A PROMINENT businessman has been arrested after an investigation found a reported £1.5m hole in his company accounts.

Doug Brown, 59, was questioned over allegations of theft and money laundering after financial irregularities were uncovered when Palmer UK carried out an internal investigation.

Mr Brown ran the specialist engineering firm on the Tofts Farm Industrial Estate, in Hartlepool, until the former managing director retired in May this year. He worked at the company for 23 years.

Staff leaving the factory unit last night declined to comment on the news of their former boss' arrest.

The present management team is co-operating fully with officers from Cleveland Police's fraud investigation unit.

A Cleveland Police spokeswoman said: "We can confirm that a 59-year-old man has been arrested in connection with theft, false accounting and money laundering and he is currently on police bail pending further inquiries."

When The Northern Echo visited Mr Brown's home, in the exclusive North Lodge area of Chester-le-Street, there was no sign of activity.

The house is surrounded by mature trees and hedgerows and protected by security gates leading to an entrance driveway. A call via an intercom system at the gate went unanswered.

A sign outside the father-of-two's house, called Mayfield, said the property had been sold by Bradley Hall Chartered Surveyors subject to contract. The house, which has four bedrooms and seven reception rooms, has a guide price of £895,000.

The investigation is believed to focus on accounts and transactions dating back to 2000.

Palmer International is a global company producing friction additives and resins derived from cashew nutshell liquid.

From the company's US headquarters Kevin Palmer, chief executive officer of Palmer International, said: "A former employee of 23 years has been arrested by Cleveland Police and is currently out on bail.

"A criminal investigation concerning that individual is proceeding with suspicion of theft of corporate monies. The current management of the company is supporting Cleveland Police in their investigation.

"If any fraud has occurred, we hope that wrongs are righted and restitution is made."

In September 2000, Mr Brown took over as chairman of the North-East Euro Forum, which was formed to advise businesses to prepare for the start of trading in the Europe-wide currency. He also served on the North-East Chamber of Commerce International Trade Committee.