Gordon Brown endured a savaging in the Commons about the Labour donations scandal today, as his chief fundraiser was forced to admit that he had known for two months that a millionaire property developer had illegally donated £600,000 to the party through middlemen.

Facing calls to resign, Jon Mendelsohn issued a statement saying that he had been unhappy when he found out about the arrangement with David Abrahams when he was appointed to his role as Labour director of election resources in September.

He said that he had checked with Peter Watt, the party general secretary, and was told that the procedure was above board and part of a "long-standing" arrangement. Mr Watt resigned over the scandal on Monday.

Mr Mendelsohn is the latest figure to become embroiled in the affair, in which it has been revealed that Mr Abrahams used at least four friends to transfer more than £600,000 to Labour while his own identity remained secret, breaking funding rules.

The latest disaster for Labour, after Northern Rock and the data loss debacle, prompted David Cameron to ask at a rough-house Prime Minister's Questions whether Mr Brown was up to the job of leading the country.

One donation made by an intermediary was accepted by Harriet Harman, who said that she did not know that the donor, Janet Kidd, was a proxy to Mr Abrahams. However, Mr Brown and Hilary Benn both refused offers of cash through Ms Kidd. Baroness Jay, a member of Mr Benn's campaign team, asked Mr Abrahams to donate in his own name because using a proxy was probably not legal – suggesting that the deceit was known about in some Labour circles.

Mr Mendelsohn today issued a statement in which he tried to clarify his position, claiming that he asked Mr Watt about the donations but had been reassured about them.

"I was informed by Peter Watt to whom I reported that this was an arrangement with David Abrahams which was long-standing and which was appropriately dealt with in relation to the Party’s reporting requirements," the statement said. "He told me these donations fully complied with the law, and I had no reason to doubt that information.

"However, I was unhappy with the arrangement whereby donations were taken through a third party, and was determined it would not play a part in our future plans. I was very concerned that these arrangements did not meet the strict transparency test that I wished to see in place.

"I did not discuss this with the officers of the National Executive Committee or party leadership but I decided to tell Mr Abrahams that his method of contribution was unacceptable. I had no intention of asking Mr Abrahams for donations and wanted to give him the courtesy of explaining this personally."

Mr Abrahams said this morning that he had received no correspondence from Mr Mendelsohn until yesterday, after the scandal broke, when he finally received a handwritten letter through the post from Mr Mendelsohn inviting him to a meeting in London to discuss his donations.

Even then, he said that it appeared to be couched as soliciting further gifts rather than asking him to change the way that he gave. He said that he was at no point told that what he was doing was illegal.

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