Skellett bows to institutions and quits Jarvis over bribe inquiry

Colin Skellett resigned from his £100,000-a-year job as chairman of Jarvis, the rail maintenance company, yesterday amid continuing police investigations into whether he accepted a £1m bribe as head of Wessex Water. He will receive no pay-off.

Mr Skellett, who denies the allegations, had previously said that he would be prepared to stand aside while the police investigation ran its course but had given no hint that he would resign.

However, his position was weakened by several institutional shareholders who contacted the Jarvis board, expressing concern over the possible effect of Mr Skellett's arrest on the company.

One leading shareholder said he was pleased with the outcome. "It is always better if both parties concentrate on what's most important for them and avoid any potential distractions," the fund manager said.

The Jarvis board met earlier this week to discuss Mr Skellett's position. He then decided to resign, saying it was in the company's best interests.

Jarvis said it had accepted the decision "with great regret". It added: "Mr Skellett has indicated that, given the ongoing public investigation into the sale of Wessex Water it is right that at this time he should step down from the board of a publicly listed company.... The board is confident that Colin Skellett will be cleared of the allegation and wishes him and his family well in the future."

However, Wessex Water said it had decided that Mr Skellett should continue in his position as chairman and chief executive, after considering the circumstances surrounding the arrest and taking legal advice.

"Based upon this advice, the board is satisfied that Colin has not breached any contractual terms or his fiduciary duties as a director of Wessex Water," it said.

At Jarvis, Mr Skellett will be replaced by Lord McGowan, a non-executive director on the board. He will take over as chairman on an acting basis.

Mr Skellett, 57, joined Jarvis as a non-executive director in May 2000, moving up to non-executive chairman in August of that year.

During his time as chairman, Jarvis experienced rapid growth when it won government contracts to manage schools and other public facilities. But the Potters Bar rail crash in May cast a cloud over the company because it was responsible for the maintenance of the rails.

Jarvis shares fell 5p to 261.5p after yesterday's announcement. The shares stood at more than 500p before the crash and have fallen further since Mr Skellett's was arrested.

City of London Police are investigating whether Mr Skellett accepted a bribe of £920,000 during the $1.77bn (£1.2bn) takeover of the water utility by Malaysia's YTL in May. He has been released on bail until January. YTL beat competition from Royal Bank of Scotland.

Mr Skellett has admitted receiving the money but has said it was an up-front payment for five years consultancy work. Mr Skellett believes the police had been alerted by the large sum entering his Barclays Bank account, under tougher disclosure obligations.

City institutions say that governance issues remain at Wessex Water, where the rest of the board appeared not to know about Mr Skellett's £1m payment.