WENDY Alexander was facing a police investigation into her campaign finances last night after it emerged that she had written a personal thank-you letter to a businessman for an illegal donation.
The Scottish Labour leader disclosed this week that members of her campaign team had broken the law when they accepted a cheque for 950 from Paul Green, a Channel Isles-based businessman, for her leadership campaign. He is not a registered UK voter, so is not allowed to donate to British political parties.
Ms Alexander's aides have consistently argued that the donation was handled only by Charlie Gordon, a Labour MSP, and that she did not know the details of Mr Green's donation. Mr Gordon at first told the campaign team the money had been donated legitimately through a Glasgow company, Combined Property Services, but it later emerged that Mr Green's name had been on the cheque.
And it was revealed yesterday that Ms Alexander had written to Mr Green personally in October this year, from her home in Glasgow, thanking him for his cheque.
That letter had been sent to Mr Green's Jersey tax-haven home - undermining the claim that neither Ms Alexander nor senior members of her team knew that his donation was illegal.
It also emerged yesterday - in an extraordinary statement from Mr Green - that the businessman had given another earlier donation to the Scottish Labour Party through Mr Gordon, and that had been accepted, too.
Mr Gordon, the Glasgow Cathcart MSP and a former leader of Glasgow City Council, organised both donations, and party officials claim he failed to tell them about the true nature of either of them. He was coming under increasing pressure to resign as an MSP last night.
But Ms Alexander is ultimately responsible for all donations, and if there is a police investigation - which is looking increasingly likely - it will arrive at her door.
The SNP demanded police be called in to investigate all aspects of the donor scandal.
The SNP intends to wait until the Electoral Commission decides whether to call in the police. If the commission does not, then the Nationalists intend to do so.
Roseanna Cunningham, the SNP MSP for Perth, said Ms Alexander's position as Scottish Labour leader was "increasingly untenable".
She went on: "The Electoral Commission should now report this matter to the police - as they have done south of the Border - since it is clear that an illegal act has taken place, with responsibility lying entirely with Wendy Alexander.
"One way or another, there must be a police investigation. Wendy Alexander's position is becoming increasingly untenable - by the day and by the hour."
Murdo Fraser, the deputy leader of the Scottish Tories, described Ms Alexander's position as "precarious" and said he wondered if Labour leaders were going to make Mr Gordon the fall guy for the affair.
He said there were still key questions to be answered.
"When Wendy Alexander signed her letter to Mr Green, did she not think to query the Jersey address? Is it credible to suggest that the Scottish Labour leader, with a long track record of political experience, would have been totally unaware of the law on political donations?" he asked.
Mr Fraser went on: "Any donation, whether made directly or via this Glasgow company, is still illegal. So anyone who knew that Mr Green was involved in making these payments was party to that non-permissive donation."
A spokeswoman for Ms Alexander confirmed the Scottish Labour leader had "regulated donee" status - making her liable for the accuracy of her election returns. This means she is liable to check the admissibility of all donations above 200 - such as the gift from Mr Green.
Ms Alexander herself made one brief statement on the affair yesterday to apologise, but she refused to answer questions, saying she was co-operating with the Electoral Commission.
"I deeply regret that this situation has occurred," she said.
The pressure on Ms Alexander, which was already building, became intense when Mr Green decided to make a statement explaining his role in the affair.
He had become incensed by the way in which Mr Gordon had claimed, repeatedly, that Mr Green's donation had been taken "in good faith" as a corporate donation from a UK-registered company, when it had really come from Mr Green personally.
Mr Green, 65, said: "It has damaged the Labour Party that I support in Scotland, and it was all so unnecessary if the party had only applied the rules.
"I cannot understand why they continued to maintain that the donation had come through a UK company when I had a letter from Wendy Alexander thanking me personally."
Mr Green then published the letter he had received from Ms Alexander, in which she thanked him for his "generous support" for her leadership bid.
He also revealed that he had made a donation to Mr Gordon's election campaign in Glasgow Cathcart in April this year, also for 950. This means Mr Gordon received two illegal donations from Mr Green, one in April and one in August, and had not told the Electoral Commission until prompted to do so by an outcry in the media.
Labour leaders moved quickly last night to distance themselves from the increasingly isolated Mr Gordon, revealing they had turned down an offer of a donation from Mr Green two years ago because he was not allowed to give money.
