Hugo Charlton was suspended as leader and chairman of its executive committee after it was disclosed that he had proposed himself for a peerage.
The party also withdrew his nomination for a place in the House of Lords as a Green Party peer after it was taken by surprise over his nomination.
The scrutiny committee on peerages is looking again at a number of nominations on the forthcoming peerage list which includes donors to the Labour Party proposed by Tony Blair. A spokeswoman for the House of Lords Appointments Commission, which vets nominations to the Lords, said: "We are taking a closer look at some nominations."
The investigation comes after Mr Blair proposed a clutch of millionaire Labour Party donors for peerages. Between them, they donated almost £500,000 to the party.
Among them was Barry Townsley, a millionaire stockbroker, who supported one of the Prime Minister's flagship city academies.
Mr Townsley was involved in a City scandal in the 1980s and was censured by the stock exchange.
After an investigation into his firm, Jacobson Townsley, the disciplinary committee of the stock exchange found "the conduct of Mr Jacobson and Mr Townsley to be disgraceful". It concluded both men were guilty of "gross misconduct". They were barred from the floor of the exchange - where brokers do business - for six months.
The House of Lords Appointments Commission, an independent committee made up of senior politicians from all parties, is in charge of vetting nominations "to ensure the highest standards of propriety". It also vets "individuals added to honours lists by the Prime Minister for propriety". It makes recommendations to Tony Blair about nominees, but has no statutory power.
Lord Oakeshott of Seagrove Bay, a senior Liberal Democrat peer and a former member of the Parliamentary Joint Committee on Lords Reform, said last night that the watchdog should be given the power to reject nominees it believes are inappropriate.
"The appointments commission should get statutory backing. The commission's decision should be final on vetting party leaders' nomina- tions for peerages," he said. "Mr Blair's present power to overrule the commission's objections to his own nominees is Kafkaesque."
The Green Party is now likely to decline an extra place this year on the red benches and has introduced a democratic selection process.
It convened an urgent meeting of its executive committee last Monday to discuss the nomination of Mr Charlton, after it was taken by surprise by the report that he had proposed himself for a place in the House of Lords. Senior sources at the party said the Greens had been unaware that Mr Charlton, who was registered as the leader of the party in order to comply with electoral law, had nominated himself.
"In the light of last week's report in respect of Hugo Charlton's nomination for a life peerage, a full meeting of the Green Party executive took place earlier this week. The Green Party prides itself on having a robust and open structure. Regrettably, Hugo Charlton's nomination did not conform to the procedures mandated by the party at its March 2005 conference," it said in a statement.
"Accordingly, Mr Charlton's application for a life peerage has been withdrawn and he is no longer chair of the party."
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