An Oxford college is facing calls to return money given by an American financier who was wanted by the FBI.

In 1987 Wadham College, in Parks Road, was offered a donation of between £100,000 and £1m from Mark Rich, who had fled America for Switzerland two years previously.

Mr Rich was accused of illegally trading in commodities with Iran, Iraq and Libya and breaking United Nations sanctions on trade with South Africa.

Despite the accusations, the college accepted the money and made Mr Rich a foundation fellow of the college. In a controversial decision, Bill Clinton pardoned Mr Rich. Dr Evan Harris, MP for Oxford West and Abingdon, who is a graduate of Wadham, thinks that the college should return the money.

He said: "The question is whether Wadham should have accepted the money in the first place and if Mr Rich should still be a fellow of the college if he was engaged in nefarious activities. He may be using it as a badge of respectability.

"This is embarrassing for the college which has strong links with anti-apartheid organisations and recently invited Nelson Mandela for a dinner, for which Mr Rich, as a fellow of the college, was presumably invited."

But John Flemming, warden of Wadham College, said he did not believe that the college had a moral responsibility to return the money.

He said: "I am aware of the tax reasons he had for leaving the USA but it's not obvious to me what the right thing to do is and I don't know how the college will react."