Michael Levy: Lord Cashpoint

The Saturday ProÞle

There are those in the Labour Party who secretly are rather pleased that Michael Levy, the man rather contemptuously known as Lord Cashpoint, is currently getting his comeuppance. Lord Levy is the chap, we have this week learned, who had the bright idea that if Labour supporters made "loans" to the party, instead of giving gifts, the money wouldn't have to be disclosed under the electoral law which requires all donations exceeding £5,000 to be made public.

It seemed like a good idea at the time. Not least to Tony Blair. It's no secret that the Prime Minister thinks that the worst part of his job is having to raise the cash to run the Labour machine. So when Michael Levy came along all his problems seemed solved. The entrepreneur had, after all, proved himself to be rather good at accumulating large amounts of money.

He had done it for himself. Born into a poor family in the East End of London, whose family all lived in a single room until Levy was nine, he had made £10m from the sale of a record company he set up when he was just 29 and sold 15 years later in 1988. He then made around £70m for a variety of Jewish charities. And now he could do the same, Blair thought, for the Labour Party. He did just that, raising well over £40m for the Blair machine over the past decade.

Yet it has never been uncontroversial. Michael Levy has polarised opinion wherever he has gone - in the music business, in party politics and in the Middle East - to which he became the Prime Minister's personal envoy in 2000.

Some of the hostility is pure snobbery. There are those who speak disdainfully of his record empire being based on the naffest of pop music. Among the stars of Magnet Records were names like Alvin Stardust, the Drifters and Bad Manners. But at one point his highly commercial stable of artists between them accounted for almost 10 per cent of the UK charts. But he also had a sense of commitment, backing Chris Rea for four long years before the singer took off and became his biggest star.

"People say he is a schlock merchant, likes twee rock and roll," says Pete Waterman, the record producer who launched the careers of Kylie Minogue and Jason Donovan, and who is one of Levy's former employees. " What Michael does is he picks people, trains them, then backs them. He is the greatest salesman I have ever met in my life."

But there was another side to Levy. "He is extremely tough, one of the hardest bastards I have ever met," Chris Rea has said, "but I would leave my children with him rather than anyone else." Waterman concurs: "He's always been a big charity man. I've seen him pay the rent for years for a guy who was down on his luck. Someone's mother was seriously ill and he paid for her operation. He gave me £5,000 for the deposit on my first house. The money was a gift. He is the most generous man I have met in my life."

After his mother died, Levy sold his record company and threw his energies into Jewish charities. His Who's Who entry is dominated still by his charitable work with the JFS, one of the world's largest Jewish schools, the Chief Rabbinate Awards for Excellence, the Friends of Israel Educational Trust and many more. Many of them have had their fortunes completely transformed by Levy's activities. The £36m annual income of Jewish Care now puts it in the big league of British charities. Such is his standing in the Jewish community that the Jerusalem Post has hailed him as "undoubtedly the notional leader of British Jewry", a verdict which, as one wag put it, must have come as news to the Chief Rabbi.

His operating technique there gives an insight into how he has been working on behalf of Tony Blair. A reporter at Jewish Care's annual fundraising dinner noted how, for more than two hours, Levy worked the room, greeting and physically touching every one of the 800 donors present. He works to a brief prepared by the charity's staff on the financial circumstances of each of the targets and estimates of what they could run to. "I will basically memorise that, and have the figures in mind," Levy revealed. "You know, you discuss a gift with somebody, and sometimes you put a number to them, and they'll go, 'You're joking!' and I say, 'Come on, you can do that. Why don't we spread a commitment over a number of years?'"

It was in 1994 that Tony Blair, then the shadow Home Secretary, met Levy at a dinner in the Israeli embassy. Attracted by Levy's traditional emphasis on family and religion, the pair became friendly and the Blairs soon became regulars at the Levys' Friday night dinner parties. Before long, the pair became tennis partners, sometimes playing twice a week.

Levy began to support Blair's private office from his own pocket and was asked to set up a Labour Leader's Office Fund. Levy applied himself with his customary vigour and soon had set up a blind trust into which his contacts including Alex Bernstein, former head of Granada Television, and the printing millionaire Bob Gavron both contributed. Both later received peerages. "While it does not necessarily follow that the scheme was anything other than the model of probity," wrote David Osler, author of Labour Party plc: New Labour as a Party of Business, "there is at least an argument that Lloyd George knew its father." It was with David Lloyd George's government that the notion of "honours for sale" first entered British politics after the First World War.

