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Prime Minister John Key says it would be "utterly wrong" for MP Hone Harawira's family to make money by copyrighting the Tino Rangatiratanga flag - although he doesn't believe that was what they have been trying to do.
The Maori Party MP's wife, Hilda, intended copyrighting the flag with its only living designer, Linda Munn, and making money from royalties.
Harawira said on Wednesday night he had withdrawn from the process and told the families of the flag's designers to appoint lawyers to set up a trust to receive royalties.
The flag has been given official status for Waitangi Day, when it will fly at Key's official residence in Wellington, the Auckland Harbour Bridge and government buildings.
"Any measures to copyright it for the benefit of the Harawiras would be wrong, and my understanding is that they are not trying to do that," Key told reporters on Thursday.
"Actually, the legal advice I have is you can't copyright the flag the way they wanted anyway."
Harawira was involved in the hui process that chose the Tino Rangatiratanga flag from a range of Maori flags and Key said politicians had to be very careful about conflict of interest and a perception that they were feathering their own nests.
Now Hilda Harawira has gone on the defensive, saying she believes the Harawira family being unfairly targeted.
"The hardest thing about the Harawira whanau at the moment is that we're so good looking, everybody just wants to attack us," she says.
Meanwhile Munn says the Harawira family was not trying to cash in on the flag by copyrighting it.
She says Harawira and his wife were advising her on the copyrighting process and would not get any money from it.
"I find the whole money making thing quite dirty and they would never ask for anything," she told Tauranga website sunlive.co.nz.
"I'm stepping up and taking ownership. I was worried it would be taken away...it's to protect it and keep it in New Zealand. We have found a lot of our designs from here have been taken away overseas."
Munn says she expected the copyright process would be completed within a year and revenue would go into a trust.
About eight trustees would be appointed and she would personally ensure the trust's accounts were transparent.
Munn designed the flag with Jan Dobson and Hiraina Marsden about 30 years ago. She is the only surviving member of the trio.
Munn says she and her family, along with the families of the other two designers, would received some of the flag's profits.
The trust would help establish community initiatives such as scholarships, a marae-based art school and programmes for teaching Maori and New Zealand culture.
"This is the dream we've always had. I will make sure this vision for the community is seen through," she said.
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