Sleaze, smears, Saudis, leaks and dodgy money: Donald Macintyre and Nick Cohen pick through a week of accusations and denials

IF DAVID ASHBY, Conservative MP for Leicestershire North West, did not have an interest in the issue of the homosexual age of consent, last week's Government crisis might not have assumed the dimensions it did.

It is a curious by-product of Ashby's interest - shared by a growing number of MPs - that the Home Affairs Select Committee agreed to investigate party political funding. In a trade-off, Labour members of the committee agreed to vote with Ashby in favour of an inquiry into the age of consent, provided he backed their proposal for one on party funding. Thus was created, in a Tory-dominated committee, the majority required for an investigation that would prove deeply embarrassing for the Conservatives.

The inquiry gave MPs an unrivalled opportunity to question Sir Norman Fowler, the Conservative Party chairman, on the payments made by Asil Nadir and others to Tory funds, leading to last Tuesday's debate in the Commons. And that in turn provided the most dramatic backdrop possible to Michael Mates's ferocious but finally unsuccessful fight for political survival, a fight that ended at lunchtime on Thursday.

Ashby's unwitting part in this is a bizarre element of a bizarre saga. It was fortuitous that the news of Mates's connections with Nadir coincided with revelations about the former Polly Peck chairman's donations to the Tories, but the two became inextricably connected in the public and political mind. The result was the fall of a minister, the airing of some ugly allegations of sleaze in public life and another dreadful week for John Major's government.

TO MAKE sense of the affair, it is necessary to trace Mates's downfall from its beginning: an anonymous typed letter with a SW1 postmark sent to 'Black Dog', the Mail on Sunday's political gossip column. Peter Dobbie, the paper's political editor, saw immediately that it was potentially explosive: it said that Mates, the minister responsible for law and order in Northern Ireland, had given Nadir, shortly before he broke bail and fled to Northern Cyprus, a watch inscribed with the now famous message: 'Don't let the buggers get you down.'

One inference drawn by Dobbie and his colleagues was that their informant knew about the watch because he had seen it. In other words that, unlike Nadir, the watch was still in London, more than likely at the Serious Fraud Office - the very 'buggers' alluded to in Mates's message. It is a curious fact, to which we shall return, that this was not the case. Indeed at the SFO an exhaustive search was carried out and the watch was not found. Whoever tipped off the Mail on Sunday must have been a member of a very small circle who knew that Mates had made the gift.

Whatever the source of the story, its publication on 27 May put Mates's career in jeopardy and he was obliged to explain publicly that he had taken up Nadir's case on behalf of a constituent, Mark Rogerson, who was one of Nadir's advisers. Soon it became known that several other MPs, including Michael Heseltine, Mates's political idol, had also expressed worries about the pursuit of Nadir with Sir Nicholas Lyell, the Attorney General.

WHY should politicans want to meddle in the legal process? First, it is part of the job of representing their constituents; the Attorney General receives 200-300 representations about prosecutions from MPs each year. Second - and this may seem hard to credit now - before Nadir fled, his supporters believed he would ultimately be vindicated and would walk out of court a free man. Mates became involved because he accepted the argument of these people that the case was a miscarriage of justice in the making.

The campaign for Nadir had two prongs. The first was the conventional attempt by his lawyers to have the case thrown out. Nadir's defence team, led by Anthony Scrivener QC, believed it had a better than even chance of winning when the case came to court.

The second prong of the campaign was led by two PR men: Christopher Morgan, a City public relations expert, and his partner Rogerson, a former business journalist. They went to every MP they could think of to push their argument that Nadir was being persecuted unjustly. Seven Tory MPs, including Mates, Heseltine and Peter Brooke, the Heritage Secretary, found their arguments plausible enough to raise concerns with the Attorney General.

Morgan knew Mates from the 1980s and had got to know Heseltine in 1986 when he was lobbying for the European bid for Westland Helicopters, which Heseltine supported. Morgan helped Heseltine in the 1987 general election, while Rogerson lived in Mates's Hampshire East seat, and could therefore take the Nadir case to the minister as a constituent.

Last week one angry Nadir supporter described the frenetic lobbying to save the bankrupt from the SFO. 'We went through the correct channels at first and took Nadir to see Peter Brooke, his constituency MP,' he said. When this failed, they did not give up. 'We spread the net as far as we bloody could, spoke to a hell of a lot of MPs, leant on all our friends. We weren't asking MPs or anyone to be judge and jury. Not asking them to decide if he was innocent. Just asking them to look at the issues and challenge the Attorney General to put up or shut up. I'm glad that seven guys had the guts to listen, stick their necks out and have a go.'

