The Victorian Liberal party could reap $1m in interest from a loan deal that would see the embattled former leader John Pesutto agree to repayments of around $10,000 a month.
The party’s administrative committee will meet next Thursday to consider loaning Pesutto about $1.5m to cover the balance of the $2.3m in legal costs he owes fellow Liberal MP Moira Deeming after the federal court found he repeatedly defamed her.
The “request from the member for Hawthorn” – Pesutto – appears at the top of the meeting’s agenda but details of the proposed loan have not been circulated to the full 19-member committee amid concerns about potential leaks to the media.
Some members have claimed they have not been provided any information because they are opposed to the loan being granted.
A source with knowledge of the plan, who requested anonymity due to the sensitivity of the deal, said it was drafted by party president Phil Davis, with input from lawyers and accountants.
It would be facilitated through Vapold, the party’s investment arm, and comes with 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.
He 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%.
The source said Pesutto intends to pay about $10,000 a month in repayments and that Vapold could make about $1m in interest over the life of the loan.
Calculations show that, without taking into account future fluctuations in commercial interest rates, the total interest on a $1.5m loan with a fixed 6% rate would be about $1.08m, if it were paid over 20 years with monthly instalments of nearly $11,000.
Another source who is close to Pesutto but requested anonymity to speak freely about the terms of the potential loan said it was “not a get out of jail free card by any means”.
“It is going to be an albatross around his neck going forward personally for years to come,” they said.
“Some would argue he’d be better off declaring bankruptcy but he’s committed to continuing to serve the party and avoiding a by election in Hawthorn.”
Vapold’s directors have met and backed the proposal, according to the source, although it remains unclear whether that endorsement was made formally.
Corporate documents show Alan Stockdale – the 80-year-old battling to maintain control of the Liberal party’s troubled New South Wales division after claiming women were now “sufficiently assertive” and the party might need to consider quotas for men – is among Vapold’s directors, as is Karyn Sobels, the treasurer of the administrative committee.
Three sources said Vapold was expected to act on the request if the administrative committee gives the plan the green light.
Vapold was contacted for comment.
The details of the loan come as Pesutto’s supporters seek to shore up the support of the majority of the committee.
Several administrative committee members who requested anonymity given the nature of negotiations expressed concern the loan may not be repaid in full, due to the time remaining in Pesutto’s career. The former Liberal leader is 54. Some have indicated they would be unwilling to back the proposal unless substantial security was provided.
Others argued the loan could breach party rules and go against the wishes of rank-and-file members, who believe Pesutto should bear the cost alone. They oppose a push for a secret ballot.
Deeming herself expressed “dismay” at reports the party was considering loaning its own funds to help him, in a letter sent to Pesutto on Sunday, which was also addressed to Davis and the Victorian opposition leader, Brad Battin.
“From the outset, both former president Greg Mirabella and incumbent Philip Davis publicly stated that no party funds would be used in this action and to now expect the party to cover Pesutto’s substantial debts goes against the grain of everything we believe as Liberals,” Deeming wrote.
In the letter, she offered to delay payment of $2.3m in legal costs until 2027 on the condition her preselection for the next election be secured, among other demands. That offer was rejected by the party.
In a follow-up email to the committee on Wednesday night, Deeming wrote she was “sad my latest attempts to settle this matter in the best interests of all parties, including the Liberal party, were not successful”.
“My conscience is clear; I did my very best to try and turn our collective focus away from internal matters,” she said in the email, seen by Guardian Australia.
Battin was peppered with questions about Deeming’s offer at a press conference in Shepparton on Thursday but declined to answer, citing “legal advice”.
“It is a frustrating process,” he said. “Hopefully we can resolve this … very soon.”
Another offer was also revealed on Thursday, from the NSW property developer Hilton Grugeon, who bankrolled Deeming’s defamation case.
Grugeon’s offer to Pesutto, first reported by the Age but independently confirmed by Guardian Australia, would have provided the Hawthorn MP with a $1m, three-year loan, with monthly interest payments, secured against his family home, but only if he did not challenge for the Victorian Liberal leadership during the loan period. If he did, Grugeon would immediately call in his debt.
The offer also repeated the conditions outlined in Deeming’s letter, including guaranteeing her preselection.
In a letter to the administrative committee, Pesutto said it was “inappropriate to entertain” Grugeon’s offer and he “did not do so”.
Pesutto has until 27 June to pay the $2.3m in costs owed to Deeming, or face bankruptcy and disqualification from parliament.
