Plot thickens in the case of the Australian Defense Minister and his Chinese lady friend

From Spy master opens new investigation into Liu affair

A second inquiry will be held into allegations that Defence officials spied on their minister, Joel Fitzgibbon, but this time it will be conducted outside the department.

The Inspector-General of Intelligence and Security, Ian Carnell, who oversees the nation's intelligence and security agencies, has expressed concerns about the allegations and will hold an inquiry, even though the Defence Secretary, Nick Warner, has announced a separate inquiry by Defence's internal security agency. Mr Carnell's office said last night the inquiry would be private, thorough and timely.

Defence last night confirmed an initial inquiry had found no evidence that officials investigated Mr Fitzgibbon or Ms Liu or secretly accessed his personal information.

"Prior to the current media articles, no Defence investigative authority was aware of Ms Liu," Mr Warner said. A full report is due next week.

Mr Warner said he has given the initial findings to Mr Carnell.

The Attorney-General, Robert McClelland, also said yesterday that the domestic spy agency, ASIO, had no information to suggest that Ms Liu was a security risk. A Chinese embassy spokesman said it was aware of media reports about Ms Liu but would not comment.

Mr Fitzgibbon was forced to apologise this week after admitting he failed to declare two, three-day trips to China paid for by Ms Liu in 2002 and 2005. He said yesterday his trips were for political and cultural meetings but admitted his failure to declare them was "untidy" and "inexplicable".


From Liu links reach to heart of the ALP

The trail from the Chinese businesswoman at the centre of spy allegations and campaign donations involving Defence Minister Joel Fitzgibbon leads closer each day to the heart of the Labor Party.

It is not only Mr Fitzgibbon defending Helen Liu as he fends off persistent suggestions his personal friend might pose a security risk because of her links to Chinese political officials; former NSW Labor premier Bob Carr and Chinese-born NSW Labor MP Henry Tsang are also keen to declare this generous ALP donor and gift-giver is their longstanding mate as well.

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In the driveway sits a dusty Mercedes Benz S320 with tyres that have gone flat during her absence in China for many months. Ms Liu could once claim a small fleet of such luxury cars. With her ex-boyfriend and former business partner Humphrey Xu, she owned a Rolls-Royce Silver Shadow, a Mercedes 560 SEL and a Porsche 944 when the couple lived at Castlecrag on Sydney's northside.

More than a week after claims officials from Mr Fitzgibbon's Defence Department mounted a covert investigation because of concerns Ms Liu posed a security risk, the minister is still wading through questions about his relationship with Ms Liu.

Mr Fitzgibbon has introduced the woman he describes as a personal friend to party colleagues at dinners. But there has also been a financial relationship between them. Apart from accepting money from Ms Liu for his election campaign fund, Mr Fitzgibbon rents a townhouse from her family when he stays in Canberra.

He accepted two free trips to China from her company in 2002 and 2005 at which he met Chinese Communist Party officials. His fare was also paid when he joined his father, former Labor MP Eric Fitzgibbon, on a trip to China in 1993.

The missing link in Mr Fitzgibbon's story of his relationship with Ms Liu is Mr Xu, her former boyfriend. It was Mr Xu who first met Mr Fitzgibbon and became his personal friend. It was also Mr Xu who arranged for Eric and Joel Fitzgibbon to travel to China in 1993 after a meeting in the NSW Hunter Valley to discuss winery investments.

At the time, Mr Xu appears to have been the brains behind companies involving his then girlfriend Ms Liu such as Diamond Hill International and Wincopy.

Mr Xu, who was born in Canton, entered Australia in 1986, two years before Ms Liu.

By the time the pair met in 1988, shortly after she arrived from Shandong province, he had already begun dealing in property and amassing a fortune.

When the pair's relationship started to go sour in the mid-1990s, Mr Xu thought he would try his luck in the US and left Ms Liu behind.

A year later when he returned without the success he had hoped for, Ms Liu had taken control of their companies and they fought several bitter court battles over assets. In court, it was acknowledged she had amassed $1.5 million on her credit cards.

It was during this period that Ms Liu deepened her links with high-level Chinese contacts, joining the editorial committee of Shandong Ming Jia, an organisation with strong links to the Chinese military. She also became vice-chairwoman of the World Federation of Overseas Chinese Associations.

Among the mysteries about Ms Liu are her qualifications and business experience.