WENDY ALEXANDER has been reported to the procurator fiscal for failing to register her leadership campaign donations. Dr Jim Dyer, the standards commissioner, has sent a report to the area fiscal in Lothian and Borders after concluding there was evidence the Labour leader broke the rules on declaring gifts.

She now faces a police investigation and possible charges if the fiscal concludes the offence warrants a criminal sanction.

The dramatic development will increase the intense pressure on Alexander to resign as Labour leader and comes as she awaits the verdict of the Electoral Commission's investigation into her campaign team's acceptance of an illegal £950 donation from Jersey tycoon Paul Green. However, while the commission's inquiry has been the focus of the media's attention, Dyer has also been investigating Alexander's compliance with the Scottish parliament's rules on registering gifts.

It was reported on Friday that Dyer had notified Alexander that any donations she received over £520 should have been registered as gifts, a ruling that prompted the Labour leader to publish a selection of her financial backers.

However, the Sunday Herald understands that Dyer also sent a report on the Alexander case to the area fiscal in Lothian and Borders on Friday.

He also notified Alexander and the Parliament's Standards Committee about his actions, which will cause ructions within the Scottish political world.

The basis for Dyer sending his report to the prosecutor is contained in the Memorandum of Agreement'' between the Standards Commissioner and the Crown Office.

It states that if the commissioner is satisfied, in relation to any complaint that the member has committed the conduct complained about, and the conduct would, if proved, constitute a criminal offence, the commissioner shall: a) suspend investigation and consideration of the complaint; b) submit a report to the procurator fiscal and c) notify the committee''.

One legal insider said the fiscal would now decide whether a police investigation was required into the Alexander case, and then decide if a prosecution should be raised.

The report to the fiscal is a devastating blow for Alexander, who has repeatedly insisted she is innocent of any intentional wrong-doing'' over the botched financing of her leadership campaign.

Her four-month leadership of Labour at Holyrood has been dogged by the row over her acceptance of an illegal campaign contribution from a Jersey-based businessman, a story first broken in the Sunday Herald.

Her reputation was further harmed by the revelation that her campaign team actively sought donations under £995, which is £5 below the Electoral Commission's level for public registration.

However, her ruse to get past declaring her donors on the Holyrood register of interest - the cash was directed to the Wendy Alexander Campaign'' not the MSP herself - has been spotted by Dyer, who ordered disclosure.

Despite the significance of being reported to the procurator fiscal, it is likely Alexander's supporters will urge her to stay on and fight.

Her closest ally, Jackie Baillie, said recently: If the Electoral Commission judge that there has been intentional wrongdoing, by either Wendy or one of her campaign team, I would have thought she had even more reason to stay on and fight for her reputation.'' A spokesman for Alexander said: We are not going to comment on Jim Dyer's investigation.'' A spokesman for the Crown Office said: We can confirm the report has been received by the area procurator fiscal for Lothian and Borders, and this is now being considered.'' Dyer declined to comment last night.

In a separate development, the Sunday Herald can reveal Team Alexander gave a false account of the source of the illegal campaign donation that has engulfed her leadership for two months.

An on-camera statement from November claimed that the £950 cheque from Paul Green had been handed to Alexander's leadership campaign "under the auspices" of a company called Combined Property Services (CPS).

However, the claim has since been withdrawn in the course of interviews with the body currently investigating the donations to Alexander's war-chest.

Alexander's colleagues originally stated that the cheque had come from Glasgow-based CPS, a claim the company and Green firmly denied.

A press conference called on November 29 to explain the confusion saw Charlie Gordon, who solicited the donation, resign as Labour's transport spokesman.

In his statement to the media, Gordon said: "I asked for a donation from Mr Green, and he asked me to ensure that it was in line with the rules.

"I handed the donation on to the campaign team and conveyed to them that it was a donation under the auspices of Combined Property Services and that Mr Green had a controlling interest in the company."

However, the Electoral Commission has been informed that the claim about CPS being named as the original source of the donation at the time the cheque was handed over is untrue.

It is also understood that while Gordon read out the statement, he did not coin the "under the auspices" phrase that has since been retracted.

Various members of the team, including campaign manager Tom McCabe, co-treasurer David Whitton, as well as Alexander herself, contributed to the resignation script.

Rather than the campaign team being made aware of CPS's involvement in late August, when the cheque was received, the Glasgow-based firm was first mentioned about two months later.

A copy of Alexander's official donor list, which was obtained by the Sunday Herald and dated November 5, revealed the donor's address to be Green's Jersey residence.

Days later, however, Team Alexander informed the commission that the cheque had come from CPS.

It is also understood that another Paul Green cheque solicited by Gordon, this one for the Glasgow South Labour party last April, made no mention of CPS. Internal paperwork for the £950 donation shows it was a personal contribution from Green.