SCOTTISH Liberal Democrat leader Nicol Stephen's re-election campaign is being bankrolled by a businessman previously investigated for tax fraud and whose firm was described as "cynical and insensitive".

The enterprise minister's local party has accepted nearly £4000 in donations from Aberdeen-based Ian Suttie, who laid off nearly 200 workers at textile firm Richards in 2004 without pay or redundancy money.

Suttie was slammed by an industrial tribunal and later dubbed "irresponsible" by an Aberdeen sheriff after a separate investigation into his tax affairs.

Critics have called on Stephen to make a statement about his links to the entrepreneur, whom the LibDem leader has praised in the Scottish parliament.

The donations were revealed in the Electoral Commission's latest round of financial disclosures.

Stephen's local party in Aberdeen South recently declared £1200 in donations from Suttie, on top of £2400 previously given to the branch.

Suttie, an oil tycoon and one of Scotland's richest men, is a controversial figure due to his role in the closure of the Richards of Aberdeen textile business, which he took over in 2002.

The company collapsed in November 2004 and resulted in 196 workers, some of whom were on the minimum wage, losing their jobs and pensions, with no pay or redundancy.

Employment tribunal chairman Nicol Hosie awarded the staff an average payout of £3500, adding: "Staff were treated in a cynical and insensitive manner."

Unions were incensed after one of Suttie's other firms announced plans to build an "urban village" on the Richards site, leading to accusations that the tycoon had bought the firm as a way of "asset-stripping" it and using it for property development.

Suttie ran into further trouble in 2006 after a tribunal found that his carpet firm, First Textile Flooring, had failed to consult 38 Ayrshire workers about their redundancy. The firm was ordered to pay £160,000 to its former employees.

But the businessman's most serious brush with authority occurred in 2005, when he was accused of fraud by not declaring more than £179,000 in interest in his bank accounts.

The millionaire was cleared by the court but was accused of being "irresponsible" by the sheriff for not checking his bank statements.

The revelations are an embarrassment for Stephen as his local party has accepted a stream of donations from the businessman.

Stephen's role as enterprise minister includes promoting corporate social responsibility. In 2002, he praised the businessman in the Scottish parliament.

Suttie's cash will effectively bankroll Stephen's re-election campaign in Aberdeen South, as Electoral Commission data shows the branch has not received any other registerable donations in the past four years.

The row also brings into focus the links between the LibDems and Aberdeen businessmen with property interests - days before Suttie's most recent handout was declared, the party's neighbouring Aberdeen Central branch declared £7500 in donations from entrepreneur Alan Massie.

Critics say that Suttie's generosity in particular puts LibDem councillors in an awkward position, as they are about to rule on his proposed redevelopment plans for the former Richards site.

Amicus regional officer Graham Tran condemned the LibDems for taking Suttie's cash: "Nicol Stephen should make a statement on whether he has any links to Ian Suttie. For the LibDems to accept this money is outrageous."

A spokesman for Stephen said the payments were above board.

He said: "These donations will, of course, be part of the campaign budget, but it is a thriving local party. Nicol Stephen has no direct responsibility for fundraising in Aberdeen South."