Friday, July 21, 2006

Funny money

In all the fuss over the question about party funding, Iain Dale has an interesting revelation - the companies established by Michael Brown and used as vehicles for a donation to the Liberal Democrats of £2.4 million are about to be struck from the register at Companies House for failing to submit returns.

Needless to say, the Liberal Democrat anonymous bloggers are out on Iain's blog with their own version of the truth. One holds that the Political Parties and Electoral Registration Act 2000 - which legislates for all of this - defines a company as doing business in the UK if it is registered and suggests that this might be a legal loophole that would allow the Liberal Democrats to keep the cash. OK, for the benefit of the tape, here's the relevant section of PPERA

54. - (1) A donation received by a registered party must not be accepted by the party if-

(a) the person by whom the donation would be made is not, at the time of its receipt by the party, a permissible donor

(2) For the purposes of this Part the following are permissible donors-
(a) an individual registered in an electoral register;
(b) a company-
(i) registered under the Companies Act 1985 or the Companies (Northern Ireland) Order 1986, and
(ii) incorporated within the United Kingdom or another member State, which carries on business in the United Kingdom

The company must be registered, but it must also carry on business. As the Inland Revenue have had no dealings with the company and no returns have been filed, it seems unlikely that the Liberal Democrats could claim that the company was carrying on business at the time the donation was received.

Another comment says that the Electoral Commission investigated the donation and found that the Liberal Democrats acted reasonably.

True - up to a point.

You see, the initial investigation last year did indeed find that they acted reasonably, but also required the Liberal Democrats to tighten up their checking processes - which had previously amounted to an assurance from Michael Brown that his company did indeed 'do business' in the UK. However, the Electoral Commission haven't given up and the investigation is ongoing - it is currently suspended to allow the police a clear run at Mr Brown pending possible charges.

If the donation is deemed to be unlawful, then the Electoral Commission can obtain a court order to forfeit the sum. That order would be obtained under the civil standard of proof - the balance of probabilities. Unless the Liberal Democrats can come up with some very nifty legal footwork, then I think they face a real funding crisis. Perhaps one or two of their tame millionaire MPs could be prevailed upon to donate some extra cash?

The worst thing about it is that the donation came too late in the campaign to make a real difference and was just spent recklessly, rather than being targetted on key activities like voter identification.

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