Tory embarrassment over funding deepens: Former Central Office treasurer admits error of judgement in taking money from Nadir as more links with ministers emerge (CORRECTED)

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THE TORY party's embarrassment over its funding arrangements increased last night with fresh revelations over ministers' links with Asil Nadir and an admission from the party's former treasurer that it should not have accepted donations from the fugitive tycoon.

The Independent has also discovered that the party, which has a pounds 19m overdraft, drew up a new scheme to allow companies to give financial assistance to the Tories without telling their shareholders.

According to a Conservative Central Office document, sympathetic companies were encouraged tolend money and allow the party to use the interest without having to declare the loan in company accounts. But last night the party said the memorandum had been withdrawn shortly after it was circulated in June last year and no company had followed its advice.

The Independent has learnt that two cabinet ministers have had close associations with the public relations consultant now being retained by Nadir. Richard Ryder, the Chief Whip, was listed as a political adviser to the consultant, Christopher Morgan, who also provided Michael Heseltine, the President of the Board of Trade, with unpaid assistance during the 1987 general election campaign.

Lord McAlpine, former treasurer at Central Office, speaking to ITN from Venice, where he now lives, said he had made an error in judgement in taking money from the Polly Peck tycoon, now a fugitive in Turkish northern Cyprus. 'I misjudged,' he said. 'I didn't make a judgement. It was all done at third hand.'

The party has admitted that Nadir's Polly Peck made secret donations of pounds 440,000, and Lord McAlpine said that if he was treasurer now he would 'instigate checks' to ensure companies were abiding by the law and declaring donations.

Officials dealing with Mr Nadir's bankruptcy last night confirmed that they had written to Central Office asking for details of the pounds 440,000 donations.

A spokeswoman for Neil Cooper, the trustee in bankruptcy, said the money must be returned if it should not have been paid. The trustee has powers to recover gifts made by a bankrupt person in the five years before the bankruptcy order.

Lord McAlpine fuelled unease about Tory reliance on secret foreign donations by confirming that the party used 'tons' of offshore bank accounts to receive cash from overseas donors.

Mr Ryder's office issued a statement yesterday in which it was confirmed that 'like other Members of Parliament, Mr Ryder knows Mr Morgan'. The statement continued: 'Mr Ryder's name appeared on a PR register without his authority or consent. When it was drawn to Mr Ryder's attention, he gave instructions for it to be removed immediately.'

The Chief Whip did not record any relationship with Mr Morgan in the Register of Members' Interests for the period that he was listed as a political adviser. Mr Ryder said last night that he had at no time been paid by Mr Morgan.

Earlier this month, he was asked to raise Nadir's case with the Attorney General by Mr Morgan, but declined to do so.

The Attorney General has disclosed that seven MPs contacted his office about the case, including Mr Heseltine, Michael Mates, the Northern Ireland minister, and Peter Brooke, Secretary of State for National Heritage. The identities of the other MPs have not been revealed. In a written answer to David Winnick, Labour MP for Walsall North, the Attorney General refused yesterday to disclose how many of the seven were ministers.

Mr Morgan has represented Nadir since 1991 and first met the Turkish Cypriot two years before that. He has remained his public affairs adviser since the Polly Peck founder jumped his pounds 3.5m bail last month and fled to northern Cyprus. He said yesterday that he was at present working for Nadir without payment.

Mr Morgan is closely associated with senior members of the Tory party. In 1986, Mr Ryder was identified as a 'political adviser' in the Public Relations Consultants Association Yearbook entry for Christopher Morgan Marketing & Public Relations. Mr Morgan declined yesterday to explain the nature of the relationship, except to agree with the statement issued by Mr Ryder's office.

During the 1987 election campaign, Mr Morgan gave unpaid assistance to Mr Heseltine, who toured the country supporting local Tory candidates.

'It was necessary for him to set up his own . . . support group to enable him to put together topical speeches,' said one of Mr Morgan's former business associates. 'We were involved in the role of information gathering.'

The memorandum obtained by the Independent and written by Randle Cooke, deputy director of the party treasurers' department, proposes a scheme which 'enables the lender to benefit the party free of any legal constraints, as with a donation, of declaring sums in excess of pounds 200 in the annual report and accounts'.

Central Office suggested that companies open a current account at a Royal Bank of Scotland branch at Charing Cross, central London, where it banks. Rather than pay interest on the deposit, the memorandum suggests, the bank would instead reduce overdraft charges to the party, which at interest rates of between 8 and 12 per cent would currently cost between pounds 120,000 and pounds 200,000 a month.

Under Schedule 7 of the 1985 Companies Act, companies must declare gifts to political parties in the annual report and accounts. Not so with loans, and the Central Office document adds that loans made and withdrawn within a single financial year need not be mentioned in the company accounts at all.

The chief executive of at least one public British company is believed to have been consulted on the scheme.

Robin Cook, Labour's trade and industry spokesman, said last night: 'Such an arrangement would be a transparent device to flout the law. The job of ministers is to ensure that the law is enforced, not to think up new ways of getting around it.'

Asil Nadir threatened the Government yesterday with revelations he said would be more damaging than the Watergate affair. He also alleged that he has tapes of ministers and officials proving the existence of a conspiracy to bring down his business empire.

Nadir, talking to British journalists at his home in northern Cyprus, said one minister was recorded saying: 'We know there is a conspiracy by the intelligence services but there is nothing we can do.'

Andrew Marr, page 23


In our edition dated 18 June we incorrectly stated that the Chief Whip, Richard Ryder MP, was a member of the Cabinet. Mr Ryder has also asked us to make clear that he did not fail to disclose a relationship which ought to have been recorded in the Register of Members' Interests. He had incorrectly and without his knowledge been listed in the Public Relations Consultants Association Yearbook in 1986 and no such interest existed.