Australian MPs are locked in a fiery debate over claims that Prime Minister Kevin Rudd tried to help a car-dealer friend get a government loan, BBC reported.
The debate is focusing on an e-mail which apparently comes from the leader's office asking the Treasury to deal with the loan request "asap".
But Mr Rudd says the e-mail is fake and says opposition leader Malcolm Turnbull must resign for suggesting otherwise.
Mr Turnbull has demanded Mr Rudd stand down, saying he has lied to parliament.
Analysts say it is the biggest test Mr Rudd has faced since he was elected in 2007.
The row has been brewing for weeks, since it emerged that car dealer John Grant lent a pick-up truck to Mr Rudd for use in his constituency.
Mr Grant is a friend of the prime minister, and opposition politicians believe Mr Rudd tried to help him secure money from a Treasury fund called OzCar to help his business deal with the global economic slump.
The row escalated on Friday, when Treasury official Godwin Grech told a Senate committee he thought he could remember receiving an e-mail regarding funding for the car salesman.
During a stormy debate in parliament on Monday, both sides traded insults and demanded resignations.
Mr Rudd had given Mr Turnbull and ultimatum to produce the e-mail in the parliamentary session, or resign.
He told parliament the opposition had failed to provide the evidence so had "no alternative now but to stand up and apologise and resign".
Shadow treasurer Joe Hockey demanded Mr Rudd and Treasurer Wayne Swan should both stand down.
The prime minister called in the police to investigate the e-mail over the weekend.
Australia's ABC News is reporting that the police have now uncovered the e-mail - and have confirmed that it is fake.