Sunday, April 22, 2007

LibDems Face Double Whammy Brown Fine

The spectre of jailed fraudster Michael Brown has returned to haunt the LibDems, who, according to Scotland on Sunday may not only have to repay the £2.4 million they took from him, but may also face a £2.4 million fine from the Electoral Commission. It's difficult to see how on earth they would be able to find £4.8 million without going under. Surprising thought it may seem, this is not something I would welcome. These are the main bits of the Scotland on Sunday story...

The Liberal Democrats are facing a potentially ruinous bill of up to £4.8m after taking donations from a crooked Scots businessman, Scotland on Sunday can reveal. Party funding watchdogs last night confirmed that the impact of Charles Kennedy's decision to accept £2.4m from Michael Brown could be doubled if the Lib Dems have to pay back the entrepreneur's former business associates, as well as a matching "fine" imposed as a punishment for accepting the cash. The Electoral Commission is set to order the party to return the 2005 donation amid suspicions that Brown's company was not doing business in the UK at the time of the payment, making it impermissible under funding rules. But, rather than going back to Brown, the £2.4m would have to be paid as a "fine" into the Consolidated Fund, the government's Bank of England account.

To make matters worse, a group of millionaires who invested in the company, 5th
Avenue Partners Ltd, insist the money is theirs and have demanded repayment-
meaning the Lib Dems will have to find another £2.4m on top of the fine imposed
for taking the cash. A senior source at the commission last night confirmed they were considering using their full powers against the party, which is already more
than £1m in the red. The double demand could force Lib Dem chiefs to go cap-
in-hand to the party membership for extra contributions of at least £50-£60 per
person. The Electoral Commission source said: "There is a double jeopardy
element in this situation. If the commission rules that the donation must be
returned, it clearly cannot go back to the donor himself, so it must be paid into the consolidated fund. The demands of creditors or investors would be completely separate to that and up to the party to settle independently." The Brown donation, the biggest-ever received by the Liberal Democrats, has been subject to intense scrutiny since former leader Kennedy gratefully accepted it as a huge contribution to the £4.9m cost of running the party's 2005 election campaign. Although little was known about the Majorca-based tycoon, it later emerged that he was born in a run-down part of Glasgow's West End and ended up in Majorca after making a £10m fortune from property deals and City trading. But holes in Brown's story began appearing under closer inspection soon after details of his financial support were revealed. The High Court ruled that his company was fraudulent and had never traded, he was extradited from Spain and jailed for two years last September after admitting perjury and a passport offence. Lawyers for Martin Edwards, former Manchester United chairman, two Chinese tycoons and an American lawyer have since written to the party saying they believe that the money is theirs.

Last week, Brown was charged with 18 further offences including money
laundering and theft. Brown will also face allegations of perverting the course
of justice and fraud. The donation was part of an investigation by City of
London Police into allegations of a £45m high-yield fraud. He is the subject of
an international money-laundering investigation by police as well as facing
civil action by the HSBC bank. The donations have exposed the Lib Dems to
ridicule and recriminations from opponents who believe Brown's intervention gave
them an unfair advantage during the 2005 election.

A Lib Dem spokeswoman last night confirmed they had been made aware of the
"double jeopardy" threat hanging over the party's head. She added: "Our legal
advice is robust and on the basis of this our auditors advised that we need not
make provision for any repayments. "The party acted in good faith at all
times in relation to these donations, which were properly spent on the Westminster general election campaign two years ago."

I do not deny that the LibDems acted in good faith, but in issues like this, it's not enough. They clearly didn't do the requisite due diligance and that, I believe, will be at the core of the Electoral Commission's findings. I do believe they should pay the money back, but I do not believe they should face a £2.4 million fine as well.


Anonymous said...;jsessionid=FDXSVGBYN2LAZQFIQMFCFFWAVCBQYIV0?xml=/news/2007/04/22/nhons22.xml

Check it out ! Maybe even Michael Ashcroft might learn something.

Thanks for the sleaze, Mr Dale, this is what we really, really want on a Sunday..

Anonymous said...

Whils i would never vote for the Lib Dems they have a right to exist and should remain as a political party.

Seems very unfair to me.They couild be bankrupted out of existence.

Anonymous said...

