THE scandal involving embezzlement allegations against the Liberal mayor of the Hills Shire is set to embroil the party in a bitter factional war.
The Premier, Barry O'Farrell, is understood to have demanded that the mayor, Greg Burnett, not contest next Saturday's preselection for candidates for the September local government elections.
''There is an expectation within the party that Mr Burnett will not be a candidate for preselection,'' a senior party source said.
A spokesman for Mr O'Farrell said: ''The Premier is concerned at the allegations. He's raised the issue with the state director and urged action be taken.''
Advertisement But Cr Burnett's key backers are the federal MP Alex Hawke and the state MP Ray Williams, who are continuing to support him. ''Mr Burnett is maintaining his innocence,'' Mr Hawke said yesterday.
Mr Williams said of his friend and former campaign manager: ''He maintains he hasn't done anything wrong and he is going to strongly defend his reputation.''
Mr Williams also denied there was pressure from head office for his 27-year-old son, Ryan, to stand aside as a candidate. The MP's son plans to run on Cr Burnett's ticket.
On Thursday the Herald revealed that in 2008 Cr Burnett allegedly embezzled $285,000 by forging signatures on cheques. Cr Burnett denies any wrongdoing.
Cr Burnett was working as the financial controller at Guardian real estate agency in Dural in 2008 when the bank raised concerns that the signature on a $45,000 cheque had been forged. An investigation by an independent auditor determined nine cheques had been fraudulently paid over to Cr Burnett's company. Cr Burnett allegedly threatened self-harm if the matter was reported to police. He subsequently sold his house and shares to repay the money.
The council's general manager, David Walker, has now referred the allegations to Castle Hills police and the Independent Commission Against Corruption.
Adding to the controversy was yesterday's resignation from the Liberal Party by the former Hills mayor Peter Dimbrowsky, who intends to run as an independent.
Cr Dimbrowsky said the Liberal Party's factions were ''destroying the brand''. He accused factional chiefs such as Mr Hawke, who heads the soft-right faction, of installing puppets ''to do their bidding'' on local councils.
Angry party members have also told the Herald that repeated attempts to have the allegations against Cr Burnett investigated were ignored by the party and the council.
The general manager cited ''legal reasons'' yesterday for being unable to comment on whether the allegations had been drawn to the council's attention since 2008.
The Hills deputy mayor, Liberal Michelle Byrne, confirmed she had received written material alerting her to the embezzlement allegations against Cr Burnett shortly before he became the mayor last year.
When asked if the allegations had concerned her, Cr Byrne replied, ''Absolutely. But without evidence what was I meant to do?''
Cr Byrne said that although she had spoken to Mr Hawke in recent days, Cr Burnett was not discussed. Instead she and the federal member spoke about a controversial 25-storey development proposed for Samantha Riley Drive, Kellyville.
''He just wanted to know my position on the towers,'' she said. Cr Byrne said both she and Mr Hawke were opposed to the proposal.
But Mr Hawke yesterday denied having any such conversation about the towers. ''No, I haven't discussed the matter with any councillor,'' Mr Hawke said.