Victorian Labor MP Cesar Melhem is being taken to court for allegedly breaching the Fair Work Act during his time as state head of the Australian Workers' Union.
The Registered Organisations Commission says it has commenced civil proceedings in Federal Court against the AWU and former Victorian branch secretary, Mr Melhem.
The action relates to allegations of a scheme to artificially inflate union membership between 2008 and 2013, in breach of the Fair Work Registered Organisations Act.
"The Commissioner alleges the AWU entered in its register of members hundreds of persons who were not members and failed to remove from its register over 2,000 unfinancial members in breach of various provisions of the RO Act," the ROC said in a statement released this week.
"The Commissioner further alleges the conduct engaged in by the AWU and Mr Melhem constituted a scheme pursuant to which the membership of the AWU was artificially inflated and the AWU Victorian Branch received payments that were not legitimately due to it."
Mr Melhem told AAP he refuted the allegations and looked forward to his day in court.
"I don't accept what they are alleging about some administrative breaches," the MP said on Tuesday night.
Mr Melhem stood down as upper house whip in 2015 over allegations aired at the union royal commission about his time as an AWU boss.
It was told the AWU received money in exchange for workplace deals which sold out workers.
But Mr Melhem took the stand and defended a 2010 agreement with contractor Cleanevent that paid the AWU $25,000 a year and saved the company $1.5 million in wages.
On Tuesday he said a criminal inquiry against him stemming from the royal commission was recently dropped.
In a statement, the AWU criticised the ROC as a Liberal Party attack dog but said it would engage in the legal process "in good faith".