English lawyer David Mills said he was "deeply ashamed" to have written a letter falsely claiming that Silvio Berlusconi had given him $600,000.
Mr Mills, who acted as Mr Berlusconi's tax lawyer, was giving evidence in relation to corruption charges being brought in Italy against the former Italian leader. Appearing by videolink from Westminster magistrates' court to the hearing in Milan, he described what he had written as "a scenario that I invented in order to be presented to the Inland Revenue". He added: "It's pure imagination. It's fiction." Mr Mills said that the money had actually come from his associate, Diego Attanasio.
Mr Mills, who is separated from his wife, the former Labour cabinet minister Tessa Jowell, was charged with corruption in Milan and convicted in his absence in February 2009. But he was cleared by the Italian Supreme Court a year later.
Mr Berlusconi is facing a trial on bribery allegations involving Mr Mills. He denies wrongdoing.