A POLICE chief has been called to an emergency meeting to explain the collapse of a lengthy drugs case which could cost taxpayers as much as £20m.

Cleveland Chief Constable Sean Price has been asked to prepare a report to present to the special meeting of his police authority.

After the case came to a halt, it emerged that senior officers encouraged a cash-for-guns loan to a man who was later charged with a shotgun murder.

Details of the loan were revealed during the nine-month drugs case but can only now be reported after the judge lifted a banning order on proceedings.

During the case, Judge Peter Armstrong was told that notorious armed criminal Keith McQuade approached security company boss Joe Livingstone in December 1999 for a loan to buy sawn-off shotguns.

Mr Livingstone contacted Cleveland Police through an intermediary to ask what he should do, and following a meeting between senior officers, the go-ahead was given for him to hand over the cash.

Police had planned to keep McQuade under surveillance, but after losing track of him within a few days, Middlesbrough man Lee King was shot dead.

McQuade, 32, was arrested and charged with the killing but acquitted after a trial in April 2001, during which the loan was never mentioned. He was later jailed for life for armed robbery.

In between the killing and the trial, Mr Livingstone was put under police surveillance as part of a National Crime Squad drug-busting investigation called Operation Imago.

He was one of 12 men who were later charged with conspiracy to supply cannabis and Ecstasy throughout the North-East and whose pre-trial hearing started at the beginning of this year.

The Northern Echo told yesterday how the hearing was brought to a halt on Thursday on a technicality, after nine months of legal wrangling, when lawyers argued the defendants could not receive a fair trial.

Judge Peter Armstrong stayed the case at Teesside Crown Court because of a new European ruling governing evidence being withheld which could be used by the defence.

Mr Livingstone and his solicitor, James Watson, were last night joined by his MP, Ashok Kumar, in demanding an inquiry into the handling of the case.

But a Cleveland Police spokeswoman said: "The judge has made it clear that he makes no criticism at all of any party in this case, and the stay was ordered merely on a changed legal position regarding disclosure which arose part way through the trial due to a recent European Court ruling."

Mr Watson said: "Matters of very serious import were disclosed during the trial. We would expect the chief constable to investigate potential criminal and disciplinary matters that clearly arose.

"A detective sergeant has admitted encouraging the unlawful acquisition of a firearm which the police believe may have been used to kill Lee King.

"If that is true, that officer and the officers who encouraged him are potentially guilty of very serious criminal offences."

Mr Kumar said: "Unanswered questions about the conduct of this and other investigations lead me to the view that there must be a full inquiry to establish the facts of the matter."

Cleveland Police Authority chairman Ken Walker said the meeting - which could be as early as next week - will be public so "issues raised are dealt with in as open a way as possible".

Coun Walker said: "Obviously I share the widespread concern over all the issues surrounding the staying of a major trial.

"I have taken steps to ensure that members of the police authority are fully briefed on all aspects of the case - and the issues raised in the media following the staying of the trial - and I have asked that a full report be presented to a special meeting of the police authority at the earliest opportunity."

Mr Livingstone said last night: "I want a full public inquiry into the rules and guidelines the police broke and the suppression of evidence. The police may have helped to arm a man they knew to be highly dangerous.