The Observer on Michael Brown and that Lib Dem donation: economic with the actualite

by Stephen Tall on September 7, 2008

The spectre of Michael Brown – currently on the run ahead of a fraud trial due to begin this month – and his £2.4m donation to the Lib Dems in 2005 returns to the headlines today, with news from The Observer that Lib Dems face court over funding:

The Liberal Democrats are facing an embarrassing High Court battle with a lawyer who says that the party wrongly accepted £632,000 of his money as part of a donation. Robert Mann, 60, claims that the party failed to carry out adequate checks on the money which was received as part of a £2.4m gift from the financier Michael Brown. … On Thursday, Mann’s solicitors at the City fraud specialists Bivonas advised the party that a writ will be placed before the Royal Courts of Justice this week demanding the return of the money. It follows an exchange of legal letters last month seen by this newspaper.

Missing from this news report of course (as we’ve come to expect from the mainstream media) is any reference to the verdict of the Electoral Commission when they investigated the case. As The Observer’s reporter Rajeev Syal has dismally failed in his duty to furnish his readers with the basic facts of the story – remarking only that the Commission’s inquiry has been suspended: true, but not the whole truth – let Lib Dem Voice once again remind readers what the Commission has said:

The Electoral Commission has previously made clear its view that it was reasonable for the Liberal Democrats – based on the information available to them at the time – to regard the donations they received from 5th Avenue Partners Ltd in 2005, totalling just over £2.4m, as permissible.

“It remains the Commission’s view that the Liberal Democrats acted in good faith at that time, and the Commission is not re-opening the question of whether the party or its officers failed to carry out sufficient checks into the permissibility of the donations.”

You might have thought Mr Syal and The Observer would have felt it worthwhile letting their readers know that the Commission had previously judged the party had “acted in good faith”. But then that might have added balance to a story; and to think journalists accuse blogs of factual tardiness.

Finally, readers may wish to speculate which party in this case cared to show to The Observer “an exchange of legal letters last month seen by this newspaper”. Might it, perhaps, have been Robert Mann in a rather crude bid to embarrass the Lib Dems ahead of the party’s conference as a legal short-cut? Surely The Observer wouldn’t have allowed itself to be manipulated in such a way? Just asking, y’know.

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And of course, if you look at the Party’s financial report to conference, it notes that it has set no money aside to cover returning Brown’s donation, following legal advice that any such claim would not succeed.
I think they’d have to be *fairly* confident to do that.

by Grammar Police on September 7, 2008 at 11:13 am. Reply #

And the rest of the Electoral Commission statement says:

“Nevertheless, we have always said that if any additional information that has a bearing on the permissibility of the donations comes to light, for example as a result of the ongoing police investigation or legal proceedings relating to the affairs of 5th Avenue, we would consider the matter further.”

I do hope you were not being economic with the actualite?

That the Liberal Democrats acted in good faith is widely accepted.

If the case is proved that the Liberal Democrats were duped by Michael Brown and benefited from money that was not his to give leaves questions about the Liberal Democrats refusing to pay back money that belongs to other people.

An embarrassing situation for a serious political party to be in.

by Alan Clarke's best lines on September 7, 2008 at 4:16 pm. Reply #

I’m not convinced that the party should feel honour bound to repay the money, but this whole incident has damaged our ability to speak on issues to do with party funding.

Isn’t it time that Clegg committed us to not accepting more than £25,000 from any individual or company a year? He keeps talking about this figure; what’s stopping us from taking unilateral action?

by James Graham on September 7, 2008 at 4:42 pm. Reply #

ACBL – if the case is proved that the money was not a permissible electoral donation, then we’ll worry about paying the money back.
James is right, we need to take action to ensure our ability to speak on party funding. Both the Tories and Labour like to use this issue to try to close down the debate.

by Grammar Police on September 7, 2008 at 6:09 pm. Reply #

Stephen, your economy with the truth amounts to parsimony. The rest of the statement which was made after Brown had been convicted of perjury and a passport offence reads:

“It is not clear to the Commission that 5th Avenue Partners Ltd was carrying on business in the UK at the time the donations were made. If not, then the donations were impermissible. Under Section 58 of the Political Parties, Elections and Referendums Act 2000, the Commission has the power to apply to a court for an order that the party must forfeit to the Consolidated Fund an amount equal to the value of any impermissible donation. We are considering the available evidence and expect to reach a decision on whether to apply for such an order in the next few weeks.”

