Labour is to investigate a newspaper report that MP George Galloway received money from Saddam Hussein's regime.
The inquiry was announced by Labour Party chairman Ian Hunt, who said the allegations were "extremely serious".
Mr Galloway's solicitors tonight said: "Mr Galloway has never, directly or indirectly, been granted, nor has he sought, oil or any other commercial contracts with Iraq, nor has he received any money from Saddam Hussein's regime."
The Telegraph said it had found Iraqi intelligence documents which suggested Mr Galloway took a slice of Iraq's oil-for-food programme worth at least £375,000 a year.
According to the newspaper, the suggestion was made in a confidential memo to Saddam from Iraq's intelligence chief, who is not named. It was written in January 2000.
He dismissed the Telegraph report as "the latest in a long line of smears to try to stop the work George has been doing".
I was ready to believe he could be innocent until this last line. A long line of smears? What work can his critics stop now that the war is over? Innocent men sometimes blame their accusers and point to their motivations, but guilty men always do. The Telegraph has more to lose by running the story than Galloway has by making excuses for his enemies’ actions. The odds are in favor of Galloway's guilt. A simple, not guilty would have been a fine statement for an innocent man.
Galloway threatens to sue Telegraph
However, Mr Galloway strenuously denied the claims and said the evidence was fabricated as part of a smear campaign against him.
"I will be suing for libel, without any equivocation. The Daily Telegraph produces no evidence for the serious allegations that they make other than a document, which they say popped into their hands in a search through a cruise missile and smoke blackened building," Mr Galloway told BBC Radio 4's Today programme.
However, (Telegraph reporter David) Blair told Today he was convinced the document implicating Mr Galloway was genuine.
"Nobody steered me in that direction at all. We just went and purely by chance we stumbled across this room which had these files in it, and again purely by chance we came across these files which carried the label Britain. And it was two days before we had actually gone through the contents and found this document.
"I find it very hard to believe that this document is not authentic. I think it would require an enormous amount of imagination to believe that someone went to the trouble of composing a forged document in Arabic and then planting it in a file of patently authentic documents and burying it in a darkened room on the off-chance that a British journalist might happen upon it and might bother to translate it. That strikes me as so wildly improbable as to be virtually inconceivable."
Is Galloway going to claim that the Telegraph forged the document?
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