Nadir 'gifts' to Tories traced

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Christopher Morris knew the sensitivity of the confidential report he was sending to the Conservative Party's head office in Smith Square.

As joint administrator of Polly Peck, Asil Nadir's crashed conglomerate, the senior partner with accountants Touche Ross had to recover funds defrauded from the company. His report details the route of stolen Polly Peck money to party coffers. Morris wanted it back.

"This report ... contains highly sensitive information," he wrote. "We should appreciate receiving prior notice if it is intended to take copies of any part of this report. In due course, when its purpose has been served, we would request that this report and any copies are returned to ourselves so that we can maintain total security over its contents."

The Conservatives were only too happy to agree. Paul Judge, then party director-general, replied to Morris: "I welcome your statement that you and your fellow administrators do not seek to foster publicity and I trust that this correspondence will remain entirely confidential between us. As requested, I return your report herewith."

The Independent on Sunday has obtained a copy of the report and correspondence between Morris and Judge. It shows the administrator's investigation had confirmed suspicions that the party had received stolen money.

Following questions from Touche Ross, Conservative Central Office in 1991 detailed nine Polly Peck payments totalling pounds 440,000 received between 1985 and 1990. Central Office later disposed of all the copies of receipts sent to Nadir and others who donated until 1990, as Judge confirmed.

Touche Ross did not contact Central Office again until July 1993. The previous month, Norman Fowler, then party chairman, told the Commons: "If we receive proof from Touche Ross or any other source that the money we received was stolen, we will return it."

Press speculation was not enough, he said. He needed to hear from Touche Ross. The following month, the Touche Ross report landed in Smith Square.

The report sets out how more than pounds 12m was defrauded from Polly Peck, how pounds 9.5m of it went to Nadir's mother Safiye and Nadir himself, while pounds 365,000 of it was diverted to the Conservative Party.

Six donations, totalling pounds 365,000, were paid out of funds defrauded from Polly Peck and routed though its subsidiary Unipac's NatWest Jersey account, which was "the conduit for the misappropriations by Asil Nadir."

The last donation, for example, was made just six months before Polly Peck's collapse. Headed "Donation of pounds 80,000 on 9 March 1990", the report says: "This amount was paid out of the Unipac NatWest Jersey account (67249566) by cheque number 1765. It was funded by a transfer of pounds 3,250,000 from PPI's account at NatWest Bishopsgate (00525502).

"This transfer also funded a portion of a transfer of pounds 3.5m to Impexbank [owned by Nadir] and subsequently transferred to a Swiss bank account in the name of Mr Nadir's mother."

Despite the contents of the report, Judge replied: "Although there may have been irregularities within the PPI Group's own systems, the Conservative Party could not be aware of this and the report does not, it seems, demonstrate that the donations were in any way from stolen money."

Ten months later, in July 1994, Christopher Morris wrote asking Judge for a meeting to press his claim. The meeting proved fruitless for Touche Ross.