Boris Johnson overruled advice last year from the House of Lords Appointments Committee against making the businessman a Lord - the first time the watchdog’s recommendation has been ignored.
A former Tory treasurer, Lord Cruddas resigned in 2012 after reports he had offered access to then prime minister David Cameron and chancellor George Osborne in return for donations.
In a letter to government lawyers setting out their case for judicial review, the Good Law Project said that Cruddas, his wife and his company had between them given £3m to the Tories - including £1.2m since Mr Johnson became PM in 2019, as well as donating £50,000 to his campaign for the Conservative leadership.
The letter before claim states that the former party treasurer gave £250,000 to the Tories weeks before it became known last year that Mr Johnson had nominated him for a peerage, and a further £500,000 three days after becoming a peer in February 2021.
The director of the Good Law Project, barrister Jolyon Maugham, said: “The independent watchdog didn’t think Peter Cruddas should be given a peerage. But Boris Johnson ignored their advice and appointed him anyway.
“Just three days after he entered the Lords, he gave the Conservatives half a million quid.
“I don’t think this is lawful. I think a fair-minded observer, presented with the facts, would conclude there was a real possibility or danger of bias in the Prime Minister’s decision-making.”