Porter is ordered to repay £26.5m in votes scandal

One of Britain's worst political corruption scandals reached its conclusion yesterday when Dame Shirley Porter was ordered to repay £26.5m wasted on Westminster council's "homes for votes" affair.

In a damning judgment, the House of Lords found the former leader of the flagship Tory borough guilty of attempting to "gerrymander" local elections more than 15 years ago. The law lords reimposed the surcharge made by a district auditor against Dame Shirley and her deputy, David Weeks, for selling council homes to potential Tory voters to try to boost the party's chances at the polls.

The pair had acted unlawfully by concentrating on marginal wards for a programme of selling flats and houses that had been specifically earmarked for the homeless, the Lords ruled.

The millionaire Tesco heiress, who now lives in Israel, immediately vowed to fight on by taking the Government to the European Court of Human Rights. Legal experts pointed out that the court process had in effect been exhausted. Westminster City Council announced it would immediately seek the money owed.

The council's head of legal services gave Dame Shirley and Mr Weeks 14 days in which to pay the surcharge and warned that it would take action to recover the cash if the deadline was not met.

Dame Shirley and Mr Weeks had been cleared of the charges by the Court of Appeal in May 1999, which held that politicians, national or local, could pursue policies and make "voter-pleasing decisions" that were to their party's advantage.

But in their 78-page judgment, the five law lords unanimously quashed that decision in emphatic fashion, upholding the findings of district auditor John Magill and the High Court. Lord Scott of Foscote ruled that both Dame Shirley and Mr Weeks were guilty of "political corruption".

"The corruption was not money corruption. No one took a bribe. No one sought or received money for political favours. But there are other forms of corruption, often less easily detectable and therefore more insidious," he said.

"Gerrymandering ­ the manipulation of constituency boundaries for party political advantage ­ is a clear form of political corruption".

He said that, if unchecked, "it engenders cynicism about elections, about politicians and their motives, and damages the reputation of democratic government".

The damning judgment leaves the reputation of Dame Shirley, one of the Tories' most flamboyant figures of the 1980s, in tatters. The daughter of Jack Cohen, a former East End barrow boy who founded Tesco with the motto "pile 'em high and sell 'em cheap", she put the London borough on the map with her right-wing populist policies. She may have seemed divisive, pushy and egotistical, but she was praised repeatedly by that other famous grocer's daughter, Margaret Thatcher.

Dame Shirley's fear of losing Westminster to the Labour Party, a fear that prompted her to draw up the gerrymandering scheme, led ultimately to her downfall. In the May local elections in 1986, Labour had come within four seats of taking control of the flagship council. Five weeks later, Dame Shirley called senior colleagues to a lunch at her cottage deep in the Oxfordshire countryside. On the face of it, she appeared to be proposing an extension of the Tories' popular national policy of selling council houses to tenants. But her real agenda was to replace Labour voters with people who favoured the Conservative Party.

Alarmed at the growing number of homeless in Westminster, whom the council had a statutory duty to house but were described by councillors not "our natural supporters", she devised the now infamous "Building Stable Communities" policy. Although she tried to cover the plans by talking of "balancing the social mix", secret council papers showed that the objectives included "social engineering" and "economic justification for Gmander of housing".

A year later, eight key wards were identified for particular attention with a specific target of producing 2,200 "more electors". But alarm bells began to ring at Westminster City Hall, where some officials were worried that the concerted campaign to sell the homes would make it impossible for the council to meet its legal obligation to house homeless families.

By March 1998, local residents and politicians had begun to raise questions. Dr Richard Stone, a Westminster GP, sent a letter to the district auditor after patients complained about being excluded from housing. Mr Magill took nine years to complete his investigations before delivering with his verdict. Dame Shirley and others were ordered to repay the £26mn lost from rent and rates.

Dame Shirley appealed to the High Court, which rejected her case, before winning in the Court of Appeal. Mr Magill refused to give up and took the matter to the Lords.

In yesterday's judgment, Lord Bingham of Cornhill summed up the feelings of many of Dame Shirley's and Mr Weeks' critics. "The passage of time and the familiarity of the accusations made against them cannot and should not obscure the unpalatable truth that this was a deliberate, blatant and dishonest misuse of public power," he said.

What compounded the wrongdoing was the fact that the pair tried to cover up the scheme with "pretence, obfuscation and prevarication", Lord Bingham said.

But despite the ruling, Dame Shirley was as defiant as every. "I am very angry and shocked. I am not corrupt. I did not abuse power. My faith in British justice has been shaken," she said. With many of assets now abroad, a huge question mark remains over Westminster's chances of recovering its lost millions.

The 71-year old heiress once owned luxury homes in London, Palm Springs, California and Tel Aviv, but now spends most of her time in Israel. She and her husband, Leslie, are estimated to be worth about £69m. Mr Weeks is simply not rich enough to pay much of the surcharge.

To add insult to injury of the verdicts against her, there were reports last year that Dame Shirley's son John was ready to join the Labour Party. Last night, as Labour MPs called for her to be stripped of her damehood, senior Tories revealed that she was no longer a member of the party.

The cool response from the party she worked so hard to keep in power, albeit unlawfully, is perhaps the one sanction she will feel most acutely.

David Weeks David Weeks was deputy leader to Dame Shirley, succeeding her in 1991. The High Court judges originally found his role in the designated sales affair was "inextricably linked" to Dame Shirley's.

He promoted and supported the "designated sales" policy and was found to have lied to Mr Magill and the High Court when he said the policy had been abandoned after legal advice.

John Magill Seen by many as the "Wyatt Earp" figure in the long campaign to bring Dame Shirley to justice, John Magill is the epitome of a mild-mannered but utterly tenacious public investigator.

A partner in the firm Deloitte and Touche, the 57-year-old chartered accountant emerged as Dame Shirley Porter's nemesis when he was appointed district auditor to Westminster in 1986. He retired two years ago.

Richard Stone Dr Richard Stone, a Westminster GP, noted how many empty council homes were boarded up while some of his patients were unable to move into higher category homes despite the urgent need. He fired off a letter to the district auditor and began a chain of events that led to the original judgment. Subsequently a member of the inquiry into the murder of Stephen Lawrence.

Barry Legg One of the original respondents in the case, Barry Legg was a Westminster councillor who went on to become Tory MP for Milton Keynes South West from 1992-97. His supporters say he was unfairly smeared by Labour activists because he was an MP under the John Major government. He was not found guilty of wrongdoing in the auditor's report.