Criminal charges are on the cards for Health Workers Union boss Diana Asmar so her civil case should be halted to avoid an unfair trial, her lawyers have argued.
The Fair Work Commission launched Federal Court civil proceedings against Ms Asmar in August, alleging she falsely claimed more than $120,000 as relevant business expenses.
It's also claimed she authorised more than $2.7 million to be paid to a printing business that invoiced for products and services that were never received.
Ms Asmar's husband David, Health Services Union branch president Rhonda Barclay and union officials Kerry Georgiev, Nick Katsis, David Eden and Lee Atkinson, are also listed as respondents to the civil case.
Her barrister Rishi Nathwani KC on Friday argued for the Fair Work proceedings to be stayed because criminal charges were "on the cards or reasonably likely".
He told the court Peter Walsh, the director of the printing company at the centre of the allegations, was arrested by the financial crimes squad on November 14.
The 74-year-old Mount Eliza man was questioned over the fraud allegations and released pending further inquiries, Mr Nathwani said.
He argued if police had taken steps to arrest and interview Mr Walsh, then it was only a matter of time before Ms Asmar was also arrested.
Police could not prosecute Mr Walsh without prosecuting Ms Asmar, as she allegedly authorised the false invoices and received some of the payments, Mr Nathwani said.
"If Mr Walsh is under suspicion and arrested, it goes without saying that Diana Asmar must be," he told the court.
Mr Nathwani also said police had successfully obtained a search warrant in relation to Ms Asmar, which showed investigators were compiling evidence against her.
He argued Ms Asmar would be prejudiced if she had to defend both criminal and civil proceedings against her on the same allegations.
Even though she is yet to be charged or arrested, the barrister said she would be unable to provide a full defence to the Fair Work case without placing a potential criminal defence at risk.
Mr Nathwani added if she exercised her right to silence in the civil case, then she would be disadvantaged for not properly participating.
However, Fair Work barrister Matthew Follett KC said Ms Asmar would not be hindered if the civil case continued and she could claim penalty privilege if required.
The court had also not received any direct evidence from Ms Asmar about her claims of prejudice, Mr Follett said.
Justice Craig Dowling allowed Mr Nathwani to obtain more evidence, giving him two weeks to file an affidavit from Ms Asmar.
The stay application will be decided at a later date.
