Tories to steer clear of fresh donations from Asil Nadir

Return of controversial tycoon to Britain is an uncomfortable reminder of party's era of sleaze

Asil Nadir (second from right) and his wife, Nur, leave their temporary home in central London (afp/getty images)

The Conservative Party is ready to reject any future donations from the fugitive tycoon Asil Nadir, The Independent on Sunday has learned.

The former Tory donor, who will go to court for the first time this week to face £34m fraud charges, has suggested he would be willing to give more to the party, despite questions hanging over some £400,000 given in the past.

"If you approve of the policies of a government, if you want to extend their power, why not do it? It's not criminal, it's allowed," he told Sky News.

But it is understood that senior figures in the Conservative Party are anxious to avoid further controversy over party funding, and would decline the offer of more donations from the 69-year-old former Polly Peck boss, who returned to Britain from Turkish-occupied northern Cyprus at the centre of a media circus.

The publicity around the court case threatens to reignite interest in the Conservatives' links to big money. This month it emerged that the hedge fund boss Jon Wood – nicknamed "Keyser Soze" after a character in The Usual Suspects – gave David Cameron £500,000 just two days before the general election. The sum is 10 times larger than the £50,000 cap on donations the Prime Minister has advocated.

To add to the party's woes, it is only 10 days since the property magnate David Rowland backed out of becoming Tory treasurer after scrutiny of his business dealings. He had returned to live in the UK from Guernsey last year in order to donate money to the party.

The Deputy Prime Minister, Nick Clegg, is leading policy on political reform and will hold talks with Labour on "limiting donations and reforming party funding in order to remove big money from politics". However, a deal is not expected until 2014. The Lib Dems faced their own difficulties during the election campaign over a £2.5m donation from a convicted fraudster, Michael Brown. With the PM on leave and little media activity planned for next week, government insiders are nervous about Mr Nadir's appearance resurrecting memories of Tory sleaze. Much has been made in recent days of Michael Mates, a minister in John Major's government, famously giving Mr Nadir a watch engraved "Don't let the buggers get you down".

In the mid-1990s, the then Tory party chairman, Norman Fowler, decreed that any donation found to have been stolen money would be returned to Mr Nadir, but it has taken almost 20 years for a court case to begin. The Labour MP John Spellar has challenged the Tories to disclose whether they have ever repaid the "substantial" donations Mr Nadir made. In a letter to the party chairman, Baroness Warsi, he asked: "If the Conservative Party has not made any repayment in the past, does it have any plans to do so in future?"

Mr Nadir was facing 66 counts of theft relating to the collapse of his Polly Peck empire when he fled Britain in May 1993 for northern Cyprus, which has no extradition treaty with the UK. Last week he insisted he is innocent and had not done any "deal" with the British authorities.

The Serious Fraud Office agreed not to oppose bail in return for stringent conditions, which include a £250,000 bail, surrendering his newly issued British passport, wearing an electronic tag and reporting weekly to a local police station.

Doubts have been raised about the prospect of Mr Nadir being successfully prosecuted, which include fears that computer files important to the case have been lost or damaged.