The Georgian terraces are at 13 and 14 Lord North Street, in one of the most expensive parts of Westminster near the Houses of Parliament.
Mrs Gorman said that last year she sold one of the properties for pounds 445,000. The remaining house, where she lives, is valued at pounds 500,000.
The Daily Mirror claimed yesterday that the leasehold of of the houses had cost Mrs Gorman pounds 30,000 and that she had bought the freehold of both from Westminster council in 1982 for pounds 25,000.
Mrs Gorman was a Conservative member of Westminster council in 1982, when the freeholds were bought. She went on to become a member of the housing committee after becoming the freeholder.
The ruling Conservative group is already suffering a political battering over the condemnation it received in the District Auditor's report on the council's policy of sending the homeless out of the borough while selling empty council property to potential Conservative voters.
The auditor said the policy was 'disgraceful' and described it as gerrymandering.
Yesterday, Labour councillors in Westminster said that they would ask tomorrow whether the normal procedure of considering bids from other potential buyers for the freeholds of both properties were considered by the council's finance management committee when the sale was made to Mrs Gorman.
'I will be in the housing department first thing on Monday morning to see the file relating to these sales to Mrs Gorman,' said Gavin Millar, Labour's housing spokesman.
Mrs Gorman became one of the leading irritants to John Major during the Conservative crisis over the Maastricht Treaty. She prides herself on being one of the 'bastards' Mr Major denounced last year.
Yesterday she accepted some of the details of the press reports, but angrily denounced their implications. 'Last year we sold number 13 for pounds 445,000 and I suppose the one we have lived in for 20 years and still live in is worth about the same.'
She said she and her husband had bought the 14-year lease for the two houses which had been knocked together into one property from the theatrical impresario 'Binkie' Beaumont 20 years ago. Mr Beaumont had lived there for 40 years. Later they converted the property back into two houses and sold number 13 Lord North Street to a businessman.
'When we bought the freehold from Westminster Council we paid considerably more than pounds 25,000 for it,' she said. 'They were asking for six-figure numbers.'
The Daily Mirror 'will have to pay the price for telling lies', she said. 'For the Mirror to say we made pounds 1m out of it is just lies.'
The row blew up only a week after the disclosure of a controversial Westminster council-house deal in nearby Gayfere Street involving Tory MP Alan Duncan. He also bought the freehold of two former Westminster-owned houses. He insisted there was nothing illegal in the transaction, but immediately resigned from his post as Parliamentary Private Secretary to the Health minister Brian Mawhinney amid furious press comment about one of the richest men in the Commons buying up council property.
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