heron's report, if it were up to me I would not employ these individuals."
An investigation by the chief executive of Otakaro found the two men had behaved in a similar way while employed there.
Heron's report showed Cleverley was a shareholder in PIML, but there was no evidence he was involved in the company's operations.
He had not declared his shareholding in the company to CERA because he believed it was not operating.
"In my view, his failure to do so was a significant error of judgment," Hughes said.
The report also looked at Cleverley's position as director of Silverfin Capital Ltd, a company which leased property to the Canterbury DHB.
The ministry of health and SSC earlier recommended he step down from Silverfin, but he did not accept that.
Hughes said it would have been "prudent" for Cleverley to step down from that role to avoid any issues of perception of conflict of interest.
Cleverley today resigned from both health boards to protect their reputations.
"It takes some integrity and courage to do what he's done and I absolutely respect him for it," Hughes said.
Hughes added that New Zealanders needed to have confidence that public servants worked to the highest standards of integrity in all things.
"It is completely unacceptable for any public servant to try to use their official position for personal gain," he said.
"Any conduct of that nature is a serious breach of the standards expected of public servants in New Zealand and will be treated very seriously.
"Public servants need to exercise a high standard of judgement around the management of conflicts of interest.
"Those holding senior leadership and governance positions in public organisations needed to demonstrate the 'highest possible standards of judgment' and model that to employees."
Gallagher and Nikoloff said the report found any allegations of criminality was unfounded, but Heron said their statement was untrue.
He said it was simply not his role to investigate an potential criminal activity, but the matter has been picked up by the SFO and will be looked at by them.
Gallagher and Nikoloff's statement also said the report found them to be people of integrity, but this was also untrue.
Labour Canterbury spokeswoman Megan Woods said the referral to the SFO is a positive move, but one that raises serious questions about the Government's oversight of the rebuild.
"This is a thorough report which exposes the extent of alleged conflicts of interest. We need reassurance that this is not the tip of the iceberg," Woods said in a statement.
"While the investigations have to continue, the Minister for Greater Christchurch Regeneration, Gerry Brownlee, can't dive for cover.
"There has to be political accountability for what happened under his nose. We must consider the political culture that allowed this questionable behaviour to emerge.
"The buck stops with Gerry Brownlee. He is the responsible Minister and will need to ensure the rebuild continues at a pace without distractions like this which erode confidence."
