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A company linked to Conservative MP Johnny Mercer has said it is taking legal action over reports that cash from a firm that marketed a failed bond scheme funded his salary.

Mr Mercer, who represents Plymouth Moor View, has rejected any suggestion of wrongdoing, saying there was a "coordinated effort to go after me" and adding: "Politics is truly grim."

His comments came after a BBC report that his private salary was funded by a firm that marketed a failed bond scheme that lost savers £236 million.

The MP receives £85,000 from Crucial Academy, an organisation that trains armed forces veterans, for working 20 hours a month - equivalent to more than £350 per hour.

This is in addition to his basic annual MP's salary of £79,468.

A report by the BBC alleged that Crucial Academy was loaned £325,095 by Surge Group, following a loan to Surge Group from Surge Financial Ltd, which took a 25% commission for marketing bonds for London Capital and Finance (LCF).

Earlier this month, the Financial Conduct Authority (FCA) said an independent probe should be carried out following the collapse of LCF in January.

The Serious Fraud Office has already opened an investigation.

The Crucial Group issued a statement insisting that Mr Mercer "has not received any money, directly or indirectly, from London Capital and Finance PLC at any stage".

The statement said that the Group and its subsidiaries were 100% owned by Neil Williams, adding: "Crucial no longer has any ties to the companies that were linked to LCF in today's stories."

And it said: "Crucial has instructed legal action to commence and will not be commenting further."

The company said that Mr Mercer was paid "in line with his skills and experience" for his "valuable contribution" to its activities. It said Crucial would remain committed to its efforts to help veterans into new careers.

Responding on Twitter, Mr Mercer said: "Extremely saddened by efforts made against a good company, run by good people doing good things for veterans.

"Never have I received any money - directly or indirectly - from any 'collapsed bond scheme'. Legal action has commenced. Appreciate the kindness. Politics is truly grim."

In an earlier statement, Mr Mercer insisted Crucial Academy has "no financial link" to LCF and had repaid the loan from Surge Group after it was uncovered.

"Clearly there is some coordinated effort to go after me at present - the reasons for which are unclear," he said.

"Let me be very clear from the outset: I totally reject the assertion that I have done anything wrong in working as a non-executive director of Crucial Academy.

"This is a training academy that trains veterans from the armed forces with particular specialist skills in cyber security, and places them with major companies.

"There are many similar endeavours, particularly in the US.

"It is possible to draw a link between an individual and any number of companies. This has been done by the BBC between Crucial Academy and London Capital Finance (LCF) - through two other companies.

"I have sought rigorous assurances that at no stage was capital used from any business with LCF, in Crucial Academy. I received those assurances.

"It now appears that there is a historical link between the two, that has been uncovered in the accounts when Surge Group loaned the Crucial Group £325,095.

"Clearly I had no role in this, joining the Academy only last autumn."

Mr Mercer said that once that "historical link" was discovered, a management buy-out of Crucial Academy took place and the loan was repaid "to ensure the continuing integrity" of the firm.

He described the report as an attempt to tie him to LCF, a company that had "imploded amid allegations of fraud".

"I have never met, heard of, or had any interest in this company previously, yet alone the financial products they offered," he said.

"I have huge sympathies with the bondholders, and would support them in any future action they take to try and recover their position.

"But let me be clear: Crucial Academy is a good organisation, doing good things, run by good people, with no financial link to London Capital and Finance.

"I have no intention of resigning or cutting them loose in this storm.

"The wider context of calling out deliberate efforts to smear me by so-called colleagues in the House of Commons, and then this story appearing so soon afterwards, I will leave for others to judge."