Donorgate, otherwise known as the Dodgy Donations Scandal, the Labour Funding Fiasco and much else besides, was yet another scandal that rocked Gordon Brown's Labour government towards the close of 2007.

1. Operation Under the Water

On the 20th November the Electoral Commission published a quite routine report detailing the donations and loans received by British political parties during the third quarter of 2007. There in the list of the Top Ten donors to the Labour Party, behind the names of David Sainsbury and Mahmoud Khayami and a number of Trade Unions, were the names of Raymond Ruddick and Janet Kidd with one donation apiece of £80,000. Now whereas Messrs Sainsbury and Khayami were quite well known, no one had previously head of either Mr Ruddick or Ms Kidd. Further research revealed that since 2003 Mr Ruddick had donated the grand total of £196,850 to the party, whilst Ms Kidd had chipped in with the sum £185,000. This aroused the curiosity of journalists at the Mail on Sunday who decided to find out more about these generous benefactors to the People's Party.

Raymond or Ray Riddick turned out to be a jobbing builder who drove a battered Ford Transit and lived in a former council house on the Blakelaw estate in Newcastle, and as one Labour MP later put it, "the only way anyone there would have that sort of money is if they were very lucky or they were drug dealers". When the Mail on Sunday tracked Ray Riddick down at his home on the 22nd November to ask him about his political donations he declined to make any comment. When they returned the following day he was a little more forthcoming but simply told the Mail journalists that they were "barking up the wrong tree" and that "I've never voted in my life. I can't stand Labour. I can't stand any politicians." Some eight hours later however, he contacted the paper and admitted that he had indeed donated to the party, although he refused to be drawn any further on the matter and took the time to repeat his claim, "I do not like the Labour Party or politicians." The Mail on Sunday however noted that both Ruddick and Kidd were closely connected with a property developer named David Abrahams, described as a "leading Labour figure in the north-east", who was known to have contributed to Hilary Benn's deputy leadership campaign.

News of this emerging story was all around Fleet Street on the Saturday, which led to the rest of the press scurrying around to produce their own take on the story. Whilst the Mail on Sunday duly published its exciting revelations on the 25th November, the Sunday Times tracked down Abrahams who simply said that he was "not bothered" by the story, although he was prepared to admit to The Guardian that the money had indeed originally been his. Abrahams claimed to be "a very private person" who "did not want to seek publicity" and complained that it was "diabolical how people who want to give money to parties are made to feel like criminals". Mrs Kidd's husband, Michael Kidd subsequently turned up on BBC Radio Five Live to confirm that his wife had been given the money by Abrahams "with the clear instruction to donate it to the Labour Party" and that she "saw it as part of her job".

This might well have been bad enough, but on the evening of the 26th November it then emerged that a solicitor named John McCarthy had also made six donations amounting to £202,125 over three years on behalf of the same David Abrahams. Then on the following day a fourth go-between emerged in the form of a lollipop lady named Janet Dunn, whose husband Anthony had once worked for Mr Abrahams in the past, and had donated £25,000 to the Labour Party back on the 31st January 2003. When initially approached the Dunns denied knowing anything about a donation to the Labour Party, indeed as Mr Dunn put it "My wife and I are both lifelong Tory voters and I was once a member of the Conservative Party". However after checking their bank statements they later confirmed that Mrs Dunn had indeed banked a cheque for £25,000 from Abrahams and given him a blank cheque for £25,000 in return. They were now apparently "very upset" and complained that they'd "been used".

In fact the total amount of money given by Mr Abrahams through these various individuals rapidly increased until it reached the sum of £673,975, but what later made things interesting was the suggestion in the The Observer of the 2nd December that this was all the result of a Conservative initiative codenamed Operation Under the Water, whilst the Sunday Telegraph noted on the same day that a certain Richard Hardyment, a research assistant for John Derek Taylor, the Baron Taylor of Holbeach and the Conservative Shadow Minister for Environment, Food and Rural Affairs, had earlier submitted a request under the Freedom of Information Act to the Department of Transport for information about the ministry's dealings with both Janet Kidd and Ray Ruddick. Whilst no one from the Conservative Party stepped forward to claim the credit, if it was indeed a "sophisticated Tory operation" which had sent the Mail on Sunday scurrying up north to investigate potentially controversial Labour donors, then it can only be said that the mastermind behind Operation Under the Water succeeded beyond their wildest dreams.

