THE surprise arrest of the beleaguered former Labor MP Craig Thomson on Thursday sent shockwaves through a government which was just coming to terms with its brave new world of a hyper-extended election campaign.
Mr Thomson's case has been a running sore for Labor but that has now entered a critical phase, just as the Prime Minister, Julia Gillard, had seized the initiative with her September election announcement.
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Federal MP Craig Thomson arrested
Federal MP Craig Thomson has been arrested at his electorate in NSW. He is set to face around 150 fraud charges.
Government and opposition figures reacted cautiously to the news, eager to avoid the legal pitfalls of commenting on matters now before the courts.
Mr Thomson faces 150 charges, any one of which has the potential, if he were found guilty, to force his disqualification from parliament as they carry a jail term of one year or more.
Legal experts say while that is a theoretical possibility in such cases, the proximity of the general election, now set for September 14, means court proceedings would be unlikely to reach a conclusion before then.
A more immediate threat, however, comes from the hit to the MP's finances associated with funding his legal defence.
Fairfax Media last year revealed NSW Labor had paid almost $350,000 in legal costs relating to Mr Thomson before the MP was suspended from the party in May.
An extract of a report from NSW Labor's finance committee, prepared for the state conference, showed $240,000 of that amount was to cover a defamation settlement with Fairfax Media.
It is understood party officials had been worried that if the ALP had not footed the bills, Mr Thomson could have gone bankrupt, disqualifying him from being an MP and causing a by-election that could imperil the minority Gillard government.
It remains unclear how Mr Thomson will meet his new costs after the party said it would no longer foot his bill.
If a by-election were required, it would be a matter for the Speaker of the House of Representatives, Anna Burke, to issue the writs. But with an election date on the horizon, that is seen as unlikely.
The Coalition workplace relations spokesman, Eric Abetz, questioned what Ms Gillard knew and when, hinting that she may have been tipped off before she announced the election date on Wednesday.
Thomson: 'I've done no wrong-doing'
Federal MP Craig Thomson has been arrested and charged with 149 fraud offences. He says he will be 'vigorously defending these charges'.
It was a suggestion Ms Gillard rejected while touring flood-affected Bundaberg, describing Mr Thomson's situation as, ''something for the police''.
Asked if she had any prior knowledge about the arrest she said: ''Of course not.''
Mr Thomson has strenuously denied allegations he misused union funds to pay for prostitutes, air travel, entertainment and cash withdrawals when he was the HSU national secretary from 2002 to 2007.
His lawyer, Chris McArdle, was scathing about the process as he defended his client's innocence.
He criticised the way police had handled the arrest complaining journalists had received more warning of the arrest than Mr Thomson.
A spokesman for NSW Police said that Mr Thomson was arrested because he refused an invitation before Christmas to surrender himself.
Mr McArdle denied the NSW police account, saying Mr Thomson had only been invited to go to Victoria for an interview.
''It is untrue to say we were invited to go and surrender our client for arrest,'' he told ABC TV.
He explained Mr Thomson had declined to be interviewed because he lived in a liberal democracy, ''whereby you are not obliged to answer questions.''
The HSU national president, Chris Brown, said the union had received the news about Mr Thomson's arrest on Thursday, ''like everyone else''.
''Given the investigation that has been under way for well over 12 months, it is probably not surprising that it has got to this stage,'' he said.