Sydney collar-bomb suspect is arrested by Kentucky Swat team

Suspect Paul Peters and victim Madeleine Pulver

When it emerged that the collar bomb was a fake and the extortion note alluded to a character in an obscure novel, many Australians suspected that the ordeal which a Sydney teenager was subjected to a fortnight ago was a schoolboy prank.

With the arrest of an Australian businessman in Kentucky, that theory appears to have been torpedoed. Although the motives behind Paul Peters' alleged targeting of the wealthy family of 18-year-old Madeleine Pulver are not yet clear, the incident has taken on a new air of seriousness.

Mr Peters, 50, who was held at his ex-wife's house in Louisville by an armed FBI Swat team acting in conjunction with New South Wales police, was an executive with a Sydney-based financial services group, Allco, which folded in 2008.

Police are investigating links between him and the international software company Appen, of which Ms Pulver's father, Bill, is chief executive.

Ms Pulver endured 10 hours of terror after a masked intruder entered her home in the prosperous suburb of Mosman and strapped what he said was a bomb to her neck. She telephoned her father, who contacted police. It was only after painstakingly removing the device that bomb disposal experts could ascertain that it contained no explosives.

The mystery deepened when it emerged that a note pinned to Ms Pulver's chest referred to Dirk Struan, a ruthless businessman in James Clavell's 1986 novel Tai-Pan. Australian media noted that the book was on the recommended reading list for pupils at Sydney Church of England Grammar, attended by Ms Pulver's brothers. Yesterday, as officers with machine guns descended on suburban Louisville, that line of speculation was quashed.

Australian police, who will seek extradition, say the note contained financial demands and instructions to contact Mr Peters, a father of three. He will be charged with kidnapping, breaking and entering, and demanding property with menaces.

Mr Peters was managing director of Allco's Malaysia branch. The com- pany was listed on the Australian Stock Exchange. He reportedly lived at one time in Hong Kong, the setting of Tai-Pan. Recently he has divided his time between Australia and the US.

Mr Pulver said the family was "enormously relieved" by the arrest.