Senator Conroy, a former Transport Workers Union (TWU) official, also defended the use of “re-election funds” by unions to help bankroll officials’ election campaigns.

He was responding to reports about Ms Gillard‘s work when she was an industrial lawyer with Slater & Gordon and in 1995 helped set up a legal entity for then-Australian Workers Union boss Bruce Wilson.

Later, there were allegations of official corruption but no charges were ever laid.

“There were clearly problems with what was going on with some officials at the AWU and the police investigated this,” Senator Conroy told reporters in Canberra on Thursday.

“And ultimately they couldn’t get enough evidence to prosecute anybody.

“It is disappointing there was no ultimate prosecution of anybody in that case.

“But the fact that people misused that account has got absolutely nothing to do with the prime minister.”

He said the “smears” against Ms Gillard started with the Liberals in the Victorian parliament 17 years ago and were now being continued by “looney tunes internet websites”.

Senator Conroy said the TWU had a “re-election fund” he had personally contributed to and that such funds were voluntary and legitimate.

“What I object to strenuously is the suggestion that trade union figures are corrupt … because they have a re-election fund,” he said.

“This is a smear across the whole movement.”

Senator Conroy said it was a “matter for the prime minister” to decide whether to make a statement to parliament.

“But the facts are known,” he said.