Australian minister fights honey-trap investigation

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The Australian Defence Minister Joel Fitzgibbon is embroiled in a damaging row centring on his relationship with a wealthy Chinese-born businesswoman, amid allegations his own department covertly investigated whether their friendship was a potential risk to national security.

The affair threatens to tarnish the squeaky-clean image of Kevin Rudd's Labor government, with Mr Fitzgibbon admitting last night that he failed to declare two trips to China paid for by his friend, Helen Liu. According to local media, Ms Liu, based in Sydney, maintains contact with senior Chinese government officials, and is believed to have been mentioned in secret reports by Australian intelligence officers.

Mr Rudd declined to comment in detail on the controversy yesterday. But Mr Fitzgibbon's political future seems precarious, after he first denied ever receiving any significant gifts from the Liu family, and later was forced to apologise for failing to disclose the trips to Beijing and Shanghai in 2002 and 2005.

Defence officials, meanwhile, are investigating reports by the Fairfax group of newspapers that the department's own intelligence officers spied on the friendship between Ms Liu and the Fitzgibbon family, and leaked information to the media.

Mr Fitzgibbon, who is spearheading major reforms of the defence department, suggested that people opposed to the changes might be behind the alleged investigation into his private life. He may also have annoyed the military after he castigated the top brass for being incompetent following a mistake over the pay of SAS soldiers.

As well as the two Chinese trips, made while in opposition, the Defence Minister – who sub-lets a flat from Ms Liu in Canberra – admitted receiving a suit from her last year. He did not state whether it was a handmade Italian affair, as suggested by local media, but said he had returned the clothing.

According to Fairfax newspapers, intelligence officers found Ms Liu's bank account details on the minister's office computer. Mr Fitzgibbon said yesterday: "My family has had a close personal relationship with the Liu family for some 16 years. No one has ever raised any concern with me about that relationship."

Ms Liu has business interests in both China and Australia, and her property development companies have donated thousands of pounds to the Australian Labor Party.