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Last Updated: Friday, 23 September 2005, 08:33 GMT 09:33 UK
Lib Dems facing donation inquiry
Liberal Democrats conference
The Liberal Democrats held their annual conference this week
The Liberal Democrats are to be investigated over a 2.4m donation received before May's general election, the Electoral Commission has confirmed.

The inquiry centres on whether the donation was "permissible" as electoral law requires donating companies to be registered and trading in the UK.

The company, 5th Avenue Partners, said it had relied on the Lib Dems to ensure the donation was proper.

The party said it had acted in good faith with all donations.

But it confirmed it was in correspondence with the commission over the payment - almost half the sum spent during its election campaign.

'Due diligence'

The company is owned by a Swiss-based company headed by Scottish-born financier Michael Brown.

It had offices in London at the time of the election but it is not entirely clear whether it was trading in the UK.

Mr Brown could not give the money directly as an individual because he is not registered to vote in the UK.

An Electoral Commission spokeswoman said: "We are looking into an allegation about whether the donations made by the company, 5th Avenue, are permissible.

"We are really at the early stages of reviewing with the party where this donation came from and if the company involved are permissible donors."

If the money had to be repaid, it would leave a substantial gap in the Lib Dem finances.

The gift was the largest donation received by the Lib Dems in modern times and helped it spend 6m on its election campaign.

In a statement, Lib Dem chief executive Lord Rennard said: "We believe that we have acted in good faith and properly in relation to all donations received by the Liberal Democrats and that all donations we have received are from individuals entitled to donate to British political parties or from companies based and trading in the UK".

Proper checks?

The Times reported that Michael Brown, the Swiss-based financier who owns the firm, said he felt "totally let down" by the Lib Dems.

"If the people who handled my donation were elected to run the economy, I would not be happy - it would be disastrous," he said.

"As a donor, I rely on the party to verify that the donation is proper. In the case of the donation made by my company, very little due diligence was undertaken."

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