Given that a High Court judge ruled that 5th Avenue’s activities were all fraudulent, you are misleading your readers. If Mr Mann can demonstrate to the court’s satisfaction that there was no business in the company, then either the Lib Dems will be required to return the donation or it will be forfeit. “Good faith” is irrelevant.

by Mark Williams on September 7, 2008 at 7:54 pm. Reply #

And then we’ll see if the Commission applies for an order or not, won’t we.

by Grammar Police on September 7, 2008 at 8:03 pm. Reply #

While Mark Williams has a point, what has happened since the Michael Brown debacle is that UKIP were taken to court of £400,000 in donation which were clearly inadmissable, yet only had to pay back £18k. The fact is, the UKIP case was a more open and shut one. If they escaped having to repay the full amount it is highly unlikely that any court will force the Lib Dems to do the same.

However, that was regarding the exact implementation of the PPERA. I suspect that Robert Mann has another trick up his sleeve. Nonetheless, it is a bit rich to expect the Lib Dems to pay up when it was just as encumbant on Mann himself to look into Brown before handing over £600,000. Don’t they have caveat emptor in the States?

All of this is irrelevant though. We have paid a heavy price for accepting this donation and now need to rectify the situation. The best way of doing this is to practice what we preach about donations caps.

by James Graham on September 7, 2008 at 8:15 pm. Reply #

James Graham: In the UKIP case the court distringuished between the payments that were made before the payer knew he was not on the register (allowed) and those made afterwards (forfeit). Unfortunatly the law won’t work on the basis of precedents for partial repayments, but on applying consistent legal principles to the facts of each case. If the same principle was applied to the Brown money (although there is no reason to think that it should) then Brown always was a crook and his company never traded, so all the money would be forfeit.

Regarding Robert Mann, I doubt very much that he will be claim on the basis of the Lib Dems not acting in good faith. Rather I am sure that he will claim that the party is in receipt of his stolen property and that he is entitled to its return. It doesn’t help Mr Mann to claim that the donation was impermissible, since that could lead to the money being forfeit, but the party risks losing the money to the Treasury (which would be the full £2.4m) *and* losing £600k in the courts so they have to pay Mr Mann anyway. I suspect there may be an out of court settlement and a cheque from the Quakers in York.

by Mark Williams on September 7, 2008 at 9:58 pm. Reply #

“‘Good faith’ is irrelevant.”

I don’t know the details of the case but if Mr Mann is asking for a remedy in equity (and your suggestion seems to be that this is at least partly a tracing action) then the good faith actions of an innocent third party would be highly relevant.

I can’t see that the PPERA rules will be particularly relevant to this case as confirming that someone is on the electoral register wouldn’t in any way establish their legitimate ownership of a donation.

by Hywel Morgan on September 7, 2008 at 10:17 pm. Reply #

Does anyone know of a Polly Peck customer who might like to claim their money back from the Tories. If the Treasury get the £2.4m, how can Mr Mann claim his £600k from the Lib Dems as they won’t have it any longer.

by David on September 7, 2008 at 10:21 pm. Reply #

Stephen, your economy with the truth amounts to parsimony.

Mark – I don’t really understand this. But, anyway, the question of whether the money was Michael Brown’s to give away is a very different one from whether the Lib Dems were justified in accepting the donation in the first place.

by Stephen Tall on September 7, 2008 at 10:22 pm. Reply #

Hywel Morgan: Relevance of good faith – it is irrelevant because a political party is not permitted to simply rely on the say-so of a donor, they have to take all reasonable steps to ascertain whther a donor is a permissible donor, which would include verifying that the company had a business. If Mann convinces the court that this is a donation that should have been reurned and would have been returned if proper enquiries had been made (proper enquiries in the opinion of the court, not in the opinion of a quango), then any claims of good faith are not relevant.

by Mark Williams on September 7, 2008 at 11:05 pm. Reply #

Mark Williams: “(proper enquiries in the opinion of the court, not in the opinion of a quango),”

That quango being the Electoral Commission, who’s job it is to decide whether proper enquiries have been made?

You think that the Courts will have a different view in this instance?

I suspect Mann’s main problem will be proving that it was his money that went to the LDs (Taylor v Plumer).

