THE controversy over the Blair family trust’s “Cheriegate” property deals has returned to haunt the prime minister as he is about to leave office.

Complex links involving the trust, a French arms firm, bribery scandals, Saudi Arabia, South Africa and the Serious Fraud Office (SFO) raise new embarrassment for Tony Blair over a potential conflict of interest.

At the centre of the controversy is Thales, a supplier of military aviation electronics, which was revealed three years ago to have rented two flats owned by the Blair trust. Thales reportedly paid £60,000 a year for the Bristol properties for two years.

Late last year Thales was one of several defence companies that successfully lobbied ministers to stop the SFO inquiry into the alleged bribery of Saudi Arabian officials in the multi-billion-pound al-Yamamah arms deal.

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Thales now stands to earn tens of millions of pounds from the supply of Eurofighters to Saudi Arabia, which had been threatened by the bribes inquiry.

In a separate bribery scandal, Thales faces allegations that it paid Jacob Zuma, former vice-president of South Africa, to stop an investigation into another multi-billion-pound arms deal.

South African prosecutors suspect that a £69,000 bribe allegedly paid to Zuma was channelled through a bank account belonging to Berwin Leighton Paisner (BLP), a London legal firm. Coincidentally, Martin Paisner, a BLP partner, is one of two trustees who run the Blair trust.

There is no suggestion that Paisner or his law firm has done anything improper or was aware of any wrongdoing; but sources disclosed this weekend that the SFO has sought access to BLP’s bank accounts to trace any payments possibly made through them to Zuma.

Whitehall officials said the SFO was following international protocol in helping the investigation by the South African police.

The SFO has made no move to dampen calls for a public inquiry into the halting of the Saudi investigation. On Friday night Lord Goldsmith, who as attorney-general stopped the inquiry on the prime minister’s advice, announced he was to quit.

The Blairs set up their family trust when Labour came to power in 1997. They are expected to get access to its assets after the prime minister steps down on Wednesday. The Thales connection is the latest embarrassment to hit them over the trust’s controversial Bristol property deal, which sparked the “Cheriegate” row in 2002.

It emerged then that a convicted conman, Peter Foster, who was the boyfriend of Cherie Blair’s lifestyle guru Carole Caplin, had helped the prime minister’s wife to buy the luxury flats at a £69,000 discount. The Blairs bought the two flats through the trust for more than £500,000.

When it was revealed two years later that Thales was renting the flats for the use of executives working in Bristol, there were accusations of a potential conflict of interest. Thales said, however, that it had been unaware of the Blairs’ ownership. It was just a “coincidence” that the landlord had turned out to be the prime minister.

Blair may now come under increased pressure to disclose exactly how much his trust received from Thales and whether that amount could be deemed overgenerous. A Thales spokesman said last week: “No one can find a full record of what we paid.”

Last December Alex Dorrian, chief executive of Thales, was one of a group of defence company bosses who lobbied the government to stop the SFO inquiry into the al-Yamamah arms deal with Saudi Arabia.

The SFO was investigating an alleged £60m slush fund paid by BAE Systems, the al-Yamamah contractor, to senior members of the Saudi royal family. The Saudis were threatening to suspend diplomatic and intelligence ties if the inquiry continued.

Thales, BAE and four other arms firms warned Blair that the dispute with Saudi Arabia must be resolved or new business worth several billion pounds and tens of thousands of jobs could be jeopardised.

Blair has since said that he took full responsibility for the decision to drop the inquiry, which provoked worldwide criticism. Thales is now helping BAE to supply 72 Eurofighter jets to the Saudis in a £20 billion deal that is expected to be signed next month.

This weekend senior opposition politicians accused Blair of a conflict of interest. Norman Lamb, the Liberal Democrat trade spokesman, said: “It beggars belief that the prime minister can allow this sort of incestuous relationship between his private finances and public office to exist.” Paisner said he could not discuss his dealings with the Blairs or the trust. “I do not discuss my clients,” he said. BLP said it had already been approached by the South African authorities and had provided information which showed its former client was not involved in any arms deal and that there was nothing improper about the payment. “As the request was properly authorised, we provided the information,” it said. “We are not aware of any outstanding questions.”

Thales has denied any wrongdoing. It said it would defend itself vigorously against the bribery allegations made by the South African police.

These arise from an investigation into charges that Zuma was bribed to block a criminal inquiry into Thales, which was then known as Thomson-CSF. Zuma denies any wrongdoing.

Additional reporting: Tom Baird

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