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Donghua Liu has hired one of the country's most expensive lawyers in preparation for possible Labour Party legal action, the NZ Herald reports.
The paper says Mr Liu has retained Paul Davison, QC, to head a team of advisors reviewing his records.
"Yes, I can confirm that I have been engaged to advise Mr Liu in connection with the issues arising from his donations to the Labour Party," Mr Davison told NBR.
The QC's client list includes another immigrant whose political donations have caused controversy: Kim Dotcom.
Labour leader David Cunliffe has challenged Mr Liu to substantiate allegations he donated $150,000 to his party, later revised to below $100,000 as it became trickier to explain how an all-comany river boat cruise in China in 2007, attended by then cabinet minister Rick Barker, constituted a donation to the Labour party.
Mr Barker has challenged the Chinese millionaire to at least swear an affidavit if he can't produce any paperwork.
Earlier this week, Mr Cunliffe said he would not rule out legal action.
Labour has brought in a barrister to audit its own accounts, but says it has so far found nothing, and Mr Barker — present at the time of Mr Liu's alleged large donation, says he remembers no transaction of that size. Labour has also questioned how Prime Minister John Key had foreknowledge of a series of Herald stories on the issue, with Mr Cunliffe saying the sequence of events suggests a smear campaign.
Separately, Mr Liu has plead guilty to domestic violence charges after an incident in December. He is awaiting sentencing, and faces a maximum penalty of three weeks jail. Mr Liu has been a major National Party donor, and former cabinet minister Maurice Williamson resigned his portfolios nine weeks ago over a call to police after the millionaire's initial arrest.