DAVID CAMERON faces a new row over Tory funding after it emerged that the Conservatives have taken large donations from hedge-fund managers whose firms placed bets short-selling shares in some of Britain’s crisis-hit banks.

The Conservative leader has accepted almost £2m from hedge-fund managers who have been offered membership of an exclusive dining club reserved for backers who give £50,000 or more to the Conservative party.

Cameron has given small dinner parties for members of the so-called “Leader’s Group” where the donors get to chat in private to the Conservative leader. Cameron has hosted at least one dinner for donors at his home in west London.

.Big donors who are entitled to automatic membership of the club include Paul Ruddock and Michael Hintze, whose companies took out short positions on British banks before the practice was banned by the government last week.

Ruddock has donated £259,500 to the Conservatives. He is the co-founder and chief executive of Lansdowne Partners Limited, which has taken tens of millions of pounds in short positions in Halifax Bank of Scotland (HBOS), Barclays and Northern Rock.

HBOS came close to collapse this month before it was taken over by Lloyds TSB. Northern Rock was bailed out by the government to stop it going bust.

There is no suggestion that Ruddock or the other Tory hedge-fund donors have done anything improper. His lawyers said yesterday that he had no direct role in the short-selling by his firm and that, anyway, the bets were held on behalf of its clients. The donation to the Conservatives was made by Ruddock personally and has no connection with Lansdowne.

However, the disclosure that the Tories are being funded by wealthy businessmen whose firms aim to make huge profits by betting that the value of shares will fall will not help Cameron’s efforts to address growing public concern over turmoil in the financial markets.

A second Tory donor is Hintze, whose company took out short positions on Bradford & Bingley, which has lost 95% of its value in the past year and is this weekend facing collapse.

Opposition politicians have accused Cameron of being compromised. “Tory lips were sealed while short-sellers ravaged HBOS. Cameron didn’t care or dare bite the hedge-fund hands that feed them. Cameron should be ashamed of himself. He shouldn’t rub shoulders with these merchants of doom,” said Lord Oakeshott, Liberal Democrat Treasury spokesman.

Six leading hedge-fund managers are eligible to be members of Cameron’s Leader’s Group, which entitles members to personal access to the Conservative leader, including small private dinners.

Cameron was criticised by the Commons standards watchdog last year for inviting members of the club to have lunch with him in his House of Commons offices. He now holds meetings, lunches and dinners outside parliament.

Norman Baker, Liberal Democrat MP for Lewes, has written to Cameron demanding that he disclose all the meetings held with club members.

Hintze, worth an estimated £250m, has given more than £774,000 since 2002. His hedge fund CQS took out a short position on Bradford & Bingley before the practice was banned.

Short-selling involves a trader borrowing shares for a fee and selling them in the hope that, if the share price falls, the trader can buy them back at a cheaper price and return them to the borrower, thereby making a profit.

Details of the Conservative leader’s fundraising are to be disclosed tomorrow in a Channel Four Dispatches documentary, Cameron’s Money Men.

The party has also taken cash from wives of wealthy businessmen. Catherine Lagrange, wife of hedge-fund manager Pierre Lagrange, gave the party £50,000 in November last year.

A Conservative spokesman said: “All donations are legal and comply with Electoral Commission rules.” Additional reporting: Georgia Warren

Donors eligible for Cameron’s dining club

Michael Hintze
Fortune: £250m
Hedge fund: Founder and boss of CQS Short-sold stock in: Bradford & Bingley
Donation: £774,430

Catharine Lagrange
wife of hedge fund manager Pierre
Her donation: £50,000

Paul Ruddock
Fortune: £350m
Hedge fund: Lansdowne Partners
Short-sold stock in: Barclays, HBOS
Donation: £259,500

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