Mates, Heseltine and the rest did not think they were sticking their necks out. It is not unusual, as we have seen, for an MP to approach the Attorney General. Moreover, those approaches are strictly confidential, so they ran no apparent risk of association with a famous bankrupt. Mates, so passionately convinced of Nadir's innocence, went a step or two further, but could have had no idea that he was sowing the seeds of his destruction.

It was only in the heated atmosphere after Nadir's flight last month, with the police being blamed for not acting on warnings he would jump his pounds 3.5m bail and the SFO being criticised for the delays in bringing the case to court, that things changed. Now any number of angry people were tempted to leak or smear.

WHEN the finger pointed at Mates, John Major was obliged to speak. As his long defences of David Mellor and Norman Lamont demonstrated, the Prime Minister has a visceral distaste for demands that he should sack his ministers. However, he took a precaution. Alex Allen, his principal private secretary, spoke to Mates to ensure there were no more skeletons in the cupboard. This conversation left Major sufficiently confident to tell the Commons on 8 June that the 'unwise' gift of a watch by Mates had been a 'misjudgement', but it was not a 'hanging offence'.

Before long, the name of Asil Nadir was before the public eye again in a quite different context. The Commons select committee inquiry provided the occasion for the revival of a year-old story that he had given pounds 440,000 to Conservative party funds, but with an added twist. Nadir, it was now alleged, had made the donations in the expectation that he would receive a knighthood. Senior Conservatives were again fighting accusations of sleazy connections with the fallen entrepreneur.

On 19 June the spotlight switched back to Mates, when the Independent revealed he had accepted on behalf of his estranged wife, Rosellen, the loan of a Volvo. The lender was none other than Nadir's friend Rogerson.

The mood in the Conservative Party changed sharply. Suddenly Mates was fighting for his political life. Several Sunday papers carried highly coloured stories suggesting Mates shared Nadir's belief that the businessman had been 'set up' by MI6 because he stood in the way of an international plan to reunify his native Cyprus. (Mates was to deny that he had subscribed to such a view, but the stories were well-sourced, and confirmed by more than one informant in an ideal position - to put it mildly - to know what Mates had been thinking over the previous weeks.)

A totally unexpected blow now fell upon Mates: Heseltine's heart attack in Venice. His toughest potential protector, and the man who secured him his ministerial post, would not be able to defend him. Instead that job fell to Keith Hampson, MP for Leeds North West, and, along with Mates, the man who had run Heseltine's campaign for the Tory leadership in 1990. On the Sunday evening, Hampson tried with some success to convince a distinctly hostile Sir Marcus Fox, chairman of the 1922 Committee, that Mates had still not committed a 'hanging offence'.

The coincidences are striking: Mates's involvement with Nadir coincides with the Commons investigation into, among other things, Nadir's donations to the Tory party; when Mates gets into real difficulty, his most powerful friend has a heart attack. Now another accident strikes: on the morning after Hampson's meeting with Fox, the Guardian published a story alleging that pounds 7m of Saudi Arabian money was poured into the Tory coffers just in time for the 1992 general election.

The effect of this was to force up the political temperature violently, as demonstrated by the reaction of the Prime Minister, in Denmark for the EC summit. Asked about the story by Michael White, political editor of the Guardian, he fulminated: 'I am assured that your story this morning was total and utter fantasy . . . Bring the evidence to me Michael or don't print it.'

The Prime Minister's wrath was in vain. The following morning's headlines were dominated by further accusations about the Saudi money. In a Commons intervention, and under the legal protection of parliamentary privilege, the Labour MP Clive Soley had named Heseltine as a link man with the Saudis.

THE ALLEGATION of Saudi gifts was certainly the gravest of all those being levelled at the Conservatives in the course of the growing controversy prompted by the select committee hearings on party funding. Hong Kong millionaires, the Sultan of Brunei and Nadir are one thing, a powerful foreign government with huge trade connections in Britain is another. Were the claims true?

The Guardian refused to retract, but also failed to produce the evidence. Soley too refused to back down, but declined to repeat his charges outside the House. No fresh evidence has emerged to support the claims, and even Labour MPs have doubts.

Last week the Independent on Sunday spoke to one of the Guardian's sources, a respected Arab author, journalist and former adviser to the Saudi royal family who has fallen out with the regime, accusing it of corruption. He conceded that the information he provided the Guardian was based on hearsay and he had no documentary evidence. It came, he said, from someone directly involved in a meeting between a British minister and Prince Bandar bin Sultan, a confidant of King Fahd. Last week the Arab author went back to this source and requested further verification, but was rebuffed.

