"The parties were in part advertising and PR," said the associate, who spoke on condition of anonymity. "He wanted to show he was the biggest and greatest and how he had money. Back in 2000 he didn't have as much money as he showed the world he did."
The flamboyance and prankster humour masked a sharp business mind, the source said. "He was really good at bringing people around him and getting them to do their best for him."
As for money opening doors, since setting up home in a sprawling $30 million mansion near Coatesville, built by the founders of the Chrisco hamper empire, Dotcom's dinner guests have included John Banks when he was mayor of Auckland.
"I met him because he was wanting to be generous to the city," the former mayor told the Herald. They also met at the waterfront apartment of property developer Dave Henderson on New Year's Eve 2010 to watch a $500,000 fireworks display paid for by Dotcom.
The politician gave Dotcom advice regarding his residency application and to his staff about the Overseas Investment Commission process when the German was trying to buy the Chrisco mansion.
The Commission vetoed his purchase of the mansion, claiming Dotcom did not meet its good character requirements. This was despite Dotcom having been granted residency (on condition that he invest at least $10 million), which has its own good character test.
The inference, he told a reporter in September, was the Government wanted his money and job-creation capacity "but you can't buy the home you desire for your family".
Prime Minister John Key this week acknowledged the anomaly and said officials are looking at whether the two tests should be the same.
Two specialist immigration lawyers told the Herald the residency process Dotcom went through is robust and fair and the 38-year-old German founder of Megaupload.com appeared to have fulfilled requirements.
A US indictment alleges that Dotcom and associates ran what the FBI calls a "Mega conspiracy" that cost copyright holders of films music and other content more than US$500 million ($608 million) in lost revenue through distribution of pirated material.
Auckland District Court judge David McNaughton this week noted that he had no way of assessing the strength of the US Government's case.
The judge denied Dotcom bail as he considered him a significant flight risk, having noted that he appeared to have the means to flee and if he got to Germany (which doesn't have an extradition arrangement with the United States) would be beyond the reach of US courts.
Dotcom emphatically denies any criminal misconduct, believes he has a good defence and says he has no intention of leaving the country and will vigorously contest extradition to the US. He has said that when Megaupload.com is notified of infringing material it is taken down.
Dotcom's birth name is Kim Schmitz. He also uses the name Kim Tim Jim Vestor and has current passports in all three names, issued by Germany and Finland. He also had fun with a variety of aliases, including Kimble and King Kimble.
He explained the reason for changing his name but Judge McNaughton added that "the fact remains that he has no qualms about changing his identity and had up to the time of his arrest been operating at least one bank account under another name".
His name changes are legal and would not ordinarily disqualify him from residency.
"I've heard very loose comment that you can buy your way into the country and that is simply not true," immigration specialist lawyer and former MP Matt Robson told the Herald. Applicants were closely scrutinised, no more so than for the top business bracket, Entrepreneur Plus, a new category aimed at attracting wealthy migrants to invest in businesses and create jobs.
Dotcom, who invested $10 million in government bonds and says he has created 20 jobs, was one of the first approved under the category which Labour has attacked as a failure. Entrepreneur Plus was introduced in November 2009 and after nine months had resulted in one approval, which Labour's immigration spokesman at the time, Pete Hodgson, seized on to label it "a complete and utter failure".
Dotcom was granted residency under the scheme in December 2010. To date 10 people have been granted residency under Entrepreneur Plus, with total investment just over $100 million, an Immigration Service spokesman said. Two applicants have been declined.
As well as a character check that includes providing a police clearance from their home country, applicants have to demonstrate a business record, which Robson says is scrutinised by officials who specialise in dealing with business applicants. Business capacity related to what they plan to do in New Zealand, that their money is from a legitimate source and that tax is paid on it.
Robson was unimpressed by Winston Peters' call for an inquiry. "[Peters is] the person who likes to ask about that, never mind where the chips fall. If it turns out he's completely wrong he'll never [give] an apology to say 'I'm sorry I put someone through this'.
"[Dotcom] is entitled to fair assessment rather than supposition about what he might or might not have declared, or supposition that immigration somehow or other said 'it doesn't matter what [convictions] you have got, we're letting you in'.
"I can advise that there is a tough procedure. For business people I have to spend a lot of time showing they are bona fide."
Dotcom, who grew up near Hamburg, started as a computer hacker then helped firms with IT security. This week's bail decision set out his previous offending: a two-year suspended jail sentence in 1998 for hacking carried out four years earlier; a 20-month suspended jail sentence in 2003 for insider trading and breach of trust committed in 2001 (both in Germany); a fine imposed last year in Hong Kong for failing to publicly disclose the number of shares he had acquired in 2009.
Dotcom's convictions in Germany were expunged under that country's clean slate legislation and he declared the convictions in his application for residency as required. (New Zealand has a similar law allowing offences that did not carry a jail sentence to be concealed if they meet conditions including having gone seven years without a conviction.)
Another immigration law specialist, David Ryken, said most people get a good character waiver if their record has been expunged in their home country. The exceptions would be crimes New Zealand considered heinous.
In deciding whether to grant a waiver, the Immigration Service's Operations manual directs factors to be considered should include seriousness of the offending, how long ago, family ties to New Zealand and "whether the potential contribution to the country will be significant".
Might that afford the rich an easier ride? Ryken: "I suppose if you are about to invest $20 million and provide 100 people with employment your contribution is pretty significant but I think it is jaundiced to say you buy your good character waiver."
The potential contribution was not simply a dollar measure. Those with skills in short supply would have a good chance of getting waiver.
"The rules are very strict but there is flexibility, particularly where the offending is long ago ... where the contribution [money or skill] is significant."
"Hacking more than 10 years ago I would have thought would be a shoo-in for a waiver, particularly if the home country considered that it belonged in the category that should be forgiven after a period."
The discretion is similar to that used by judges every day in district courts who decide to place no weight on minor offences committed long ago. According to Ryken, something that happened in somebody's past may no longer be relevant to whether or not New Zealand should accept them.
"I think we have a fair and robust system where we look at this through these balancing points."
It may have been some comfort to Immigration NZ that Hong Kong, which has a similar system, previously granted Dotcom residency, most likely through its capital investor category.
Dotcom would have been required to declare in his New Zealand application that he was being investigated by the FBI had he been informed. Failure to have done so could lead to a revocation of residency inquiry.
In the Grand Jury indictment, filed on January 5 in the US District Court in Virginia, is the allegation that the primary purpose of Megaupload.com is to reproduce and distribute pirated copies of copyrighted works for private financial gain and that this was encouraged by a rewards programme and benefits system.
It claims this gained Dotcom and others more than US$175 million.
Dotcom has retained an eminent Queen's Counsel to help overturn the bail decision and prise open the door to his prison remand cell.
