POLICE investigating a suspected multi-million pound fraud at Duncan Bannatyne's business empire have arrested the company's former chief executive, The Northern Echo can reveal.

Graham Nigel Armstrong, a one-time close friend of the Dragon's Den star, was arrested on Wednesday (December 17) on suspicion of fraud.

The 43-year-old, known as Nigel Armstrong, has been released on bail pending further inquiries. He was previously managing director and chief executive of Mr Bannatyne's Darlington-based business, for which he has worked for 17 years.

In his autobiography, Mr Bannatyne refers to him as "the most important person working for the company".

Mr Armstrong was suspended from his high-powered position earlier in the year, when the company launched an internal investigation. It is understood he is no longer employed by the business, although he remains a company director.

Yesterday’s move follows the arrest last week of Mr Bannatyne's finance director, 45-year-old Christopher Watson, on suspicion of fraud by abuse of position.

Last night, speaking from his home in the West End of Darlington, Mr Armstrong told The Northern Echo: "I am a director and shareholder of the Bannatyne Group and I am currently helping the police with their inquiries with an investigation into the company's affairs."

A Durham Police spokesman said: "We can confirm a 43-year-old man was arrested on suspicion of fraud.

“The investigation involves an alleged multi-million pound fraud on a Darlington-based business."

A spokesman for Mr Bannatyne's company said: “This news relates to a matter that the company informed the police about some time ago.

"The individual was suspended during the thorough investigation process.

"There has been no effect on the successful operation of the business.”

Mr Bannatyne's autobiography describes Mr Armstrong as a "very able young guy".

The Dragon wrote: “Nigel is much better at running the company than I am.

“The company went from strength to strength under Nigel’s leadership.”

In another book, Mr Bannatyne talks about having identified Mr Armstrong’s talents and earmarked him for bigger and better things.