BORD na Mona managing director, Dr Eddie O'Connor, has said he will launch a legal challenge to the Government's decision last night to suspend him on full pay.

The Cabinet last night suspended Dr O'Connor pending further inquiries into his remuneration package, which is expected to be conducted by a firm accountants. No time scale has been set for the investigation, but government sources said it would be conducted as quickly as possible.

The Cabinet last night suspended Dr O'Connor pending further enquiries into his remuneration package, which is expected to be conducted by accountants Arthur Andersen and will look again at the information collated in two previous investigations by accountants Price Waterhouse. The move followed contacts earlier yesterday to try to broker a settlement package, which came to nothing.

Dr O'Connor said last night: "I will, on the advice of my legal team, be taking immediate steps to challenge the decision of the Government and the process which led to it and I will be seeking a judicial review of the decision at, the very earliest opportunity."

He added that he was "appalled and outraged" by the decision. Dr O'Connor claimed that it had been taken without any substantive discussions taking place on any form of settlement. "No offer of any kind was made to me in advance of the decision," he said.

Government sources said last night that the decision was taken after talks on a settlement deal under which Dr O'Connor could leave Bord na Mona on agreed terms broke down. A figure in the region of £750,000 was proposed by the Government at one stage according to a Government source. However, sources close to Dr O'Connor have categorically denied that any such offer was made.

The Minister for Transport Energy and Communications Mr Lowry, refused to comment on the suspension decision after leaving last night's Cabinet meeting. Mr Lowry said that the decision was being communicated to the managing director.

It is understood that a letter containing the Cabinet's decision was sent to Dr O'Connor's home in Clonskeagh last night by taxi. Dr O'Connor said the media had been informed of the Government decision before he was.

It is understood that Mr Paddy Hughes, the chief operations officer of Bord na Mona has been appointed acting chief executive officer.

The decision to seek a third-party review of the affair was driven by the need to ensure that the rules of natural justice were followed, according to Government sources. Dr O'Connor will be invited to state his case as part of the new investigation.

Dr O'Connor outlined much of his version of events in a letter sent to the Mr Lowry on Monday.

In the letter, Dr O'Connor addressed a number of aspects of his package including the £66,000 in unvouched expenses he received and an income continuance bond.

He also concentrated on the leaking of two Price Waterhouse reports on his remuneration and other damaging information.

Dr O'Connor pointed out that some of the information leaked was known only to himself and the board chairman, Mr Pat Dineen. However, Mr Dineen has strongly denied that he leaked information. In the case of the Price Waterhouse report, the chairman said he forwarded copies to the Department of Energy and the company's legal advisers.

Dr O'Connor also pointed out in his letter to Mr Lowry that the leaking of the two Price Waterhouse reports on his remuneration had been done so in a fashion designed to do the maximum damage. This included the highlighting of matters that he said were of no benefit to him, such as corporate purchase of wine. Dr O'Connor also claimed that the terms of reference of the second Price Waterhouse report were unilaterally changed and that it was leaked to give the impression that his package was £1.9 million.

Dr O'Connor justified the £52,000 he claimed in business expenses, which Price Waterhouse classified as being of personal benefit. He said that it was correct that these should be treated as business expenses as they were to enable him to devote more time and effort to his work. These included membership of a social club and a sporting club as well as the agreement that his wife could accompany him on four business trips a year. It also related to the provision of a family car for a short period and the payment of his home telephone and fax bills.

Dealing with the payment by Bord na Mona of £15,000 last year to the Revenue Commissioners in settlement of tax owed on his unvouched expenses, he said the liability arose because the expenses were not properly vouched and not because the Revenue Commissioners considered them to be beneficial payments.

The expenses themselves were agreed with the previous chairman Mr Brendan Halligan.