Water chief held over £1m bribe

The head of Wessex Water was arrested yesterday on suspicion of taking a £1m bribe as part of the £1.2bn sale of the British utility company to a Malaysian energy group.

City of London Police Fraud Squad officers detained Colin Skellett at his home on the outskirts of Bath at about 7am. Mr Skellett, 57, who has three children, is also non-executive chairman of the rail maintenance firm, Jarvis. Its subsidiary is at the centre of investigations into the cause of the Potters Bar train crash, which killed seven.

Wessex Water, which supplies drinking water to 1.2 million people and sewerage services to 2.5 million in the South-west, was bought by YTL Power last March. Previously, Wessex had been controlled by Enron, the US energy company that went bankrupt last year after it was found to have hidden millions of dollars of debt.

Last night, Mr Skellett was being held at Staple Hill police station in Bristol for questioning. He is being investigated under the Prevention of Corruption Act 1906 for allegedly receiving a corrupt payment of "nearly £1m", City of London Police have confirmed.

A spokesman said: "The investigation is focused only on the suspected payment to the official and there is no suspicion of general mismanagement within Wessex Water."

Yesterday, police completed a search of Mr Skellett's home and office in Bath. The spokesman said: "Items were found that need to be checked." It is thought the seized items include computers as well as electronic and paper records and accounts.

Police have 24 hours to question Mr Skellett but can apply for an extension of 12 hours. A second man, who voluntarily attended a police station in the City of London, was also arrested yesterday. He has no connection with Wessex Water.

Mr Skellett, who is the chairman and chief executive of Wessex Water, has worked in the water industry for most of his life. A chartered chemist, he joined the firm in 1974 and rose up the ranks before becoming chief executive in 1988.

YTL Power, a subsidiary of YTL Corporation, beat both Royal Bank of Scotland and Abbey National to buy Wessex Water. At the time, Wessex Water was owned by Azurix, a wholly owned unit of Enron.

A spokesman for YTL said: "YTL has no knowledge of any illegal payment and has offered the police its full co-operation in relation to the investigation."

Although the arrest has no connection with Jarvis, the announcement caused the company's share price to fall by 40p, or 13.4 per cent, wiping £54m off its stock market value. Mr Skellett earns £101,000 a year in his capacity as the Jarvis chairman.

In a short statement to the City yesterday, Jarvis said: "The company has noted the news reports today in relation to its non-executive chairman, Colin Skellett, concerning matters relating to Wessex Water. The company is seeking further information and a further statement will be made as soon as possible."

The company, whose Jarvis Rail subsidiary was responsible for maintaining the lines at Potters Bar, remains the subject of investigations into the cause of the crash. It continues to insist that sabotage was responsible for the disaster. Earlier this month Mr Skellett said he would resign from his position if the company was found to have been at fault. His statement came as the firm announced no more bonuses would be paid to its bosses until the cause was known.

And the reverberations of the Enron scandal continue to be felt. On Wednesday, a former executive pleaded guilty to fraud and money laundering charges, admitting that he defrauded investors by illegally using three partnerships to enrich himself.

Police said they would not be able to lay charges against Mr Skellett themselves because the offences being investigated were under the 1906 Act. Instead, a decision will have to be made by the Attorney General.