Did Mills use 'bribe' to invest in firm that won Government deal?

David Mills ordered £150,000 from a fund at the centre of the Silvio Berlusconi corruption investigation to be used to purchase shares in a company appointed to administer a flagship Government policy. The first evidence directly linking Tessa Jowell's husband to the Government and the public purse has prompted immediate calls for an inquiry.

The international lawyer subsequently bought a major stake in Intermediation Ltd, a company of which he was already a director. The London-based firm offers mediation services to potential litigants - designed to ease pressure on courts and cut Legal Aid bills. The company's role in delivering the policy was revealed by Lord Irvine, the Lord Chancellor, in December 2001 soon after Mr Mills's wife, Ms Jowell, had been elevated to the Cabinet as Secretary of State for Culture.

Announcing the new scheme at Birmingham Crown Court, Lord Irvine said: "The Government wants to lead the way in demonstrating that going to court should be a last resort."

Nigel Evans, the Tory MP for Ribble Valley, said he would be writing to Sir Gus O'Donnell, the Cabinet Secretary, on Monday asking for him to investigate the disclosure. He said he was particularly concerned at the apparent link between Mr Mills's labyrinthine financial interests and public money.

Mr Evans said: "Tessa Jowell should have referred this matter to her permanent secretary at the time and perhaps even spoken to the Prime Minister about it. We know her husband's dealings were complicated, but that is no excuse for Mrs Jowell referring nothing to anyone."

The disclosure of the fax message dated December 1999, in which Mr Mills sought to liquidise funds to invest in the venture, came as prosecutors in Milan formally requested Mr Mills and Mr Berlusconi be put on trial for corruption. Mr Mills, who is the brother-in-law of the former director of public prosecutions Dame Barbara Mills, declined to comment last night on his connections with the company.

There is no suggestion of any wrongdoing on the part of Intermediation Ltd. The company is an accredited mediator at four crown courts - Birmingham, Guildford, Coventry and Warwick - where it offers services costing up to £750 an hour. Mr Mills became a director on 5 November 1999 when the company was valued at £104,000. In its latest annual return Inter-Resolve, as it is now called, has grown in value to £930,000. As well as offering the first "no win, no fee" mediation service, it also acts as a referee in disputes at the Lloyds insurance market.

Mr Mills remained a significant shareholder in the company after stepping down as a director in August 2004 - shortly after his interrogation by Italian prosecutors over the alleged bribe. As recently as July last year he still owned 173,000 shares in the company, valued at £17,000.

In a fax to Dr Albert Mayer, of Struie Holdings Limited, a company Mr Mills told investigators was managed on his behalf, he instructs him to sell holdings in an investment fund called Eureka. He asks for the proceeds to be invested in a "ship currently being refitted in Poland" and "£150,000 in an English company Intermediation Limited". He adds: "I will give you instructions about that early in the new year," before wishing Dr Mayer and another associate "a happy Christmas and new Millennium".

Investigators believe the Eureka Fund was the repository for part of a $1.6m (£920,000) tranche of money payable to Mr Mills for his work for Mr Berlusconi.

In court papers lodged yesterday, prosecutors allege Mr Mills deliberately avoided mentioning to an Italian court a phone conversation he had had with Mr Berlusconi in 1995 during which the latter mentioned an enormous bribe paid by him to the now deceased former Socialist prime minister Bettino Craxi. He also, it is alleged, failed to tell the court that two offshore companies,involving one arm of Mr Berlusconi's empire buying film rights in the US then selling them to Mediaset, his TV business, for three times the price, were connected to the media mogul.

For these favours in court, prosecutors claim, Mr Mills was paid at least $600,000 by Mr Berlusconi. In July 2004 Mr Mills admitted receiving such a payment in compensation for what he had described in a memo to his accountant as "turning some very tricky corners" on Mr Berlusconi's behalf. He has since retracted the admission.

The prosecutors say Struie Holdings was used to make "investments of huge amounts of sums and money transfers" on behalf of Italian clients, including Diego Attanasio, who Mr Mills claims was the source of the $600,000 alleged bribe.