Tessa Jowell, the Culture Secretary, has been dragged into a scandal surrounding her husband and the Italian Prime Minister, Silvio Berlusconi, after it was alleged she allowed a mortgage on their house to be used in a financial deal.
According to The Sunday Times, the Cabinet minister signed a mortgage document that allowed her husband, David Mills, a corporate lawyer, to bring £350,000 into Britain from an offshore account.
Italian prosecutors, who hope to bring Mr Mills to court within 10 days, claim a similar sum of cash was paid to Mr Mills by Mr Berlusconi - an allegation that Mr Mills vehemently denies. He says he had provided Italian prosecutors with an irrefutable paper trail showing money had not come from Mr Berlusconi.
His wife, Ms Jowell, has not been linked to the Italian scandal involving her husband until now. But an investigation shows that her signature on a mortgage document enabled Mr Mills to undertake a complicated financial transaction to bring cash onshore. Some £350,000 was paid by an Italian into a specialist offshore investment vehicle after being transferred through at least seven accounts worldwide.
Mr Mills, after gaining the signature of his wife, then raised a loan on their Kentish Town house in north London for a similar amount, according to The Sunday Times. This money was put in a second hedge fund and the mortgage on the house was paid off within a month, using the cash from the first hedge fund, which prosecutors claim may be linked to Mr Berlusconi.
In a leaked letter sent by Mr Mills to his accountants, Mr Mills revealed that the cash should be handed over "discreetly". "At the end of 2000 I wanted to invest in another fund, and my bank made a loan of the amount, secured on my house etc of about €650,000. I paid it off by liquidating the $600,000."
Mr Mills said he used the money to repay the mortgage as a "normal domestic transaction". He said Tessa Jowell had not been financially involved.
"If I say to her that I am borrowing money for the short term, which it was, she trusts me enough to know I am doing what I say I am doing," he said.
MPs are expected this week to ask whether Ms Jowell made disclosures to her Permanent Secretary about the mortgage deal and her husband's involvement. Yesterday Ms Jowell issued a statement saying she was satisfied there was no conflict of interest: "I signed a charge over our jointly owned home to support a loan made to my husband alone by his bank.
"I am satisfied that no conflict of interest arose out of this transaction in relation to my ministerial duties. As is standard practice in relation to legal proceedings it would be inappropriate for me to comment further."