Charles: I am royal at centre of rumours

The Prince of Wales went on the offensive last night to try to quash a burgeoning royal scandal when he named himself as the senior royal accused of involvement in an allegedly compromising incident witnessed by a servant.

Prince Charles dismissed the allegation, insisting that the incident described did not take place. Details of the allegation cannot be published because a former royal servant won a libel injunction last Saturday preventing The Mail on Sunday from publishing them.

The Prince released his statement hours after The Guardian overturned a separate injunction, preventing it from identifying the servant who had successfully gagged the Sunday newspaper. He can now be named as Michael Fawcett, 40, the Prince of Wales's personal assistant until he left his post in March after a row over the sale of royal gifts.

The Queen is understood fully to support the Prince's decision to release the statement as an attempt to quash the speculation. His sons, William and Harry are also understood to back their father's approach.

A statement from Clarence House said: "In recent days, there have been media reports concerning an allegation that a former Royal Household employee witnessed an incident some years ago involving a senior member of the Royal Family. The speculation needs to be brought to an end. The allegation was that the Prince of Wales was involved in the incident. This allegation is untrue.

"The incident which the former employee claims to have witnessed did not take place. There is a particular sadness about this allegation because it was made by a former Royal Household employee who, unfortunately, has suffered from post-traumatic stress disorder and has previously suffered from alcoholism following active service in the Falklands.

"He has, in the past, made other unrelated allegations, which the police have fully investigated, and found to be unsubstantiated. The newspaper group that sought to publish this allegation knew this and has described the former employee as 'hardly a reliable witness'. This was why the newspaper concerned agreed to the injunction on Saturday afternoon. The Prince of Wales has always tried to avoid becoming involved in disputes with the media, which he appreciates fulfils an important role. It is important, however, to state clearly that the allegation is entirely untrue."

Sir Michael Peat, the Prince's private secretary, said he knew the allegation was untrue for three principal reasons. "Firstly, the Prince of Wales has told me it is untrue and I believe him implicitly. Secondly, anyone who knows the Prince of Wales at all would appreciate that the allegation is totally ludicrous and, indeed, risible.

"And thirdly, the person who has made the allegation unfortunately has suffered from health problems and has made other, unrelated allegations which have been investigated by the police and found to be unsubstantiated."

Although the Clarence House statement did not name the servant who made the allegations to The Mail on Sunday, it relates to George Smith, who was close to the Princess of Wales. He alleged last year that he had been raped by a member of the royal staff.

As the High Court agreement with The Guardian was confirmed, the Media Guardian website named Mr Fawcett as the man who had obtained the injunction against The Mail on Sunday.

Mr Fawcett, 40, was the "indispensable" royal aide said to squeeze the Prince of Wales's toothpaste. He resigned as the Prince's personal assistant despite being cleared of serious wrongdoing by a report into allegations of malpractice at St James's Palace. He had been accused of selling unwanted gifts on behalf of the Prince and quit after being branded a bully.

Mr Fawcett still enjoys the Prince's patronage as a freelance fixer and party planner, and picked up a sizeable cash severance package as well as an agreement to work as the Prince's events manager.