2. The Political Parties, Elections and Referendums Act 2000

Having been elected in 1997 promising an end to 'Tory sleaze', the new Labour government decided to 'clean up' party funding by passing the Political Parties, Elections and Referendums Act 2000 (generally known in the trade as PPERA for understandable reasons). Amongst other things this piece of legislation required political parties to keep records of who had given them money, and report said donations to the Electoral Commission so that they became a matter of public record and everything could be seen to be above board. In consequence the Act created many new criminal offences such as those of "failing to provide information about donors", "knowingly giving a party false information about donations" and "withholding information from a party with intent to deceive", all of which bore a maximum penalty of a fine of £5,000 and a year's imprisonment.

Fairly obviously, if it was a legal requirement for a political party to disclose the identity of its donors, then it follows that it was going to be illegal to hide the identity of the donor by pretending that the money came from someone else; or to quote from the Labour Party's own 2005 Treasurers' Handbook: "If a person gives another person money, which the second person donates, the donation is from the first person: the second person is disregarded as an agent...donors cannot hide behind 'fronts'." However this fairly basic requirement of the law appears to have escaped the notice of many in the Labour Party as events soon showed.

3. The Dodgy Donations pile up

Given all the information that entered the public domain by the 26th November, a Labour Party spokesman emerged to tell the nation that the party was "beyond reproach in this matter", and announced that the party's General Secretary had "been asked to investigate this issue and report his findings to the party's Treasurer". On the following day, in what the Daily Mirror described as "a new hammer blow", the General Secretary Peter Watt and the man charged with conducting the investigation, promptly resigned and issued a statement stating that, "I was aware of arrangements whereby David Abrahams gave gifts to business associates and a solicitor who were permissible donors and who in turn passed them on to the Labour Party".

Over the succeeding days it emerged that Janet Kidd had indeed been quite busy with someone else's cheque book, and that she had made a number of contributions to the personal campaigns run by various Labour Party figures during the sundry leadership contests earlier in June. It appeared that Janet Kidd had sent Gordon Brown a cheque to help fund his leadership campaign, but his campaign team declined the cheque "as she was not known to them". She also sent Hilary Benn a cheque for £5,000 to help fund his deputy leadership campaign, when one of Benn's supporters Margaret Jay, otherwise known as the Baroness Jay of Paddington, made everyone "aware that this donation was on behalf of Mr David Abrahams", and therefore it was refused. Abrahams subsequently made a donation of £5,000 to the campaign in his own name, which was accepted and reported to the Electoral Commission, although apparently Hilary Benn was "completely unaware that Mr Abrahams was making donations to the Labour Party nationally via others." Janet Kidd also sent Harriet Harman a cheque for £5,000 for her deputy leadership campaign, although in this case the funds were received on the 4th July (after Harriet had won the election for deputy leader), as according to The Times Ms Harman's campaign team had been actively seeking funding to pay off the debts she had incurred during her ultimately successful campaign. However, in contrast to her colleagues Harman accepted the money (in "good faith" as she later put it) and even sent Janet Kidd a thank you letter.

As it turned out, it was the last of these that proved the most troublesome, since of course Harriet had actually pocketed what was now seen as a 'dodgy donation'. Sources described as "friends of Ms Harman" however claimed that she was rather peeved at having "been stabbed in the back by these people in the North-east", and named one Chris Leslie as the man who recommended that she seek a donation from Janet Kidd. The point here being that it was Chris Leslie who acted as the co-ordinator of Mr Brown's own leadership campaign, and since Ms Harman's friends were in possession of a covering letter from Mrs Kidd when she sent the cheque which said, "further to a conversation with Chris Leslie", they appeared to be suggesting that she'd been deliberately dropped in it by Mr Brown and his friends. Although Leslie emerged to admit that he had indeed passed Kidd's details onto Harriet's supporters in response to an approach they had made to him, he denied knowing anything about Janet Kidd, or making any representations as to her suitability as a donor, and insisted that it was up to Harriet's lot to check such things.

