Labour's fundraising nightmare spread north of the border yesterday, with one resignation, a watchdog investigation, an admission the law was broken, and little expectation that the story finishes there.

Several of the key questions were answered when members of Wendy Alexander's team came forward at a lunchtime press conference. But their statements left other questions hanging in the air.

Why did Wendy Alexander need to raise funds?
Some unspecified time around August, the month Jack McConnell resigned, Wendy Alexander's team was gearing up for a contest to succeed him. Charlie Gordon was part of her team and agreed to do some fundraising. A campaign account was opened, avoiding any donations coming under the Scottish Parliament's rules for declaring donations to MSPs.

Although no-one else challenged her, this was to pay for a mailshot to Labour members and a biographical film about the new leader, which was shown at the party and media event when she was confirmed in the role. The fundraising drive amassed £17,000 and, by yesterday, £1300 remained in the account, with £950 of that to be repaid to Paul Green.

How does electoral law limit donations?
Donations can come from people on the electoral register or from a UK company, but any of more than £1000 needs to be declared in public through the Electoral Commission. There are rules about channelling money through a third party. "A person commits an offence if he knowingly enters into, or knowingly does any act in furtherance of, any arrangement which facilitates or is likely to facilitate, whether by means of any concealment or disguise or otherwise, the making of donations to a registered party by any person or body other than a permissible donor." Based on that, the Electoral Commission guidelines state: "Transferring a donation to an agent rather than directly to a party must not be used as an attempt to evade the controls on permissilbity and transparency."

How did the Paul Green donation break the law?
Because he is based in the Channel Islands and is not on Britain's electoral register, Mr Green is not allowed to contribute to political funds in Britain. His statement yesterday said he was asked to contribute to Mr Alexander's campaign funds. He asked if this would comply with Electoral Commission rules, and Mr Gordon assured him it did. Relying on that information, he made the donation from his personal account.

So there was no indirect donation or third party involved?
That is where Labour made a mess of handling this affair. When The Herald approached Wendy Alexander's office on Tuesday to ask about Paul Green being a donor to her campaign fund, it was confirmed that he had donated through a company called Combined Property Services, based in Glasgow. It was known he had links with this company, and that was the name that had been submitted to the Electoral Commission in its accounts.

It now turns out that the company has him as a client, but did not process any donation to Labour or Ms Alexander over the past year. There remained uncertainty over the way the money was transferred when Ms Alexander's campaign manager, Tom McCabe, yesterday took questions from journalists. He said Mr Green had signed the cheque, but suggested it may have been through a UK company's account. However, Mr Green last night said his donation had been from a personal account, having been assured this complied with the law.

What about the other donations?
It is clear the request for a donation of less than £1000 would keep details of the fund from becoming public. Those details have been submitted to the Electoral Commission, which has since destroyed them. New copies are now being submitted. There must be at least 16 other donors, and probably several more, as not all the donations came close to £1000 mark. However, Labour would not say how many there are, and nor will it disclose their names.

How has Labour responded to this?
It admitted the Paul Green link when asked about it, and then got in a twist over the channel through which the funding was delivered. It was claimed on Wednesday evening that Labour had asked the Electoral Commission to check the donations, when in fact, the Electoral Commission had done the asking in calling the Alexander campaign to account.

Yesterday, Ms Alexander sought to pull the SNP into the funding mire at First Minister's question time, by pointing out that none of the candidates in the SNP leadership and deputy leadership contests three years ago declared any donations. The Nationalist MSPs responded they had funded their campaigns personally, so that line of attack quickly fell flat.

Labour claims that Mr Gordon admitted to having taken the cheque directly from Paul Green only at 1pm yesterday. He announced his resignation 70 minutes later, and quickly departed while Tom McCabe took media questions.

What problems does Scottish Labour now face?
Charlie Gordon could become the subject of a criminal inquiry. There was an admission yesterday that he had broken the law. He sought and received a donation from someone who was not allowed to donate to British political funds, and he was at least partly responsible for filing an inaccurate report about the donation to the Electoral Commission. The next question is whether others were responsible for signing off that submission, most likely to be Tom McCabe.

What do we still not know?
There are several nagging questions about Mr Green's donation to the Alexander campaign.

  • Mr Green says he was specifically asked to donate £950. Was it only Mr Gordon who thought to keep the donations secret by ensuring they should be under the £1000 threshhold for publicity, or was that approved by Ms Alexander and/or Mr McCabe? If the team had agreed that approach, it was within the letter of the law, but does Ms Alexander think it within the spirit of transparency about political funding?
  • Why did Mr Gordon think to approach Mr Green? There is no known record of the latter making other political donations. But the two men go back some years through Glasgow City Council. While Mr Gordon was Labour leader of the council, he was encouraging retail developments in the city, and Mr Green was one of the biggest retail developers.
  • How far does liability spread for the admitted illegality? Could Mr Gordon face charges, and will any criminal investigation spread wider?
  • The biggest question is how Labour, at Holyrood and Westminster, digs itself out of its fundraising mess. As the previous police investigation into cash-for-peerages showed, a police investigation can take many months, draw in the most senior figures for interview, and can drag out the political pain.

Labour is also likely to find it ever more difficult to find donors who are willing to accept publicity, when it already faces large debts.