The man behind Labour's troubles

But just who is David Abrahams? What does he want? What does he know? And who could he bring down?

So what did he want in return for £601,975? David Abrahams and his network of allies – now notorious as Labour's "Friends in the North" – systematically targeted Gordon Brown and some of his most senior cabinet ministers, offering huge donations by proxy to a cash-strapped party. Last night Labour Party MPs and officials were asking themselves with some trepidation: why?

Mr Abrahams used four people to make proxy donations to the Labour Party totalling £601,975: Janet Kidd, his secretary (£147,000); Ray Ruddick, a contractor from Durham (£172,850); Janet Dunn, wife of an employee of Mr Abraham (£25,000); and a solicitor, John McCarthy (£257,125).

One of them, Mrs Dunn, claimed she was not aware of the money being donated in her name. Confronted on her doorstep by the media, she said: "I knew nothing about it and we have always been Conservatives."

That led to Tory claims last night that Labour may have "cooked the books" to put Mrs Dunn's name down as one of the donors on behalf of Mr Abrahams. Another proxy, Mr Ruddick, also raised doubts about the donations.

He said: "I was surprised to find a lot more money has been handed over to the Labour Party than what should have been."

Mr Abrahams, a millionaire property developer who also operated under the name David Martin, used his secretary, Ms Kidd, to offer Mr Brown's leadership campaign team a donation, thought to be around £25,000, but his team turned it down because he did not know her personally.

Mr Brown admitted he had met Mr Abrahams, but added: "I have no recollection of any conversations about any of these issues."

Mr Abrahams said he had received a letter yesterday from Jon Mendelson, Mr Brown's fundraiser. Interrupting the BBC Newsnight programme, Mr Abrahams read out the letter. It said: "Dear David, thank you for the message which Oliver [an official of the Labour Party] passed on to me. The party is very appreciative of all the help and support you have given over many years. At some point I would like to have the opportunity to talk with you personally about what we are doing and our plans between now and the next general election..."

Mentioning the priority for resources for the next general election, Mr Mendelson added: "Any time that your diary allows when you are next in London I would very much like to meet to discuss this with you. Warmest regards, Jon. Director of General Election Resources."

Mr Abrahams said he could not recall whether he approached Harriet Harman or she approached him for money. He said he could not be sure how many people within the Labour Party knew he was making donations.

Mr Abrahams is seen as a "Walter Mitty" character by Labour MPs, but the embarrassment he can cause to senior figures in the party is real enough. He once tried to stand for Labour in Richmond, North Yorkshire, but was rejected when it emerged he had invented the existence of a wife and a son.

He has been a frequent visitor to Labour conferences, rubbing shoulders with a host of cabinet ministers including John Hutton, Hazel Blears and David Miliband, whose constituency is South Shields. He is little known by any of those he has met, but that will not lessen the fear in Westminster, where this latest donations scandal is rapidly taking on a toxic quality.

It appears Mr Abrahams and two of his proxies – Ms Kidd and Mr Ruddick – secured a lucrative building deal in Durham for a new business park that promises to make them a fortune. He has six companies in his own name. Questions are now going to be asked over whether any planning applications were approved by government ministers for any of his companies. A previous planning application had been delayed over congestion fears.

Mr Abrahams partly bankrolled Labour's campaign for the Sedgefield by-election in Co Durham. He donated a total of £62,000 in two cheques on the day that Tony Blair announced he was standing down. He used Ms Kidd to pay £38,000 towards the Labour campaign and Mr Ruddick to donate £24,000.

Mr Abrahams, who uses the business name David Martin for his development empire in the North-east, insists he had used the subterfuge because he did not want publicity for the donations.

Janet and Anthony Dunn had said they knew nothing about the money donated in her name until Monday. But last night Mr Dunn apologised, and said in Mr Abrahams had put £25,000 into his wife's account and shortly afterwards, in January 2003, she had written a blank cheque for that amount.

Mr Dunn said: "It was done as a swap cheque. It was just done in and out. David's put one in and we've put one out. I thought it was just a bit of business. It was David's money and we've been used. We can't go backwards, unfortunately."

That was the only time they had had any such arrangement with Mr Abrahams and they had not known the cheque was destined for the Labour Party, Mr Dunn said. They had since forgotten about the transaction.

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