The Liberal Democrats’ main corporate backer is a care home business that has been giving the party nearly half its profits and whose ultimate ownership is secret. A businessman who sits on the board of all the sister companies of the donor firm Alpha Healthcare has been given a seat in the House of Lords.

Lord Hameed was proposed for the peerage by the Lib Dem party treasurer and lauded by the only Lib Dem member of the Lords Appointments Commission but sits as an independent. All involved deny any connection between the peerage and the payments.

Alpha Healthcare has handed over nearly £400,000, the largest single tranche of £125,000 being accepted after the seat in the Lords was confirmed. The Lib Dems’ previous largest corporate donation of £2.4 million was paid by the overseas businessman Michael Brown’s company, 5th Avenue Partners. In an unrelated case, Mr Brown faces trial in London accused of transferring criminal property, furnishing false information, deception and perverting justice.

The Lords’ vetting panel was unaware of links between Lord Hameed and the Lib Dems’ new top business donors. The Cabinet Secretary, the Committee on Standards in Public Life and the appointments commission are being urged to look into relationships.

Lord Clement-Jones, the Lib Dem treasurer, said that he had “no idea” who had proposed Lord Hameed. After The Times said it had evidence that it was him, he said: “I couldn’t remember that. That’s fine. I thought he was a very upstanding member of the Asian community and somebody who would make a very good peer.”

Lord Clement-Jones said he thought that he had probably told Lord Dholakia, the Lib Dem representative on the appointments commission, about the donations. This was because he was “very close” to Lord Dholakia, the deputy Lib Dem leader in the Lords, and because he is Asian.

Lord Hameed insists that he has never given a penny to a politician and knew nothing of the payments until contacted by The Times.

The Lib Dems began receiving the money nine months after Khalid Hameed, then the chief executive of the Cromwell Hospital in London, joined the board of Alpha Hospitals. Its sister company Alpha Healthcare gave £10,000 to the Lib Dems’ London region during Simon Hughes’s campaign to become mayor in 2004.

Mr Hughes and Lord Hameed have known each other for years; the peer chairs the Commonwealth Youth Exchange and the MP is its parliamentary vice-chairman. The mayoral campaign was chaired by Lord Clement-Jones. Lord Dholakia was party president. Alpha Healthcare is the care homes division of a group directed by the brothers Dhruv and Bhanu Choudhrie. Lord Hameed has gone into business with them to set up a private hospital. The companies are ultimately owned by opaque entities based in the tax havens of Guernsey and the British Virgin Islands.

Lord Hameed, High Sheriff of Greater London, is a prominent Muslim promoter of interfaith dialogue, and a winner of the Sternberg Interfaith Award. His progress to the Lords began in 2005 when he was nominated by the former British Airways chief Lord Marshall, a crossbencher. The nomination was formally supported by Lord Clement-Jones, two nonLib Dem peers and two dignitaries.

During 18 months when Lord Clement-Jones became party treasurer, Alpha Healthcare gave the Lib Dems another £260,000. At one stage, it donated nearly half its annual posttax profits. The company gave its latest payment last May.

When Dr Hameed’s name came before the appointments commission, Lord Dholakia, a Hindu, said they knew each other from religious gatherings. The commissioners decided that the connection was insufficient for Lord Dholakia to withdraw from discussions. The commission gave Lord Hameed a nonparty peerage last February. Lord Dholakia accepts that, had he known of the donations, he should have declared them.

Alpha Healthcare said the gifts came from its profits and it was “complete and utter nonsense” to link the payments to the peerage. Asked why it paid £395,000 to the Lib Dems, a spokesman said: “Why not?”

What the party told The Times

Lord Clement-Jones, treasurer of the Liberal Democrats The Times Do you know how Lord Hameed came to be made a people’s peer? Who nominated him?

Lord Clement-Jones I mean, people write in themselves, don’t they? I’ve no idea, actually.

