Labour admits: we broke law as Gordon quits post

Kevin Schofield and Michael Settle The Labour Party in Scotland is facing the prospect of a wounding criminal inquiry after one of its most senior figures admitted illegally securing funds for Wendy Alexander's leadership campaign.

Charles Gordon quit as Labour transport spokesman at Holyrood just hours after an investigation by The Herald revealed his involvement in securing a payment from a multi-millionaire tax exile.

Yesterday, he admitted approaching Paul Green to ask for a donation. Mr Green said he was asked for £950, just below the level which would have to be declared publicly. As a Jersey resident, Mr Green is barred by UK law from giving money to political parties or politicians.

Tom McCabe MSP, Ms Alexander's campaign manager, conceded said there had been "clearly a breach of the law", a dramatic reversal of the statement which Ms Alexander's team had issued on Wednesday.

The admission in Edinburgh came as the Labour Party at Westminster was facing the prospect of a second police inquiry in less than two years as the proxy donations scandal was referred to Scotland Yard.

In another devastating blow for Prime Minister Gordon Brown, the Electoral Commission said it had passed the case to the Metropolitan Police for further investigation. Assistant Commissioner John Yates, who led the cash-for-honours inquiry into the award of peerages by Tony Blair when he was Prime Minister, will be available to advise the investigation.

A spokesman for Mr Brown said last night that the Labour Party would co-operate with the inquiry "in every way".

The scandal moved closer to the Premier after a member of his campaign team admitted he had put deputy leader Harriet Harman in touch with one of the intermediaries used by property developer David Abrahams.

It was the disclosure at the weekend that Mr Abrahams gave Labour £650,000 through a series of associates to get round the law requiring political donors to be declared which prompted the initial inquiry by the Electoral Commission.

In another twist, Peter Hain last night admitted he failed to register a £5,000 donation to his deputy leadership campaign by Labour's new chief fund raiser. The Works and Pensions Secretary blamed an "administrative error" for the failure to inform the Electoral Commission of the donation by Jon Mendelsohn.

With Labour in Scotland openly acknowledging the law has been broken, criminal investigations both north and south of the border now seem inevitable.

In his resignation statement, Mr Gordon, MSP for Glasgow Cathcart, said he had wrongly informed Ms Alexander's campaign team that the £950 donation had come via a Glasgow firm, Combined Property Services.

It emerged yesterday, however, that the donation had in fact come directly from Mr Green, breaking the Political Parties, Elections and Referendums Act 2000.

Last night, after attending a prestigious Asian business awards ceremony in Glasgow, Ms Alexander said: "My campaign team acted in good faith. I regret what has happened today and I will co-operate with the Electoral Commission fully."

Mr Gordon's relationship with Mr Green goes back to his days as leader of Glasgow City Council. Three years ago, Mr Green gave £1m to the council to help fund a regeneration project just days after a planning application had been approved.

Yesterday, Mr Green broke his silence on the matter to dispute Labour's earlier insistence that the money had been channelled through Combined Property Services.

He said: "In August of this year, I was asked by Mr Gordon to donate £950 to Wendy Alexander's campaign to become leader of the Scottish Labour Party. I asked Mr Gordon if this complied with the Electoral Commission rules and was told it did.

"Relying on that confirmation I made the donation from my personal account. Combined Property Services would have no reason to be aware of this small donation which was made by me personally, openly and in good faith."

His comments were backed by Gordon Wilson, owner of the company, based in Glasgow's Bath Street, who said: "No donation has ever been made by Combined Property Services to either Wendy Alexander or the Scottish Labour Party.

"I have checked the accounts for the last year and no such cheque has gone through our company."

A defiant Ms Alexander, sister of senior Westminster minister Douglas Alexander, a close ally of Mr Brown, told MSPs yesterday that she and her team were in touch with the Electoral Commission, which has asked for details of all the donations, totalling £17,000, she had received to help with her leadership bid. Until yesterday, none of the donations had been made public, as all are below the £1000 threshold.

At a hastily-arranged news conference earlier, Mr McCabe said that neither Ms Alexander nor anyone else in her campaign team had any idea that Mr Green's contribution broke the law when it was received.

He said: "Our job now is to assure the Electoral Commission of the sequence of events and to do our best to right a wrong that has clearly happened."

Mr McCabe also revealed that, despite the fact Ms Alexander was elected leader unopposed, just £1300 of her campaign fund was still unspent and was in a campaign bank account.

He added: "She is clearly very upset that having secured the leadership, this kind of distraction casts a shadow over that entire campaign. She deeply regrets the fact that this has happened."

However, opposition parties last night said the row raised serious questions about Ms Alexander's abilities as Labour leader.

Deputy First Minister Nicola Sturgeon said: "Labour is in a mess over this. Charles Gordon has resigned but the responsibility is Wendy Alexander's. It was her leadership campaign."

Murdo Fraser, the deputy leader of the Tories, said it was "a huge embarrassment" for Labour. "The way in which Labour has handled this issue demonstrates either inability or reluctance to get to the core of the problem, " he added.