Nine directors of the scandal-plagued NSW RSL have been formally accused of working against the interests of members by engaging in a cover-up over the alleged rorting of expenses by former president Don Rowe.
The NSW leadership group has also been internally charged by the national RSL with bringing the organisation into disrepute after a number of embarrassing stories by Fairfax Media and the ABC exposed the alleged financial mismanagement at the century-old institution.
More National News Videos
RSL reform push grows
A shake-up of the RSL's leadership looms as questions emerge about financial management. David Wroe explains.
The national RSL has ordered their state counterparts to explain their actions or face being swept aside through a no-confidence motion - an unprecedented move in the RSL's 100-year history.
An official "charge sheet" obtained by Fairfax Media was sent to nine of 11 current members of the NSW state council on Tuesday, just 24 hours after the national RSL received a second report from forensic auditors at KordaMentha.
![Former NSW RSL president Don Rowe at Sydney's Hyde Park war memorial.](/web/20170119173750im_/http://www.smh.com.au/content/dam/images/g/t/9/z/1/m/image.related.articleLeadwide.620x349.gtswyp.png/1484731189731.jpg)
The report found that the nearly 40,000 members in NSW, 364 sub-branches and the RSL national group had been told Mr Rowe resigned in late 2014 due to "ill-health" when evidence shows the council was aware of allegations against him that possibly amounted to fraud.
Between 2009 and 2014, Mr Rowe ran up a credit card bill of $475,000, including $213,000 in cash withdrawals, all paid for by the NSW RSL.
He also provided mobile phones to five family members at a cost of $38,000.
He was given an ultimatum to quit or face a wider audit by former state president Rod White, who has since resigned as national president following questions about his own financial arrangements.
![A portion of the RSL charge sheet obtained by Fairfax Media.](/web/20170119173750im_/http://www.smh.com.au/content/dam/images/g/t/s/x/f/k/image.related.articleLeadNarrow.300x0.gtswyp.png/1484619745225.png)
But until now there had been no evidence that Mr White's knowledge of the alleged rorting had been shared with the state council.
KordaMentha investigators have unearthed an email in which auditors Grant Thornton alerted councillor Peter Stephenson of a "prima facie case of fraud under the NSW Crimes Act" against Mr Rowe over the free phones to his family members.
Weeks later, Mr Stephenson alerted members via the RSL's Reveille magazine that Mr Rowe's departure was down to ill-health.
KordaMentha also found that the NSW branch's honorary legal adviser John Cannings had briefed the state council that Mr Rowe's activities had been "careless".
The charge sheet, sent to Mr Stephenson, current state president John Haines and seven others, alleges the council "engaged in conduct prejudicial to the interests of the RSL for failure to transparent in December 2014 and in the whole of the year 2015 with the national board of the RSL and RSL membership".
All nine NSW state councillors have been ordered to appear before the board of the national RSL in Canberra on February 3 to show cause why the national league should not pass a no-confidence motion in their ability to govern the NSW branch.
A supporter of the current state council has already compared the process to the Nuremberg trials on social media.
Fairfax Media has contacted Mr Haines seeking comment on behalf of the state council.Â
In October, Fairfax Media revealed Mr White and three NSW colleagues had received a share in nearly $1 million in consulting fees paid by RSL LifeCare, where they were directors.
RSL LifeCare, which operates 45 nursing homes and retirement villages, is controlled by RSL NSW. Mr White and other members of the state council had appointed themselves to the board.