All of which led to newspaper headlines on the 30th November such as 'Labour at war over party donations', or as The Guardian put it 'Harman implicates Brown', and the development of frosty relationship between the leader and deputy leader. Many of the papers noted that during a press conference Gordon Brown was repeatedly asked whether he had any confidence in Harman, and only responded in the affirmative at the seventh time of asking. Although, as many pointed out, Gordon never liked Harriet that much in the first place

4. David Abrahams and Jon Mendelsohn

David Abrahams was a curious if not controversial figure in Labour politics in the north-east of England. A millionaire property developer, who also operated under the name David Martin, he was once selected as the Labour candidate for Richmond in Yorkshire, only to be de-selected when allegations emerged that he had paid a divorcee named to Anthea Bailey to pretend to be his wife in order to help him secure the nomination. Whilst this brought an end to whatever political ambitions he might have harboured, he continued to be a supporter of the Labour Party, and according to a "senior Labour MP" found by the Mail on Sunday Abrahams harboured an ambition to become a member of the House of Lords.

Faced with the various revelations regarding his use of no less than four different people to launder donations to the Labour Party, David Abrahams claimed that he was not aware of the fact that there was anything "untoward" in these arrangements and that "I didn't have the rule book in front of me when I suggested the donations", and seemed to imply that it was the Party's job to check the rule book. Indeed when Abrahams appeared on Newsnight on the 27th November he insisted that as far as he was concerned the Labour Party were quite well aware of what was going, and as supporting evidence referred to a "personal message from Jon Mendelsohn" that he had just received at 1.30 that day. He duly read an extract from the letter in which Mendelsohn wrote that he was "very appreciative of all the help and support you have given over many years". The importance of said communication being that Jon Mendelsohn had been appointed as Director of General Election Resources by Gordon Brown on the 3rd September 2007, and was therefore a senior figure in the Labour hierarchy and commonly known as "Brown's chief fundraiser".

Mendelsohn later explained that although he was aware of what was going on, he had been told by Peter Watt that "this was an arrangement with David Abrahams which was long-standing" and "fully complied with the law". Although Mendelsohn claimed to have "no reason to doubt that information", he decided that this "method of contribution was unacceptable" and that his letter to Abrahams was simply "a polite and courteous request" for a meeting at which he was planning to tell him of that decision. In many ways this was a rather curious explanation, as it rather begged the question as to why Mendelsohn thought that he had the authority to terminate an arrangement sanctioned by his (at least nominal) boss without reference to anyone else in the party. Even The Guardian found it difficult to explain Mendelsohn's conduct, noting that "He did not think it fit to warn his party leader, or the police, or the Electoral Commission - all of whom should have been contacted". Even consistently loyal Jack Straw sought to distance himself from the whole thing when he appeared on the BBC Radio 4 Today programme, and rather cryptically remarked that the "precise state of mind of Mr Mendelsohn and what he then did" was a matter for others to ponder on.

Neither did this prove to be the end of the matter as David Abrahams then wrote an article for The Independent on Sunday of the 2nd December, in which he claimed that he had met Jon Mendelsohn on the 25th April 2007 at a dinner of the Board of Deputies of British Jews. According to Abrahams, he told Mendelsohn "that I regularly donated to the party" and then "described how it was done through intermediaries for the purposes of anonymity to which he replied, 'That sounds like a good idea'." Abrahams also issued a subsequent statement in which he claimed that Mendelsohn was "one of only a very few people who were aware of this method of making donations to the party". As far as Mendelsohn was concerned these allegations were "completely untrue" and "fictional" and he reiterated his position that he had only learned of what was going on in September. (A number of papers also noted that there was a certain amount of bad blood between the pair, as Abrahams had been thrown out of the Labour Friends of Israel group when Mendelsohn was its chairman.)

