Monday 8 March 2010

The Ashcroft Loophole

At first sight, the announcement by the Electoral Commission last week seemed to be saying that there was nothing at all wrong with the donations made to the Conservative Party through Bearwood Corporate Services (BCS). However, when one looks at the detail, it seems to be, as the Sunday Times put it yesterday, more a case of 'not proven' than 'not guilty'.

The paper went on to say:

'The commission made it clear that it had been unable to find out exactly where the money donated to the Tories by BCS had originated. Papers had been destroyed and the commission had been “unable to obtain any meaningful information” from a Belize company that owned shares in BCS.'

In short, many months of investigation by the Commission have not got to the bottom of the matter, and that has been a result, in no small part, of the Tory leadership being evasive and obuscatory, the relevant Tory officers and staff refusing to attend interviews with the Electoral Commission, and those others directly involved in the matter being singularly uncooperative.

Even the key finding, which is that BCS was 'trading' in the UK, and therefore eligible to donate seems to skip over the fact that the donations were definitely not the result of that UK trading. This seems to expose something of a loophole in the law. On this basis, any company which processes at least one invoice for goods or services supplied in the UK can then proceed to donate millions of pounds without having to disclose where those millions came from.

I don't know what the expectations of those passing the law were, but I would have thought that they would have supposed that a company would be making donations from the profits on its UK activities, yet BCS appears to have made massive donations even when trading at a loss.

In fact, BCS seems to have created millions of new shares in itself, sold those shares to another company or companies in the Ashcroft empire, and used that new-found capital to make its donations. Since the shares were not traded on any open market, it's hard to calculate their worth at the time of their purchase; but the decision to then donate the capital raised to the Tory Party effectively rendered those shares worthless thereafter, since the company had turned capital inflows into revenue outflows.

This loophole, which effectively allows donations from overseas which would be illegal if made directly to then become legal, needs to be plugged. It makes a complete mockery of the law, and politicians exploiting loopholes to avoid the intention of the law should be ashamed of themselves.

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