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The Lib Dem leader is privately furious with his predecessor for leaving the party with the damaging saga. A figure close to Sir Menzies said: “The party certainly owes Charles Kennedy a great debt, and it is £2.4 million.”
But senior party figures believe that, rather than having to repay the donation, it is more likely that they will have to approach donors for help towards legal costs arising from it. Contingency plans involve instructing a Queen’s Counsel to fight any court order to repay or forfeit a sum equivalent to the donation.
Lib Dems accept they may have to undertake a cash appeal — circulating supporters by e-mail and approaching very wealthy backers. These include Lord Alliance, Lord Razzall, a former party treasurer, and Paul Marshall, all of whom made declared loans to the party last year. “We could raise the money if we had to, no problem,” another source said.
Most of the gift from Michael Brown, a trader now serving a jail term for perjury and making a false statement in order to obtain a passport, was negotiated with Mr Kennedy’s office, rather than via the party’s headquarters. Brown referred later to giving the money “to Charles Kennedy” rather than the Lib Dems.
The Electoral Commission has announced that it will decide shortly whether to seek a court order forcing the Lib Dems to pay £2.4 million into the Consolidated Fund if the gift is thought impermissible.
The party also faces a civil court action from clients of Brown who gave him money to invest and want to recover it from the party. In theory, the party might have to find twice the £2.4 million, though that is unlikely. Aides believe a big legal bill for costs is more probable. “We would be astonished if they found that in law this company never existed and therefore we have to pay the money back,” a senior Lib Dem said.
Senior Lib Dems are baffled by the commission’s statement, which accepted the party acted in good faith.

Sam Coates's blog about Westminster, politics and spin
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