Former world champion boxer Terry Marsh's political ambitions were destroyed by a London council, an official report has concluded.

The inquiry revealed the 41-year-old former Liberal Democrat candidate for Basildon was treated "unjustly" by Tower Hamlets Council after it leaked information of a fraud inquiry to the national press.

The council has now apologised to Mr Marsh, and has been told to pay him £250 compensation.

Mr Marsh was forced to quit the 1997 General Election campaign, in which he was standing as the Liberal Democrats' Parliamentary candidate, after someone from the council told the Mirror newspaper Mr Marsh was being investigated for fraudulently claiming a £10,000 student grant.

The first Mr Marsh - and the police - knew about the inquiry was when it was revealed in the Mirror.

Although he was cleared by a crown court jury of the charges, the leak and the court case left his political ambitions in tatters.

A report by the Local Government Ombudsman today severely criticised the council and indicated the leak was politically motivated, although it did not pinpoint who was to blame.

The verdict ends a personal crusade for Mr Marsh, who claimed from the outset someone was out to smear him.

Speaking from his Langdon Hills home, he said: "It just confirms my original suspicions. But there is no bitterness and it has been no big deal. All is fair in love, war and politics."

A spokesman for Tower Hamlets Council admitted the council had breached local government rules.

He said: "Senior officers have accepted the findings of the report but it is still to be considered by members. The chief executive of the council apologised in writing to Mr Marsh prior to the ombudsman's report."

The report concludes: "The leak caused Mr Marsh injustice. He was understandably outraged that the first he knew about the allegations was from the press rather than the council.

"I am unable to establish who leaked the information, but consider that the council was the most likely source. The improper disclosure of the information was maladminstration.

"He will always be left with the suspicion that the leak was politically motivated. The council should consider carrying out leak inquiries more promptly in the future."

Converted for the new archive on 19 November 2001. Some images and formatting may have been lost in the conversion.