The Chinese lover of one of the businessmen who ran Rover was paid a “plainly excessive” £1.7 million, it was revealed today.

The sum paid to companies associated with Chinese automotive consultant Dr Qu Li was attacked in a damning report into the collapse of MG Rover.
The payments to Dr Li, who had an “intimate relationship” with the car company's engineering boss Nick Stephenson, are likely to infuriate many of the thousands of workers who lost their jobs when MG Rover collapsed in financial difficulties.

Business Secretary Lord Mandelson has ordered solicitors to start work which could lead to the four being disqualified from being directors of other companies. The long-awaited 830-page report also concluded that:

* The so-called Phoenix Four obtained “unreasonably large financial rewards” after they bought MG Rover from BMW for a nominal £10 in 2000.

* The four members of Phoenix Venture Holdings — chairman John Towers, vice-chairman Peter Beale, car dealer John Edwards and Mr Stephenson —“chose to give themselves rewards out of all proportion to the incomes which they had previously commanded”.

* The four and chief executive Kevin Howe received pay and pensions worth more than £42 million.

The four-year report by accountant Gervase MacGregor and Guy Newey QC cost the taxpayer £16 million.

Lord Mandelson urged the Phoenix Four to apologise and said they had “brass-neck nerve” to describe the report as a witch-hunt or a whitewash of the Government's involvement.

The report raised a series of questions over the decision to employ Dr Li, suggesting that her main role was translating — a claim she strongly denies.

Dr Li provided consultancy services to MG Rover over 15 months during 2004 and 2005 and was paid a two per cent success fee, totalling £740,000, for a deal in which the Shanghai Automotive Industry Corporation paid £37 million for intellectual property rights relating to the Rover 75 and other products and engines.

But most of the other directors of the companies paying the relevant fees “were not consulted” and only one director, Mr Beale, was told of Mr Stephenson's relationship with Dr Li, the report said. It concluded: “Our own view is that the way in which the agreement and payment of the two per cent fees were authorised was unsatisfactory.”

But Dr Li today rejected the report's findings on her. In a statement through her lawyers, she said: “I brought to the table Shanghai Automotive, a major car manufacturer in China. I delivered enormous benefits for MG Rover. The multi-million-pound sale of intellectual property rights which I brokered realised value for MG Rover and extended its survival period. Despite industry-wide recognition of my knowledge, skills and hard work I am deeply puzzled and upset at the inspectors' criticism of my professional fees.
“Regarding my relationship with Mr Stephenson I can honestly say that this never interfered with my professional responsibilities.”

A relationship developed between Dr Li, who is single, and the divorced Mr Stephenson in 2004, although Mr Stephenson said it was “dead and buried” near the end of the year. MG Rover's collapse led to the closure of the once-mighty factory at Longbridge in Birmingham, which has since re-opened under Chinese ownership building MG sports cars with a workforce of a few hundred.