A Queensland credit union last week claimed to be 'delighted' with a scathing Senate report, which found its Board had conducted a "reprisal" by closing the accounts of people trying to make directors accountable at its 1993 annual meeting.

A week ago, we reported the findings of the Senate Privileges Committee into the Queensland Professional Credit Union's decision to deny membership to Alexandra Hills couple Kevin and Irene Lindeberg, and Ferny Hills resident Des O'Neill.

Mr and Mrs Lindeberg had their savings withdrawn and their accounts compulsory closed, and Mr O'Neill had his credit union membership rejected after they circulated a notice of motion in August 1993, two months before the AGM.

The motion, moved by Mr Lindeberg and seconded by Mr O'Neill, asked Chairman of Directors Cec Lee and General Manager Gordon Rutherford to explain their actions in a controversial superannuation scheme investigated by the Senate Select Committee on Superannuation.

The motion also called on Mr Lee and Mr Rutherford to justify the credit union paying their legal representation before the 1993 Senate hearing, including the employment of a Queens Counsel, a total of $21,000.

In a unanimous all-party report, the Senate Privileges Committee said the credit union had conducted "a reprisal" against Mr and Mrs Lindeberg, and that the refusal of membership to Mr O'Neill was "a preventative measure" to stop the men moving and seconding the motions.

Some of these issues were revisited on Thursday night at the credit union's 1995 annual meeting, held after the release of the Senate Privileges Committee report.

Earlier in the week, The Sunday Mail had approached Mr Rutherford for permission to attend and cover the meeting. Permission was refused on the ground that the meeting was "private".

However the meeting was widely tape recorded. Members angry at what they perceived as the credit union's lack of accountability readily released copies of the proceedings.

The meeting revealed a polarised membership. One faction used the event to closely question the directors, the other accused the first of acting against the financial interests of the credit union.

In his report, Mr Rutherford emphasised that the Senate Privileges Committee had not found that the credit union had breached parliamentary privilege. Mr Lindeberg and Mr O'Neill had claimed they had been victimised by the credit union for giving evidence critical of Mr Rutherford and Mr Lee at the 1993 Senate hearings.

"The Committee has determined not to make a finding that contempt of the Senate has occurred. Naturally the credit union Board is delighted with this finding of the Senate Privileges, " Mr Rutherford said.

However angry members later read out sections of the Senate Privileges Committee report where the accusations of "a reprisal" and "a preventative measure" were contained.

Mr Lee responded: "I'd just briefly say we were disappointed with that part of the report.

"What is important is that there was no contempt of the Senate -- I guess by that they didn't accept the complaint."

Mr Rutherford and credit union auditor Lindsay Ellwood from KPMG also replied to an accusation against the credit union made in the Senate recently by Queensland Senator John Woodley.

Senator Woodley said the credit union "had behaved in a cavalier manner with depositors' savings" and was "involved in a tax minimisation scheme for its general manager's superannuation."

He accused Mr Rutherford of converting $77,000 worth of long service leave and holiday pay to an employer superannuation contribution for his fund. The conversion attracted only 15 percent tax, rather than full personal income tax.

"This one transaction ... equates to approximately $72,000 in tax and about $15,000 in interest to date on the late payments, up to $25,000 penalty for non-compliance by the credit union, and a further $10,000 approximately for non-payment of payroll tax," Senator Woodley said.

"I am concerned that the members of the QPCU will have to pick up the costs of legal services in defense as well as the unpaid tax bill and fine when it should be reimbursed by Mr Rutherford."

Mr Ellwood said the transaction arose "from a relatively unique set of circumstances, which we consider do not constitute a general tax minimisation scheme".

"The taxation office has indicated that their inquiries are fully complete and that they do not require any further information regarding the transaction."

He said KPMG had issued an unqualified audit report for the credit union.

Mr Lee too last week said no tax was payable, and that the tax office did not intend to pursue the issue further.

A spokesperson on superannuation for the Australian Taxation Office, Murray Hawkins, yesterday said he could not comment specifically on the credit union's affairs, however he said the position was "crystal clear" that income tax was payable in such circumstances.

"If you've got an accrued entitlement and you decide not to take it and have it paid out, its taxable."

Senator Woodley last month also attacked Queensland's financial supervisory bodies for failing to investigate the transaction.

"I believe that the credibility of Treasurer De Lacy, the credibility of the Queensland Office of Financial Supervision and the Queensland Government's financial institutions code stands or falls on the way in which they discharge their duty," he told the Senate.

"I am told that some of the evidence has been formally put before the regulators three times."