Tycoons face police on cash for honours

MILLIONAIRE businessmen who secretly lent money to the Labour Party have been warned that they will be questioned by Scotland Yard in the criminal investigation into allegations of peerages for sale.

The Times has learnt that 12 businessmen, including four whose peerage nominations were blocked by the House of Lords Appointment Commission, have been told by Labour to expect the police to approach them after Easter.

The revelation comes after detectives yesterday arrested Des Smith, 60, a head teacher and former adviser to the Specialist Schools and Academies Trust (SSAT), which recruits sponsors for the city academies, specialist schools partly funded by the private sector.

Mr Smith resigned after being taped by an undercover reporter apparently promising potential donors OBEs, knighthoods or peerages in return for funding an academy.

The arrest has thrust Tony Blair, who made developing city academies a key education policy, into the centre of the growing political scandal. Lord Levy, who is Mr Blair’s personal fundraiser and who negotiated most of the secret loans, is president of the SSAT. He was appointed last September, with the trust saying that he had played “a key role in raising sponsorship” for city academies.

The arrest triggered a near-meltdown in Downing Street yesterday. Mr Smith boasted to the undercover reporter that he was a regular visitor to Downing Street in his work for the academies. There was shock at No 10 that an arrest had been made, and that the police inquiry had been widened to cover city academies. One party figure said: “It’s a relief that it is someone not associated with the Labour Party, but the worry is that as a result we have no idea what he is saying in there.”

Suspicions of a link between honours and donations to the academies have existed since the programme was set up in 2001. Six of the biggest sponsors have been honoured after pledging money.

Two sponsors, Sir David Garrard, the property developer, and Barry Townsley, a City broker, made donations of £2.4 million and £1 million respectively. They were both put forward for a peerage by Mr Blair. The blocking of their nominations by the Lords Appointments Commission triggered the police investigation.

Lord Levy, who persuaded many businessmen to make loans rather than donations, thereby circumventing rules that donations of £5,000 or more be disclosed, has also been told to expect a visit from Scotland Yard.

He attended his first council meeting at SSAT’s headquarters in November. One source told The Times that he arrived late “because he said he had been in a meeting at No 10”.

A source close to the investigation said: “The police have contacted the Labour Party, but not yet spoken to the donors. They know who they want to talk to.”

Friends of Sir Gulam Noon, the curry magnate, whose peerage was blocked by the commission because of his secret loan, said he was told by Lord Levy not to declare it.

Mr Smith, a head teacher in Dagenham, East London, was arrested at his home in Wanstead by the Specialist Crime Directorate under the Honours (Prevention of Abuses) Act 1925. He was released on bail last night.

Mr Smith told the undercover reporter that a peerage would be a “certainty” if support was forthcoming for up to five academies, involving a contribution of about £10 million. He later insisted it was not possible to secure such rewards.

The arrest comes at a critical time for the academy programme, which is rapidly expanding from 17 schools at present to 100 in two years. The SSAT is desperate to find suitable backers. Officials close to the project said the arrest, and links to sleaze, could jeopardise plans to attract leading corporate companies.

THE PATRONS

Sir Clive Bourne, life president of Seabourne Group, gave £2 million to open Hackney Mossbourne City Academy in 2004. Knighted 2005.

Roger de Haan opened Marlowe Academy in Kent in 2005 with £1 million sponsorship. Backing plan for Folkestone Academy (in development). CBE in 2004

Sir David Garrard, property tycoon and chairman of Garrard education trust, knighted 2002. Opened Bexley Business Academy with £2.4 million sponsorship. Peerage blocked

Sir Ewan Harper, chief executive of United Learning Trust, Lambeth Academy (opened 2004), Paddington Academy (in development). Knighted 2003

Sir Frank Lowe advertising agency founder, counts Tesco, Coca-Cola and Unilever on client list. Opened Capital City Academy in 2003 with £2million sponsorship. Knighted 2001

Jack Petchey, backing new academy in Hackney, to open this year for £2 million. OBE in 2004

Barry Townsley, stockbroker, sponsored Stockley Academy, Hillingdon, (opened 2004) for up to £2 million. Peerage blocked

Sir Peter Vardy, car dealer and founder of Emmanuel Schools Foundation, offered £2 million to set up Christian-based city academies. Knighted 2001

Copyright 2006 Times Newspapers Ltd.