11/26/2011 06:16 EST | Updated 01/26/2012 05:12 EST

Murdoch son denies lobbying Australian senator who alleges News Corp. offered inducements

CANBERRA, Australia - Rupert Murdoch's eldest son denied Saturday that he was present when a former Australian senator alleges a News Corp. executive offered him favourable newspaper coverage and "a special relationship" in return for voting against government legislation.

Australian police are investigating former Sen. Bill O'Chee's allegations that during a 1998 lunch, News Corp. executive Malcolm Colless offered him inducements in the form of editorial favours to vote against the conservative government's legislation on the creation of digital TV in Australia. News Corp. stood to profit from the legislation failing.

O'Chee said Friday that Murdoch's son Lachlan, then a senior News Corp. executive, was at the restaurant table during crucial parts of his discussion with Colless about digital TV.

Lachlan Murdoch, now an Australian television network board member, dismissed O'Chee's account as a "fabrication."

"I have never been involved in lobbying Mr. O'Chee on any issue," Murdoch said in a statement Saturday.

O'Chee stood by his account. "Of course he would say that," he said.

Murdoch accepts that he and O'Chee were at the same upscale restaurant in the eastern city of Brisbane, although he says he no longer has any recollection.

News Corp. editor Chris Mitchell recalls going to lunch with Murdoch that day and introducing him to O'Chee as they passed his table on the way out.

"We did not sit down and spoke for a minute before we left to return to work," Mitchell said in a statement. "There was no discussion of any particular subject. Only polite hellos."

News Corp.'s Australian subsidiary News Ltd. has denied allegations of improper conduct and said two guests who shared the table with Colless and O'Chee did not hear any improper conversations.

Offering a senator a bribe or inducement to influence a vote is an offence punishable by up to seven years in prison.

O'Chee's allegations were reported to police by Rob Oakeshott, an independent federal lawmaker whose support is crucial to Prime Minister Julia Gillard's minority government's survival.

"I emphasize that this is not passing judgment on the veracity of the allegations," Oakeshott told The Associated Press in a statement. The allegations were reported "to make sure the right people could test the truth or otherwise of the serious allegations being made," Oakeshott said.

O'Chee, a former senator for Queensland state with a track record of voting against his National Party's wishes, alleged that Colless told him that while voting against the legislation would be criticized, "we will take care of you."

Colless "also told me we would have a 'special relationship,' where I would have editorial support from News Corp.'s newspapers, not only with respect to the ... legislation, but for 'any other issues' too," O'Chee alleged in his statement to police.

O'Chee said that a week after the lunch, he called Colless to say he had decided to vote for the legislation. It then became "almost impossible" to attract News Corp. coverage, O'Chee said in his statement.

He lost his Senate seat in elections four months after the lunch.

The allegations are embarrassing for News Corp., whose ownership of 70 per cent of Australia's newspapers has raised criticism from within the government that Murdoch's empire has too much control over Australian media.

The government has opened an inquiry into potentially increasing newspaper regulation in Australia after News Corp. closed its top-selling British tabloid News of the World in July over illegal phone hacking allegations.