The Arab intellectual argues that the allegations should be seen in the wider context of British-Saudi relations, dominated since the mid-1980s by the so- called Al Yamamah arms deal, the largest in history, worth pounds 42bn and some 40,000 jobs to Britain. It was negotiated personally and secretly by Margaret Thatcher and Prince Bandar.

Al Yamamah has already generated allegations about undisclosed transfers of money between Saudi Arabia and Britain - this autumn an American court will hear charges brought by Thomas Dooley against his former employer, Sikorsky Helicopters, and against Westland Helicopters of Britain. He alleges that these companies and others conspired to pay bribes to Saudi princes with the aim of winning the helicopter component of the Al Yamamah deal. The defendants deny all charges.

Mud was sticking to the Government and, not for the first time, Major was perceived to be reeling before events. With shocking new headlines every morning, Tory backbenchers were complaining of 'drift' and talking of the need for Major to 'get a grip'. There was a growing feeling that the way to demonstrate authority was to sack Mates.

THE Mates crisis was now moving to its denouement. The minister, who had moved around Westminster boldly asking backbenchers and whips whether he could survive, had some hope of doing so. When Richard Ryder, the Chief Whip, greeted Mates civilly in the whips' office, he felt heartened. Hampson told him that while some right-wingers, who had never forgiven Mates for his part in Thatcher's downfall, wanted to see him go, more mainstream members were less sure.

Then came a meeting with Gordon Greig, political editor of the Daily Mail. Greig had with him a leaked copy of the letter from Mates to the Attorney General about a detailed aspect of the Nadir case, which his paper was to publish the following morning. Reading it, Mates was in two minds. On the one hand it underlined how close to his heart was Nadir's cause, and it contained no great surprises. On the other hand, Mates realised that if this letter was leaked so might others be, containing passionate denunciations of the Serious Fraud Office and more besides.

Mates was sufficiently worried to commit what turned out to be his terminal mistake - dinner at the Reform Club with Christopher Morgan, an even closer adviser to Nadir than Rogerson. According to one friend, Mates 'wanted urgently to find out if Morgan had any ideas about the source of the leaked letter'. But that does not explain the venue, a club frequented by politicians, civil servants, journalists and members of the intelligence community. This was, in effect, a public meeting.

If Mates showed hubris on Wednesday night by going to the Reform, nemesis in the form of ITN was about to overtake him. At this point, the exact sequence of events, and specifically who knew what, is still shrouded in obscurity. But it is certain that the whips' office was aware by late morning that ITN had a story damaging to Mates - quite possibly that it was the story of Mates's dinner the previous night. And although Downing Street insists it is not unusual for Major to look at the lunchtime network news bulletins in his private office, he certainly watched ITN on Thursday after Cabinet. Equally it seems certain that a senior whip, almost certainly Ryder himself, spoke to Mates after the bulletin appeared. All that can be said with certainty is that Mates went shortly afterwards to see Major, who did not hesitate to accept his resignation.

Theories abound; the satisfaction of Downing Street in the outcome is taken by some MPs to suggest that it was not just a lucky coincidence that the ITN story brought matters to a head. Indeed the most extreme theory, held by at least one MP, is that Mates - as a Northern Ireland minister an IRA target, not to mention a politician with a somewhat chequered private and professional past - was in the constant sights of the security services and that this explains the leaks not only of his dinner on Wednesday night but of the watch episode as well.

It is a theory that fits the remarkable matter of the orginal leak to the Mail on Sunday, but there is no more corroboration for it than there is for the competing theory that it was a disgruntled member of the SFO angry at Mates's campaign against its prosecution of Nadir. Equally Mates, short of announcing his dinner to the Press Association, could have hardly have picked a more public way of having it. The story of who tipped off ITN may never be known. Either way, by lunchtime it was all over.

The departure of Mates lanced a boil in Westminster. The relief among Tories was palpable, just as it was when Lamont and Mellor went. In the hectic confusion of the previous days, the Government had been under pressure to do something. Now, at last, something had been done and there was blood on the carpet.

Early in the week, one MP, surveying the mounting crisis, had said prophetically: 'We shouldn't make any concessions on the funding system under pressure from the Labour Party and the press. If it's a choice between making concessions on disclosing donations or losing Mates, then I'd rather see Mates go.' Mates had little or nothing to do with the party funding scandal, but in falling on his sword he was paying the price for that just as surely as for his foolishness in accepting the loan of that Volvo.

Additional reporting by Peter Koenig and Teresa Poole.

(Photographs omitted)