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Millionaire property magnate Sir Robert Jones is upping the ante over a $25,000 donation to Winston Peters as allegations surface the trust at the centre of the furore was set up to fund the New Zealand First leader's legal battles.

Sir Robert announced yesterday he would be formally writing to Peters' brother Wayne this week asking exactly what happened to a $25,000 cheque he made out in 2005 to the "Spencer Trust".

Peters has said he has "no involvement with that trust" administered by his brother, but former NZ First staff member Rex Widerstrom told the Herald on Sunday he was prepared to swear an affidavit stating the trust was set up around the time of the Winebox Inquiry to funnel anonymous donations from people who wanted to support Peters' various legal battles.

He said he had the opinion that during his time with Peters there were occasional discussions in the NZ First parliamentary offices about the Spencer Trust, and he was absolutely convinced Peters had knowledge it existed and what its function was.

He recalled one conversation between Peters and ex-staffer Sarah Neems when Neems asked Peters if a donation should go into the Spencer Trust and Peters agreed it should.

Another former NZ First staff member - who did not want to be named - said it was his understanding the name "Spencer" was decided on because of Peters' great admiration for his namesake Winston Churchill. Churchill's middle name was Spencer and for years his photograph hung in Peters' Wellington office.

Controversy over the Spencer Trust follows claims NZ First has received donations from wealthy donors which it has not declared to the Electoral Commission. Peters has dismissed the claims as unsubstantiated rubbish.

Wayne Peters told the Herald on Sunday he had no comment to make about the Spencer Trust, while Peters told journalists yesterday attending a press conference for US Secretary of State Condoleezza Rice he would not be answering questions on the issue.

He could not be reached last night for comment on Widerstrom's claims.

However, yesterday Sir Robert went on the front foot over suggestions by Peters that his "memory was failing him" over the donation, questioning why Peters would solicit funds for a trust he had no knowledge or involvement with.

He said he would be writing to Wayne Peters this week asking what the money had been spent on.

All donations to political parties of more than $10,000 must be declared to the Electoral Commission.

The commission has confirmed it has no record of NZ First declaring the $25,000 donation from Sir Robert, any of his companies, or from the Spencer Trust in 2005.

Despite Peters' claims of a failing memory, Sir Robert said that he recalled the background to the donation very clearly.

"There was a lot of drinking and when we got round to the subject [of the donation] there was a tremendous argument and I said 'Winston, I'm not giving you anything'. Finally to get him off my back I said 'you can have $25,000 on the basis of friendship'," Sir Robert said.

Asked if he believed it was plausible Peters knew nothing of the Spencer Trust, he added: "Of course he [Peters] did... [But] there was no bloody mention of the Spencer Trust. The money was to go to his party.

"I don't tell bloody lies. Why am I in the firing line for an act of benevolence? I won't tolerate it."

Widerstrom - who worked for NZ First between 1993 and 1996 before having a fallout with Peters over his position on the party list - said the Spencer Trust was established as a fighting fund for Peters' legal battles. "That I'm sure of. The argument was that NZ First was built around Winston and that winning the various legal skirmishes was crucial for his credibility and thus the party's," he said.

"The fund existed. Wayne [Peters] was involved, dollars went in from various sources and I was told by Peters and Neems that its purpose was the legal fees."

He recalled another $50,000 donation that he says Sir Robert made in 1995 to NZ First that also was not declared to the Electoral Commission.

Peters, he said, had asked him to fill in for him at the NZ First annual meeting in Tauranga and he remembers objecting but was told it was important he be in Wellington to see Sir Robert.

The next day Peters told him he had managed to solicit $50,000 from the property developer.

"I assumed the money was for the party. I could not say for sure where the money went to, but assumed it was through the Spencer Trust."

Peters plans to brief Prime Minister Helen Clark on the matter this week. She said yesterday she retained confidence in him as foreign minister and would be "giving these issues my attention in the coming days".