April 14, 2008 12:00 PM

Hours after Heath Ledger‘s body was discovered in a New York City loft on Jan. 22, stricken loved ones gathered in his hometown of Perth, Australia, to address the media. Acting as spokesman, Heath’s father, Kim Ledger, wrapped a protective arm around his ex-wife, the actor’s mother, Sally Bell, and spoke to reporters on Bell’s front lawn, of their “generous, kindhearted, life-loving son,” who had died of an accidental overdose of prescription drugs at age 28. In the days that followed, the Ledger family—joined by Michelle Williams, 27, and his 2-year-old daughter Matilda Rose—remained united in grief. But in recent weeks, that image of a close-knit clan has begun to crack, exposing old grudges, bitter infighting over money and, most shocking of all, a report that Heath may have fathered a child at 17 with an older woman. The rumor, which made headlines across Australia on March 31, “could well be just talk, but a DNA test would certainly fix it,” says a Ledger cousin, Richard Syme, who along with several other family members is estranged from Kim. “That would be the best thing for everyone.”

Stories of a secret child—and possible heir alongside Matilda to the millions Ledger earned in his short career—have swirled around Perth for some time. “It’s been a very well-known rumor” for years, says the actor’s uncle Haydn, who with his sibling Mike fell out with their brother Kim over money more than a decade ago (see box). Heath’s parents and sisters have not commented, but the uncles and other relatives alienated from Kim say they believe the actor had an affair with a 25-year-old woman, who at the time was in a relationship with another man. After the fling ended, according to Sydney’s Daily Telegraph, she discovered she was pregnant and gave birth to a girl. In an interview with PEOPLE, the woman at the center of the controversy sought to defuse the speculation. “I’m not going to say anything. Sorry. I’ve got to get my head around this,” said the woman, who lives in Perth with her husband and children. “They don’t think of an 11-year-old girl’s interests here, do they?”

Could the story be true? It has been years since Heath’s uncles have had contact with Kim’s side of the family. What no one disputes is that Heath left his family in Perth around the time the woman became pregnant, traveling cross-country to Sydney to launch his career as an actor. “He wanted to find out a bit about himself,” says a close friend. By 1998 he had relocated to Hollywood—and only made brief visits home. A source close to Heath says the actor would never abandon a baby on the other side of the world. “That man wouldn’t have been capable of having a child whom he couldn’t love and cherish with every bone in his body,” says the source.

The controversy has arisen amid fierce fighting between Kim Ledger and his brothers, who say he squandered some of the family wealth and are concerned he will do the same to his son’s estate. (Drawn up before his relationship with Williams, Ledger’s will names his parents and three sisters as his beneficiaries; Kim maintains that Matilda and Michelle “will be taken care of.”) “He mismanaged an estate so much it plunged into enormous debt,” says Mike Ledger. “Our only vested interest is to assure that Matilda is well looked after.” Robert John Collins, the will’s Australian coexecutor, says the uncles’ claims that Matilda won’t be provided for are “rubbish.”

An automotive engineer and racecar driver, Kim, 57, whose marriage to Sally Bell ended in 1989, wasn’t always close to his son. “My dad loves being a father. He has to be a father, which I love and hate,” Heath told Vanity Fair in 2000. “Our relationship went from being in each other’s face to being best friends.” Last Christmas, Heath spent time with his parents in Perth, a holiday he cherished. “He and Kim were like brothers,” says a close friend.

A month before he died, Heath spent a pleasant dinner with his father and older sister Kate at an Indian restaurant in Fremantle, a port city near Perth. “He was joking around and having a good time,” recalls Gurps Bagga, owner of Maya restaurant. “He was enjoying his family’s company.”

Appearing unscathed by rumors of another sibling Down Under, Ledger’s daughter has been living with Williams at the home the couple once shared in New York City. “She’s a loving, strong mother,” says Michelle Vella, a designer who worked with Williams. “Her priority and her love is Matilda.” A close friend of Heath’s now hopes the rest of Ledger’s family can move forward as well. “One thing Heath wanted,” says a close friend, “was to keep things private.”

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