Charles Kennedy today said that he had commissioned an internal inquiry into revelations in The Times that the businessman who bankrolled the Liberal Democrats' election campaign is wanted for fraud in the US.

Mr Kennedy insisted that his party had followed all Parliamentary guidelines before accepting a record £2.4 million donation from Michael Brown, a Swiss-based financier who is not registered to vote in the UK.

He said, however, that he wanted to be "absolutely convinced" that the gift - which paid for much of the Lib Dem election campaign - had met the party's own strict rules on funding.

The Times today revealed that Mr Brown faces up to five years in jail after skipping probation in Florida seven years ago while owning money to a court. He has been accused of bouncing 12 cheques worth more than $7,300. He said that he was "truly shocked" to learn that he was regarded as an absconder on court papers.

The discovery places pressure on the Lib Dems to repay the donation, which amounted to two-thirds of its income in the first quarter of this year.

There is no precedent for a British political party keeping major funding from a donor who was a wanted man when the gift was made.

Asked today about the donation, Mr Kennedy told the BBC: "Now, I am asking obviously, the people involved for an explanation and an account. But until and unless I receive that I think it would be unwise for me to start deciding what to do right here and now.

"The Electoral Commission, which is the proper public body that examines these things, has said quite straightforwardly that the Liberal Democrats have behaved according to the law. That is as it should be.

"But equally I want to be absolutely convinced, myself, that everything internal has been proper and up front as well. That’s what is going to take place."

The Electoral Commission watchdog said it was "permissible" for the Liberal Democrats to have accepted the money from Mr Brown’s company 5th Avenue, which allowed the party to increase election spending to a record £6 million.

But the Commission said it should have made closer checks on the gift, to ensure that it was not breaking rules which ban donations from foreign companies with no activities in the UK.

Mr Brown has repeatedly misled The Times about his police record. He claimed that, in 1995, he was arrested in the US for signing three bounced cheques for about $40 each.

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