Michael Kroger is the Victorian Liberal Party's current president. Credit:Justin McManus He has since removed himself from the two registers but remains on the register in South Australia where he has confirmed assisting Bechtel in discussions with the SA government about nuclear waste. But he has not ruled out a continued commercial arrangement with some of his clients. Some inside the Liberal Party are warning that the internal battle could be damaging for Opposition Leader Matthew Guy because of the factional fallout and the potential for a WorkChoices-style political campaign from Labor and unions. Mr Reith's record as an industrial relations warrior and the Fair Work Commission's decision to lower penalty rates for some workers on Sundays have raised fear among his opponents that Labor will run a tough campaign against Mr Guy during next year's state poll. "The state election will now be full of balaclavas, Alsatians, WorkChoices and children overboard," a senior Liberal said. "It is going to be a disaster. God help us."

Many, including some federal MPs, are critical of Mr Kroger for failing to stop membership recruiter Marcus Bastiaan on his campaign for party renewal, with many viewing the 27-year old Brighton man as a branch stacker. Another big criticism of Mr Kroger has been over his standoff with the Cormack Foundation, a major donor for the Liberal Party, which is withholding half-a-million dollars needed to run the branch over concerns that internal governance issues were not fixed after the Damien Mantach scandal. Mr Mantach embezzled $1.5 million from party coffers during his term as state director, and was sentenced to five years' jail in July. Mr Kroger continues to defy the demands of the Cormack Foundation, which includes business heavy-hitters Hugh Morgan, Rupert Murdoch's brother-in-law John Calvert-Jones and former ANZ chairman Charles Goode. The foundation wants the roles of president and chair of the finance committee to be separated – both positions are held by Mr Kroger.

Former premier Jeff Kennett is backing Mr Reith, saying it is time for a change and pointing out that the financial interests of the party had suffered in recent years. "If Michael were to continue I think our financial situation would get worse," he said. "In the interests of the party it is time for a change." On Thursday Mr Reith confirmed having helped arranged meetings for his clients with both sides of politics in Canberra and Victoria, including on defence and corrections issues. Such meetings included discussions with Coalition corrections spokesman, Ed O'Donohue. He told Fairfax Media it would be inappropriate to continue as a lobbyist "when and if" he were to become party president. He said he had legal advice that he should cease his lobbying activities. "I've bought to an end my activities as a lobbyist," he said.

But he is likely to face party pressure over his confirmation that he may remain on the books of one client in particular, Bechtel, even if elected president. He said that decision would be made after legal advice and discussions with his client. Party officials working as lobbyists has been controversial in the Liberal party, particularly in NSW where Tony Abbott has railed against what he claims are conflicts of interest.