Confidential statements made to the government's chief watchdog during a high-profile investigation into Dr Nigel Murray's irregular spending, have been controversially released to his lawyers.

Privacy Commissioner John Edwards' view is that the witness statements to the State Services Commission's inquiry into the former Waikato District Health Board chief executive's spending of taxpayer money should be released to Murray's lawyers.

It comes after a top-level legal argument broke out in May over the statements after Murray's employment lawyer, Peter Cullen Law, sought the statements and any questions asked of the witnesses under the Official Information Act.

When the State Services Commission [SSC] failed to release the 12 witness statements Murray's lawyers complained to the Ombudsman and the Privacy Commissioner.

At the time the SSC said the Privacy Commissioner's decision would have significant ramifications for future state sector investigations.

The four-month SSC inquiry, led by John Ombler, found Murray's spending of $120,000 of taxpayer money on travel and accommodation during three years in the job was either unjustified or unauthorised and the case was referred to the Serious Fraud Office.

The office of the Privacy Commissioner would not confirm his view that the statements should be released but three witnesses told the Herald they had been notified by the SSC three weeks ago that they would be.

Former Labour MP Sue Moroney, who was one of the witnesses interviewed for the inquiry, said the issue needed to be addressed by the Government in its current review of the Protected Disclosures Act.

"I think this exposes some gaps in the Protected Disclosures Act because an organisation with the mandate of the State Services Commission needs to be able to thoroughly investigate these types of events like what occurred at Waikato DHB," Moroney said.

"The people who are in the work place need to know their disclosures will be protected.

"If this continues to happen it will scare people off from making declarations to bodies like State Services Commission when they quite properly investigate potential fraud of this nature."

Waikato District Health Board member and one of the witnesses Dave Macpherson called it a dangerous situation.

"When you think about the theoretical encouragement of whistleblowers, who tell people when things have been mishandled by the organisations they are in, it's a really dangerous thing for someone to have to do in terms of their job security."

He said the Privacy Commissioner had effectively "thrown that safety net out the window".

"It's going to impact people. They are not going to be prepared to be whistleblowers if the fact they are the ones that have spilt the beans is going to be released to the public or potentially someone who wants to take legal action against them."

Four of the witnesses were Waikato DHB staff and all but one were named in the report.

"There are staff who are currently there who are going to be feeling extremely vulnerable," Macpherson said.

State Services Commissioner Peter Hughes said he respected the Privacy Commissioner's view. 

However, he said legislation that recently passed in Parliament meant the release of witness statements in future State Services Commission investigations would be at the discretion of the commissioner, depending on the circumstances.

"When there is wrongdoing people need to be speak out without fear of repercussion."

All but one of the witnesses were named in the report, released on March 22 this year.

Murray's lawyer Calum Cartwright did not respond to questions about the release of the statements, however earlier this year he confirmed the law firm requested copies of the witness statements and the questions asked of those witnesses.

"We have always maintained that Dr Murray is entitled to those statements in accordance with the principles of natural justice and fairness," Cartwright said.

"Indeed, we consider the investigator's decision to receive statements confidentially has breached Dr Murray's right to a fair investigation."

Meanwhile Cartwright would not say if Murray had been interviewed by the Serious Fraud Office for its investigation.

"As you may already be aware, the Serious Fraud Office Act 1990 imposes obligations of secrecy on those participating in an SFO inquiry.

"Disclosing protected information under the act is an offence. For this reason we will not comment on any aspect of its inquiry."