But the defence of change of position is relevant – as the courts weigh up which would be the greater injustice, to return or not to return. Mann’s decision to invest – compared with the LDs’ acceptance of a donation within strict time limits that the electoral commission said, on the same evidence as open to the LDs presumably, was permissible – could be relevant.

by Grammar Police on September 7, 2008 at 11:43 pm. Reply #

@David (re Polly Peck)

I have no idea whether this is true but LOrd McAlpine, former Conservative Party Treasurer claims that the donations from Polly Peck were repaid to the liquidator:

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2007/11/30/do3004.xml

Also the reason Mr Mann can claim the £600k even though it has been spent is that the validity of the claim doesn’t depend on whether or not the money has been spent, although if there is nothing left in the till, the party may become insolvent.

by Mark Williams on September 7, 2008 at 11:45 pm. Reply #

“it is irrelevant because a political party is not permitted to simply rely on the say-so of a donor,”

This would probably be an action founded on other grounds than the PPERA legislation, not least because that law wouldn’t provide Mr Mann with a remedy. There is case law holding it to be inequitable to trace to innocent third parties.

by Hywel Morgan on September 8, 2008 at 12:19 am. Reply #

“the validity of the claim doesn’t depend on whether or not the money has been spent”

No, but it might make a difference to whether he can get it back or not. And I wouldn’t get your hopes up about the party becoming insolvent if any money does have to be paid.

by A lawyer and a Lib Dem on September 8, 2008 at 8:19 am. Reply #

A lawyer and a Lib Dem Says:
“No, but it might make a difference to whether he can get it back or not. And I wouldn’t get your hopes up about the party becoming insolvent if any money does have to be paid.”

Well you can’t have it both ways. After spending the Brown donation, either the Lib Dems have the money to repay Brown/Mann or they don’t. In the latter case the party becomes insolvent.

by Mark Williams on September 8, 2008 at 7:57 pm. Reply #

Hywel Morgan Says:
8th September 2008 at 12:19 am
“There is case law holding it to be inequitable to trace to innocent third parties.”
Which is precisely why counsel for Mr Mann is likely to try to demonstrate that the Lib Dems are not an innocent party, having accepted a donation from a company that was not engaged in a business in contravention of PPERA. I am sure the past Treasurer does not relish the prospect of taking the witness stand to the asked about 5th Avenue Partners “business”. I am sure that Peter Wardle and Sam Younger would feel the same.

by Mark Williams on September 8, 2008 at 8:16 pm. Reply #

“Which is precisely why counsel for Mr Mann is likely to try to demonstrate that the Lib Dems are not an innocent party,”

I agree – but in proving that point the issue of good faith conduct is likely to be highly relevant (which you were claiming it wasn’t).

“having accepted a donation from a company that was not engaged in a business in contravention of PPERA”

Also relevant but I think he’d have to go further than that to win his case as PPERA checks wouldn’t establish the legitimate origins of the money. Mr Mann might also legitimately be asked why if he couldn’t identify Browns true intentions (he was after all putting at risk a substantial amount of money) the Lib Dems would have been able to in what is a very short timeframe.

by Hywel Morgan on September 9, 2008 at 12:18 pm. Reply #

I dealt with this issue a lot when I was working at the press office, there is no doubt in my mind that the party did abolutely everything that could reasonably be expected in checking the validity of the donation and were correct in accepting the money and spending it. You shouldn’t turn down a £2m donation lightly in the run-up to a General Election if you are persuaded that the money is legit and valid.

In my view, the Electoral Commission has acted pretty badly. It seems almost impossible for them to ever “close the file” on a case. I was never able to get out of them an explanation of what evidence, criteria or period of time lapsed would be necessary for them to declare “case closed”. This has the impact of potentially impairing the day-to-day actions of a political party, if they are forever open to the possibility – however remote – that a substantial sum will have to be repaid. In this case, of course, the party’s auditors seem very confident. But my basic point about the Commission’s inability to make a final decision representing a threat to a functioning democracy still stands.

On James Graham’s point, I have some sympathy…but we would, of course, risk placing ourselves at an even greater disadvantage in competing with Labour and the Tories. By way of analogy, if Arsene Wenger firmly believes that there should only be 8 outfield players in a football team – or that teams should be limited to only one substitution per game – it doesn’t follow that Arsenal should impose such restraints and limitations on themselves unless their opponents are willing to do likewise.

by Mark Littlewood on September 9, 2008 at 12:47 pm. Reply #

No one thought it was strange that a person/company comes out of no where and decides to donate such a larage amount of money? No one asked who is this person or who is this company? This comapny was how old? This wasn’t a couple of dollars that came your way thios was a lot of money. With this amount of money someone wants something in return! So no one asked wht was wanted in return.

