Two leading figures in Victoria's political and business establishment, Hugh Morgan and Michael Kroger, are locked in a dispute in which $500,000 in donations have been withheld from the Liberals' state branch and claims of serious governance failings made.
While the dispute, outlined in an extraordinary letter leaked to The Age, is ostensibly about the financial safeguards at Victoria's liberal party headquarters, it also represents a challenge to Mr Kroger's authority as the all-powerful state party president.
In the letter, Mr Morgan, who chairs key Liberal fundraising body the Cormack Foundation, warns Mr Kroger that the state branch should not budget for a $500,000 payment this year.
The money is needed for the smooth operation of the state branch and senior Liberal figures say that the party is danger of "not being able to keep the lights on".
The Cormack Foundation is one of the party's biggest donors and over the past 18 years has contributed over $40 million to Liberal branches across Australia – it has recently made payments to Family First and the Liberal Democrats for the first time.
The foundation has eight listed shareholders, who are also the company's directors. They include Mr Morgan, Rupert Murdoch's brother-in-law John Calvert-Jones and former ANZ chairman Charles Goode.
In his December 20 letter to Mr Kroger, Mr Morgan outlines concerns that Mr Kroger's dual role as both party president and the chair of the finance committee is not "in accordance with current good governance practice".
"There are fundamental gaps in the implementation of appropriate governance provisions which would be in accordance with almost universal modern practice for any significant public institution," Mr Morgan's letter states.
On Friday, Mr Morgan said the problem "remained unresolved" and that the governance issue could be easily fixed. While he didn't elaborate, Mr Morgan's comments suggest that the Cormack Foundation would release the funds if Mr Kroger agreed to appoint an independent finance committee chair.
Mr Kroger did not wish to comment, although it's understood his supporters see Mr Morgan's letter as a factional play to diminish Mr Kroger's influence within the state branch.
The Morgan letter appears to contain a snide reference to the lack of qualifications held by other administrative officials.
"One can go further with respect to the other [state branch reform] recommendations covering the appropriate skill requirements for various appointments, but the fundamental issue for which Cormack can not condone is the common appointment process."
The need for governance reforms was identified in August 2015, after it was revealed that the now jailed former state director Damien Mantach had embezzled $1.5 million from the Liberal Party.
A subsequent audit of the party's financial structures by PPB Advisory made a number of recommendations, including that the role of chair of the finance committee and president be separated.
The story Big Liberal donor withholds $500,000 in dispute with party kingpin Michael Kroger first appeared on The Age.