Levy's blind trust raised around £2m and increased Blair's financial and political independence from both the party membership and the trade unions. (Labour's reliance on trade union funding has declined from two thirds of the total in 1992 to around a quarter now.) It enabled him to run the biggest opposition leader's office ever, with 20 full-time people including his press strategist Alastair Campbell and chief of staff Jonathan Powell. Together with his sidekick Amanda Delew - known to Labour insiders as " Amanda the Loot" - whom Levy had worked with at Jewish Care, he raised around £12m before the 1997 election. The day Tony Blair arrived in Downing Street after Labour's landslide victory was, according to Pete Waterman, one of the most emotional moments in Mike Levy's life. Later that year, he was made a life peer - Baron Levy of Mill Hill.

In the years that followed, Lord Levy relentlessly cultivated rich individuals at Friday night informal suppers and Saturday night VIP dinners. There potential donors mixed with cabinet ministers and music industry folk. "It's showing the goods," Levy said a couple of years ago, in a rare interview. "It's done on a fairly personal basis. 'Come over for dinner, I'm having a few people.'" One of his political allies was even more direct: "If he thought you would give a lot of money to the party, he would invite you to play tennis at his house and say 'there's a fair chance Tony will turn up'. Tony turned up, of course. When Tony left. Levy asked for money."

Usually it was all behind the scenes. But occasionally it became public, and for the wrong reasons. Levy was involved in soliciting the controversial £1m donation from Formula One chief Bernie Ecclestone. Other donors, such as the Hinduja brothers and Lakshmi Mittal, ended up in the headlines. All of which makes you wonder what Levy had in mind when he said, in that interview, "I have refused gifts on two occasions, one for £1m, from people who, though subtle about it, had an agenda".

Yet behind the scenes Levy was making enemies. Senior Labour insiders would mock his "bouffant hair and high heel shoes" and say he was " puffed up with his own influence and power". They scoffed at his " ridiculous" £5m marble and granite-lined mansion in north London with its tennis court, swimming pool, palm trees and separate servants' annexe. "He's a pain in the arse," one former minister confided. "He drives everyone absolutely mad."

Stories began to appear in the press about his tax avoidance measures. (In 1999, he paid just £5,000 in tax.) There were suggestions - which he vehemently denied - that a £100,000 consultancy contract, with an Australian property company wanting to set up shopping centres in Britain, came about because of his closeness to the PM. There were reports about a Guernsey offshore trust, even though he had moved his interests back to the UK around the time of the 1997 election.

What most irritated many was the fact that - despite his public embrace of Jewish causes - he was appointed the Prime Minister's personal envoy to the Middle East in 2000. With a home in an exclusive suburb of Tel Aviv, close ties with the Israeli Labour Party, and both his children living in Israel, how could he be seen as an impartial honest broker? As Foreign Secretary, Robin Cook would barely speak to him, and relations with Jack Straw are only a little better.

Certainly he has had his problems in the job - even managing to fall out with Ariel Sharon after he walked out of a meeting with the then Israeli leader. But insiders say he has had successes - brokering talks between the then Palestinian leader Yasser Arafat and Israeli foreign minister Shimon Peres, persuading Mr Sharon not to snub Jack Straw after the Foreign Secretary made a reference to "Palestine" which outraged Israelis, and securing Arafat's agreement to appoint a Palestinian prime minister. But he has travelled less in the region in recent years.

Whether his influence will outlive the Blair era is unlikely. His loyalty is to the Prime Minister personally. He has said that he and Blair are " like brothers" and he was one of the few Westminster insiders at Cherie Blair's 50th birthday party. He does not like Gordon Brown. And in any case, he is said privately to believe that state funding of political parties is the way forward. After the events of the past week, that day may be closer than he had supposed.

A Life in Brief

BORN 11 July 1944, the son of poor immigrant parents.

EDUCATION Hackney Downs grammar school.

FAMILY Married Gilda Altbach, 1967. One son and one daughter.

CAREER Chartered accountant 1961-1973. Chairman and founder of Magnet Records, 1973-1988, sold to Warner Bros for £10m. M&G Records 1992-97, Chase Music, 1992-present. Life peer, Baron Levy of Mill Hill, 1997. Prime Minister's envoy to the Middle East since 2000.

CHARITIES Works with many Jewish charities; chief fundraiser to the Labour Party since 1997.

HE SAYS To potential donors: "Come over for dinner, I'm having a few people."

THEY SAY When it comes to fund-raising "there's no one better in the country" - Simon Morris, director, Jewish Care charity