The chairman and chief executive of Wessex Water, Colin Skellett, has been arrested on suspicion of receiving a bribe of nearly £1m.

City of London Police fraud squad officers arrested Mr Skellett, 57, on Thursday morning.

Later in the day, a second man was arrested after coming voluntarily to a City of London police station in connection with Mr Skellett's arrest.

Mr Skellett is being held at an Avon and Somerset constabulary police station.

Police are investigating whether Mr Skellett received payments in connection with the recent take-over of Wessex Water by Malaysia-based YTL Power.

YTL Power bought Wessex Water in May this year for £1.24bn ($1.7bn).

Late on Thursday, YTL Power said it had "no knowledge of any illegal payment and has offered the police its full co-operation in relation to the investigation."

Focus

Detective superintendent Ken Farrow, head of the City of London police fraud squad, said the "inquiry so far focused exclusively on [a Wessex Water] senior official's relationship with a Malaysian utility company".

"There is no suggestion of any wider mismanagement of the Wessex Water Ltd," he said.

Police said that the second man arrested had "no direct connection with Wessex Water", but was "to be interviewed in relation to a questionable payment of nearly £1m allegedly received by the senior official" at Wessex Water.

Mr Skellett is also the non-executive chairman of Jarvis, the contract company responsible for track maintenance at the site of last May's rail crash at Potter's Bar.

Jarvis said on Thursday afternoon it was "seeking further information" on the reports, and would issue a further statement later.

Jarvis shares closed more than 13% down on the day at 258 pence.

Enron's shadow

The company's former owner, Enron, went bankrupt late last year after it emerged that it had hidden millions of dollars in debt using a series of external financial partnerships.

The bankruptcy, the second-biggest in US history, shook investors' confidence in corporate accounts, and helped to trigger the recent global stock market slump.

Bath-based Wessex Water supplies drinking water to about 1.2 million people and sewerage services to 2.5 million people in the south-west of England.

It made a pre-tax profit of £84.3m in the 12 months to 31 March, 6% down on the previous year.