SENIOR Labour officials face charges over their handling of millions of pounds in secret loans gathered to help the stricken party fight the last election, it emerged last night.
Scotland Yard detectives are considering bringing "specimen charges" against the officials over allegations that they broke funding laws over their management of some of the loans accepted from 12 wealthy backers.
Members of the 'cash-for-honours
' inquiry team are still focusing on the question of whether the loans were offered at a commercial rate of interest, dictated by the Political Parties, Elections and Referendums Act (PPERA) 2000 - and whether they were paid back.
A source close to the inquiry said the proposed charges would be in addition to expected actions in relation to alleged breaches of honours regulations and conspiracy to pervert the course of justice.
He also warned that the police report was expected with prosecutors by the end of the month, with a decision on any charges shortly after - raising the prospect of Labour figures being officially charged during the final days of the party's campaign to win the Holyrood elections on May 3.
Scotland on Sunday also understands that, following a wave of complaints from friends of Labour fundraiser Lord Levy, the Prime Minister last week ordered aides not to "brief" against the peer, who has become a focus for the investigation.
The declaration that Levy would not be "hung out to dry" underlines growing anxiety within the party over the possibility that he might "implode" amid the pressure being heaped upon him.
Labour-supporting tycoon Sir Alan Sugar warned that a wave of stories regarding Levy's role in drawing up a list of nominations for honours suggested he was being made "a scapegoat". The intervention followed a complaint that Levy, Blair's tennis partner, was being left "twisting in the wind".
Levy last night fuelled fears he was about to turn against the Labour Party after telling friends he was furious at the lack of public support from senior ministers.
A Cabinet minister close to Blair's chief fundraiser, Levy was incensed at the failure of the Labour establishment to rally to his defence.
"He feels that he has given the party everything," the minister said. "He's helped raise between £60m and £80m for us - and without that money we might well not be in government - and yet people are not standing by him.
"He feels badly let down, not so much by Blair but others who he feels could be showing a bit more public support right now."
Downing Street has tried desperately hard in recent days to reassure Levy that he is not being made a scapegoat as the year-long police inquiry draws to a close.
The peer has been arrested by police and questioned under suspicion of conspiracy to pervert the course of justice in the course of their investigation into whether honours were sold for cash.
The only other member of Blair's inner circle to have been arrested is Ruth Turner, who was questioned under suspicion of perverting the course of justice.
The police investigation into allegations that honours were being sold was launched last year. But it has switched focus to allegations of a cover-up, with the BBC being temporarily banned from reporting concerns expressed by a Downing Street aide about Levy's role in drawing up the Honours List.
It emerged that Turner had sent an internal document to Jonathan Powell, Blair's chief of staff alleging that she was being pressured by Levy to "shape" her evidence to police.
Another aide, Blair's political secretary John McTernan, is said to have given police details of a meeting to discuss peerage nominations at which Levy lobbied for Labour donors.
Yitzchak Schochet, a rabbi at the Mill Hill Synagogue which Levy attends, Sir Alan Sugar and David Rowan, editor of the Jewish Chronicle, have all rallied to his defence in recent days.
"There is a general feeling, and it is increasingly sensitive, that this is all about 'get the Jew'. I do not play the anti-Semitic card. But within my immediate community, and the Jewish community generally, they are sensitive to the fact that this is becoming all about one Jew," Schochet said.
