Canberra: Australian police dropped their investigation into allegations that an MP used a former employer`s credit card to pay for prostitutes in a case that could have derailed Labor`s fragile rule.
Craig Thomson, whose seat is vital to the government`s balance of power, was accused of paying for sex workers with a card issued by the Health Services Union in 2003 and 2005, when he was the organisation`s national secretary.
The Labor politician denied the allegations, first made public two years ago by local newspapers, and the New South Wales state fraud squad on Thursday announced that there was no basis for a criminal probe.
Police said that based on material supplied by the Health Services Union, including their own examination of the use of Thomson`s credit card, "there was no evidence to warrant a formal investigation by NSW Police".
The matter has been forwarded to police in the state of Victoria as the financial controls of the union are conducted out of their Melbourne office, but reports said they were unlikely to reach a different conclusion.
"I have always rejected claims of wrongdoing in these matters ... I will make a comprehensive statement in the near future," Thomson said.
The decision will come as a huge relief to embattled Prime Minister Julia Gillard, whose support in opinion polls is at all-time lows after a series of policy missteps.
She backed Thomson, and the Labor Party helped pay for his defamation case against the newspapers that first published the allegations after the court case threatened to bankrupt him.
Parliamentary rules stipulate that bankrupts or anyone convicted of a crime that carries a possible penalty of a year or more in prison are forbidden from holding office.
Thomson has since abandoned the defamation action.
Labor holds power with a wafer-thin majority of just one seat after deadlocked elections last year, and the loss of Thomson`s seat -- which would likely swing to the conservatives in a by-election -- could end their rule.
Deputy Prime Minister Wayne Swan said the "mud-slinging" should now stop after what he said was a "categorical statement" by police about Thomson.
"If people have got allegations to make they should be dealt with in the normal way, free from the lynch-mob mentality which the Liberal Party is pursuing," he told ABC radio.
"It doesn`t matter whether it`s Craig Thomson or whether it`s the economy or whether it`s asylum seekers; regardless of the facts they are out there running these scare campaigns and throwing mud all of the time."