WENDY Alexander's leadership of the Labour Party in Scotland was under intense pressure last night, after it emerged she wrote a personal letter of thanks to the multi-millionaire tax exile who helped fund her campaign.

The note was sent to Paul Green at his Jersey home in October, three weeks after Ms Alexander was elected unopposed to succeed Jack McConnell as Scottish Labour leader.

Until Thursday, Ms Alexander's campaign team had been claiming the £950 donation was channelled through a Glasgow-based firm but in her letter, which was dated October 5, Ms Alexander says: "I would like to thank you for your generous support for my leadership campaign.

I am very grateful to youYours sincerely, Wendy."

As opponents questioned whether her personal involvement in the illegal donation scandal had rendered her position untenable, a "very angry" Mr Green turned up the heat with a series of critical comments. Speaking exclusively to The Herald last night, Mr Green insisted he had done nothing wrong and alleged that he had been "smeared" by Ms Alexander's team.

He said: "I have been completely exonerated, which is good news for me and not so good news for those who tried to smear me. If I live to be 1000, I will never know how the Labour Party got themselves into this mess."

Earlier, in a full media statement, he said: "I am very angry after innocently becoming embroiled in a national controversy. It has damaged the Labour Party that I support in Scotland and it was all so unnecessary if the party had only applied the rules.

"I cannot understand why they continued to maintain that the donation had come through a UK company when I had a letter from Wendy Alexander thanking me personally."

The leadership's woes were compounded when Mr Green also revealed that MSP Charles Gordon, who quit on Thursday as Labour's transport spokesman at Holyrood, had solicited an earlier donation from the property tycoon, who was behind developments such as the Parkhead Forge and the newly opened Silverburn mall in Glasgow.

It was also illegal and, at £950, was again just under the threshold which requires it to be declared publicly.

The money was paid to the Glasgow South Constituency Labour Party in April, apparently to support Mr Gordon, the former leader of Glasgow City Council, in his election campaign to the Glasgow Cathcart seat at Holyrood.

But the donation threatened to drag Tom Harris, the Glasgow South Westminster MP and UK Transport Minister, into the row, although the Labour Party was at pains to stress that he knew nothing about the money.

However, it also emerged yesterday that Mr Green had tried to make a donation to the Scottish Labour Party in the past but that a senior HQ official, believed to be General Secretary Lesley Quinn, had turned it down because she knew such a contribution would have been illegal.

As Gordon Brown last night told police in London considering a criminal inquiry into Labour's disguised donations that he would welcome the "fullest possible investigation", First Minister Alex Salmond came close to calling for the police in Scotland to become involved, saying: "When there has been assumed or even suspected illegality, that is normally the best way to deal with this."

One of his MSPs, Roseanna Cunningham, went further, saying the letter of thanks from Ms Alexander to Mr Green was "the smoking letter".

She said: "It is clear that an illegal act has taken place, with responsibility lying entirely with Wendy Alexander. One way or another, there must be a police investigation. Wendy Alexander's position is becoming increasingly untenable - by the day and by the hour."

Ms Cunningham also said that, given his involvement in both illegal donations, Mr Gordon should "consider his position as an MSP".

Murdo Fraser, the deputy leader of the Scottish Conservatives, said Labour had to make clear whether there had been "a cock-up or a cover-up".

He added: "The only defence Wendy Alexander and her team seem to have left is that they acted in good faith, but in total ignorance, of the law. When Wendy Alexander signed her letter to Mr Green, did she not think to query the Jersey address?

"Is it credible to suggest that that Scottish Labour leader, with a long track record of political experience, would have been totally unaware of the law on political donations. Her position is precarious and I wonder if they will resort to making the fall guy fall further, as Charlie Gordon is again heaped with the blame."

Ms Alexander yesterday said she was "very sorry" for the row, which first came to light following an investigation by The Herald.

In a three-line statement issued last night, a spokeswoman confirmed the Labour leader had been the "regulated donee" of her campaign fund, and therefore legally responsible for any donations.

She added: "As with other donors, Wendy Alexander wrote a thank-you letter to Paul Green."