Colin Craig's wife says Rachel MacGregor "confessed" to having an emotional affair with her husband hours after the press secretary's shock resignation.
Helen Craig took the stand at the former Conservative Party leader's defamation trial today and said the issues the couple had faced since the 2014 general election were "challenging and a shock".
Two days before that election MacGregor, Craig's then press secretary, resigned suddenly, causing widespread speculation about her relationship with her boss.
Helen Craig said she knew "there was a serious problem" when her husband rang her that morning.
He said MacGregor had made a pay demand, that he had said it was not a good time, so she refused to attend media interviews with him that they were heading to.
"Not long after that Rachel rang me directly and confessed she had been having an emotional affair with my husband.
"She admitted they had kissed and that he had touched her breast. She agreed to come and meet with me about that, but I have never heard from her since."
Helen Craig spoke about finding out MacGregor had made a complaint to the Human Rights Commission alleging she had been sexually harassed during her employment.
"It was shocking for both of us," she said.
The couple had "many" discussions about the claim and "did a lot of soul searching".
"It was obvious to me that Colin and Rachel had become too close and that lines had been crossed on occasion.
"My husband has apologised to me for that and I have forgiven him."
Helen Craig met MacGregor soon after she was hired in 2011.
She soon realised her husband and the press secretary were becoming close and "felt it necessary" to put boundaries in place.
"I was aware that Colin and Rachel were getting very close through the intense work they were doing together," Helen Craig said.
"In 2012 Colin and I wrote a letter to Rachel, setting out some rules... I felt it helpful to put boundaries in place."
Helen Craig said while MacGregor came across as confident and vivacious, often the press secretary would "struggle".
The couple lent her money and support in managing her finances.
Helen Craig said that by May 2014 her husband had a job review meeting with MacGregor. He believed she was "overwhelmed" and not coping.
They organised for "cover" for her, Helen Craig described it as a "job sharing" situation.
Helen Craig spoke about the decision to publish the Dirty Politics and HIdden Agendas pamphlet.
She said the allegations about her husband were "ridiculous" and the only way to get the truth out was to publish the book.
She said it was "the right thing to do" and the only way to match the false allegation.
The couple held the press conference releasing the pamphlet together to make a point.
"It was very important to me that we did this together. I wanted everyone to know that I stood by Colin and together we rejected this dirty politics and false allegations," Helen Craig said.
She said Williams "lies" were unethical and without any regard for the truth.
"I have not come under any pressure from Colin to give this evidence," she told the jury.
"I have thought about his very carefully and reached my own views."
WIlliams' legal team ended the day by announcing they would not cross examine Helen Craig.
Why is Colin Craig on trial?
The defamation trial unfolded after Craig's press secretary, Rachel MacGregor, resigned suddenly just 48 hours before the 2014 general election.
The resignation was high profile, sparking speculation about why she left.
Weeks later MacGregor turned to Taxpayers' Union director Jordan Williams for support, and told him she had made a complaint to the Human Rights Commission alleging that Craig had sexually harassed her.
She shared letters and poems the politician had sent her. Williams then revealed the details to other Conservative Party members.
When Craig found out he publicly claimed Williams was part of a group of "culprits" determined to have him removed as party leader through a "campaign" of "false accusations".
Williams then filed defamation proceedings in the High Court, saying he did not lie about Craig.
After Craig finished reading his brief of evidence to the jury last week, his Peter McKnight started the cross-examination.