Banker advised Railtrack while planning its demise

A senior investment banker at Schroder Salomon Smith Barney was involved with Railtrack at the same time as advising the Government on preparations for putting the company into administration, it has emerged.

Chris Houston, SSSB's head of project finance, is co-director of the team assigned to the administration of Railtrack. However, Railtrack said last night that Mr Houston had also been involved in advising it on the funding of modernisation schemes for the network.

SSSB maintained last night that there had been no conflict of interest and said that Mr Houston had not been involved in advising Railtrack on any specific projects. "When we were approached by the Government we explicitly cleared our appointment at the highest level at Railtrack to ensure that there were no sensitivities of any sort," a spokeswoman said.

However, Railtrack said its understanding was that SSSB had been appointed to advise the Government on the restructuring plans for the network devised by Railtrack's own advisers, Credit Suisse First Boston. "We thought SSSB were acting as midwives, not undertakers," said one senior Railtrack source.

SSSB said the advice it gave to Railtrack about raising finance for upgrades through so-called special purpose vehicles (SPVs) came from two members of Mr Houston's team, John Burnham and Mark Davis. But Railtrack said that as overall head of the team, Mr Houston was involved in providing it with general advice on how to take SPVs forward.

Meanwhile, the Association of British Insurers, which represents institutional investors in Railtrack, met the chief executive, Steve Marshall, last night to press him over the company's communications with shareholders in the run up to its collapse. The Financial Services Authority is already examining whether Railtrack should halve alerted the markets to its worsening financial position.

Private Railtrack shareholders are due to meet this morning to discuss legal action against the Government.