A British MEP at the centre of a fraud investigation has used taxpayers’ money to prepare a libel action against a critic accusing him of wrongdoing.

Tom Wise, of the UK Independence party, used £8,000 of public money to take legal action to silence someone accusing him of misusing public funds.

He used his MEP assistants’ and secretarial allowance to pay his solicitor to prepare a libel case over claims by Greg Lance-Watkins that he was abusing the same fund by getting money under false pretences. Lance-Watkins, who runs a Eurosceptic website, had accused Wise of having acted inappropriately by claiming £36,000 a year from his assistants’ allowance to pay for his researcher, when he had arranged to pay her a fraction of that sum.

European Union rules state that in order to avoid fraud, payment for assistants must be made direct to them or to a third party. The MEP is not allowed to handle the money.

Wise had ensured the money was paid into his own bank rather than that of the researcher by placing his account number next to her name on the form submitted to the EU payments office. Once the money was put in his account he began to spend it. Olaf, the European commission’s antifraud body, is investigating the case, which was exposed by The Sunday Times in February. Wise has repaid £25,530 to the EU.

Following Lance-Watkins’s comments about the case on the internet, Wise consulted Ste-phen Welfare, a solicitor, who prepared a libel writ. Although no action was taken, Welfare’s bill of about £8,000 was paid for through the same account Wise had been accused of misusing.

Welfare last week confirmed he had acted for Wise and had been paid by the EU.

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