Prince's aide forced to resign after inquiry - then given new job at palace

The four-month inquiry into the behaviour of royal servants – commissioned after the Paul Burrell fiasco – has failed to stem criticism of the Prince of Wales. His closest aide will still work for St James's Palace despite being forced to resign.

Michael Fawcett, 40, who rose from royal footman to become the Prince's "indispensable" servant, stepped down after he was branded a bully and found to have taken gifts from suppliers to the Royal Household. But he will continue to work for the Palace as an events consultant from next month under a contract with his new company and will be given financial help to replace his grace and favour mansion in Surrey.

The report by Sir Michael Peat, the Prince's private secretary, criticised the running of St James's Palace, pointing to "serious failings" in how it handled the disposal of gifts and an allegation of male rape.

Sir Michael said at the launch of the 104-page report in St James's Palace he had uncovered a series of administrative and procedural lapses that led to gifts going missing and rules not being upheld.

He said: " The cover may be cream but it's certainly not a whitewash. I am not going to make excuses – things have not been handled well in this office."

The inquiry found Mr Fawcett had broken regulations by accepting presents from suppliers. These included a £3,000 club membership, a Rolex watch and "numerous bottles of champagne, chocolates and small things".

But Sir Michael found the royal servant was not guilty of any financial impropriety.

Sources indicated last night the resignation settlement with Mr Fawcett, who received at least two offers of £1m from newspapers for his story, could also be as high as £1m.

Prince Charles said he bore responsibility for the failings. "The review does not make comfortable reading in some parts but I accept full responsibility and all the findings."