Electoral commission admits: 'We allowed politicians to break the law on election finances for five years'
By Paul Hutcheon, Scottish Political Editor

Labour leader Wendy Alexander faces a Holyrood ban after a parliamentary sleaze watchdog found her guilty of breaking the rules on MSPs' conduct by not declaring donations to her leadership campaign.

The Sunday Herald understands Holyrood's standards commissioner Jim Dyer has issued a report to a parliamentary committee stating Alexander should have declared most of her £16,000 leadership campaign war chest as gifts.

If the committee accepts the findings it could punish Alexander with a suspension from parliament for a limited period of time, which would mean the Labour leader being barred from taking part in debates or First Minister's Questions. Another sanction open to the committee would be censure.

The revelation comes as the Electoral Commission, which regulates election finances, admitted it allowed Scottish politicians to break the law for five years before considering using its criminal sanctions. It believed politicians needed half a decade to "learn" about new laws governing their behaviour.

It also declined to take action against former first minister Jack McConnell's constituency Labour party in 2003, despite the fact it broke party finance legislation.

The commission was criticised earlier this year when it failed to report Alexander to the procurator fiscal for flouting electoral law.

Dyer's report into the Alexander affair is the latest chapter in the long-running saga over the donations made to her campaign to become Labour's Holyrood leader last September.

She nearly resigned her post after it emerged she had accepted an illegal £950 donation from Jersey-based businessman Paul Green - a contribution that triggered an Electoral Commission investigation.

A second probe was then launched, this time by Dyer, over Alexander's failure to register around £10,000 of donations on her MSP register of interests.

The commissioner initially ruled in February that Alexander should have declared the donations, a case he subsequently referred to the procurator fiscal. After the prosecutor decided not to press charges against Alexander, Dyer resumed his investigation into Labour's Holyrood leader.

The Sunday Herald has learned that Dyer has submitted his report to Holyrood's standards committee and concluded she has breached the legal requirement for MSPs to declare gifts.

A spokesman for Alexander angrily hit out at details of the secret report being leaked, saying: This is obviously a politically inspired leak and it fits a pattern of the SNP's smear campaign against Wendy Alexander.

It is a disgrace that the report has been leaked before the standards committee has seen it. As far as we are aware, only the clerks and the convener of the standards committee would have seen it.'' It is now up to the committee, which is comprised of seven MSPs, to decide whether it accepts the findings and recommends a punishment. Of the seven, three are Nationalists while two are Labour. The Liberal Democrats have one MSP, as do the Conservatives.

Dyer could not be contacted for comment last night.

Meanwhile, the Electoral Commission's director of party and election finance, Lisa Klein, who worked on the Alexander case, said in a briefing to journalists last week that political parties should be aware a "culture of circumvention is no longer appropriate".

However, she admitted the organisation, set up in 2001, had given parties and politicians a five-year pass from adhering to the law on electoral finance.

"In the early days, officials took a decision to give complicated legislation time to bed down. So in the first cycle, the idea was much more in terms of learning and helping parties.

"The decision to become much more of a regulator was taken in the last two years."

When asked how many times the commission had used its criminal powers against parties or politicians, Klein said: "There have been three referrals for criminal prosecution. One was in Northern Ireland, which resulted in a caution, and there are two others - both under criminal investigation."

Her colleague Andy O'Neill, who heads the commission's Scotland office, said there had been cases in the five year "grace" period that may have been worthy of investigation or criminal charges. "The Motherwell Red Rose donations was an issue that we looked at," he said.

The Red Rose case involved £7580 of undeclared donations from a Lanarkshire fundraising dinner being ploughed into McConnell's Motherwell and Wishaw Labour party.

The commission found the local party had broken the law but opted to take no action, as the watchdog was not using its enforcement powers.

Similarly, the commission declined to impose any criminal sanctions against Wendy Alexander after it concluded she had broken the law by failing to declare a £950 donation from Jersey businessman Paul Green.

The body instead allowed Holyrood's Labour leader to forfeit the dodgy donation - a decision that led to accusations of a whitewash. Both Klein and O'Neill said the commission was now ready to act against organisations that breached electoral law.