16:00 - The husband of Liberal Candidate for Lindsay Karen Chijoff has resigned from the party over the letterbox pamphlet scandal. Greg Chijoff has apologised for the flyer and claimed his wife did not know about it.
Gary Clark, the husband of outgoing MP Jackie Kelly, is also embroiled in the incident. In a letter submittesd to the NSW Liberal Party State Director, Mr Clark was contrite. "I also take this opportunity to apologise to other members of the community, particularly the Muslim community to whom I bear no malice for the offence caused by my actions and authorise you to make this letter public," he said.
9:00 - At least two Liberal Party members have been expelled from their party after it was revealed they were involved in the distribution of false, race-based campaign material smearing the Labor Party.
The pamphlet, placed in letterboxes in the marginal NSW electorate of Lindsay, is attributed to the ficticious "Islamic Australia Federation" and and urges voters to support Labor for its purported links to Islamic extremism.
"We gratefully acknowledge Labor's support to forgive our Muslim brothers who have been unjustly sentenced to death for the Bali bombings," it says.
"Labor is the only political party to support the entry to this country of our Grand Mufti Reverend Sheik al-Hilaly and we thank Honourable Paul Keating for overturning the objections of ASIO to allow our Grand Mufti to enter this country."
It also says Labor endorses the construction of a controversial mosque in St Marys, where race relations is a touchy issue.
The Daily Telegraph today reports the false campaign was uncovered by a team of Labor members who conducted a stake-out in St Marys. They busted a group of Liberals putting the material into local letterboxes.
The offenders allegedly included Gary Clark - the husband of MP for Lindsay Jackie Kelly - NSW Liberal state executive member Jeff Egan, and president of the Glenmore Action Group Troy Craig.
Labor's national campaign director, Tim Gartrell, says he has filed an official complaint with the Australian Electoral Commission.
But Ms Kelly has denied any links to the pamphlets, attempting to blame a "goon squad" of unionists and Labor members.
" ... an ALP goon squad, which I understand was led by some unionists, have chased down and hunted down and tried to intimidate. I understand there was even a fight," she told ABC radio this morning.
"Everyone has got home printers and what not. You can do up dodgy flyers how you like. Anyone could have, even the goon squad following."
"My view is that it is a bit of a Chaser-style prank," she said of the pamphlet's contentious content.
"I think its intent is to be a send-up, but it obviously hasn't worked.
"If you read it you would be laughing. Most people who have read it have sort of said that's a Chaser-style of prank."
She said she "absolutely" guarenteed the material was not funded by her office or the Liberal Party.
Watch an interview by Ms Kelly on the Nine Network by clicking the video tab above.
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