Lib Dems 'checked out' fraudster Michael Brown
Former Lib Dem leader Charles Kennedy has insisted his party went the "extra mile" to check out donor Michael Brown before accepting his money.
Brown - who gave the party £2.4m ahead of the 2005 election - was later convicted of stealing £36m from clients and is now on the run from the police.
The Electoral Commission ruled in 2009 the party could keep the money.
The watchdog denied reports in The Sunday Telegraph that it is considering reopening its inquiry.
"The investigation was closed in 2009 and we have no intention of revisiting it," a spokesman told BBC News.
"If anybody presents us with new evidence, we will look at it."
The Telegraph claims Brown is living under an assumed name in the Dominican Republic, which does not have an extradition treaty with the UK.
Mr Kennedy, who was leader at the time the donation was made, said: "We were very careful, we always were in the Lib Dems, to keep a distance, a buffer zone, over donations."
He said he knew Michael Brown and "had quite a number of dealings with him".
But he added: "I know, or I was told, and I don't doubt the veracity of this at all, that not only were all responsible checks taken before his company made this donation but, indeed, they went the extra mile with the authorities in making checks."
He told the BBC's Andrew Marr show Brown's donation - the biggest in the party's history - had "long since been spent".
Brown, a bogus international bonds dealer, was found guilty in 2008 of defrauding £36m, including £8m from former Manchester Utd chairman Martin Edwards, and given a seven-year jail sentence.
He was tried in his absence after skipping bail.
Southwark Crown Court was told he had channelled the gift to the Lib Dems through a company called 5th Avenue Partners.
The Electoral Commission ruled that there was no "reasonable basis" to conclude he had personally donated the money and it was reasonable for the Lib Dems to "have regarded the donations as permissible".
In a separate development, City of London police have arrested two men as part of their investigation into Brown's disappearance.
A police spokesman said the force had been "aware for some time" that the fugitive had been living under an alias in the Dominican Republic.
As part of its investigations, two men were arrested in London on Friday on suspicion of assisting an offender.
Both men have now been bailed pending further inquiries.
Detective Superintendent Bob Wishart said: "Contrary to some reports in the media, City of London Police remain determined to ensure Michael Brown is returned to the UK to face justice and serve his sentence - his victims and UK law demand no less.
"This is what we have been working quietly to achieve away from the glare of publicity, which in this case risks making our work more difficult."