As revealed in yesterday's Independent, the parliamentary watchdog ruled that Bowen Wells should have mentioned in committee discussions that he was a director of Mr Ashcroft's BHI Corporation.
Mr Wells, chairman of the International Development Select Committee, was paid pounds 20,000 per year plus expenses for his non-executive directorship of BHI, the holding company for Mr Ashcroft's Belize Bank.
The Parliamentary Commissioner for Standards, Elizabeth Filkin, found the MP "would have been wise" to declare his connection but said he had not breached the stricter rule against paid advocacy.
While Mr Wells held the directorship, between 1997 and 1998, his committee investigated the Lome Convention, whose trade rules on bananas affect growers in Belize. Two per cent of the Belize Bank's loan portfolio was in loans to those farmers, Ms Filkin was told.
The ruling followed complaints by two Labour MPs, Denis MacShane and Alan Whitehead, who argued there was a conflict of interest between the directorship and Mr Wells' committee duties.
However, Ms Filkin rejected a claim that Mr Wells should have stood aside from committee proceedings. She said he had properly declared his BHI directorship in the Register of Members' Interests as well as to the International Development committee when he was elected chairman.
"Mr Wells would, however, have been wise, both in private session when the committee decided to consider the Lome Convention and publicly when the committee took evidence from the banana producers, to declare the possible connection of BHI, through its principal subsidiary the Belize Bank, with the banana industry," Ms Filkin concluded.
In a letter to Ms Filkin, Mr Wells said he had consistently advised Mr Ashcroft not to invest in the banana industry. He said he did not believe he had broken any rules.
"When, on a separate occasion, I perceived that such a conflict might possibly arise - when the committee decided to report on the proposed public/ private partnership of the Commonwealth Development Corporation - I immediately resigned from the BHI board," he wrote.
The Commonwealth Development Corporation announced in July that it was buying a citrus processing plant in Belize from Mr Ashcroft's company, which was disposing of "non-core investments."
Mr MacShane said the Tories were "were like rabbits caught in Ashcroft's headlights" and had lost all sense of political judgement.
"If Michael Ashcroft has either the interests of his party at heart or has concern for the good name of parliamentary politics he should resign as Tory party treasurer and go home to Belize for good," he said.
Mr Whitehead said: "Here is a senior member of the Conservative Party who is sucked into a directorship of an overseas company run by Mr Ashcroft and who then effectively represents that company's interests whilst chairing a select committee. I really think that is very poor judgement."Reuse content