How the Victorian Liberals' conservative warlords tore the party apart

When Michael Kroger walked into a Melbourne studio in May 2012, he had decided to lob a metaphorical grenade that would spark eight long years of open warfare within the Victorian Liberal Party.

The self-styled "powerbroker" gave separate interviews to the city's rival radio hosts, Jon Faine and Neil Mitchell, dumping on his close friend and associate, former federal treasurer Peter Costello.

Former Liberal Party president Michael Kroger remains on the party's powerful administrative committee.Credit: Daniel Pockett

"I'm at my wits' end with him ... this is the Kroger of the Kroger-Costello faction, that should tell you something," he said. "No, I don't want to have lunch with Peter anymore. I don't want to do it anymore. I have been apologising for him and defending him for 35 years."

The Days Of Our Lives-style split - which led news bulletins across the country - had reached the point of no return a few days earlier when Kroger's ex-wife, Helen Kroger, had been pushed down the party's Senate ticket in favour of Costello's former staffer, Mitch Fifield, and Scott Ryan.

Kroger was furious that Costello hadn't intervened to stop it and lashed out, saying Costello was "bitter", like "a bear with a sore head" and wanted to come back to Parliament. He claimed that a few months earlier Costello had approached him at The Australian Club, asking him to encourage a young MP, Josh Frydenberg, to step aside in Kooyong to create a vacancy.

Costello later rejected Kroger's allegations as "lurid" and wrong.

"The Liberal Party is run by a membership, not by factional bosses ... I know how it works. I do not need to go to Mr Kroger for assistance in relation to its affairs," he said. "The last thing I would ever do is to give confidence to Michael Kroger."

Michael Kroger as Victorian Liberal Party president, and Peter Costello, the then-candidate for Higgins, in 1989.Credit: Cathryn Tremain

The very public feud gave Liberal factional figures waging their own wars in Victoria a green light, though it was only two years since the party had returned from a decade in the wilderness to form a one-seat majority government.

Within 10 months of Kroger's outburst, Victorian premier Ted Baillieu had resigned, having been undermined for much of his time as leader, and a year later the state's Coalition government would be dumped after just one term.

The in-fighting continues to this day. Once divided between economic wets and drys, the Victorian Liberals were now split on social grounds. Religious and ethnic groups were courted and signed up to branches en masse. MPs with progressive views on abortion, same-sex marriage or euthanasia were plotted against and punished.

As a player in this strife, Costello faded away almost immediately. Almost all of those once aligned with him have left the factional scene and Federal Parliament.

But former friends and allies within conservative ranks have now turned on each other. Keeping up with the shifting allegiances is a week-by-week proposition.

Kroger has remained a central figure throughout.

"He just needs to be fighting someone," a long-time Liberal factional figure said this week.

"I'm not sure anyone remembers what they're fighting about anymore. It changes from day to day. It's no longer about ideology or principle; it's about power, who is in control. It's become more important than being in government to them."

Baillieu, the only Liberal leader to win a majority in Victoria in the last 24 years, this week added his voice to calls for an end to the bickering, branch stacking and power-hungry factionalism.

He said Victoria had gone from "the jewel in the Liberal crown", as Sir Henry Bolte once described it, to a national basket case.

"I think it's important for all Liberals to realise that there are much more important things to be talking about in Victoria than these sorts of silly political games," Baillieu said.

"The great saying in the Victorian Liberal Party is that there will be comings and goings in all sorts of directions.

"Nobody wants to see any branch stacking. Nobody wants to see any sectarian divide in our community or in our party. It's the middle ground where elections are won."

When Marcus Bastiaan graduated from Brighton Grammar in the late noughties, he was clear-minded in his intention to pursue a political career. His father being a local periodontist and his mother a well-regarded surgeon, Bastiaan had solid links to the local community. He had the gift of the gab and preached barrel-chested conservatism at any forum that would host him - church meetings, sports club events and Rotary get-togethers.

In his university years, when he dropped out of three courses, he recruited vast numbers of former schoolmates to the party, according to three who spoke to The Age on the condition of anonymity. One claimed he joined the party in 2011 and remained a member until 2016, despite not paying for membership renewal. "There were plenty of us there – maybe 15 or 20 or so that I knew," he said. "I was just following the crowd."

Marcus Bastiaan and Michael Kroger.

Bastiaan, who grew up on the Mornington Peninsula, has always denied his methods broke any rules despite complaints from rivals. "It's not against the rules to stack the shit out of the place if the people pay for their memberships," said one close ally.

It was around 2016, when he emerged as a potent figure in party affairs, that Bastiaan developed a relationship that would dominate the party for years. His bond with Kroger, who had recently returned as party president, was strong but awkward. Kroger, who sources say felt uncomfortable with Bastiaan's aggressive tactics, relied heavily on his younger counterpart's numbers and respected his tenacity. At one point, the young Turk hatched a plan to knock off Kroger, before Assistant Treasurer Michael Sukkar intervened.

