MICHAEL ASHCROFT is a powerful man. A former treasurer of the Conservative Party, he is now its deputy-chairman. He is also a very wealthy man—the 65th richest in Britain, according to a rough-and-ready ranking by the Sunday Times. Through one of his companies, he has given over £3m ($6m, at today's rates) to the Tories in the past five years in cash and kind (including free flights for the leadership and opinion-poll research). Before the last general election, Lord Ashcroft lent the Tories another £3.6m.

As well as being powerful and rich, Lord Ashcroft is elusive: he is the right-wing pimpernel of British politics, whose name is uttered with awe and terror by Labour MPs. The mystery partly emanates from Lord Ashcroft's association with Belize: he spent part of his youth in what was then still British Honduras, subsequently returning to Belize to base some of his business activities there.

Belize is the smallest country on the American mainland, and one of the poorest in the Caribbean (“if the world had any ends,” Aldous Huxley wrote of it, this “would certainly be one of them”). If Lord Ashcroft is an influential man in Britain, in Belize he is a colossus. His holding companies control, among other things, the country's biggest bank, Belize Bank. A strange tale involving that bank and Hugo Chávez, Venezuela's left-wing president, now risks embarrassing the Tory deputy-chairman.

At issue—and now under dispute in assorted ongoing court cases—is a $10m transfer from Venezuela to the government of Belize that has, in effect, ended up in the coffers of Belize Bank. The bank argues that the money it received constitutes repayment of a government-guaranteed debt; the current government says Belize Bank had no right to hang on to it and is suing to get it. The story revolves around a private hospital established by a company called Universal Health Services (UHS), with early financial backing from the government of the day and from Belize Bank.

The UHS hospital is today a surprisingly modest building in a suburb of Belize City. According to the Ministry of Finance, the firm borrowed money from Belize Bank in 1998 and then from various arms of the government, incurring debts that were transferred between government agencies as they rapidly mounted. It is unclear why the agencies and Belize Bank continued to lend relatively large sums over an extended period to such an unpromising enterprise, which was never able to meet its repayment obligations.

By December 2004, says the Ministry of Finance, UHS owed Belize Bank Bz$29m ($14.5m, or £7.7m). The prime minister of Belize, Said Musa, agreed to guarantee repayment of all UHS's obligations to Belize Bank (assuming a guarantee previously issued by Belize's Development Finance Corporation). The guarantee was signed by Mr Musa and by Francis Fonseca, the attorney-general. As court papers show, the guarantee was not disclosed publicly and the cabinet was not informed of it.

Further funds were advanced and UHS's debts continued to mount, to more than Bz$33m by March 2007, according to court submissions. A new agreement was reached on March 23rd 2007 in the form of a settlement deed and a loan note signed by Mr Musa and representatives of Belize Bank in the presence of Mr Fonseca. In it the government promised to repay UHS's existing obligations to the bank, beginning on April 23rd, and the former open-ended guarantee was discharged. Any disputes were to be resolved through arbitration in London. An additional loan facility for Bz$12m was agreed on March 29th.

The GDP of Belize is only $1.2 billion; many of its 300,000 inhabitants live in poverty. Illiteracy, shanty housing, gang crime and ill health are all sadly common (the annual budget of its health ministry is less than $40m). So you might think that there would be restraints on the government's ability to agree to what, in Belizean terms, was an enormous guarantee. In fact, there were: under section 7 of the Finance and Audit (Reform) Act of 2005, the government required the approval of the National Assembly. It was not secured.

By this time, the existence of the original guarantee had become known. The Association of Concerned Belizeans, a pressure group, and others filed suit to prevent the government from paying Belize Bank. Their lawyer, Lois Young Barrow, the ex-wife of the man who is Belize's prime minister today, argued that, according to the constitution, the 2004 guarantee should have been taken to cabinet. When the 2007 deal was revealed, she argued that it violated the 2005 finance act. Belize Bank, joined to the action as an interested party, tried and failed to quash it on procedural grounds. It maintained that whatever the status of the 2007 agreement, it was still entitled to its money. The government's solicitor-general undertook not to make any payments until the court case was concluded.

As payments from the government were not forthcoming, Belize Bank invoked the arbitration clause in the 2007 loan agreement and opened proceedings in London. The tribunal held that there was a dispute over which it had jurisdiction but got no further. By then, according to the party ruling Belize at the time, the unpaid debt totalled some Bz$45m.

As these legal twists and turns were pursued, general elections were nearing in Belize. The sitting prime minister, Mr Musa, was not favoured to win: he needed money to woo voters. As subsequent events were to show, Belize Bank was unlikely to be repaid after he left office. So the government looked for other solutions.

