The Scottish Labour leader Wendy Alexander was under mounting pressure last night as she faced the prospect of a police inquiry into a donation to her leadership campaign.
She insisted she did nothing "intentionally wrong" after a Scottish National Party worker lodged a formal complaint to police over a 950 donation from a Jersey-based businessman.
The Electoral Commission is also investigating the donation by Paul Green who is not registered as a voter in the UK.
Yesterday, Ms Alexander, the sister of Douglas Alexander, the International Development Secretary and a close ally of the Prime Minister, attempted to shore up her position with a statement insisting that she had not intentionally broken the rules.
She said: "I deeply regret the damage which recent publicity has brought to the Labour Party. However, I reject any suggestion of intentional wrongdoing on my part. I intend to address these matters with the Electoral Commission with whom I am co-operating fully."
Ms Alexander, who became leader of the Scottish party in September, added: "I am confident when all the facts are known I will be exonerated of any intentional wrongdoing."
It was claimed yesterday that Gordon Brown had urged Ms Alexander not to quit as the funding row in Scotland added to Labour's woes.
Labour's Chief Whip Geoff Hoon said: "I don't believe it puts her in an impossible position, but clearly she has to explain how this came about and what she knew at the time."
But Nicola Sturgeon, the SNP Deputy First Minister said Ms Alexander's position looked untenable. "The only reason Ms Alexander is staying in post is to act as a human shield for Gordon Brown whose sole priority is not her interests or Scottish Labour; it's to prevent the house of cards collapsing down south.
"The Scottish Labour leader has been presented with incontrovertible evidence yet has resorted to a vow of silence."
Alistair Carmichael, the Liberal Democrat spokesman on Scotland, said: "This is a very big mess for Labour. Labour wrote the rules on party donations themselves yet seem unable to stick to them."Reuse content