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For the past six months Attorney General Baroness Scotland has paid Loloahi Tapui, 27, from Tonga, to look after her large family home in West London. using the National Insurance number issued to her as a student.
Last night Lady Scotland denied knowing of her illegal status and fired her immediately.
But Lady Scotland could theoretically be prosecuted under laws that she is paid to enforce.
Even unknowingly employing an illegal is still an offence, punishable by a £10,000 fine, under legislation that she helped steer through Parliament as a Home Office minister in 2006.
As the most senior lawyer in England and Wales, the Attorney General is legal adviser to the Government and supervises all criminal prosecutions.
Confronted at Lady Scotland's home yesterday, Miss Tapui admitted she had overstayed her visa and was working illegally.
She confirmed that she had worked for the Attorney General for about six months and said the job was arranged by Lady Scotland's personal assistant.
Miss Tapui and Lady Scotland both confirmed that the housekeeper did pay tax and National Insurance on her wages.
The fact that Britain's top law officer could be so easily hoodwinked highlights the lax controls that critics claim are a feature of Labour's immigration policy.
The revelations are a grave personal embarrassment for Caribbean-born Lady Scotland - the first-ever female Attorney General - and could lead to calls for her to resign.
The case has echoes of former Home Secretary David Blunkett, who quit the cabinet in 2004 after it emerged that he sought to fast-track the visa application of his lover's Filipina nanny.
Two of Bill Clinton's nominees as U.S. Attorney General - both women - had to withdraw in 1993 after it emerged that they employed illegal immigrants as nannies and a home help.
Miss Tapui grew up on the remote island of Vava'u. As a citizen of Tonga - formerly part of the British Empire - she does not need a visa to spend fewer than six months in Britain as a tourist.
She was living in the UK in 2003 and successfully applied for a student visa, which entitled her to work legally.
However, her application a year later for an extension was turned down and she was told she should leave the country.
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