"It was said that when he left the interview he went back into the main prison where he was found to have the stuff concealed in a sock.
"When Mr Reid was first charged, he filed for a judicial review, and that has since been granted. However, while he was awaiting news of the review he was denied access to a lawyer and the prison elected to have the hearing anyway.
"This is now accepted as having being unlawful and therefore the penalties imposed were also unlawful."
He added: "Both parties have agreed on this and an order of consent was made by Justice Stephen Kos."
Lawry indicated Reid may take civil proceedings against the Department of Corrections.
"He ... has the right to take matters further," Lawry said. "He can pursue a civil action, and I believe he is considering this, but that is for another day.
"He has already served the punishment given to him but feels he cannot get that time back." The Department of Corrections confirmed the conviction against Reid had been quashed.
"A finding of guilt was quashed on July 26 and the charge is now withdrawn. The department cannot comment further."
Garth McVicar, from the Sensible Sentencing Trust, was appalled at the possibility of Reid suing for loss of privileges and his time spent in solitary.
"This guy is moaning that he can't get that time back? Try telling that to the families of his victims," McVicar said.
"He's a clever and cunning man who knows how to exploit the system."
Reid was jailed for life for raping and murdering deaf Christchurch woman Emma Agnew in 2007, as well as the rape, attempted murder and robbery of a 21-year-old student in Dunedin nine days later.
Murray has been crusading to clear his name. She was due back in court on the smuggling charges in November, which she said she would defend.
"Quashing a conviction is not something that is done lightly, so it will have repercussions on my situation."
Law change underway
Justice Minister Judith Collins said law changes were underway to redirect prisoner compensation. "Currently, if financial compensation is awarded, victims of the prisoner can seek redress for the harms they have suffered, and any remaining compensation goes to the prisoner.
"The Government's policy is to redirect financial compensation that might be payable to prisoners towards services and programmes supporting victims of crime."