The Times Lord Marshall nominated him.

Lord Clement-Jones Well, so, then, you do know the process.

The Times And Lord Marshall gave me a list of the people whom he described as the formal supporters.

Lord Clement-Jones Yes?

The Times First one was: Lord Clement-Jones. I don’t need to go on.

Lord Clement-Jones I couldn’t remember that. Well that’s fine. I recommended him. I thought he was a very upstanding member of the Asian community and somebody who would make a very good peer.

The Times Lord Dholakia, did he know that Alpha Healthcare was giving money to the Liberal Democrats?

Lord Clement-Jones Presumably he must have known. I keep Navnit [Lord Dholakia] informed because he is a member of the Asian community and everybody knows Navnit, so I’m sure now he knows all the donations and I think probably during Simon Hughes’s campaign I would have said to Navnit: “Navnit, by the way, the Choudhries have given some money to Simon’s campaign.” I’m sure I would have. Navnit and I are very, very close. He is my deputy leader in the Lords, come on!

Lord Dholakia, Lib Dem deputy leader in Lords

The Times Did you know that Alpha Healthcare was giving money to the Liberal Democrats?

Lord Dholakia No.

The Times When did you find out?

Lord Dholakia I didn’t until [ The Times] rang me and mentioned it.

The Times Lord Clement-Jones says to us that he thinks he probably told you because he is very close to you as deputy leader . . .

Lord Dholakia That’s not how deputy leader works. In fact I hardly see Clement-Jones.

The Times . . . and also you’re a member of the Asian community. The donations from Alpha Healthcare began during the Simon Hughes campaign. You were president of the Liberal Democrats.

Lord Dholakia I would not get involved in Simon Hughes’s campaign at all.

How it unfolded

June 2003 Khalid Hameed joins board of Alpha Hospitals

March 2004 Alpha Healthcare, a sister company, pays £10,000 to Lib Dems’ London region during Simon Hughes’s mayoral campaign. Mr Hughes is a parliamentary vice-chairman of the Commonwealth Youth Exchange, Dr Hameed is its chairman. Lord Clement-Jones is chairman of the mayoral campaign. Lord Dholakia is Lib Dem party president

Sept 2004 Mr Hughes replaces Lord Dholakia as president

Jan 2005 Dr Hameed is formally proposed as a nonparty, or “people’s” peer by four peers and two dignitaries. One is Lord Clement-Jones, former chairman of the Lib Dem finance committee. Dr Hameed did not tell Lords Appointments Commission about the donations because, he says, he knew nothing of them. Lord Clement-Jones claims he was unaware at the time that Dr Hameed was on the board of Alpha Healthcare’s sister companies and so could not declare any financial interest

March 2005 Alpha Healthcare pays £100,000 to Lib Dems

July 2005 Lord Clement-Jones becomes Lib Dem treasurer. He says he thinks he probably told Lord Dholakia about the Alpha Healthcare donations because they are close and his deputy leader is from the Asian community

Dec 2005 Alpha Healthcare pays another £60,000 to Lib Dems

Nov 2006 Alpha Healthcare pays £100,000 to Lib Dems

Feb 2007. Dr Hameed chosen as people’s peer. Lord Dholakia, sole Lib Dem on Lords Appointments Commission, tells commissioners he knows Dr Hameed for his interfaith work. He stays during discussion of the appointment, making no declaration about Alpha Healthcare donations because, he says, he knew nothing of them. If he had, he would have declared, he says

May 2007 Alpha Healthcare makes its largest and latest donation to the Lib Dems, of £125,000. It has given £395,000 and become the party’s biggest corporate donor. Lord Hameed of Hampstead hosts a party for the Lib Dem leader Sir Menzies Campbell, who wants to meet members of Asian community

Times Recommends

• No room for Baldrick in overstretched army
• Freecycle booms as middle class feels squeeze
• Marksman gets £5,000 over ‘serial killer’ quip