Gillard haunted by slush fund scandal

Julia Gillard wanted to talk about school funding yesterday, but questions about a 17-year-old corruption scandal continued to haunt her as Labor braced for a new opinion poll this morning.

Labor MPs dismissed fresh claims about the Prime Minister's role in an alleged union slush fund involving her then boyfriend, Bruce Wilson, as a Coalition smear campaign.

"This is a complete non-story, and it's a demonstration of the desperation of this opposition that they want to muckrake, that they want to kick this story along," said Mark Dreyfus, a parliamentary secretary.

However, Opposition Leader Tony Abbott noted that it was the Labor MP and former Attorney-General Robert McClelland who had raised the matter earlier this year. McClelland, who was sacked from the Cabinet after Kevin Rudd's failed leadership tilt, told Parliament in June that questions about the Australian Workers Union (AWU) affair remained unanswered.

The Opposition Leader called on Gillard at the weekend to make a statement to Parliament responding to allegations that she was forced to resign from the Slater and Gordon law firm because of her involvement.

Gillard, a former industrial lawyer, was a partner at Slaters when claims about the slush fund surfaced in 1995.

She had been advising the AWU, of which Wilson was a senior official, for several years. He and a colleague, Ralph Blewitt, were accused of siphoning off hundreds of thousands of dollars donated to the union by construction companies, and using them to buy a house in inner-city Melbourne. They were never prosecuted, for lack of evidence.

The Prime Minister, who ended her relationship with Wilson when the affair came to light, has consistently denied knowing anything about it. The firm has said its internal inquiry cleared her of any wrongdoing. At the weekend, she refused to respond directly to a claim that she resigned from the firm following an internal review of its dealings with the AWU. "I am not dignifying all of this scurrilous campaigning by going through these things point by point," she said.

A former Slaters partner, Nick Styant-Browne, told the Australian that Gillard had told the firm she could not categorically rule out having benefited from the union fund in the renovation of her Melbourne home, although she believed she had paid for all the work and had produced receipts.

He also said that the partners "took a very serious view of the matter" and "accepted her resignation".

Gillard was involved in a testy Australian TV interview on Sunday in which she asked the interviewer: "I did nothing wrong. Are you challenging that?" She added: "Have you got an allegation to put to me. If you do not, why are we discussing this?"

According to local media, the renewed focus on the scandal - which has dogged Gillard repeatedly over the years - has deepened concern among Labor MPs and ministers about her leadership. "The troops are getting a bit worried," one Cabinet member supportive of Gillard told the Sydney Morning Herald. But the affair shows no signs of abating, with Blewitt offering to reveal full details of what went on in exchange for immunity from prosecution.