Scandal a ticking bomb for politicians

CANBERRA - Australia's political leadership this week faces a showdown on a developing scandal now under investigation by both the federal police and the Attorney-General's Department.

The outcome could have serious political implications, and may lead to criminal charges carrying lengthy potential jail sentences.

At its heart is an email that may or may not exist allegedly proving improper interference by Prime Minister Kevin Rudd and Treasurer Wayne Swan in a potential financial bailout for one of Rudd's friends.

The text was quoted in News Ltd newspapers, and Treasury official Godwin Grech told the Senate he recalled an approach from "at least the Treasurer" over assistance to Brisbane car dealer John Grant under a scheme set up after finance companies abandoned the sector.

Rudd had previously told Parliament he had made no representations on Grant's behalf, and Swan said he had made no special representations and was not aware of the outcome of any discussions between Grant and the Treasury.

Emails relating to the discussions were later shown to have been sent by fax to Swan's Brisbane home.

Opposition Leader Malcolm Turnbull said Rudd and Swan misled Parliament and demanded they resign.

But during the Senate hearing Grech said no trace of the alleged email from Rudd's office had been found by Treasury IT experts, and no one, including News Ltd, had been able to produce a copy.

Grech also told the Senate: "My recollection may be totally false."

A similar search of Government computers had since failed to uncover any trace of the email, and Rudd passed the matter to Attorney-General Robert McClelland for investigation.

McClelland said at the weekend that if the email was fake a range of "indictable and very serious" federal crimes might have been committed.

"The integrity of information and identity relating to public officials is crucial to the proper performance of Government."

Turnbull's attack could now backfire, with suggestions a fake email may have come from within the Opposition.

"Mr Turnbull and the Liberals have been boasting for a long time now that they are in possession of this information," Rudd said yesterday.

"Well, the time has come to produce this information to the Parliament for authentication.

"If when Parliament resumes in 24 hours Mr Turnbull fails to produce this email, this email upon which his entire case against the Government is based ... he has no alternative but to stand in the Parliament, apologise, and to resign."

Turnbull denied involvement and said the evidence against Swan remained damning. "The email was not composed by anyone in the Liberal Party or anyone in the Opposition."