And I thought we were screwed up here. Glad to see you have political liars too.

by Over the Pond on September 10, 2008 at 5:38 pm. Reply #

Just an aside… Re the Observer, isn’t it amazing how sanctimonious journalists can be while being paid vast sums that come from advertising revenue from organisations promoting goods and services of the most dubious provenance. I particularly liked a very snotty article in the Guardian a few weeks ago about the carbon footprint generated by frequent travellers next to an advert promoting Guardian Holidays to some exotic destination…

by Martin Land on September 10, 2008 at 8:01 pm. Reply #

It seems odd to me that the party was supposed to somehow know about the criminal activities of Mr Brown prior to the police taking action against him.
But there is always a lot of political milage to make when any political party gets caught up like this.
Legal disputes like this discredit politics and in fact take us away from what politics should be all about.
The way to stop this and make sure that political parties get fairly funded is to have state funding of political parties.

by Geoffrey Payne on September 10, 2008 at 8:01 pm. Reply #

I have no idea who “Over the Pond” is. But, without wishing to sound too pompous, it is wholly evident from his/her post that he/she knows virtually nothing about Michael Brown’s donation to the party or any of the circumstances surrounding it. At the very least, he/she knows a lot less than I do.

I think I can say – without breaching any confidence – that the first two questions he/she put (above) can be answered in the affirmative, although the way they are worded is ludicrous. And also wholly unfair to LibDem employees who acted in good faith and exercised good judgement throughout.

I have no idea why he/she assumes that Michael Brown and 5th Avenue Partners came out of ” no where” (sic). This reinforces my view that he/she is not really abreast of the details.

In terms of asking the age of the company – which company is he/she referring to exactly? 5th Avenue Partners in the UK or the EU or in another jurisdication?

It is worth remembering that Michael Brown had every right to put his name on the electoral register. If he had chosen to do so, he could have have supplied limitless money to any party of his choice personally – rather tha via a company.

I assume the assertion that Michael Brown must have been “wanting something in return” is just a further element of a deeply ill-informed rant.

I have a lot of sympathy with James Graham’s arguments on contribution limits – so does the LibDem party in general. But – in the absence of such restrictions – I find nothing extraordinary at all about very rich people giving vast sums of money to causes they care about.

For example, I do not believe that Michael Aschcroft “wants something out of” his sponsorship of the Tories. I just think he is a Tory. And has such huge amounts of cash that he can throw millions of quid into a cause he cares about.

If I was worth £100m+, I would definitely write a cheque to the LibDems for £1m a year. And would expect absolutely nothing in return. Not a peerage. Not a veto on policy. Nothing.

I believe the LibDems handled the Brown donation with great propriety. I am utterly certain that all LibDem staff I ever dealt with on this matter went beyond the call of duty in doing everything that could reasonably be expected – by even the most vociferous critic – to ensure that all moral and legal standards were complied with.

What makes me angry is that Rupert Murdoch’s media empire (Murdoch not being a citizen of the UK, and not – as far as I’m aware – even a taxpayer here) can try and cook up some story about the behaviour of the LibDems over this donation.

A striking example of this is The Times effectively surrendering its repuation as a newspaper of record. No other serious media outlet felt the Brown donation worthy of major coverage. The Times persisted in putting the non-story on their front page. The rest of the media world frowned and yawned – and yawned again.

What is particularly irksome is that it seems to be those who are so opposed to the state-funding of parties who are so exercised about the LibDems taking £2m from 5th Avenue.

So, we can’t have a level playing field AND we daren’t accept money from maverick millionaires?

A less generous man than me might throw around all sorts of abuse. But, in my view, dubbing Rupert Murdoch as a “tax-dodging, manipulative billionaire” might be unfair.

But if anyone thinks that the LibDems accepting – and spending – the donation from 5th Avenue is the height of political corruption, then they don’t just have a warped sense of priorities, they’re just plain wrong.

I am unsurprised to see that one of the journalists involved is now working for a different newspaper (The Observer) – because this just isn’t a Watergate. Even The Times, in their wisdom, may have realised that this is not investigative jouranlism of any merit.

I suespect that the journalists involved like to think of themselves as latter day Woodwards and Bernsteins. But they’re just not. Really, truly, 100%, completely, totally and utterly not.

They will continue to try and make a “story” stand up and will fail.

The LibDems have no need for a guilty conscience here whatsoever.

by Mark Littlewood on September 11, 2008 at 2:01 am. Reply #

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