COCAINE SEIZED ON SHIPS IN TORY CHIEF'S LIST

At least two ships sailing under Conservative Party treasurer Michael
Ashcroft's former Belize 'flag of convenience' carried cocaine, an
Observer investigation reveals.

In 1994 United States Customs seized 209lb of the drug hidden in the
hold of the Monique, a 400-ton cargo ship, as it arrived in Miami from
Haiti. The cocaine had been concealed in a secret compartment beneath
a layer of animal manure.

A month later, the same organisation discovered 4,300lb of cocaine
hidden in another cargo ship, the Inge Frank, in Tampa, Florida. Both
ships flew the blue and white Belize flag and were listed on the
register part-owned by Ashcroft through his Caribbean holding company,
Belize Holdings.

The revelations, which follow claims yesterday that the US Drug
Enforcement Administration has a series of files on Ashcroft and his
Belize businesses, threaten to open a new rift inside the party, just
as a run of good election results allowed leader William Hague to
establish his authority and quell dissent.

One eminent Conservative has privately warned that sleaze could keep
the Tories out of office, in the same way that Labour was bedevilled
for 13 years by the industrial unrest of the late Seventies. He
suggested Hague should never have made Ashcroft treasurer because of
gossip about his business methods.

A shadow Minister admitted: 'Ashcroft is highly controversial. Nobody
quite knows how he made his money.'

But The Observer has learnt that Baroness Thatcher has weighed in with
a personal message of support for the beleaguered billionaire. At a
Buckingham Palace reception last week, she was heard proclaiming that
Ashcroft is a victim of a 'witch-hunt'.

Meanwhile in Belize, the People's United Party government, which
Ashcroft last year gave $1m, claimed the businessman was being
'smeared... simply to fuel the needs of British domestic politics'.
Despite Belize's claims that it has nothing to hide, many believe the
cocaine seizures justify diplomatic fears that Ashcroft's influence
over Belize made it a target for drugs traffickers and money launderers.

In a 1994 report to the Belize government, a senior Foreign Office
adviser claimed there had been 'a number of instances of
Belize-flagged vessels being used for the transport of drugs', and
that there was 'information of a large amount of money entering Belize
to pay for a shipment of cocaine'.

In particular, the Foreign Office adviser Rodney Gallagher voiced
'growing disquiet' about Belize International Services Ltd (BIS), the
company in which Belize Holdings until last month held a 50 per cent
share.

Yesterday DEA sources told the Observer that although Customs
questioned the eight crewmen on the Monique they could find no record
of charges being brought against them or the owners. However,
following the seizure on the Inge Frank, that ship was impounded and
auctioned by the US government.

In another embarrassing development for the Tory's chief fundraiser,
The Observer has learnt that Britain's Marine Accident Investigations
Branch is to publish a report questioning the Belize registry's
supervision of the Rema, a freighter which sank off the north-east
coast of Britain last year, resulting in the deaths of five British
crewmen.

The Observer understands the MAIB has ruled out crew error or
collision with another vessel as the cause of the accident. It is
expected to conclude that the Rema was unfit to sail when it left
Berwick on 25 April last year.

Two months earlier, the Rema had been called into port by the Marine
Safety Agency because it carried no lifeboats, and the master could
not produce a certificate of competence. The ship was released on
condition that Belize rectified the faults. But it was not clear
whether the registry had complied by the time of the sinking.

Yesterday Ashcroft furiously denied he had ever been involved in drug
running or money laundering. He also denied that his Belize holding
company ever had 'operational responsibility' for the registry.

There is no suggestion that Ashcroft knew of the purpose to which
ships on the register were being put.