A vice-president of the NSW RSL has become the first member of the scandal-plagued institution to bow to pressure and stand aside.
Peter Stephenson, a Vietnam veteran, called on the rest of the 11-member state council to also step down and make way for a caretaker amid an expense rorts affair that has plunged the RSL into crisis.
In a letter, Mr Stephenson said: "As a consequence of detrimental press reports regarding former state president Don Rowe and allegations in the Sydney Morning Herald that state branch had covered up the extent of Don's presidential expenses, I have determined to voluntarily stand down from state council temporarily to allow any investigations to take place unhindered."
He said he intended to defend the actions of the council based on previous advice provided by the league's then honorary legal advisor, John Cannings.
Mr Cannings had advised the council that Mr Rowe's expense claims had been outside guidelines but had not amounted to "fraudulent" or "criminal behaviour", Mr Stephenson said.
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.
KordaMentha investigators called in by the national RSL board have unearthed an email in which auditors Grant Thornton alerted Mr Stephenson to a "prima facie case of fraud under the NSW Crimes Act" against Mr Rowe over the phones.
The entire state council has been internally charged by the national council with acting against the interests of members by blaming Mr Rowe's resignation on "ill-health" when there were financial allegations against him.
In his letter to sub-branches on Thursday, Mr Stephenson said he had withdrawn his nomination for upcoming elections.
"I now call for the election process currently underway to be suspended and handed over to the Australian Electoral Commission to administer. And I also call for the remainder of state council to follow my lead by standing aside as well and to have an independent caretaker appointed to administer state branch while these investigations are continuing," he wrote.
"By standing aside I accept no culpability for the actions taken and stand aside to allow any further damage to the reputation of the RSL to be minimised."
Officers from the NSW Police fraud squad attended the Sydney headquarters of the RSL on Wednesday.
On Thursday, a police spokesman said: "The NSW Police Force is in the early stages of investigating information into reported misappropriation of funds within the NSW RSL.
"Detectives from the State Crime Command's Fraud and Cybercrime Squad have launched Strike Force Whitbread to investigate the matters and determine if any criminal offences have been committed."