Bastiaan commissioned a review that found the party's membership was skewed radically over the age of 70. Bastiaan's aim, supported by Sukkar, was to amass power and remove "dead wood" - those on the opposition benches who tended to be more moderate and who Bastiaan believed had no place in an electable party.

"The party was pretty much lifeless in Marcus' eyes … [and] MPs were fearful of getting knocked off. Kroger supported that hypothesis. It was a marriage of convenience for Kroger but he backed Marcus 100 per cent," says one state Liberal MP.

In 2018, the party was gearing up for a November election that pollsters believed would be tight and Bastiaan's numbers delivered Kroger a thumping re-election as president. Bus loads of Mormons and other hardliners elected Bastiaan vice-president of the state division and tilted the key administrative committee in his favour.

Crucially, Kroger, Bastiaan and Sukkar helped install Nick Demiris, a former Kevin Andrews staffer with minimal campaign experience, as state director of Matthew Guy's campaign to become premier.

It can often be unclear how branch stacking affects the day-to-day politics we see on TV, but the 2018 campaign laid the reality bare. With a campaign director, in Bastiaan's words, "around our finger", Bastiaan and Sukkar's brand of populist conservatism underpinned Guy's campaign. The election pitch was heavily focused on "African gangs" and a promise to scrap Safe Schools, an anti-bullying program for LGBTI schoolkids.

The Coalition suffered a devastating 7 per cent swing, losing the seat of Hawthorn and almost losing Brighton. Guy, Demiris and Kroger all resigned. Kroger, however, remains on the party's powerful administrative committee as the immediate past president.

While Bastiaan has not been at the forefront of the conservative faction since 2018, he has maintained connections with recruiters loyal to Sukkar. The group, which dramatically split with religious hardliner Karina Okotel in recent years, no longer holds power on the administrative committee. Senior MPs aligned with the group, including Sukkar, Frydenberg and Greg Hunt, have been pushing for fresh elections to committee positions, including that of president Robert Clark, who the conservatives are disaffected with.

Some in the right faction believe Clark's factional coalition - between the moderates and Okotel's religious forces - are doomed once a vote is held. "The members are f---ing pissed. All they see is factional stuff and Clark is anonymous," said the Bastiaan and Sukkar ally.

Kroger was initially able to strengthen his authority when it was discovered in 2015 the Liberals' former state director, Damien Mantach, had stolen $1.55 million from party coffers.

He vowed to clean up the state division's finances but ended up going to war with the $70 million Cormack Foundation, the party's biggest donor, over its demands the management of finances be overhauled and restructured.

Kroger's expensive and time-consuming legal action against the foundation - which infuriated many in the membership - cost the parties more than $3 million combined. Eventually he pressed for the sale of the party's 104 Exhibition Street headquarters for almost $40 million to get the division back on track financially.

While there have been discussions at senior levels of the party about a federal takeover of the Victorian branch, the move is seen as onerous and without precedent in the party. Ironically, it would likely end up vesting power in those who led the party at the time of the branch stacking.

State director Sam McQuestin wields significant control over the forensic membership audit that will attempt to weed out those members stacked by Bastiaan and Sukkar's operatives. Already, those loyal to Bastiaan on the administrative committee, including Kroger, have shown opposition to the clean-up by failing to vote for the audit.

On Monday, McQuestin leant heavily on some figures named in this masthead's reporting to step away from the party. By lunchtime Monday, Bastiaan announced via text to journalists he was quitting the party, pre-empting any disciplinary action. He said he'd had enough and wanted to focus on his business and the third child he has on the way with wife Stephanie. Ally Alex Lisov, who sits on the party's federal executive alongside Prime Minister Scott Morrison, quit on Thursday.

Frydenberg, federal Treasurer and deputy leader of the federal party, is the man everyone is looking to to fix this mess.

Federal Treasurer Josh Frydenberg gets a big congratulations from Michael Kroger after claiming Kooyong at last year's federal election.Credit: Jason South

But this scenario faces two major hurdles. Kroger is one of Frydenberg's political mentors and Sukkar is his friend, ally and Assistant Treasurer. When Frydenberg cannot attend administrative committee meetings, he often sends Sukkar in his place.

Frydenberg defended Sukkar's conduct this weekend and left it to the party to conduct an internal review. "My experience of the Liberal Party … is that people have joined because they share the values of the party," Frydenberg said on the Nine Network this week.

"They believe in the power of the individual, freedom, personal responsibility."

The question now being asked by Victorian Liberals is how much personal responsibility Frydenberg is prepared to take.

Get our Morning & Evening Edition newsletters

The most important news, analysis and insights delivered to your inbox at the start and end of each day. Sign up to The Sydney Morning Herald’s newsletter here and The Age’s newsletter here.