They should have to pay an additional fine, otherwise where's the deterrent? Parties can just take crooked money in the knowledge that if they get caught all they'll have to do is give it back. It shouldn't be £2.4 million though.

Checking I've understood this correctly:

They have to pay back the 2.4 million + an additional 2.4 million fine, + they may be getting sued for another £2.4 million?

Chris Paul said...

I'm not sure why you think the Lib Dems acted in good faith Iain. I don't know whether they did or not but I certainly see no reason to give them the benefit of the doubt.

If they have 100,000 members thay can all stick £50 in and pay the money and the fine.

Savonarola said...

For heaven's sake. If they have broken the code they get a fine. Whats the point if there is no sanction. As to repaying the money. It was never Brown's to give. He stole it. LidDems have received stolen nmoney. You don't need your mother to tell you . Pay it back.

Anonymous said...

It seems to me that they saw £ signs before their eyes and greed got the better of them?I'm sure that the vast majority of them are well meaning but there have to be some rules and sanctions if they're broken.

Chris Paul said...

They are not well meaning in Manchester. They are liars and crooks. Not nice people. Though there are a few exceptions, most of them are apolitical, lazy as hell, and willing to tell whatever fibs are needed to get the £15,000 expenses.

Anonymous said...

Is this becoming a trend on how to dispose of political opposition.

First UKIP and now the LibDems ?

Smells fishy

Man in a Shed said...

They were either naive and incompetent in accepting the money or deliberately deceitful - like when they hid Charles Kennedy's fitness to lead a political party at the last general election. (Both possibilities fit the pattern of their normal political activities and policies ).

They should be hung out to dry.

Anonymous said...

Can a political party go bankrupt? I'm sure that the legal entity can, but surely a party is the collective of all representatives and members. Could they not simply reform as the (New) Liberal Party? They would lose all assets of the previous legal entity (party HQ etc) but those assets aren't the 'essence' of a political party, after all.

Anonymous said...

Iain your getting soft in old age.
Hell mend them as they say

Anonymous said...

A little bit of common sense / sticking to the rules would go a long way in politics. It reminds me of David Cameron inviting people for lunches at parliament when this was clearly breaking the rules, although admittedly that only needed a quick apology rather than paying £2.4m.

The rules are there for a reason. I have little sympathy with any party that doesn't bother to read them, and if people don't get punished for breaking the rules then we might as well scrap the rules altogether.

Anonymous said...

Maybe if Charlie Kennedy got the money back on all his empties, it would go a long way to paying back the £2.4 m

Anonymous said...

Its one thing to expose slease. Its quite another to get anything really done about it.

Political internet sites act more like a white middle class mans punch bag, to be taken out when the "wife dont want to hear it anymore," then a serious new political inovation.

You say your piece and feel that someone somewhere is paying attention. When in reality they are, but not in the way you would hope.

All the time the great unwashed are buzy thinking they are changing the world, sitting on their fat asses glued to the bosses PC, politicians are safe, to carry on doing whatever they like.

Which is and always was. NO GOOD AT ALL.

The Conservative party under Cameron has not and will not 'modernise'. It has in reality gone back to the 1950s-60s.

My advice would be to join the Conservative party and CHANGE IT AGAIN.

Just like thousands did to get the likes of Margaret Thatcher into the leadership.

Tory MPs may in general be a bunch of santimonious toff wankers with MORE LUCK AND WEALTH THEN IS GOOD FOR ANYONE. But they are all we have got and all we will ever have between hell and the end of some kind of SOCIALISTS jackboot.

Anonymous said...


Iain, your whole story is completely 'iffy'!

Unknown said...

I seem to remember that UKIP have been fined £200,000 for taking a £200,00 donation from somebody who forgot to sign a form confirming he wanted to be on the electoral roll. Although no fan of UKIP, it seemed to me that the Electoral Commission was being a bit harsh. Given Brown's more flagrant breaches, I can't see the Electoral Commission fining the Fib Dems any less than the size of Brown's donation.

Anonymous said...

Iain, this is a very long post with relatively few comments. The lesson here is that this 'Brown' story is too convoluted, and so people aren't really interested, and therefore he will get away with it.

Unless the key details can be pulled out in a punchy form the force will be dissipated and the impact lost.

I think you have to accept that may already have happened on this, and you are just locking a stable door for a horse which has long since gone..