Whatever the truth behind the precise nature of what passed between Messrs Abrahams and Mendelsohn, this little spat did serve to illustrate the Labour Party's real problem, which was that Abrahams was insisting that knowledge of his 'laundered' donations was not simply confined to General Secretary Peter Watt. On the 6th December 2007 The Guardian put a little flesh on the bones of this suggestion, when it claimed to have established that officials from the Labour Party had helped lawyers acting for David Abrahams to draw up what it described as "complex covenants" to exploit what they believed was a loophole in the law that allowed Abrahams to hide his identity. The paper claimed that this agreement was originally made in 2003 as a result of discussions between John McCarthy and "two middle-ranking Labour officials", and that "sources close to the party" had told them that these officials took legal advice from Labour solicitors and also sought approval from "other senior party members". It all looked rather ominous as Abrahams claimed to "have letters", promised full co-operation with any investigation, and allegedly told "a friend" that "We are in the clear. I've spoken to my people and they tell me we're OK. It's the Labour lot who are going to get it."

5. Mr Gordon Brown

As far as Prime Minister Gordon Brown was concerned, the first he'd heard of the problem was on Saturday 24th November just like everyone else, but in the light of the evidence unearthed by the press he readily admitted during a press conference on the 27th November that the donations concerned were illegal and promised that the Labour Party would return all of the £673,975 involved, This statement unfortunately only revealed his own ignorance of the law, as the Electoral Commission does not permit illegal donations to be repaid to the donor as the party concerned is required to hand the money over to the Exchequer. It was also rather embarrassing since Diane Hayter, the chairman of National Executive Committee of the Labour Party, had said only hours earlier that there was no need for Labour to repay the money as "there was nothing illegal about the donations". On the following day Brown then announced that there would be an internal party inquiry into the whole affair to be conducted by the retired judge Lord McCluskey and Lord Harries of Pentregarth, the former Bishop of Oxford.

Despite these attempts to dampen down the sense of crisis, it nevertheless all triggered the sense of stunned astonishment which engulfed many Labour MPs as they came to grips with the news that their party had been caught lying to the Electoral Commission and that their General Secretary had resigned in disgrace. Added to the various troubles of the election that never was and the Datagate fiasco, Gordon Brown's government began to take on the air of a "Shakespearean tragedy", as the Labour backbencher Bob Marshall-Andrews put it as he spoke of "an atmosphere of inevitable and impending doom".

This was the background to the famous session of Prime Minister's Questions on the 28th November during which Mr Brown's hands were seen to be shaking violently, (although opinions differed as to whether this was from anger or nervous strain), and Vince Cable (acting leader of the Liberal Democrats) scored a palpable hit when he referred to the "the Prime Minister's remarkable transformation in the last few weeks from Stalin to Mr Bean." At times Brown was said to have become virtually incoherent as he repeatedly rebuffed demands from both the opposition parties to call in Scotland Yard to investigate what he had already admitted were illegal donations, and was left, as The Guardian leader of the 29th November put it, "Mr Brown gulping like a drowning man". This led Jeff Randal of the Daily Telegraph to call Brown the "Trabant of British politics" (as in you wait ten years for delivery, then the wheels come off six months later), whilst Matthew Norman in The Independent offered the opinion that Gordon Brown was "so irredeemably finished that the only sensible option open to him is to resign". There were of course, no indications that Brown had any intention of heeding Mr Norman's advice, but the upshot was that the entire British press soon found themselves running more or less the same story under the theme of 'Tories open historic poll lead over Labour', noting that the Conservative Party had now opened up their biggest lead over Labour since Margaret Thatcher was at the height of her powers as Prime Minister some twenty years previously.

Naturally the Labour Party made attempts to implicate its political opponents in similar funding peccadilloes by mentioning the Midlands Industrial Council as well the money provided by Michael Ashcroft, the Deputy Chairman of the Conservative Party who held dual UK and Belize nationality, without necessarily getting very far. When the Secretary of State for Justice Jack Straw was left to speak for the Government during the House of Commons debate on the scandal on the 5th December and made a valiant attempt to claim that the other parties were just as bad, he was rather put in his place by Francis Maude who pointed out, "There's only one party here that's being accused of law-breaking. There's only one party whose leader has admitted the law was broken. Just in case you haven't got the message, it is your party."

