Retired military commanders could be barred from the corridors of power after the MoD launched an inquiry into claims that some of them have used their access to lobby for lucrative arms deals. The president of the Royal British Legion, a decorated Falklands veteran, may become a high-profile casualty in the recriminations which have followed the revelations.

Lieutenant-General Sir John Kiszely was one of a group of former senior officers who were secretly filmed apparently boasting of their closeness to ministers, current heads of the military and MPs. He is alleged to have said he could use his position at the organisation for business purposes. He would be meeting the Prime Minister, the Defence Secretary, and the head of the British military at a Remembrance Sunday ceremony and offered the possibility of "commercial people" being present as the Legion's guests.

The Defence Secretary, Philip Hammond, said yesterday he would not hesitate to "shut the door" if it were proved that they had been using their positions to lobby in breach of rules.

The undercover sting, by The Sunday Times newspaper, also focused on Lord Dannatt, the former Chief of General Staff; Lieutenant-General Richard Applegate, the former chief of Army procurement; and the former Fleet Commander, Admiral Sir Trevor Soar. They had been approached by reporters, one of them a young woman, pretending to be representatives of a South Korean arms manufacturer.

Last night, the Legion said it had launched an investigation into the allegations against Lt-Gen Kiszely, the result of which will be sent to the organisation's trustees. Chris Simpkins, the director-general, stressed that there was "a code of conduct that addresses the issue of conflict of interest". He said the honorary position of national president was covered by the code and should not be used for commercial gain.

Lt-Gen Kiszely said: "I have always kept my role as national president of the Royal British Legion separate from my business interests."

Mr Hammond said: "There are many, many reasons why it is sensible for the MoD to maintain contact with retired officers... but if they are abusing that access for commercial purposes then we will have to tighten it up or maybe even shut it down."

All four former commanders have denied any wrongdoing.

Sources close to Lt-Gen Applegate said he had informed the MoD about the work he was carrying out on behalf of an Israeli defence company and had been cleared to continue doing so. "At no stage did I lobby or agree to a covert political lobbying campaign."

Lord Dannatt acknowledged that he offered to "facilitate conversations" but rejected an £8,000 monthly fee offer, insisting that he had "no inclination" to undertake any lobbying that would contravene the rules.

Line of fire: generals under investigation

Lord [Richard] Dannatt, former head of the Army Alleged to have offered to sidestep a ban on discussion of a £400m contract by speaking to a top MoD civil servant, an old school friend. He denied breach of the rules and said he rejected an £8,000 monthly fee offer.

Lieutenant-General Sir John Kiszely, President of the Royal British Legion General Kiszely, 64, a former director of the Defence Academy, is said to have offered to use his current role to push his client's agenda with the PM and other senior figures. He denies wrongdoing, and says he has always kept his British Legion role separate from his business interests.

Admiral Sir Trevor Soar Former Commander in Chief of the Fleet is reported to have offered to break a two-year ban on lobbying imposed on personnel leaving the service after being asked to work for a South Korean company. He denies breaking rules, insisting he had official approval.