Ma Sik-chun, 59, channelled the money to the party in June 1994, according to a series of front-page articles yesterday in the Hong Kong-based Oriental Daily News, which the Ma family owns.
According to the reports, which were accompanied by a picture of Mr Ma's son with John Major, the payment was made in an effort to smooth Ma senior's return to Hong Kong from Taiwan, where he has lived as a fugitive since 1978.
Three months after the donation was made, Ma Ching-kwan, Mr Ma's son, was invited to dine with Mr Major at Downing Street. The Oriental Daily News published a copy of the invitation and the menu - cucumber and tarragon soup, roast lamb with rosemary and orange and caramelised lemon tart.
Conservative Central Office last night strongly denied that the party would accept donations with any strings attached.
Ma senior fled to Taiwan after being charged in connection with one of Asia's largest drug-trafficking operations. A year earlier, in 1977, his brother, Ma Sik-yu, known in Hong Kong as "White Powder Ma", had taken the same route after being tipped off that the police were about to arrest him on similar charges.
In yesterday's Oriental Daily News, the family said they had asked for the return of the pounds 1m donation last April and they reproduced a receipt, numbered A10885, from Tory headquarters in Smith Square, Westminster, acknowledging the pounds 1m gift.
According to the newspaper, the Conservatives were fully aware of the source of the funds and originally made out the receipt to an "anonymous donor". It is understood the family hoped it would smooth the return of Ma senior to Hong Kong.
However, the reports say, the Conservatives decided that pounds 1m was too large an amount to be credited to an anonymous benefactor so "they realised they needed a real name but ... that it was not convenient to put Ma Sik- chun". The newspaper claimed that the receipt was subsequently altered and made out to his son "CK Ma", Ma Ching-kwan, who was then the chairman of the Oriental Press Group, which publishes the newspaper.
The paper said the true source of the donation was the fugitive Ma, although a separate donation of pounds 548,000, was donated by the "Ma family" in 1994. It is understood the bulk of this money was given to the Tories to fund a party printing press in Reading.
Last night the Conservative Party refused to discuss individual donors but a spokesman said donations were never accepted with conditions attached. "We will categorically say that the Conservative Party did not or would not accept donations conditional on favours," the spokesman said.
Asked by The Independent whether the numbered receipt as amended was authentic, the party refused to comment. It also failed to confirm or deny it had received a request for the return of the pounds 1m donation. However, the spokesman said the party would return any money if it was proven to come from illegal sources.
Mr Major's office said he was in the United States yesterday and, therefore, not available to explain why CK Ma's presence at Downing Street on 27 September 1994 was not listed at the time as one of the former Prime Minister's official engagements.
According to the Oriental Daily News, Chris Patten, the former Governor of Hong Kong and former Conservative Party chairman, acted as a "go between" for the donation from Ma Sik-chun.
Mr Patten firmly denied the allegation yesterday, describing it as a "complete and utter fabrication".
"I know nothing about any donations Mr Ma may have made to Central Office," he said. "It would have been wholly improper for me to be involved [in fund-raising] once I left the chairmanship of the party.
"Mr Ma's [junior's] father was treated in accordance with all the usual rule of law considerations. The truth of that is what has happened. Where is he now?"
In the year the donation was made, former Cabinet minister David Mellor was hired as a consultant by the Oriental Press Group in his capacity as a lawyer. It is understood that part of his role was to advise the family on whether Mr Ma senior could return to Hong Kong. Mr Mellor listed the consultancy in the Members' Register of Interests. He declined to comment yesterday.
Commenting on the donation a Labour Party spokesman said last night: "If this is true, then it is both a disgrace and a disaster for the Tory party.
"We have always said that once the source of their foreign funding became known, it would be an enormous embarrassment from which it would be difficult for them to recover. William Hague and his predecessors have got some very serious questions to answer and we will keep pressing them very persistently."
With Lord Neill's official inquiry into party funding already taking written evidence, the bombshell charge could not have dropped at a worse moment for Mr Hague.
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