The tactics of the Kenja movement and its slurs against a crusading politician have been laid bare by people close to the case. Tim Elliott reports.

On March 30, 1994, a woman walked into Rose Bay police station, and made a complaint of sexual assault against Stephen Mutch, then a Liberal MP in the NSW upper house.

The woman remained vague on the timing of the assault, saying it had happened some time between March and May 1978, when she was 18. But she was very clear on the details: Mutch had visited her at her parents' home, pushed her onto the bed and, amid much swearing and struggling, sexually assaulted her.

Mutch denied the allegations, which, due to incorrect court records, were soon being reported as having involved a girl under the age of 16. The 38-year-old MP was set to face court in March 1995, just three days before the state election, in what TV news bulletins described as a "bombshell" for John Fahey's government.

"It was a disaster," Mutch says now. "It was the worst thing that someone could say about you, and it was totally and utterly fabricated."

What wasn't known at the time, but can now be revealed, was that the woman making the allegations belonged to Kenja, a self-empowerment group that many consider to be a cult, against which Mutch had been speaking out in Parliament for some time.

Though the allegations were ultimately dismissed, they changed the course of Mutch's life, and, together with testimony from former Kenja members, provide a chilling insight into the extraordinary lengths to which the group will go to defend itself.

Founded in Sydney in 1982 by a former encyclopaedia salesman, Ken Dyers, and his third wife, Jan Hamilton, Kenja billed itself as a non-political and non-religious personal development organisation offering a range of training seminars and courses. It offers the same seminars today.

A Scientology drop-out, Dyers wooed attendees with a carefully crafted personal mythology that included a hard-scrabble youth on Sydney's streets, a celebrated World War II record (that was largely falsified), and a barnstorming business career in which he traded precious stones, invented a tax-accounting system and worked as a trouble-shooter for Consolidated Press.

Through sporting and cultural activities, Dyers and Hamilton recruited hundreds of members who would pay thousands of dollars to attend a seemingly endless round of workshops and "processing sessions", all aimed, as Kenja's website explains, at increasing "understanding of the spiritual nature of man … along with practical training in the basics of effective communication - time, space and energy."

Bevin Hudson, a former member, describes it as "a pyramid sales system, similar to Amway … Processors herd the greater body of members into fee-generating endeavours, with Hamilton and Dyers sitting atop the cash flow."

But the cornerstone of Kenja's work was "energy conversion", a one-on-one mediation session conducted with Dyers, who would stare into his participant's eyes, "making them become conscious of negative energies in their thinking, and then … dissipate them."

Mutch first raised concerns about Kenja in 1992, after being contacted by a family friend whose daughter had become a member. This precipitated more mail from ex-members, including women and girls who claimed they had been coerced into conducting nude "energy-conversion" sessions with Dyers, which were often followed by sex.

Similar complaints had also reached the police, who in September 1993 charged the then 71-year-old with 11 counts of sexual assault against four girls aged between eight and 15. Dyers was eventually found guilty on one of the 11 charges, but had the conviction quashed on appeal. In 2005 he was charged with another 22 counts of sexual assault against two 12-year-old girls, but was declared mentally unfit to stand trial. More charges were raised in July 2007. Dyers killed himself rather than face those charges.

Mutch's initial involvement, however, did not go unpunished. There were repeated crank phone calls and a barrage of form letters. Several Kenjans turned up to Mutch's wedding in January 1994, disguised in giant sunglasses and floppy hats, and began taking photos of the guests and their numberplates. When Mutch gave evidence against Dyers, he was regularly followed out of court by people who stationed themselves on street corners with walkie-talkies.

"I was so freaked out at one stage that I jumped in a cab and came straight back to Parliament rather than get the train," he says. "It sounds silly, but you get paranoid, because you really don't know what these people are capable of."

Then came the accusation of sexual assault. Even though the police dismissed the allegation - the Director of Public Prosecutions also chose not to pursue it - the case quickly assumed a life of its own. Anonymous letters detailing Mutch's supposed crimes were distributed among the parliamentary press gallery and to the letterboxes of his Cronulla constituents. They also found their way to Mutch's Liberal Party colleagues, some of whom were only too happy to use it against him. (In one instance, a political rival showed the letter to Mutch's mother.) In 1996, a particularly salacious version of the allegations was posted on the internet.

"It had a major effect on me," Mutch explains. "Not only psychologically but politically. One member of my preselection panel wouldn't even talk to me."

But according to one former Kenjan, an ex-boyfriend of the woman who came out against Mutch, the allegations were "wholly without substance," and cooked up at the behest of Hamilton and Dyers. "Around 18 months ago, in a telephone discussion [she] admitted to me that allegations made by her to police regarding Stephen Mutch sexually molesting her were entirely made up," the man writes in a statutory declaration given to the Herald.

According to the statement, Dyers and Hamilton asked the woman to lie to discredit Mutch and the case against Dyers. Otherwise, "Mr Dyers would be jailed and killed as a rock spider [paedophile] in the prison system."

The Herald attempted to contact the woman, who is living in Victoria, but she did not return calls. The woman's mother, however, was clear. "Stephen didn't do anything," she says. "Of course he didn't. The accusation was an awful thing in his life, and I naturally blame my daughter. But in a way I can't, because she wasn't in her right mind."

Hamilton, who took over the organisation after Dyers's death, denies asking anyone to lie. She claims there has been a long-running conspiracy against Kenja, involving religious fundamentalists and a US group called Cult Aware. "It's a witch-hunt," she told the Herald. "My opinion of these people is so low that I will not lower myself to conduct a conversation about them."

But it seems other members were also asked to lie. "Jan said to me, 'You have to fight lies with lies'," says Su Germain, a former Kenjan. "We were told there was huge conspiracy against Ken and that if we didn't lie he was going to jail."

Germain had been a member of Kenja since 1982. In a statement to police in 2006, she talked about processing sessions in which 50 people would be naked together in a room. Dyers would talk about "clearing sexual energies", and insisted it was "better to be naked so that you weren't hiding behind an identity".

Germain remembers a particular one-on-one nude session with Dyers in Kenja's George Street centre, when she spotted, with some alarm, a Vaseline jar sitting on the table beside her.

One day during Dyers's 1993 trial, Germain, who was a defence witness, was summoned by Hamilton to a meeting in the basement of Kenja's Surry Hills offices. There, disguised in wigs and robes from a secondhand clothing store ("so that security cameras would not show us meeting up together"), a group of defence witnesses tried to dredge up anything that reflected badly on the character of one of the plaintiffs. "But we didn't have anything, so Jan suggested some stories. One of the people there said, 'Yes, I'm sure that happened.' Before you knew it they had created a story."

The pressure to please was overwhelming. "It was high treason not to go along with the prevailing ideas within the group," Bevin Hudson says. "Anyone out of step was not just out of step with Kenja but also with the magical spiritual universe."

These days, Hudson manages an art gallery in the eastern suburbs and remains an outspoken critic of Kenja. Mutch entered Federal Parliament in 1996 but retired two years later and now lectures in politics and international relations at Macquarie University.

"The allegations affected me deeply and really impacted on my career," he says. "But I have always had sympathy for [the woman] who made them, because she was brainwashed. In the end, I'm glad I raised concern about Kenja.

It's one of the things I'm proudest about in my career."