To rub salt into the wounds Scotland had its own little funding scandal (naturally dubbed Wendygate), after Wendy Alexander who had been elected as Scottish Labour leader in August 2007 in succession to Jack McConnell, who had resigned after the party's defeat in the elections for the Scottish Parliament of May 2007. The Sunday Herald had been looking into rumours that Ms Alexander's campaign "kitty had been stuffed full of '995s'"; which is to say that her leadership campaign had sought to dodge the rules on declaring donations by requesting gifts that were just below the £1,000 limit. This indeed proved to be the case as a total of twenty-seven such donations were identified, but in so doing the Herald also stumbled across the fact that Alexander's campaign had solicited a cheque for £950 from a developer named Paul Green. Unfortunately Mr Green was a resident of Jersey, and so not entitled to vote in UK elections, and therefore not a permitted donor. Charlie Gordon, the MSP who had sought the donation on Alexander's behalf, duly announced his resignation as Labour's transport spokesman at Holyrood, although Alexander maintained her innocence, and brushed aside the clamour for her resignation, despite further allegations by the Sunday Herald of attempts to mislead the Commission by "switching" the names under which donations had been made.

For his part Paul Green claimed that the Labour Party seemed to be "rather confused" about the whole thing and that it was "a pretty safe bet" that he would not be making any further donations to the party, and that in future he would be donating to Children in Need, on the grounds that it would "not be quite as controversial"

6. Operation Minera

In response to the original Mail on Sunday story, the Electoral Commission announced on the 26th November 2007 that it had launched a formal investigation into whether there had been any failure to comply with the Political Parties, Elections and Referendums Act 2000 in connection with donations made to the Labour Party. On the 30th November it formally handed over its report on the affair to the Metropolitan Police and announced that the police would be reviewing the contents of the report. Operation Minera was duly launched to investigate "potential breaches" of the PPERA and naturally has the support of Gordon Brown who on the 1st December urged the police to carry out "the fullest possible investigation".

Comparisons were naturally drawn with the investigation into the Cash for Peerages affair which so bedevilled the final months of Tony Blair's premiership but nevertheless resulted in no charges being bought against anyone. Whether Operation Minera fairs any better in this regard remains to be seen, although even in the best-case scenario the Labour Party has been forced to relinquish the best part of £700,000 which it rather needed to pay the bills.

Abrahams and the Durham Green Business Park

At the time the 540-acre Durham Green Business Park was under development just off junction 61 of the A1 to the south of the city of Durham, by the company Durham Green Developments, which although owned by David Abrahams had only two directors named Ray Ruddick and Janet Kidd. Planning permission for this development was initially refused in 2004 and the Highways Agency imposed an Article 14 ban on the development on the grounds that it risked causing further congestion to the already busy motorway. In the course of the next twelve months both Ruddick and Kidd made a series of donations to the Labour Party on Abrahams' behalf totalling some £199,000. In October 2006 the Highways Agency removed its objections, the Article 14 ban on the development was lifted, and the planning application was approved on the instructions of the Secretary of State for Transport Douglas Alexander. However anyone who made a connection between these events would be quite wrong, as Abrahams threatened legal action against anyone who suggested he had given the money "in exchange for favours" and stated that "Any suggestion that I have made donations in exchange for favours is false and malicious."

In response a request from her Conservative counterpart Eric Pickles, the Secretary of State for Communities, Hazel Blears, promised a cross-departmental inquiry into the matter on the 27th November, only to announce in the Commons on the 4th December that there was no evidence to justify an inquiry. Hazel insisted that the ministers in her department "played no part" in deciding the case and that Douglas Alexander, the Secretary of State for Transport at the time, "had no involvement in any part of the process". The Liberal Democrat Chris Huhne also had a meering with Detective Chief Superintendent Ian Scott, the head of Durham Police CID and appeared to be under the impression that they were conducting an investigation into the affair, although whether there was one or not was another matter. It appeared however that the initial refusal to grant planning permission was because the original plans didn't meet certain technical requirements rather than to any objection in principle to the Business Park, and so permission was granted once the plans were altered to meet those requirements.


SOURCES

Based on reports from BBC News, The Guardian, The Times, The Daily Telegraph, The Independent, The Herald, The Daily Mail and their Sunday equivalents in the period between the 26th November and the 3rd December 2007.

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