Confusion over links to conman as Blair clears himself of guilt

The confusion over the exact nature of Cherie Blair's links with a convicted fraudster was still apparent yesterday.

Downing Street revealed that the Prime Minister had cleared himself of breaching the ministerial code of conduct after receiving advice from Sir Andrew Turnbull, the Cabinet Secretary, that his wife's purchase of two flats in Bristol was not improper or illegal.

However, the Prime Minister's official spokesman admitted that possible conflicts of interest might have arisen if the property portfolio had been larger.

Confusion also surrounded when and whether Mr Blair knew that his wife had used their blind trust to buy the homes, one of which was for their son Euan and the other an investment.

Journalists were led to believe on Sunday that he did not know his wife had accessed the trust money, but yesterday morning there were hints that he did, and later in the evening the story appeared to change again with suggestions that he was, after all, unaware.

"In terms of a ministerial code, the ultimate arbiter is the Prime Minister," his official spokesman said. "He is satisfied that the actions taken by the trust are consistent with the code and he came to that view after discussions with the Cabinet Secretary."

He dismissed suggestions that owning a property in Sedgefield and two flats in Bristol was a conflict of interest, saying that there was a danger of getting into "an Alice in Wonderland" situation where the Blairs could not buy homes for their sons because of the code.

"There has been, in the view of the Prime Minister, supported by his discussion with the Cabinet Secretary, nothing improper or illegal," his spokesman said. "It's common sense that if someone wants to draw money out of a trust to buy property, then they should be able to do so. After all, it's their money that is invested in the trust."

The spokesman denied suggestions of a rift within No 10 over the role of Peter Foster, the Australian fraudster, and his girlfriend Carole Caplin, Mrs Blair's lifestyle adviser.

"In terms of the relationship between Alastair Campbell and [his partner] Fiona Millar and the Blairs, they are absolutely rock solid, as they always have been, in support of the Prime Minister and Mrs Blair, through what obviously has been a difficult period."

Press officers were caught on the wrong foot when the story broke last week because Mrs Blair had not informed them of her business relationship with Mr Foster, who is facing deportation from Britain. The Downing Street civil service press team was once again caught out on Sunday by questions about why the Prime Minister's blind trust had been used to purchase the flats.

Explanations about the trust and a possible conflict of interest changed as the day went on and the Prime Minister's official spokesman, Tom Kelly, was eventually called in on his day off to try to sort out No 10's line.

There were doubts on Sunday morning about whether the trust, which was set up after the sale of the Blairs' Islington house, was blind or simply an investment trust. "It's a trust that operates to rules equivalent to a blind trust," a spokesman said. "In effect, it operates as a blind trust."

Soon, Downing Street confirmed that it was a blind trust and that it had been used to buy the flats for security reasons so that they were not registered in the Blairs' name.

But this explanation appeared to be dropped later because other ministers or former ministers needing security protection have gained permission not to list their true addresses on official documents to prevent terrorists finding their homes.

Downing Street was also adamant early on Sunday that the code of ministerial conduct and the rules governing the blind trust had not been broken, and a spokesman repeatedly said that such a suggestion was ludicrous. "You can realise the assets contained within the trust," he said. He explained Downing Street was covered because the rules stated that a blind trust was only "blind in the case of a widely spread portfolio of interests". Because property had been bought, "the issue of a conflict of interest" did not arise, he said.

But his explanation was in doubt later, as journalists put it to Downing Street that one of the flats had been bought as an investment. When Mr Kelly was called in, he explained in greater detail that the rules governing the trust, which had been set up to avoid a conflict of interest between Mr Blair's investments and policy decisions, had not been broken.

In a series of briefings, clear hints emerged that Mr Blair had not known that the trust money had been used by his wife to buy the flats. Because the Prime Minister was unaware, this meant that no rules could have been broken. The confusion followed a week of accusations that Downing Street had lied about Mrs Blair's ties to Mr Foster.

Number 10 shrugged off allegations on 1 September that the conman had helped Mrs Blair to buy the flats.

Then, the Daily Mail produced a series of e-mails between the Prime Minister's wife and Mr Foster proving that he had indeed helped to negotiate the purchases.

'NOTHING UNTOWARD' CASE FOR DEFENCE

Cherie Blair's statement, 5 December 2002

"In the summer, as our eldest son was going to Bristol University, I decided to purchase a property there ... I asked a friend, Carole Caplin, to look at the property for me ... She visited the property in late October with her boyfriend, Peter Foster. I had, at that point, never met Mr Foster or spoken to him and was unaware of the details of his past."

Statement from Janes Solicitors, 9 December

"We have received only one telephone call from Cherie Booth QC. This was on 22 November 2002. It was a conference call with Carole Caplin. The avowed and plain purpose of the telephone call was to reassure Carole that the immigration proceedings against Peter Foster were being conducted on a regular and normal basis, and there was nothing untoward. We were happy to confirm this. We wish to emphasise that Cherie Booth QC did not intrude into our conduct of the proceedings and ... had no say whatsoever in our choice of representation of counsel. In our opinion, she was simply seeking to provide support and assurance to her friend Carole and acted with complete propriety."