What friends are for

The first was to ask for a hand-out from rich and friendly countries. Taiwan agreed to help the government of Belize (one of the few countries with which the Taiwanese have formal diplomatic relations). On September 12th the Taiwanese paid a (US) $6m cheque into an account held with Belize Bank in the Turks and Caicos islands, and on October 20th another cheque for $4m was deposited.

Oil-rich Venezuela also obliged. On December 28th the central bank of Belize received $10m from Venezuela, wired via the Federal Reserve Bank in New York. In January Venezuela's generous gift, for housing and a sport stadium, was disclosed to a grateful nation; a general election was announced and cash frantically dished out to eager voters.

Unbeknownst to the public, however, another $10m pursued a more winding path from Venezuela to Belize. As court papers show, the funds were transferred on December 28th by the Banco de Desarollo Económico y Social (BANDES), Venezuela's development bank, to Belize Bank's account with its correspondent bank in London, Bank of America. The transfer contained (in Spanish) the instructions “Single disbursement [to]GOB (ie, the government of Belize) [for] construction and repair of housing”. On January 24th the money joined the Taiwanese funds in the Turks and Caicos islands.

While this aid was being wrung from public donors, a private-sector buyer for UHS was also sought. Dr Muthugounder Venugopal was the man eventually fixed upon. He and his associates ran the Loma Luz hospital in Belize—and he reportedly raised Bz$5m in the form of a loan from Belize Bank. A bewildering array of trusts and companies and a joint venture variously registered in the British Virgin Islands, Turks and Caicos, and St Kitts and Nevis was used to convey much of the money thus assembled to Belize Bank. On January 30th Belize Healthcare Partners, owned by a joint venture essentially between Dr Venugopal's Venny Group and a new Belize Healthcare Charitable Trust, paid Belize Bank Bz$39m—almost the combined total of Taiwan's grants and the secret transfer from Venezuela—to buy UHS's assets, and a further Bz$6m to other creditors and suppliers.

This secret Venezuelan transfer was not made public—until Mr Musa, despite the hand-out, lost the election on February 7th: he is now threatened by a host of corruption allegations, including some involving dodgy loans by development agencies. The day after he was swept from power, the new rulers of Belize were, they say, asked by Venezuela for an accounting of its $20m gift. The central bank of Belize demanded that Belize Bank hand over the Venezuelans' second $10m and display its authorisation for not coughing up the Taiwanese funds. In its report on the matter sent to Belize Bank on March 31st it charges the bank with various irregularities. For its part Belize Bank has challenged in court the central bank's directives.

The government of Belize, under its new prime minister, Dean Barrow, wants good relations with Belize's largest commercial bank and with Lord Ashcroft. But it also wants what it sees as its money back. On April 10th the government sued the bank for the return of the Venezuelan $10m. (Referring to the former government's secret agreements, Mr Barrow told the assembly on April 25th that “The days of doing things in the dark behind the backs of the Belizean people in order to screw the Belizean people are over.”)

What is the truth of the matter? Philip Johnson, the chairman of Belize Bank, says in a letter to The Economist only that “a further settlement was reached which allowed monies to be made available for the purchase of the assets of UHS.” He insists that the guarantees were legal, and claims that Belize Bank in fact received less than it was entitled to. As to the transfer instructions from Venezuela specifying that the funds be paid to the government of Belize for housing, his bank “was not privy to the arrangements between the Governments of Belize and Venezuela” (though, as the deposit was made into Belize Bank's correspondent account in London, it seems odd that the bankers should have been unaware of Venezuela's instructions).

A different interpretation is summarised by Mark Espat, a minister under Mr Musa who lost his cabinet job for opposing the guarantee. Money, he says, was “diverted from its intended purpose to honour a debt that should never have been agreed in the first place”.

They seek him here, seek him there

Lord Ashcroft's Belizean existence has caused him trouble before now. When he was ennobled in 2000, the Tories said he would assume permanent residence in Britain—fulfilling the inverted principle of no representation without taxation. His nomination for a peerage had previously been rejected, partly, it is thought, because of his tax status. It remains unclear whether that pledge has been fulfilled; his attendance in the Lords has been infrequent. And as the UHS row demonstrates, he is as controversial a figure in his adoptive homeland as he is in what is theoretically his real one.

The Economist sought his comments on Belize Bank's involvement in the affair, but none has been forthcoming from him or from his aides. So Lord Ashcroft's own role in the matter, if any, remains unclear. But Belize Bank is owned by a holding company of which he is the majority shareholder and executive chairman. His son runs Belize Bank in the Turks and Caicos.

Meanwhile, Lord Ashcroft and his fortune continue to exert huge influence on British politics. Exploiting a clause in party-funding laws that allows unlimited campaign spending before an election period, he is funding aggressive campaigns by prospective Tory candidates in key marginal constituencies—a tactic that reaped big benefits at the 2005 election.