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'Corrupt' donations row engulfs Liberal candidates and threatens re-election campaign -

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ELEANOR HALL: Victoria's Premier Denis Napthine is slapping down allegations of corrupt political donations in marginal seats as a smear campaign launched on the eve of the state election.

The Australian newspaper claims Victoria's ombudsman is investigating two Liberal candidates in key Labor-held seats over council planning decisions and allegedly corrupt donations.

With the election just three weeks away, the controversy could sabotage the Napthine Government's chances for re-election.

In Melbourne, Alison Caldwell reports.

ALISON CALDWELL: The Victorian Liberal Party says allegations of corrupt donations in key marginal Labor-held seats in Melbourne's south-east are all part of a smear campaign.

Liberal candidates and City of Casey councillors Geoff Ablett and Amanda Stapledon are facing questions about donations and council planning decisions in the past year.

The ombudsman will neither confirm nor deny it is investigating. Both candidates have strenuously denied any wrongdoing.

Labor's spokesman, James Merlino, says the Premier Denis Napthine must reveal what he knows about the allegations.

JAMES MERLINO: These have been allegations of corruption that the Liberal Party have been aware about for months. This is a serious investigation by the ombudsman.

Denis Napthine needs to come out today: what did he know, has he spoken to these candidates, does he have full confidence in these candidates, will they be running on the 29th of November?

ALISON CALDWELL: Speaking in Ballarat, the Premier Denis Napthine dismissed the allegations.

DENIS NAPTHINE: I have absolute confidence in councillors Geoff Ablett and Councillor Amanda Stapledon. I am absolutely confident in the checks.

They are people who are local people, hard-working local people who are fighting for their local community. They have worked hard as local councillors and they are working hard as local candidates.

This is a typical Labor Party mud-slinging, dirt exercise because they can't compete on policy.

ALISON CALDWELL: The candidates themselves have not responded to requests for comment.

NICK ECONOMOU: You couldn't have had allegations about a more controversial and relevant matter to the state election than planning at a time that is really inconvenient for the Government, that's three weeks out from the general election in arguably the most sensitive area of the Victorian electorate, the outer south-eastern suburbs of Melbourne.

ALISON CALDWELL: Senior lecturer in Politics at Monash University, Dr Nick Economou, says the controversy could derail the Liberal Party's election campaign whether it's true or not.

NICK ECONOMOU: The decisions the alignments made by voters in the clutch of seats in and around the municipality of Casey will probably determine which of the two major parties is able for form government at the end.

So whilst these are simply allegations and nothings been proven, nothings been demonstrated, I think these allegations could not emerge at a worse time for the Government in a worse place.

ALISON CALDWELL: The Victorian Liberal Party says that these allegations are part of an outrageous and despicable smear campaign. Could it just be a dirty tricks campaign?

NICK ECONOMOU: The matter is in the hands of the ombudsman and the ombudsman's office is an independent statutory authority whose independence from the political process is guaranteed by the Victorian constitution.

Now having said that, these are allegations, the office is investigating, and nothing may come of these investigations.

It's the political fuel of this, I guess, that's important and the most significant thing is that one of the candidates who appears to be in the firing line, the Liberal candidates is running for the seat of Cranbourne which Labor currently holds on a very slender margin of 1.1 per cent.

And of course adjacent to Cranbourne are the marginal Liberal seats of Mordialloc, Frankston and Carrum - all of which Labor hopes to win, must win if it wants to form government.

So the fact that there are these allegations being made about local branches of the Liberal Party in an area frankly where the reputation of the local branches of the Liberal Party has been seriously sullied by the behaviour of other Liberals, including an ex-Liberal who currently is the independent member for Frankston.

ALISON CALDWELL: Geoff Shaw?

NICK ECONOMOU: Geoff Shaw is a particularly bad look for the party in an electorally sensitive area. It just reinforces this sense that whatever it is that the Liberal Party is doing these days, it just isn't paying attention to what is wrong with its branches out in the outer south-eastern suburbs of Melbourne.

ALISON CALDWELL: In July, it was reported the Liberal Party was exploiting legal loopholes in order to hide large donor's names from scrutiny.

It was claimed the party encouraged supporters to donate up to the legal disclosure threshold at the end of the financial year on June the 30th, then make a similar donation the next day at the start of the next financial year.

In Victoria, the Liberal Party's central office cannot intervene in local branch activities.

ELEANOR HALL: Alison Caldwell in Melbourne.