The Victorian Liberal party will provide a $1.5m loan to former leader John Pesutto to ensure he can pay Moira Deeming’s legal fees and avoid bankruptcy.
The loan was debated by the 19-member administrative committee on Thursday night and ultimately endorsed after a secret ballot, which was proposed to limit any factional retribution within a deeply divided party.
Deeming, also a Liberal MP, successfully sued Pesutto for defamation after he falsely implied she sympathised with neo-Nazis and white supremacists. She has expressed dismay that a loan was even considered and argued the use of party money to cover Pesutto’s debts was “against the grain of everything we believe as Liberals”.
But Pesutto’s supporters believe the loan is reasonable as his actions as opposition leader should have been indemnified. They also argue it will avoid a costly byelection in his seat of Hawthorn, which many insiders fear they will lose.
The loan will help Pesutto pay Deeming’s $2.3m in legal fees, which were financed by New South Wales property developer Hilton Grugeon. The remaining amount has been secured through private donors, the majority of whom remain so far undisclosed.
The loan will be facilitated by the party’s investment vehicle, Vapold, and come with several strict conditions. They include Pesutto offering his superannuation savings as collateral, securing personal guarantors and committing to ongoing fundraising efforts, with all proceeds to go towards repaying the principal of the loan.
Pesutto would also be required to commit to a long-term repayment plan, with the loan to initially carry a commercial interest rate of about 6%. His supporters believe the party may reap $1m in interest by the time the loan is repaid.
The 19-member committee included Davis, federal frontbencher Dan Tehan, former party president Greg Mirabella and the party’s treasurer, Karyn Sobels, who is also one of Vapold’s directors.
In a letter to party members after the vote, Davis said “settling this matter once and for all is in the interests of the party, as it will see an end to the ongoing commentary that is letting Labor get away with their appalling performance”.
The vote count is not yet known due to the secret ballot but several Liberal sources, who declined to be named given the sensitivity of discussions, said many committee members were strongly opposed to it before the meeting began.
Details of the proposed loan were not shared with committee members known to be opposed to it before the meeting.
Some members have argued party money should be saved for trying to win elections, not to settle internal disputes. Others argue the loan will be deeply unpopular with rank-and-file members who have made their opposition clear in emails.
The opposition leader, Brad Battin, refused to answer questions about the loan during a press conference before the meeting, repeating his previous comments that his conversations with Deeming and Pesutto would “remain confidential”.
Battin said he was hoping to move on from the saga, “whatever the result”, and was determined to focus on things that “are important to Victorians”.
“I don’t want to talk about it,” Battin said. “Victorians don’t want to talk about it. They want to talk about what’s happening in crime. Victims [of crime] … don’t give two hoots what’s happening inside the Liberal party. They care [that] someone came into their house with a knife or a gun to steal their car.”
Last week, Deeming offered delayed payment of the $2.3m in legal costs on the condition her preselection was secured by the Liberal party, among other demands. The request was denied.
Preselections for the upcoming 2026 state election are expected to begin later this year and Liberal party sources expect Deeming would face a challenge for the top spot of the western metropolitan ticket.
Grugeon made a separate offer to Pesutto of a $1m, three-year loan, with monthly interest repayments, secured by his family home that is not in his name.
Grugeon’s offer also came with a condition that Pesutto not challenge for leadership of the Liberal party room during the loan period. If he did, Grugeon would immediately call in his debt.
Pesutto declined the offer and told colleagues it was “inappropriate to entertain it”. When contacted by Guardian Australia, Grugeon said he received legal advice before making the offer and that “I have done nothing wrong”.
