Convicted Lib Dem fraudster is arrested in Dominican Republic

The convicted fraudster who gave the Liberal Democrats their biggest ever donation has been arrested in the Caribbean after more than three years on the run.

Michael Brown was detained in the Dominican Republic earlier this week and his arrest, and possible extradition back to the UK, will reopen the controversy over the Liberal Democrats' refusal to hand back the £2.4m donation.

He skipped bail in August 2008 before he could be tried for a £40m fraud, and became one of the country's most wanted crooks and the target of an international manhunt.

He was tried in his absence and sentenced to seven years, but before his arrest he had been wooed by the Liberal Democrats and flew Charles Kennedy, then the party leader, around the country in a £2.6m private jet. He gave the party a £2.4m donation through a company. His spending also included a £327,000 entertainment system at his villa in Majorca, £7,000 on exclusive stationery, £100,000 on upgrading the library at a Belgravia gentlemen's club, a £400,000 yacht and cars including a Range Rover, a Bentley, and a Porsche.

Brown, who named his dog "Charles" after Mr Kennedy, had posed as an international bond dealer and promised investors returns of up to 50 per cent as reward for their faith in him. Among his victims was Martin Edwards, the former Manchester United chairman, who invested £8m with Brown's company, 5th Avenue Partners.

His arrest by police in the Dominican Republic was in the coastal resort of Punta Cana where he had rented several properties, including a luxury home in a complex guarded by private security, close to a golf course that was said to be among his favourite haunts.

While living in Punta Cana under the name Darren Patrick Nally he was sentenced to three months by a court for failing to make payments as part of an an oil deal. He was released when he promised to pay $318,000 (£205,000) to the company involved but more recently was said to be late in keeping up with instalments. Despite his arrest it remains unclear if the authorities will send him back to the UK.

The UK authorities, especially the City of London Police, will want to bring him back to serve his jail term but there is no extradition treaty with the Dominican Republic.

There were suggestion last night, however, that the Dominican Republic authorities may want to get him off their hands and that they could deport him on the grounds he had entered the country on false papers.

A spokesman for the City of London Police said: "We are pleased to hear that Michael Brown has been detained by authorities in the Dominican Republic."