The money was taken over three decades from one of his clients, Viscount Portman, head of the 78th wealthiest family in Britain. The amount would be worth about pounds 10m at today's values.
Lord Goodman was one of the former prime minister Harold Wilson's closest advisers. According to Portman family sources, Lord Wilson unwittingly received some of the money for his favourite charities. Several ministers in the Wilson government are also said to have received money from Lord Goodman, although they were not aware it had been stolen.
News of the thefts will shock the political and legal establishments. Lord Goodman was regarded as a formidable political fixer - the Peter Mandelson of the 1960s and 1970s.
He was known as the greatest negotiator of his age and worked for a host of Labour ministers, as well as Edward Heath, the former Tory prime minister, and Jeremy Thorpe, the Liberal Party leader. He was also a leading light in the Arts Council, the British Council, the Housing Corporation and the English National Opera. He died in 1995 aged 82.
Lord Portman, 64, the man from whom the money was stolen, has held the Tory whip in the Lords for more than 30 years. He knows who received the money, but said last night that he was prevented, legally, from discussing the matter..
His affairs were put in the hands of Lord Goodman when he was in his early twenties and heir to the Portman family fortune - estimated at pounds 275m.
"Everyone thought he was so kind, but underneath it all he was a conniving old crook," said a Portman family member, who does not wish to be named.
Not-so-Goodman, page 4