A wealthy Scottish fund manager who owns an extensive grouse moor has been given the largest ever financial penalty under farming legislation after police found toxic and illegal pesticides on his estate.

John Dodd, the multimillionaire owner of the 10,000-acre Glenogil shooting estate, near Kirriemuir, Angus, has had his farming subsidy cut by £107,000 after claims that pesticides on his land were being used to kill protected birds of prey.

Mr Dodd, co-founder of the Edinburgh-based Artemis investment bank and hedge fund, was found to have the pesticides on poisoned baits, game bags, and plant samples on his estate in 2006.

Investigators from the Royal Society for the Protection of Birds (RSPB) found an illegal compound - a combination of carbofuran and isofenphos pesticides that has never been licensed for use in the UK - on a dead rabbit staked out on a hillside close to Glenogil in April 2006.

The find led to a raid organised by Tayside Police, which involved 80 officers from several forces, alongside RSPB investigators and officials from the rural payments division of the then-Scottish Executive.

The police raid uncovered the same combination of pesticides on a dead pigeon laid out as bait on the estate, on game bags used by estate staff and in soil and plant samples.

Now, as a result of the investigations, officials in the rural payments division have cut Mr Dodd's farming subsidies for 2006 by £107,650.

It is the largest ever civil penalty imposed under strict EU "cross-compliance" legislation, which makes protection of wildlife a condition of the subsidy. Mr Dodd is the third landowner in Scotland to have subsidies cut under the regulations.

James Reynolds, spokesman for the RSPB, yesterday commented on the result. He said: "Agricultural grants to landowners rightly come with conditions in order to protect the public interests. Some of these conditions require that those receiving public payments protect our national heritage, and that includes birds of prey.

"Where there is good evidence we think it's correct that financial penalties are imposed.

"If they are rigorously applied by the statutory authorities, then these financial penalties should be a sufficient deterrent for others."

The regulations make it an offence to have illegal pesticides such as carbofuran on the land, or commit offences against birds of prey, including the use of illegal traps or poisons.

The Wildlife and Countryside Act makes it a criminal offence, punishable by a six-month jail term and/or a £5000 fine, to kill or attempt to kill a bird of prey.

Mr Reynolds added: "The use of illegal pesticides in estates in Scotland is pretty widespread. Not everybody is illegally killing birds of prey but there are some problem areas."

Glenogil was last year also implicated in the disappearance of a rare sea eagle, one of 15 birds that had just been released into the wild in eastern Scotland under a government- sponsored programme.

Witnesses suggest that the bird may have been killed on the estate but the allegation remains unproven. Mr Dodd insisted his staff were innocent.

Over the past three years, he had received £829,664 in single farm subsidies for Glenogil. It is understood that he is contesting the decision to dock his 2006 subsidy.