A political scandal that threatened to bring down the Australian government was defused when police announced on Thursday they will not charge a lawmaker accused of misusing an official credit card to pay prostitutes.
A conviction for theft or fraud against lawmaker Craig Thomson would have forced him to quit Parliament and cost Prime Minister Julia Gillard's year-old government its single-seat majority.
With opinion polls showing the government has become deeply unpopular, observers agree that the ruling Labor Party would have little hope of retaining Thomson's seat in an ensuing by-election.
But the New South Wales Police Force said in a statement on Thursday there was no basis for a criminal investigation.
The allegations, first raised by a Sydney newspaper in 2009, date back to when Thomson was national secretary of the Health Services Union. He allegedly used his union credit card to pay a Sydney brothel thousands of dollars of union money in two transactions in 2005 and 2007.
Thomson has denied the allegation and claimed that an unnamed man had taken his credit card and forged his signature. Thomson also said that that man had repaid the money.
Thomson sued the newspaper's owner, Fairfax Media Publications, but dropped that court action in May.
Police had never investigated the allegations because the Health Services Union, which is affiliated with Labor, had never made a complaint.
But an opposition senator, George Brandis, wrote to Police Commissioner Andrew Scipione on Aug. 22 with new evidence he said showed Thomson had committed a range of crimes, including fraud, which is punishable by 10 years in prison.
The new evidence included a statement from a forensic handwriting expert who said Thomson had probably signed one of the brothel credit card dockets in question. It also included a bundle of recently released court documents that Fairfax would have used in the defamation trial as proof of many more instances in which Thomson allegedly paid prostitutes with the same credit card.
With the police investigation under way, the union decided to hand over its own 120-page audit that found Thomson may have misused more than 100,000 Australian dollars in union funds while he was boss from 2002 until 2007.
Police said in the statement that "based on the accounting practices of the union relating to the use of corporate credit cards, there was no evidence to warrant a formal investigation."
The union's decision to support the police probe that threatened the government was divisive. Union national secretary Kathy Jackson, Thomson's successor after he was elected to Parliament in 2007, found a dirty shovel at the doorstep of her home which police are treating as a threat to her life. She has since been treated in a hospital psychiatric unit after suffering a mental breakdown.
Deputy Prime Minister Wayne Swan told Australian Broadcasting Corp. radio that the police decision not to investigate revealed the opposition tactic was to "throw as much mud as possible, regardless of the facts."
But Brandis said the opposition would continue to pursue Thomson over his use of the union credit card.
"The broader issue is the use by Mr. Thomson and others of members' money as their own," Brandis told ABC.