Rudy Giuliani, the Republican front-runner in the presidential race, is receiving policy advice and money from a billionaire investor in “vulture funds”, the activities of which have been condemned as “nothing short of scandalous” by Gordon Brown.

In an early sign of the attacks that will be made against the former New York Mayor if he wins the 2008 Republican presidential nomination, Democrats are highlighting the role being played in his campaign by Paul Singer, the chairman and founder of Elliott Associates - which is worth around $8 billion.

The Democratic National Committee is citing reports describing Mr Singer’s firm as operating the world’s biggest “vulture funds”, so-called because they feed on weakened economies, including those of developing countries.

Mr Brown, shortly before becoming Prime Minister this year, urged rich nations including the US to stop such funds undermining his own efforts to eradicate Third World debt.

“I deplore the activities of so-called vulture funds that seek to profit from debts owed by the poorest countries in the world.” In one instance, Mr Singer’s firm paid $11 million for discounted Peruvian debt and then sued the Government through a Brussels court for full payment of $58 million. Another more recent case has seen an Elliott Associates affiliate, Kensington International, buy $100 million of debt that the Republic of the Congo defaulted on for $39 million and then sue the impoverished nation for $375 million.

Mr Singer last night hit back at the “name-calling” which has characterised his operation as a vulture fund and suggested that countries which pay their debts in full will find it easier to attract new investment. “Every country has poverty, including the USA. Firms like Elliott sometimes are able to purchase debt at steep discounts precisely because of the success that some governments have in browbeating creditors and instilling an atmosphere of fear and helplessness among creditors.”

Mr Giuliani is already braced for intense scrutiny of his complex business affairs, including lingering questions over the departure from his consulting firm of former New York police commissioner Bernie Kerik - who was later convicted for illegally accepting gifts.

This week it was also reported that his law firm Caruso, Bracewell & Giuliani is being sued by a prominent Texas Republican. He alleges that the company conspired “to steal $10 million” in a speculative Caribbean investment scheme which resulted in the Commonwealth of Dominica revoking the British Trade & Commerce Bank’s licence.

Mr Giuliani’s supporters shrug off such claims, portraying them an an attempt to divert attention from Democratic financial scandals.

But that has not stopped the reclusive Mr Singer attracting unwelcome attention in recent weeks. He has emerged as one of Mr Giuliani’s most important backers, leasing him the Elliott Associates private jet while employees contributed more than $200,000 to his campaign this year.

He is also described as “major policy adviser” to Mr Giuliani and, according to one disputed account, has promised to raise up to $15 million for the White House bid.

The presidential campaign, however, insists it knew nothing about Mr Singer being the sole funder of an organisation seeking to change California’s electoral laws which Democrats claim was a “dirty tricks power grab” for Republicans to maintain their grip on the White House.

Mr Singer says he contributed $175,000 to a group called Take Initiative America “because I believe in proportional voting in the Electoral College”. Disclosure of his involvement has seen senior figures quit and the intiative now appears stalled.

Take Initiative America was campaigning to end the current “winner takes all” system for allocating votes in the delegate rich state of California which usually backs Democratic presidential candidates. The consequence of this proposal would have been to tilt the Electoral College which decides who will be president decisively in the Republicans’ favour.

Mr Giuliani’s spokesman said contributions by Mr Singer were “completely independent of our campaign.” The former New York mayor claims it would not, in any case, have been in his best interest because he believes he can win California outright.

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