Bernard Carr was due to appear before Teesside Crown Court last February to answer seven charges of obtaining money by deception.

Mr Mandelson was due to appear in court as a character witness for Mr Carr.

But the proceedings were halted on the day the trial was due to begin.

Peter Mandelson is still facing questions about his mortgage application

Pressure has been mounting in the North East for an explanation of the reasons for the case's sudden discontinuation.

'Inquiries are incomplete'

Cleveland Police have confirmed its officers are examining the circumstances surrounding the collapse of the case.

A statement issued by Assistant Chief Constable Richard Brunstrom said: "Police inquiries arising from the collapse of the trial in February 1998 have not been completed.

"It is a complicated situation which merits careful and measured consideration and we will not rush to a conclusion."

It was the second set of charges to be dismissed against Mr Carr within weeks.

He had also been charged with gross indecency with an 18-year-old man following an alleged incident in a public lavatory.

Expenses mystery

The fraud case centred on expenses Mr Carr was alleged to have claimed for travelling to London to take part in a cookery competition.

The prosecution had claimed he was reimbursed by the organisers of the competition but later tried to claim expenses from Hartlepool town council for attending a housing meeting in London on the same day.

It is not known whether Mr Mandelson, who resigned as Trade Secretary on 23 December but remains Labour MP for Hartlepool, has been interviewed by police about the collapse of Mr Carr's trial.

Mr Mandelson will know in the next few weeks whether he faces a criminal investigation over his application for a mortgage for his London home.

The former Trade Secretary admitted he may not have disclosed the £373,000 loan from the former Paymaster General, Geoffrey Robinson, on his application form.