Directors of the failed engineering company Transtec are vigorously denying charges that the company's former owner, ex-Labour minister Geoffrey Robinson improperly claimed government business grants.

In a statement two former directors MS Ahmed and JAG Knight, said "grants were correctly and fully accounted for and all procedures relating to them were properly observed".

Their statement contradicts allegations made at the weekend by the company's former chief accountant Max Ayriss who said grants applications had been improperly "maximised" and that government money in the form of grants had not been used in the "spirit" in which it had been intended.

However, Mr Ayriss told the BBC he refused to retract his allegations following publication of the letter.

On BBC Radio 4's The World Tonight, he said: "It is quite interesting that Geoffrey doesn't reply himself, he hasn't denied the allegations."

On Monday Mr Ayriss, said that a five-figure sum had been involved in several different applications for DTI grants by Mr Robinson's businesses.

He said if a claim came below the amount that TransTec could get, "Geoffrey indicated how to maximise it".

Mr Ayriss added that the Labour MP also obtained a £30,000 grant from the DTI to buy a factory building which he was not planning to occupy but simply wanted to let.

Media silence

The letter issued by the two directors also comes after the government invited all those with evidence on Mr Robinson's business dealings to step forward.

The millionaire businessman and Labour MP has maintained a media silence since the government announced it was investigating alleged irregularities in his business affairs.

Sami Ahmed, said: "We write to refute the aspersions cast by Messrs Ayriss and Dickinson on the propriety with which DTI product development contracts were carried out whilst we were employed as directors of Transfer Technology Limited (TransTec) in the relevant periods.

"These grants were correctly and fully accounted for and all procedures relating to them were properly observed.

"The DTI not only inspected and approved all claims submitted, which were in turn vetted by our auditors, as required, but also thoroughly evaluated the work carried out and the equipment developed."

No retraction

However, Mr Ayriss said that one of the signatories, Dr Jeff Knight, had nothing to do with the grant applications.

"I stand by my statements," said Mr Ayriss. "I am quite prepared to stand up in a court of law and swear that."

He added: "It is not about money this - it is about truth."

The government ordered an inquiry into the collapse of the Midlands-based company at the end of last year amid revelations of irregularities in its accounts.

Mr Robinson founded TransTec in the early 1980s but resigned as chairman when he joined the government in 1997.

The company collapsed just before Christmas, going into receivership amid claims of accounting irregularities.

A Labour insider

Geoffrey Robinson has been a controversial figure since before he left the government a year ago in connection with a secret £373,000 loan made to Peter Mandelson for the purchase of a house in Notting Hill, London.

The loan, made in the run-up to the 1997 general election, remained secret even when Mr Mandelson became trade and industry secretary - in charge of the department which was inquiring into some of Mr Robinson's other business affairs.

Revelation of the loan's existence led to the resignation in disgrace of both men. Mr Mandelson then returned to the cabinet as Northern Ireland secretary 10 months later.

Mr Robinson has been a substantial financial donor to Labour coffers and many senior government figures have enjoyed his hospitality. Prime Minister Tony Blair and his family holidayed twice in palatial overseas homes owned by the Coventry North West MP.

The former minister has also been a close ally of Gordon Brown, bankrolling a think-tank which helped research policies he would later be in a position to enact as chancellor.

Also in Mr Robinson's portfolio is the left-of-centre New Statesman magazine, which he bought with Mr Blair's encouragement in 1996.