Stephen Donald was jailed for dealing drugs had a proceeds of crime action withdrawn against him after years of haggling between the Crown and his legal team.

Donald, 57, was jailed in December 2010 for five years after he brokered a major heroin deal.

While serving his sentence at Edinburgh’s Saughton prison, he carried on running his multi-million-pound property empire and in 2011, just two months into his sentence, he won planning permission for a £1.2 million 12-flat development in Dundee.

The Crown immediately began moves to strip him of his assets, claiming his criminal activities had netted him £4 million.

After years of haggling between the Crown and Donald’s legal team, it was revealed at the High Court in Edinburgh this week that they have finally admitted defeat in their bid to recover the cash.

Donald’s legal team claims his fortune was earned in legitimate property deals. His solicitor, George Donnelly, said: “Documents revealed that my client’s assets resulted from his legitimate business interests.”

Advocate depute Barry Divers withdrew a proceeds of crime action against him this week.

Donald, of Charleston, near Forfar, was part of a six-man gang snared in December 2010 during Operation Archangel, which saw heroin worth £118,000 and £19,000 in cash seized.

They were jailed for a total of 26 years after they were found guilty of being concerned in the supply of heroin in a trial at the High Court in Edinburgh.

Donald was served with proceeds of crime papers and months of investigation followed in a bid to untangle his business interests and alleged illegal profits.

Donald is a director of SP Properties Dundee Ltd, Sapling Homes, an estate agency based in the city, and construction firm P&S Developments (Scotland).

Donald has since been freed from jail and did not attend yesterday’s hearing.