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Former Federal Liberal MP Peter Shack, who is accused of defrauding his mother-in-law’s estate of $100,000, broke down crying in his District Court trial today, telling the jury the allegation he stole from a much-loved and respected relative was “offensive”.

On the witness stand, Mr Shack, who served as the MP for Tangney for 15 years, said he would never steal from his mother-in-law Mary Stasinowsky and was adamant she had agreed to loan him the money for an investment but wanted to keep it secret from her children.

He said Mrs Stasinowsky did not want her children to learn of the loan and come to her for similar help.

Mr Shack admitted he concealed the July 2004 loan by putting misleading information on a cheque stub and faking an invoice. He said in July 2004 his mother-in-law’s estate and his own finances were in good shape. The family trust was valued at about $6 million before falling victim to the global financial crisis.

When asked by his lawyer Tom Percy how he felt about the allegation he intended to steal from his mother-in-law Mr Shack said: “Of all the things I’ve heard about me before and during this trial that is the most offensive … I would never have stolen from my mother-in law, I loved her, I respected her, she was my friend of more than 20 years.”

The jury has heard evidence from Mr Shack’s estranged wife Pauline that he allegedly confessed to her mother refused the loan but he took the money anyway and from auditor Amanda Chick who claimed Mr Shack admitted to the fraud. Mr Shack denied both those allegations.

He said in hindsight trying to cover-up his secret deal with his mother-in-law was foolish, but he made no effort to hide the loan on his own business documents.

Mr Shack, who had helped manage Mrs Stasinowsky’s finances for 10 years, described the huge pressure he was under when the GFC hit and how he became clinically depressed and “drunk myself stupid” after being accused by his wife’s family of misappropriating funds and his marriage collapsed.

Mr Shack, who was operating an Amway business before resigning, was charged with fraud in November 2011.

Mr Shack claims he spent $300,000 of his own money on Mrs Stasinowsky, who now has dementia, but didn’t in 2004. He said it was not unusual for his mother-in-law to loan him money and she once loaned him $50,000 for a BMW.

He rejects the prosecution claim he had his mother-in-law sign a blank cheque.

The trial continues.