MoD hunts for reports submitted by Adam Werritty

If records show friend was paid adviser, Fox would be in breach of ministerial rules

The Ministry of Defence has been asked by the Cabinet Office to trawl their records for any reports on defence or foreign policy issues submitted to the department by Liam Fox's unofficial aide Adam Werritty, The Independent understands.

If such documents exist, it may leave Mr Fox open to charges that he was using Mr Werritty, whose income supposedly came from a number of wealthy right-wing benefactors, as an adviser and put the Defence Secretary in breach of ministerial rules.

His aides were forced to mollify Mr Werritty yesterday after he was traduced in private briefings to journalists as a "Walter Mitty figure" who was "masquerading" as someone much more influential than he was.

He had already agreed to go co-operate in the questioning and had become distressed by the attacks behind his back. A senior Tory source said: "It was a strange strategy to take and it has now been discontinued. We are not sure what was supposed to be gained by upsetting Adam Werritty, who says he can show he did not make money out of his contacts with Liam Fox."

Labour last night called on the Government to publish the terms of reference of Gus O'Donnell's inquiry amid fears that it would not address all the issues about Mr Fox's relationship with Mr Werritty. A source close to the inquiry suggested the investigation was focusing on the question of whether Mr Werritty had received specific payments directly linked to the setting up of meetings with Mr Fox.

Mr Werritty is thought to have denied receiving money for setting up meetings with Mr Fox, but admitted receiving income from wealthy individuals, which allowed him to travel extensively with the Defence Secretary.

Craig Murray, a former British ambassador, said he had spoken to someone with access to the Cabinet Office investigation into Fox's relationship with Mr Werritty who told him it was looking only at the question of facilitating meetings.

"The investigation into Werritty's finances will look only at the question of whether he received specific payments that can be linked directly to the setting up of specific meetings with Fox," he said. "The answer is thought to be no; that is what Fox was indicating by his formulation to the House of Commons that Werritty was 'not dependent on any transactional behaviour to maintain his income'."

Jim Murphy MP, Labour's shadow defence secretary, said it was "barely believable" the Government had refused to publish the terms of reference of the inquiry. "It is troubling that we have not had any formal indication of the issues that will be covered or, crucially, the standards by which the Defence Secretary's conduct will be judged," he said.

The Labour MP Anas Sarwar called on the Electoral Commission to investigate the suggestion that Mr Werritty had been supported by "a number of wealthy private clients" who shared his and Mr Fox's strong Atlanticist views.

In a letter to the watchdog, Mr Sarwar said there had been "potential breaches of the Political Parties, Elections and Referendums Act 2000" as anonymous donations were illegal.

Referring to reports that Mr Werritty was effectively a privately-funded adviser to the Defence Secretary, he wrote: "If true, this would be a donation to Liam Fox, which would legally have to be declared."

David Cameron dismissed suggestions that he would be "a weak leader" if he allowed Mr Fox to be hounded out of office by a media campaign.

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