LABOUR is embroiled in a new controversy over the cash for honours scandal after it emerged another of its secret lenders was told he had been put forward for a top honour.
Derek Tullett, who lent Labour £400,000 last year, was told by police investigating the affair that he had been nominated for a future honour. It is believed it could have been a peerage or a knighthood. He already has the CBE.
Police have questioned 48 people and recovered thousands of pages of Whitehall documents since launching their inquiry in March. It began after The Sunday Times disclosed that four businessmen who secretly lent Labour more than £4m had been nominated for peerages. The claims that a fifth was put forward has raised suspicions that Labour might have had a “rolling programme” to reward those who secretly lent it money.
The party was under pressure this weekend to disclose whether any of its other lenders had been nominated.
Separately it was claimed last night that Tony Blair met a key witness in the police investigation, curry tycoon Sir Gulam Noon, at Downing Street only four weeks ago.
Tullett, who has also donated £650,000 to Labour, was interviewed by two officers in his private club.
A source close to the businessman said: “They [the police] opened up with, ‘You have been nominated for an honour.’ It was not something he was after.”
Tullett told friends he was flattered and surprised. “The work he did for charities would have been reason in his view. He would not have accepted it [the honour] under any other guise,” said the source.
Downing Street said yesterday it had been unable to find any official record that Tullett had been nominated for an honour. Tullett, chairman of an energy company who was made a CBE by the Tories in 1996, declined to comment.
Four businessmen who lent Labour money — Noon, Sir David Garrard, Barry Townsley and Chai Patel — were nominated for peerages by Downing Street but were subsequently blocked by the House of Lords Appointments Commission, an independent committee that vets potential peers. Labour later admitted it had received nearly £14m in loans from a dozen individuals.
Police told MPs on a Commons committee last week that they were about three-quarters of the way towards reaching the threshold of evidence required to bring about a prosecution.
In a sign of their determination, it is understood detectives have even considered questioning Blair’s police protection officers about conversations they might have overheard.
One police source said: “The protection officers might have heard conversations between Blair and others, including possibly Lord Levy [Labour’s chief fundraiser].”
It was an issue that was also raised during the investigation into former US president Bill Clinton by Kenneth Starr, the special prosecutor. Starr subpoenaed Clinton’s secret service agents to help gather evidence against him.
However, senior officers yesterday said any approach to Blair’s officers had been ruled out as unethical.
Last week it was announced detectives had interviewed under caution 13 of the 48 people they have questioned. Levy, dubbed “Lord Cashpoint”, was arrested because, according to police sources, he was not fully co-operating. Levy denies the allegation.
Downing Street is preparing for Blair to be interviewed by police, and evidence provided by Levy is understood to point to Blair’s key role in the scandal.
The affair even drew sarcastic comment last night from Vladimir Putin, the Russian president, at the G8 summit in St Petersburg. Asked by a British journalist how he would deal with Blair’s inevitable questions about Russian democracy, he said: “There are also other questions. Questions, let’s say, about the fight against corruption. We’d be interested in hearing your experience, including how it applies to Lord Levy.”
One ally of Levy said this weekend: “It is Blair who makes the final decision at the end of the day [on who gets peerages]. Levy cannot offer peerages or anything else to these people.”
Levy has told friends he was against loans but Blair overruled him because Labour was in a “desperate” financial situation. This week Labour will publish its annual accounts, which are expected to show the party has £27m of debts.
“People came with loans over the years, but Levy said he couldn’t do that, he wouldn’t do that,” said a well-placed source.
“But the party did not have a bean to fight the election last year. So Matt Carter [then Labour’s general secretary] had to get approval from the prime minister on whether we would start accepting loans. Blair agreed. Obviously, Levy is asking for gifts.
“If people said they didn’t want any publicity or grief, but they were prepared to give a loan, Levy had to go back to the party and say, ‘Look, I have someone who is prepared to give a loan’. This then goes back to Blair, who has to say yes or no to accepting it. To have a go at Levy for doing his job is just not fair.”
The police are trying to establish whether the loans were made on a proper commercial basis or whether Labour was trying illegally to hide donations.
Officers are also investigating whether the businessmen were offered the prospect of being honoured before lending the money.
Last week Noon, one of the lenders nominated for a peerage, claimed he had been told to change a disclosure form to be sent to the Lords appointments commission.
However, when contacted by The Sunday Times in March, he first denied he had ever made a loan. Later, he said: “I was not sure whether I made a loan or a donation. But I found out about it later and I think it was a small loan.”
Now Noon, who has been interviewed by police, claims he initially filled in the form, which asks about financial contributions, declaring the loan, before sending it to Downing Street. He claims to have been contacted by Levy who told him to remove it from his declaration — a claim denied by the Labour peer.
A source claimed Noon contacted Levy and asked him whether he should change the form. “Noon phoned up Levy in a panic. Levy didn’t even know he had sent the form in until Noon told him.
“Noon asked if he should get the form back and Levy said it was up to him but he couldn’t show a loan as a gift.”
Blair’s meeting with Noon on June 20 will lead to further questions about the prime minister’s judgment. According to The Independent on Sunday, Blair gave Noon the impression that, despite the scandal, he was still keen for him to become a peer. Blair is also said to have sent a handwritten note to Townsley and Garrard expressing his regret that they had not been given peerages.
Police are also understood to be studying the Tories’ loan arrangements to establish whether they were on a commercial basis. Detectives are believed to have interviewed Bob Edmiston, who lent the Tories more than £2m and whose nomination for a peerage was blocked by the appointments commission last year.
Labour sources allege the Tories redrafted several loan deals, raising the rates of interest paid from below the Bank of England base rate to above it.
