(Recasts, adds comments from Potash Corp, updates shares)
By Rosalba O'Brien and Rod Nickel
SANTIAGO/WINNIPEG, March 18 (Reuters) - Shares in Chilean fertilizer group SQM plunged on Wednesday after three board representatives from Canada's Potash Corp resigned in protest at its handling of an illicit payments scandal that has shaken the Chilean establishment.
SQM Vice Chairman Wayne Brownlee, who is also chief financial officer of Potash Corp, and two directors stepped down late on Tuesday after clashing with the rest of the board over whether and how far it should collaborate with a probe by Chilean authorities.
A quarter of the value of the $6 billion company was wiped out as investors feared what would come next for SQM, which has rights to huge nitrate and lithium reserves in Chile.
The development is the latest twist in a campaign financing saga that has dominated headlines in recent weeks in Chile, traditionally seen as having less corruption than other Latin American countries.
Authorities are investigating whether money from SQM and other companies was siphoned to fund electoral campaigns, principally for the right-wing UDI, a party with links to the 1973-1990 Augusto Pinochet dictatorship.
SQM's chairman and controller is Julio Ponce, Pinochet's former son in law, who built his stake after the dictator began selling assets in the 1980s.
Potash Corp , the world's largest fertilizer company by market value, owns an approximate 32 percent stake in the dual share structure of SQM , although it has flagged that it may not keep that indefinitely.
"Potash Corp and its SQM board representatives have demanded an exhaustive, transparent and independent investigation," the Canadian company said in a statement.
"SQM's board has not authorized a review which meets the standards we expect."
Earlier this week SQM fired its chief executive officer and said it would comply with demands from the government's internal revenue service to hand over tax information.
But Potash Corp said requests from its representatives that SQM fully co-operate were rejected.
"There's a debate on the board and with management on what (information) and how much and when they should reveal," said Potash Corp spokesman Randy Burton.
Potash Corp, which heard about the allegations in early January, wanted an independent committee to have free rein to look into them, Burton said.
He said it was too soon to know if Potash Corp would rejoin SQM's board under certain conditions but said those seats remain available to Potash. Its stake entitles it to three of the eight voting seats.
Editing by Jeffrey Benkoe and Cynthia Osterman