They also stressed Mr Gordon had failed to inform party officials in London or Glasgow of Mr Green's donations, effectively blaming the Glasgow Cathcart MSP for everything.
A spokesman said: "Any donation made to Glasgow South Constituency was done without the knowledge or advice of the Labour Party, or indeed Tom Harris [the constituency's MP]. The Scottish Labour Party's advice would have been clear, for the same reasons as a donation to Wendy Alexander's leadership campaign was inadmissible, a donation to the Labour Party would have been refused.
"In the past, an approach was made for the Scottish Labour Party to receive a donation from Mr Green; this was refused because he is not registered as an elector."
Mr Gordon said he had acted "in good faith" on both occasions and that the mistake had been a result of a "misinterpretation" of the rules. When asked whether Mr Gordon would have to stand down as an MSP, one senior source sounded less than supportive, and replied: "I have no idea what Charlie Gordon's plans are."
Labour leader lays out case for Holyrood to get new powers
WENDY Alexander signalled a major shift in Labour policy yesterday by calling for a radical overhaul of the devolution settlement.
The Scottish Labour leader is seeking the creation of a Scottish Constitutional Commission to look at all aspects of the settlement, a body modelled on the constitutional convention that paved the way for the Scottish Parliament in the 1980s and 1990s.
Labour has resisted any fundamental changes to the devolution settlement since its inception, arguing that it was working well.
But now Ms Alexander has turned that approach on its head, calling, not just for a thorough examination of the existing powers, but giving her support to the transfer of more powers - including some taxes - to Holyrood.
"We cannot become unthinking unionists," she told an audience at Edinburgh University.
The move is partly a response to the SNP victory in May and a also an attempt by Labour to win back the political agenda. But it comes partly from Ms Alexander's own convictions: she has long toyed with the idea of more "fiscal responsibility" for the Scottish Parliament.
Ms Alexander said she would put her plans for a Scottish Constitutional Commission before the Scottish Parliament next week and hopes to secure the backing of the Conservatives and the Liberal Democrats to drive it forward.
With the support of the other unionist parties, Ms Alexander's new commission could start examining the issues as early as the first part of next year.
The Scottish Labour leader made it clear she was still vigorously opposed to Scottish independence, but said she believed there were faults with the devolution settlement that could be put right.
"It is legitimate to ask whether that settlement now needs to be adjusted in the interests of all the nations of the United Kingdom," she said.
Ms Alexander claimed that, when the settlement was devised, too much attention had been paid as to how the Scottish Executive would spend money and not enough thought given to how it might be raised or how the government would be held accountable for its spending decisions.
Ms Alexander said it was now time to look at revenue-raising powers, particularly given that the so-called "Tartan Tax", which allows the parliament to vary income tax by up to 3p in the pound, was such a blunt and ineffectual tool.
Ms Alexander said there were problems with handing over control of VAT or corporation tax to the Scottish Parliament, because the EU did not allow these to be varied within individual nation states. But she said other revenue-raising powers could be moved north.
Ms Alexander also raised the prospect of tax revenue being "assigned" to Scotland.
For instance, the Scottish Government could be given all the money raised in income tax for Scotland, allowing more transparency over the money raised and spent in Scotland.
The SNP have been celebrating the 40-year anniversary of Winnie Ewing's Hamilton by-election triumph. But the Labour leader said it had succeeded only in focusing both Labour and other unionist parties on the constitutional agenda.
THE DODGY DONATION
What is this row about?
It concerns a 950 donation Wendy Alexander was given by Paul Green, a Jersey-based businessman, for her leadership campaign fund this summer.
Why is that controversial?
Mr Green is not on the UK electoral roll so cannot give political parties donations.
Did his donation break the law?
Yes. Charlie Gordon, the MSP in charge of getting the cheque, insists he thought the donation was "under the auspices" of a UK-registered company, and was not a personal cheque from Mr Green.
What does Mr Green say?
He says it was a personal cheque and had nothing to do with any company. Therefore, it was illegal.
Have there been other developments?
Mr Green has revealed that he gave money to Scottish Labour before, to Mr Gordon's election campaign in April, and it was accepted. He also revealed that Ms Alexander wrote to him at his Jersey home, thanking him for his donation.
What does that mean?
That means that Mr Gordon has received two illegal donations this year and that Ms Alexander should have been aware that his donation was illegal because she knew he did not live in mainland UK.