| Mail Online
The director of the London School of Economics has resigned over the university's links to the family of Libyan dictator Colonel Muammar Gaddafi.
Sir Howard Davies said in a statement that he recognised that LSE's reputation had 'suffered', meaning he must step down.
He has described how the decision to accept £300,000 research funding from a foundation controlled by Col Gaddafi's son, Saif, 'backfired' and expressed regret that he had visited Libya to advise the regime about how it could modernise its financial institutions.
The LSE council has commissioned an independent inquiry into the university's relationship with Libya and with Saif Gaddafi.
Sir Howard admitted making a 'personal error of judgment' in travelling to Libya himself.
He said: 'I have concluded that it would be right for me to step down even though I know that this will cause difficulty for the institution I have come to love.
'The short point is that I am responsible for the school's reputation, and that has suffered.
'I advised the council that it was reasonable to accept the money and that has turned out to be a mistake. There were risks involved in taking funding from sources associated with Libya and they should have been weighed more heavily in the balance.
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'Also, I made a personal error of judgment in accepting the British Government's invitation to be an economic envoy and the consequent Libyan invitation to advise their sovereign wealth fund.
'There was nothing substantive to be ashamed of in that work and I disclosed it fully, but the consequence has been to make it more difficult for me to defend the institution.'
Sir Howard, a former head of the Financial Services Authority and deputy governor of the Bank of England, will remain as the head of LSE until a successor has been found.
Close links: Colonel Gaddafi's son Saif attended the university in 2008
Close links: Colonel Gaddafi's son Saif attended the university in 2008
Peter Sutherland, chairman of the court of governors at LSE, said: 'Howard has been an outstanding director of the LSE these past eight years and his achievements here will endure long after the current controversy has died away.
'We accept his resignation with great regret and reluctance but understand that he has taken an honourable course in the best interests of the school.'
The inquiry will be conducted by Lord Woolf, former Lord Chief Justice of England and Wales and former chairman of the Council of University College London.
Its aim will be to clarify the extent of LSE's links with Libya and to establish guidelines for international donations in the future.
The inquiry will look at the acceptance of a £1.5 million donation from the Gaddafi International Charity and Development Foundation (GICDF) in 2009, £300,000 of which has been received so far.
Sir Howard has said that half of the money received has been spent on research related to North Africa and the development of democracy and civil society there, adding that the rest would now be put into a scholarship fund.
A further £2.2 million contract was also set up between LSE and Libya's Economic Development Board, £1.5 million has been received for the training of Libyan civil servants and professionals. Out of the contract, £20,000 has also been paid out for the tuition of the head of the Libyan Investment Authority.
Other issues to be explored include the fee of 50,000 dollars (£30,717) paid by Libya to LSE in 2007 for Sir Howard's financial advice, and the acceptance of a £22,857 award from GICDF to allow academic speakers to travel to Libya.
The LSE had already said it was investigating claims that Saif Gaddafi plagiarised his PhD thesis, which was awarded in 2008, and that is likely to also form part of the Lord Woolf inquiry.
Saif Gaddafi studied at the LSE for a number of years, gaining both an MSc and a PhD. It has been alleged that he both used a ghost writer and copied parts of his thesis.
An alleged assault involving one of Saif Gaddafi's associated and a protester took place when he returned to LSE to make a speech in May last year.
The LSE council said staff had co-operated with the investigation but could not comment further for legal reasons.
The council is to carry out its own inquiry into the running of LSE Global Governance, the arm of the university which accepted the £1.5 million donation and aims to 'increase understanding and knowledge of global issues'.
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