The Auditor General was arrested for alleged possession of stolen documents and not revealing his source, according to reports last night.

Larry Dennis was arrested on Monday and detained in Police custody for 24 hours before being released at 4.15 p.m. on Tuesday.

Detectives searched his Hamilton offices and his home in Smith’s in the hunt for the source of a Police dossier leaked to the media which claimed Premier Dr. Ewart Brown and members of the Government were investigated over alleged corruption at the Bermuda Housing Corporation.

On his release, Mr. Dennis would not say why he was arrested but that “no charges” were filed and that he was bailed to return to Hamilton Police Station on August 22.

A source, however, told The Royal Gazette last night: “He was arrested because he would not reveal the source of his information. The official charge was that he was handling stolen goods and not revealing the source. The Police have the copies, but the Supreme Court said a few weeks ago that copies are not stolen documents.”

A Police spokesman refused to comment on Mr. Dennis’s arrest, saying: “The Bermuda Police Service reserves its comment for the appropriate place and time.”

The whereabouts of the original Police dossier into the BHC allegations is unknown. In the legal wrangle over the media’s publication of the file’s contents, Chief Justice Richard Ground said in the Supreme Court that it was unclear whether the documents had been stolen or whether they had simply been copied and distributed to the media.

Last night Mr. Dennis would not comment, but said he was shocked to become the subject of a Police investigation. “I was horrified and angered by what was happening,” he said. “However, I can’t complain about how it was done and the treatment by the investigating team.”

Mr. Dennis — the Government’s fiscal watchdog — has continually called for more legislative protection for ‘whistleblowers’.

In his 2006 Annual Report, which stated $800 million of public funds were unaccounted for, Mr. Dennis said: “One recommendation (in Appendix Two) requires special mention this year. In my 2003, 2004 and 2005 annual reports I expressed concern at the number of frauds and misappropriations that were detected in recent years in Government entities.

“In my 2004 report I recommended that the Ministry of Finance consider seeking ‘whistleblower’ legislation to encourage public employees to report apparent malpractice or other wrongdoings, and to protect employees who do so.

“The legislation should be supported by practices that demonstrate that reported malpractices are investigated fully without fear or favour, that whistleblowers are protected, and that perpetrators of misappropriations and fraud are dealt with firmly.”