The Liberal Democrats could be forced to hand back a controversial £2.4 million political donation received from a convicted conman after a secret new investigation into the case by the Parliamentary Ombudsman.
Michael Brown who was a donor to the Liberal Democrat Party and who was later imprisoned. Photo: Paul Grover
The powerful watchdog is carrying out a behind closed doors inquiry into the circumstances surrounding the cash payments to the party.
Later this month the Ombudsman - which has far reaching powers to investigate public bodies - is due to decide whether to force the Electoral Commission, which oversees donations to political parties, to re-examine the legality of the massive gifts from a firm run by the fraudster.
The move would be a major blow for the cash-strapped Lib Dems who would then face the prospect of surrendering the money to the Treasury - leaving a huge hole in the Party's already precarious finances.
The Ombudsman has been re-examining the case involving 5th Avenue Partners Ltd whose founder, the flamboyant conman Michael Brown, was convicted of stealing millions of pounds.
Brown, whose £2.6 million private jet flew the then-Liberal Democrat leader Charles Kennedy around Britain during the 2005 general election, remains on the run after jumping bail.unless the companies are actually "carrying on business".
Following his conviction in 2008, detectives said Brown's 5th Avenue Partners was "just a sham...(which) didn't trade in anything".
But the Electoral Commission previously ruled that the Lib Dems had done nothing wrong as they had accepted the cash "in good faith" and it was a legitimate donation because the British-registered firm had substantial bank balances.
Despite Mr Brown owning and running the firm, the Commission said: “There is no credible evidence that any of the donations came from Michael Brown’s own money rather than one of the companies."
However, The Sunday Telegraph has learned, that following a complaint from an anonymouse member of the public the Parliamentary Ombudsman Ann Abraham has been examining whether the Commission's decision was wrong.
Officials from the Ombudsman's office have been considering a complaint of "maladministration against the Electoral Commission in relation to the way it investigated the case".
The officials are understood to have concluded that the Electoral Commission should be forced to re-opening the inquiry but the final decision rests with the Ombudsman herself.
She must weight up the serious nature of the case, the strength of the evidence and, crucially, whether it is in the public interest to force the Electoral Commission to act against the Lib Dems given, that if it were to order the Party to refund the cash, it might have far reaching financial implications which would threaten its stability and its position in the Coalition Government.
She is due to decide on the case by the end of the month.
Last night a spokeswoman for the Parliamentary Ombudsman's office said it did not comment on its investigations.
The political donations from 5th Avenue Partners Ltd formed part of a lavish facade erected by the Glasgow-born fraudster Brown who fooled rich investors into trusting him and parting with their cash.
After his conviction Sergeant Nigel Howard, of City of London Police’s Economic Crime Department, said the donation was “part and parcel of the offence.”
Brown was found guilty in his absence of theft, furnishing false information and perverting justice. He is still on the run.
Brown had a £2.6 million private jet, a £49,000-a-year flat in a prestigious part of London, a Range Rover with personalised number plates and a yacht.
He spent £7,000 on fine stationery from Smythson of Bond Street and £327,000 on an entertainment system for his villa on Majorca. He donated £100,000 to upgrade the library at his gentlemen’s club in Belgravia.
The political donation was another status symbol, according to prosecutors, because it made him seem important and well connected.
By the 2005 general election, the Lib Dems found themselves reliant on a benefactor whose head company was in Zug, in Switzerland.
The Lib Dem hierarchy persisted in defending Brown even after it was disclosed that he had a police record in America, where he was wanted for jumping probation.
Following the 2008 case, Nick Clegg, the Lib Dem leader and now Deputy Prime Minister, said: “We took that money in good faith, everyone recognises.
“It has been recognised that we did all the due diligence checks we could have done, totally unaware of the crimes of which Michael Brown has now been indicted. Beyond that, I can’t comment.”
Although Brown claimed to have gone to Gordonstoun and St Andrews, he went to a local school and did a City and Guilds in catering at Glasgow College of Food Technology.
He boasted that he was the son of a lord, that he made regular visits to Buckingham Palace to see the Duke of York and was an experienced bond dealer. In fact, he failed his maths O level and was not good at paperwork, the trial heard.
Brown was accused of conning Martin Edwards, the former Manchester United chairman, out of £8 million by posing as an experienced international bond trader.
As his lies unravelled, Brown sent e-mails claiming that he was dying of cancer. In reality, he was preparing to flee. He took the surname Campbell-Brown and stopped shaving before he disappeared in June 2008.
But the Electoral Commission previously ruled that the Lib Dems had done nothing wrong as they had accepted the cash "in good faith" and it was a legitimate donation because the British-registered firm had substantial bank balances.
Despite Mr Brown owning and running the firm, the Commission said: “There is no credible evidence that any of the donations came from Michael Brown’s own money rather than one of the companies."
However, The Sunday Telegraph has learned, that following a complaint from an anonymouse member of the public the Parliamentary Ombudsman Ann Abraham has been examining whether the Commission's decision was wrong.
Officials from the Ombudsman's office have been considering a complaint of "maladministration against the Electoral Commission in relation to the way it investigated the case".
The officials are understood to have concluded that the Electoral Commission should be forced to re-opening the inquiry but the final decision rests with the Ombudsman herself.
She must weight up the serious nature of the case, the strength of the evidence and, crucially, whether it is in the public interest to force the Electoral Commission to act against the Lib Dems given, that if it were to order the Party to refund the cash, it might have far reaching financial implications which would threaten its stability and its position in the Coalition Government.
She is due to decide on the case by the end of the month.
Last night a spokeswoman for the Parliamentary Ombudsman's office said it did not comment on its investigations.
The political donations from 5th Avenue Partners Ltd formed part of a lavish facade erected by the Glasgow-born fraudster Brown who fooled rich investors into trusting him and parting with their cash.
After his conviction Sergeant Nigel Howard, of City of London Police’s Economic Crime Department, said the donation was “part and parcel of the offence.”
Brown was found guilty in his absence of theft, furnishing false information and perverting justice. He is still on the run.
Brown had a £2.6 million private jet, a £49,000-a-year flat in a prestigious part of London, a Range Rover with personalised number plates and a yacht.
He spent £7,000 on fine stationery from Smythson of Bond Street and £327,000 on an entertainment system for his villa on Majorca. He donated £100,000 to upgrade the library at his gentlemen’s club in Belgravia.
The political donation was another status symbol, according to prosecutors, because it made him seem important and well connected.
By the 2005 general election, the Lib Dems found themselves reliant on a benefactor whose head company was in Zug, in Switzerland.
The Lib Dem hierarchy persisted in defending Brown even after it was disclosed that he had a police record in America, where he was wanted for jumping probation.
Following the 2008 case, Nick Clegg, the Lib Dem leader and now Deputy Prime Minister, said: “We took that money in good faith, everyone recognises.
“It has been recognised that we did all the due diligence checks we could have done, totally unaware of the crimes of which Michael Brown has now been indicted. Beyond that, I can’t comment.”
Although Brown claimed to have gone to Gordonstoun and St Andrews, he went to a local school and did a City and Guilds in catering at Glasgow College of Food Technology.
He boasted that he was the son of a lord, that he made regular visits to Buckingham Palace to see the Duke of York and was an experienced bond dealer. In fact, he failed his maths O level and was not good at paperwork, the trial heard.
Brown was accused of conning Martin Edwards, the former Manchester United chairman, out of £8 million by posing as an experienced international bond trader.
As his lies unravelled, Brown sent e-mails claiming that he was dying of cancer. In reality, he was preparing to flee. He took the surname Campbell-Brown and stopped shaving before he disappeared in June 2008.
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