The claim
“The money was not Asil Nadir’s to give although we thought it was at the time. Therefore the Tory Party has a duty to return it.”
Lord McAlpine, 24 August 2012
The background
The Conservative Party is under mounting pressure to give back hundreds of thousands of pounds donated by Asil Nadir’s Polly Peck International (PPI) empire in the late 1980s.
The then-party treasurer, Lord McAlpine, has said David Cameron is under a “moral duty” to return “tainted” gifts amounting to £440,000.
The Turkish Cypriot tycoon stole £28.8 million from the business before fleeing the country in 1993. He returned to Britain in 2010 to stand trial and was jailed for 10 years for theft on Wednesday.
Lord McAlpine said: “The money was not Asil Nadir’s to give although we thought it was at the time. Therefore the Tory Party has a duty to return it.”
The analysis
The judge in Nadir’s trial found that his theft of £28.8m from PPI’s accounts contributed to the company’s crash in 1990. The collapse left debts of £550m and spelled ruin for some of the company’s creditors, which included pension funds and individual investors.
Nadir’s creditors are now seeking to reclaim £374m in assets from Nadir, and administrator Kevin Hellard said: “The Conservative Party has previously stated that it would repay the funds donated by Mr Nadir in the event that he is found guilty and we confirm that we have requested the repayment of those funds.”
The Tories’ position now is in fact the same as it was in 1993, when the then-party chairman Sir Norman Fowler said: “If we receive proof…that the money we received was stolen, we will return it.”
Labour have seized on press reports of a letter written by PPI’s administrator to the Conservatives in 1993 demanding the return of the money.
Chris Morris of Touche Ross reportedly wrote to Conservative central office claiming that £365,000 of the £440,000 in donations did indeed come from money stolen from Polly Peck’s accounts.
On the face of it, this letter could be a powerful document, but the Conservatives told us they can’t find a copy of it. In fact, the Tory press office was widely quoted today as doubting its very existence, although they denied having said that when we spoke to them.
It’s unfortunate that this document has disappeared, and a little surprising, as Sir Norman told the Commons in 1993 that he had received the letter and promised to “consider” it. A party spokesman said at the time that it was in the hands of lawyers, who were evidently a little careless about filing it.
Could Touche Ross dig a copy out for us? The company is now part of Deloitte Touche Tohmatsu Ltd, one of the big four accountancy firms, and a Conservative Party donor itself, having made hundreds of thousands of pounds of payments in kind to the party while it was in opposition.
Do they have records of the 1993 correspondence? A spokeman said the firm was unable to offer any comment.
We got hold of Mr Morris, the administrator in 1993, and he recalled an exchange of letters, but said the end result was bad news for Polly Peck creditors at the time.
He said: “I believe there was correspondence on this issue and eventually our legal advice was that there were no grounds to recover the funds which I think were paid by Polly Peck International.
“The company had not itself been accused of fraud, only Mr Nadir. At the time of the payment PPI appeared to be solvent.”
Is the legal case be stronger now after an extensive Serious Fraud Office (SFO) investigation into Nadir’s affairs?
The Conservatives apparently think not, as they are sticking to the defence that the money came not from the man but from companies he set up, so cash siphoned off by Nadir himself did not directly enter party coffers.
The tycoon was convicted of ten counts of stealing the equivalent of £61m in today’s money from PPI bank accounts between 1987 and 1990, a period when he was also making donations to the Conservatives.
Although there was evidence in the trial that Nadir had used stolen money to make a charitable donation in his own name, the Conservatives said in 1993 that when it came to political donations, the money was channelled through PPI and another Nadir company, Unipac Packaging Industries.
SFO prosecutors said Unipac’s accounting records “were suspected of being created to convey the illusion of actual cash” in a bank he also owned. This was all part of a complex series of transactions involving strings of companies designed, in the words of the judge, “to obscure and conceal the reality of what you were doing”.
If one of the companies used to make the donations was part of this subterfuge, where does that leave the Conservatives, legally and indeed morally?
We also know that Nadir was not only a shareholder in PPI, the other company that donated to the party, but used some of the stolen money to buy his shares.
The verdict
If nothing else, the Conservatives have always been consistent in their position on the Nadir cash. They have always said they would give it back if it was proved to be stolen.
But given the nature of Nadir’s crimes, it’s hard to see that as anything other than a highly technical, if not cynical, line to take.
Two companies were used to channel money to the party. One of them was directly implicated in the chain of dodgy accounting that Nadir used to cover his tracks, and Nadir used stolen money to buy shares in the other one.
Having said that, it’s difficult to see who has the power to force them to pay the money back.
Other political parties have in the past managed to keep hold of suspect donations by employing a similar strategy to the Conservatives. The Lib Dems avoided paying back £2.4m donated by Michael Brown, who was later convicted of fraud.
The Electoral Commission ruled that the Lib Dems had received the money “in good faith” from a company Brown used to make the donation while living abroad.
In the case of Nadir, the commission is not even going to investigate, because the donations took place before the organisation existed.
The legal wrangling over the Nadir cash will continue, and we don’t know what the outcome will be for the Conservatives.
In the meantime, our advice to anyone with criminal inclinations who is keen to funnel money to a UK political party is to make sure you do it via a company.
By Patrick Worrall
