Liberal Leader Arthur Mitchell and MLA Don Inverarity have resigned from the legislature's public accounts committee, alleging a Yukon government "cover-up".

Mitchell and Inverarity announced their resignation at a press conference Thursday afternoon, following a Wednesday meeting of the Standing Committee on Public Accounts.

The committee's seven members debated a motion to hold a public inquiry into the government's 2007 investment of $36.5 million in asset-backed commercial paper trusts, following the federal Auditor General's ruling that the investment did not follow financial policy and was thus illegal.

The territory stands to lose some, if not all, of the $36.5 million invested.

Mitchell said the motion for the public inquiry was defeated four to two. The four members who voted against the public inquiry are the four Yukon Party members: ministers Patrick Rouble, Marian Horne and Glenn Hart, and backbencher Steve Nordick.

Inverarity and NDP MLA John Edzerza voted for the inquiry. As chair of the committee, Mitchell only votes to break a tie.

"There are many unanswered questions that the public is demanding answers to and we may now never get those answers," said Mitchell, reading from a prepared statement.

"This has now become a cover-up."

The committee, which Mitchell emphasized is supposed to be non-partisan, is "responsible for reviewing the Public Accounts and all reports of the Auditor General," as reads its mandate on the legislature web site.

"If that mandate is restricted, as it has been in this case, by the government's unwillingness to allow full public debate, then the committee becomes a paper tiger.

"I have no intention of remaining part of a committee that has been limited to discussing only the reports the government wants to look at."

Mitchell said a public inquiry would see Department of Finance officials appear before the committee to explain how the investment came to be made, with the goal of finding out who made the fateful decision.

The frozen funds are tied to a crash in the asset-back commercial paper market, which is still plaguing Canadian investors to the tune of $33 billion.

Premier and Finance Minister Dennis Fentie and his cabinet colleagues have defended the investments as routine, everyday business with their belief the investments were guaranteed, while Auditor General Sheila Fraser found no evidence of any guarantee.

In responding to Fraser's findings earlier this year, Fentie said the investment was made by finance department staff.

"We're only going to get straight answers from the officials, we're not going to get them from the politicians," Mitchell said. "We don't know whether the officials are scapegoats or the officials are to blame, and now we don't get the chance to find out."

In a letter submitted to Ted Staffen, the Speaker of the Legislative Assembly, Inverarity said his resignation, like Mitchell's, is effective immediately.

"The committee cannot function in the best interest of Yukon taxpayers while the current government is using its majority membership to censor important financial matters from public scrutiny," he wrote.

"For the sake of public disclosure and government accountability, the investments into Asset-Backed Commercial Papers need to be examined."

When asked whether he thought Fentie directed the MLAs to block the public inquiry, Mitchell said he would not speculate.

The discussions held in closed-door committee meetings will remain private, at least by Mitchell.

All he would say was that the MLAs' reasons for blocking the public inquiry were "not sufficient."

He said he will continue to pursue the matter when the House resumes sitting March 20, and that he and all Liberal MLAs will be calling on Fentie to resign.

"Things took a very bad turn under his watch."

As leader of the official Opposition, Mitchell said, he is "elected on behalf of all Yukoners to hold the government accountable."

"I am not going to be used as part of a sham, or a coverup."

As for the now vacant seats on the committee, Mitchell said he is not asking anybody to sit on a board overrun by Yukon Party MLAs.

Further to concerns over the $36.5 million, Mitchell said $15 million of taxpayers' money may also be tied up in another trust that is now frozen.

Through an access to information request, Mitchell said he learned the government invested the money in the Bank of Montreal's Apex

Trust, which is due to mature Sept. 7.

"I'm assuming we got our money out, however, it begs the question why the government was gambling in yet another risky investment."

Inverarity limited his comments because of painful root canal work performed recently in his mouth.

He said he was disappointed in the public accounts committee and that he too could not continue serving on it in good conscience.