British tycoons face investigation into sale of peerages- Paper

London, Apr 14 (UNI) Rich businessmen who secretly loaned money to Prime Minister Tony Blair's Labour Party have been warned they will be questioned by Scotland Yard as part of a probe into the "sale" of British peerages.

According to a report in The Times newspaper, 12 businessmen, including four whose peerage nominations were blocked by the House of Lords Appointment Commission, have been told by the party to expect the police to approach them after Easter.

The revelation comes after detectives arrested Des Smith, 60, a head teacher and former adviser to the Specialist Schools and Academies Trust (SSAT), yesterday. The trust recruits sponsors for the city academies, specialist schools partly funded by the private sector.

Mr Smith resigned after being taped by an undercover reporter apparently promising potential donors OBEs, knighthoods or peerages in return for funding an academy.

The arrest has put Tony Blair, who made developing city academies a key education policy, into the centre of the growing political scandal.

Lord Levy, who is Mr Blair's personal fundraiser and who negotiated most of the secret loans, is the president of the SSAT.

He was appointed last September, with the trust saying that he had played ''a key role in raising sponsorship'' for city academies.

Mr Smith boasted to an undercover reporter that he was a regular visitor to Downing Street with regard to his work for the trust. Suspicions of a link between honours and donations to the academies have existed since the programme was set up in 2001. Six of the biggest sponsors have been honoured after pledging money.

Two sponsors, Sir David Garrard, the property developer, and Barry Townsley, a City broker, made donations of 2.4 million pounds and 1 million pounds respectively. They were both put forward for a peerage by Mr Blair. The blocking of their nominations by the Lords Appointments Commission triggered the police investigation.

Lord Levy persuaded many businessmen to give loans rather than donations, thereby circumventing rules that donations of 5,000 pounds or more be disclosed. He has also been told to expect a visit from the Scotland Yard. A source close to the investigation told The Times ''The police have contacted the Labour Party, but not yet spoken to the donors. They know who they want to talk to''.

Friends of Sir Gulam Noon, the curry magnate, whose peerage was blocked by the commission because of his secret loan, said he was told by Lord Levy not to declare it.

Mr Smith was arrested at his home in Wanstead by the Specialist Crime Directorate under the Honours (Prevention of Abuses) Act 1925. He was released on bail last night. Mr Smith told the undercover reporter that a peerage would be a ''certainty'' if support was forthcoming for up to five academies, involving a contribution of about 10 million pounds. He later insisted it was not possible to secure such rewards.

The arrest comes at a critical time for the academy programme, which is rapidly expanding from 17 schools at present to 100 in two years.

The SSAT is desperate to find suitable backers. Officials close to the project said the arrest, and links to sleaze, could jeopardise plans to attract leading corporate companies.

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