Sir Francis Walsingham said...

Reminds me of the Shell scandal. In that one, the American regulators (the SEC) made a deal with the company. Their point of view was that fining the compnay was punishing the shareholders - who were the victims of the scandal. Largely state pension funds, by the way.

They very specifically didn't make a deal with Sir Phil Watts (the guy who filed false statments). To his horror he has been left facing the probablity of *personally* being resposnible for billion dollar lawsuits.

The members of the Lib Dems are not guilty - it is the leadship who are those at fault.

Anonymous said...

Sir Francis W:
"The members of the Lib Dems are not guilty - it is the leadship who are those at fault."

True up to a point. If anybody is fined it should be the party officers. There are criminal sanctions for the non-return of impermissible donations. But on the other hand, the members party should also be obliged to return or forfeit cash equivalent to money that they should have returned. If the cost of keeping the party solvent falls on the members, then fa9ir enough - their party had the benefit of the money, so they can pay for it.

In practice I think this is hardly likely to bankrupt the Lib Dems. More likely that Joseph Rowntree will be selling a few extra toffees to cover the Lib Dems losses, but therein lies another scandal....

Anonymous said...

I wonder where Chris Paul got the idea the LibDems have 100,000 members. There's not nearly that number?
Where does the idea come from that each member would be willing to cough up £60 even if they could afford it?

Tim Roll-Pickering said...

Suz: My understanding is that this interpretation comes from the idea that the Lib Dems are a membership organisation:

"The party's legal status is that of an unincorporated association, in effect a club of its 73,000 members. No committee or individual is responsible for any financial liabilities. Nor is any insurance policy."

Anonymous said...

You're letting them off the hook, Iain. If they simply have to pay back the cash, and not pay a fine, then that will simply encourage politicians in the future to chance it. They'll take the money, expecting they won't get caught, and in the full knowledge that if they are then they won't suffer financially.

The Lib Dems should pay back every penny and then the fine too. If they go under, tough luck.

James Graham (Quaequam Blog!) said...

The problem wasn't a lack of 'due diligence,' it was a lack of caution. There is only so much you can find out about a person in a few weeks and what they did find checked out - but there is a good rule in political fundraising that you shouldn't accept millions of pounds in donations from anyone who you don't know, regardless of whether they check out or not. To blame it on a lack of diligence is to blame it on the staff who made the checks, not the senior politicians who made the decision, which is unfair.

As for the double jeopardy idea, I can't see it coming to that, and if it did then the party would have a pretty cast iron argument for suing the companies who received the money in the form of advertising, yet apparently made no checks whatsoever: in particular News International who have been incredibly keen on covering this story until now. I wonder why they aren't so keen on covering this particular angle?

Anonymous said...

James: re due diligence.

Quite frankly, not being able to due the due diligence in a few weeks is not an excuse. Thee Lib Dems should not have accepted the donation until the due diligence was complete. There should be no harm in telling a donor to hang on to his money for a few weeks until the necessary checks have been made. After all that is exactly what every bank, law firm, accounting firm and goodness knows how many other businesses has to do these days before accepting a new customer.

And what does it really take: a copy of the accounts, last tax return and details of the UK resident directors, which in 5th Ave partners case, they did not have - so they should have refused the donation.

Mind you thinking about it more, it would be likely that if the Lib Dems were tosettle with the investors the EC would probably let them off forfeiting the donation, whereas if they hang onto the money, the EC is more likely to go to the courts to take the money off the Lib dems and they would still have to face a legal challenge from the investors.

Anonymous said...

As a long-standing member of the aforementioned party I should comment that most of us wanted the money paid back as soon as people realised it was dodgy. The party hierarchy ignored us.

So they can sing for a further 50 or 60 quid. And the rest. Them in high places can pay it between them and they should be more careful aout the company they keep.

And perhaps start listening to the little people for a change.

Anonymous said...

"And what does it really take: a copy of the accounts, last tax return and details of the UK resident directors,"

If a company has been in business less than a year it won't have either of those first two but could be a perfectly legitimate donor under PPERA.

The use of the phrase "due diligence" isn't particularly helpful as people equate it with financial services style due diligence when that required under PPERA is of a much lower degree.

Anonymous said...
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