Mr Hamilton formerly held a consultancy contract with Mr Kennedy's company, Pinpoint.
The MP said last night that allegations linking his work for Mr Kennedy and the visa of the multi-millionaire Prince Idris were "highly defamatory and utterly without foundation".
Mr Hamilton said he had been introduced to Idris al-Senussi, whose father was deposed by Colonel Gadaffi in 1969, by Mr Kennedy, a Balkans expert and Tory candidate in Halesowne and Rowley Regis, who had met Idris in Montenegro in October 1989.
Mr Hamilton explained that as a Libyan national, Idris had no entry visa to Britain, even though he needed to visit London regularly for business, and had been forced to use Italian documents. "[Idris] was under threat of being assassinated by Gadaffi as an enemy of the regime," he said.
"I have no affection for the current dictatorial regime in Libya," he said. "However, I would have been pleased to write a letter in support of an application for a visa from a leading opponent of Gadaffi."
The visa was subsequently granted following an enquiry by the Home Office minister Peter Lloyd, said Mr Hamilton. Mr Lloyd had told him in a letter: "I appreciate Idris is no friend of the Gadaffi regime." Mr Hamilton said: "I was not paid to intervene on his behalf and the Home Office have confirmed that."
Last night further allegations about Mr Hamilton's taking of cash from Harrods boss Mohamed Al Fayed were made by a former personal assistant to the department store's owner. Alison Foster told the Mail on Sunday that she stuffed envelopes with thousands of pounds to be paid to the MP.
Ms Foster is quoted as saying that Mr Hamilton received envelopes containing pounds 6,000 or pounds 7,000 in total from her on two or three occasions. On one occasion, she alleged, Mr Al Fayed had told her: "He wants his money. Put pounds 2,000 in an envelope and leave it downstairs for him." Mr Hamilton described the stories as "lies".
The ex-minister was also highlighted in evidence given by Ian Greer - the lobbyist implicated in the cash-for-questions scandal - to Sir Gordon Downey, Parliamentary Commissioner for Standards.
Today's Observer reports that Mr Greer testified that Mr Hamilton asked to be paid by him in the form of pictures, furniture and air tickets to avoid tax liabilities. Mr Greer's evidence forced MPs involved in the case to confess, the paper says.
It quotes Mr Greer as having said: "He felt it would be advantageous. If that was the way he wanted his commission paid, I had no objection."Reuse content