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Winston Peters' lawyer says a tip-off led him to approach billionaire Owen Glenn for a large donation to the NZ First leader's legal bills.
Brian Henry said last night he asked the Monaco-based businessman for help after another donor did not deliver.
"He had said he would make the donation and he didn't and we were left looking to see if we could find someone else.
"We made it well known around friendly political circles - or I did - that I was looking for a donor."
The intrigue over Mr Glenn's $100,000 donation is growing.
It has been suggested that Mr Peters breached Parliament's rules by not declaring any donation towards his legal bills as a gift in the MPs' register of pecuniary interest.
Mr Peters - who is Foreign Minister as well as NZ First's leader - dropped the bombshell on Friday, saying Mr Henry had told him that day that Mr Glenn had donated to the cost of his 2005 electoral petition against National MP Bob Clarkson.
Prime Minister Helen Clark today said she accepted Peter's statement that he only found out about the donation from his lawyer on Friday night.
However she said that was an embarrassing situation after Mr Peters had denied for days he had received anything from Mr Glenn, who is also one of Labour's largest donors.
"Obviously it's embarrassing for Mr Peters because he had been very adamant that that money had not gone to him or his party," she said on TVNZ's Breakfast programme.
"In his position, I'd be embarrassed if that was what I was told after making clear denials.
"However there is a distinction between whether someone gives to a party, whether someone gives to a person and whether someone gives to there expenses."
On that basis the donation did not appear to have broken any rules, she said.
"A legal defence fund is one thing. Someone giving you money for your own purposes or electoral purposes is another and Mr Peters would not be the first member of Parliament to have people contributing to legal costs."
Mr Peters admission followed a Weekend Herald story on July 12 showing Mr Glenn had said in emails that he had donated money to New Zealand First.
Mr Peters denied the story all week and continued to deny it on Friday, saying the $100,000 was not given to him or his party.
Last night Mr Henry was fielding calls about the donation at the request of Mr Peters, who refused to answer any questions about it yesterday at his party's convention in Auckland.
Mr Peters sweated profusely during his speech, which made no mention of the donation.
He left soon afterwards to join his family, mourning the death of his elderly mother on Friday.
He leaves New Zealand tonight for a meeting of the Asean Regional Forum in Singapore.
Mr Henry said he could not recall who had advised him to contact Mr Glenn when the original funder of the legal action fell through, but it was not Mr Peters.
Nor was it Mike Williams, the president of the Labour Party which has also received Glenn donations.
"I can't off the top of my head remember who it was who told me to call him."
Mr Henry said that Mr Glenn probably had not distinguished between Mr Peters' legal expenses and the New Zealand First Party.
"But he was told he was contributing towards the legal expenses of the Tauranga electoral petition - that's where the money would be applied, to that bill."
Mr Henry said no fund or account for Mr Peters' legal bills existed.
"The position is that the money is used to pay an existing bill, full-stop.
There is no fund. There is no cash sitting in a balance anywhere. There are bills to be paid."
Mr Henry said that the $200,000 in donations that had been received for Mr Peters' legal bills included Mr Glenn's $100,00.
Mr Henry would not discuss why he had not alerted Mr Peters about the donation in February, when Mr Peters denied Mr Glenn had made a donation.
Asked about pecuniary gain, Mr Peters told NZPA he did not believe he had benefited personally from the arrangement whereby his legal bills were paid by anonymous donors and he paid the shortfall.
Mr Henry concurred last night.
"There is nothing I am aware of where someone contributing towards a bill you have incurred needs to be declared."
Act leader Rodney Hide said his party was considering referring the matter to Parliament's Speaker, Margaret Wilson, for a possible privileges committee hearing.
But National deputy leader Bill English was not sure the party's strategy committee would even be discussing the issue when it met today.
National would continue to make it an issue for Prime Minister Helen Clark because it was about the standards she applied to her ministers.
Helen Clark would not respond to a question from the Herald last night on whether any Labour MP or official had been in touch with Mr Glenn during the week. Her spokeswoman referred the question to Mr Williams who would not answer it either.
- With NZPA
