THE lead author of the report which warned of “gross corruption” at a Chinese business group now working with the SNP Government says he is “surprised” ministers are

involved with it.

Ola Mestad, former chairman of the Council of Ethics which advises

Norway’s £600 billion oil fund, urged Nicola Sturgeon and her Cabinet to read the damning report on the China Railway Group (CRG) which led to the fund blacklisting it in 2014.

Mestad, a law professor at the University of Oslo, told the Sunday Herald: “We really investigated this company. It came up because we wanted to look at the where the biggest corruption issues were within the fund portfolio. It was really fact-checked.”

Mestad said CRG was not excluded because of past corruption, but because of a risk of ongoing and future corruption. “If it’s just water under the bridge, or corruption under the bridge, that’s not enough,” he said. “The fund mandate means companies can’t be

involved in current corruption or at risk of future corruption. Exclusion is not a punishment for past acts.

“I was surprised [by the Scottish deal]. I don’t think I can comment on what the Scottish Government should do, but they should read our recommendations, definitely.”

The First Minister has been under

pressure all week after agreeing a £10bn investment deal with China Railway No 3 Engineering Group Co. Ltd (CR3), a subsidiary of CRG. She signed a memorandum of understanding with CR3 and a second company, SinoFortone, on March 21 but the Scottish Government said nothing at the time.

After details emerged in the Chinese media, Sturgeon was accused of striking a “secret deal”. She then published the memorandum, which said it was the “basis and general principles for

initial discussions” on infrastructure projects in Scotland worth up to £10bn. It was then reported that Mestad’s ethics watchdog had found an “unacceptable risk” that CRG was involved in corruption, including bribing state officials. His report led to Norway’s Government Pension Fund Global ditching its £26m stake in the Chinese construction giant. On Wednesday, Sturgeon said she was “not aware” of the corruption issue when she signed the documents, adding: “There are no actual proposals on the table at this stage.”

But on Friday, Sir Richard Heygate, a UK advisor to the firms, said he and Sturgeon had discussed specifics, including £500 million for 5,000 affordable homes in Edinburgh, Falkirk and Ayrshire.

He also insisted the companies were "squeaky clean".

Labour said yesterday it would scrap the deal if it boosted Chinese steel

imports and damaged Scottish jobs.

The memorandum was signed by Heygate and a Dr Peter Zhang on behalf of CR3 and “SinoFortone (UK) Ltd”. The latter company does not exist. The Government last night said the deal was with SinoFortone Group Ltd.

Incorporated last July with a share capital of £2, it is jointly owned by two Hong Kong-registered firms, Sinolinks Holdings Group Co Ltd and Fortone Int’l Industrial Investment Co Ltd.

Zhang is the sole director and shareholder of Sinolinks while Fortone is owned by two people in China. The SinoFortone and Sinolinks websites are registered to Zhang at a small terraced house near Croydon. Zhang did not respond to emails yesterday.

A Government spokesman said: “As the memorandum does not involve any legal, contractual or funding obligation or commitment, full due diligence was not necessary. If it was to result in a specific investment agreement, due diligence would be taken forward in the normal way.”