The Nation has obtained Cabinet papers from 2013 showing Mr McCully claimed the Government faced a $20-30-million lawsuit if it didn't resume livestock exports.
However, Mr Al-Khalaf's business partner George Assaf has told The Nation they had no intention of suing the New Zealand Government.
"We have never taken any action or thought about this. We may get a legal opinion but we had no appetite, no ambition to take any Govt to court let alone NZ," he said.
He also appears to have been trying to secretly resume live sheep exports, in contravention of New Zealand law.
Which means that McCully appears to have misled Cabinet - and Parliament. Isn't it time he was held responsible for this, and sacked?