The Scorpions arrested Shabir Shaik, a bidding contractor in the arms deal and brother of Defence Department head of acquisitions Chippy Shaik, early on Friday.

The second arrest in the arms deal investigation - after Tony Yengeni was charged last month - came as accusations of a whitewash swirled around the multi-pronged probe report released in parliament on Thursday.

Shaik was held on a charge of possession of classified government documents, said National Directorate of Public Prosecutions publicist Sipho Ngwema.

He said Shaik was allegedly in possession of cabinet minutes in which the arms procurement process was discussed, and also correspondence between the departments of public enterprises and defence.

'You know and I know that his brother is in the Defence Department'

Ngwema said Shaik was competing with other contenders, yet he apparently had inside information. "He must explain that in court."

Asked how Shaik might have obtained the documents, Ngwema said: "I don't know, but you know and I know that his brother is in the defence department."

Shaik will be charged under the Protection of Information Act and will appear in the Durban Regional Court.

The multi-agency inquiry into possible irregularities in the deal exonerated the government of wrongdoing, sparking a Democratic Party walkout on Thursday.

But it found that individual officials may have been involved in conflicts of interest, corruption and improper receipt of gifts.

Modise's involvement extremely undesirable'

The government vowed to press ahead with the deal after the investigating team - Public Protector Selby Baqwa, Director of Public Prosecutions Bulelani Ngcuka, and Auditor-General Shauket Fakie - cleared the cabinet and key government figures of irregularities.

The report:

Found allegations that chief negotiator Chippy Shaik, Armscor boss Max Sisulu and former joint defence committee head Ntsiki Mashimbye had been given cars for their roles in the deal, were "without substance".

Cleared former Armscor chief executive Llew Swan of an allegation that he was given a job as a director of British Aerospace as a payoff.

Noted a conflict of interests regarding the role of Chippy Shaik, because of his brother Shabir's interests in the Thomson Group and African Defence Systems. Chippy Shaik had failed to recuse himself from deliberations concerning these aspects of the deal.

Found that allegations that, as Defence Minister, Joe Modise had paid for shares in Conlog with a bribe from a successful prime contractor, were without substance.

Although the investigators found no impropriety in Modise's conduct, his alleged involvement in a company that would benefit from the deal was "extremely undesirable", the report said, because of the negative public perception it created.

After the report's release, the government took swipes at critics of the deal in the public accounts committee, the opposition and the media, urging them to accept its findings.

An official inquiry has been promised into who was behind allegations of irregularities in the arms deal.

Acknowledging that the report pointed to weaknesses in procurement processes, the cabinet vowed to "take all necessary steps to implement (the) recommendations".

But the Democratic Party, Pan Africanist Congress and United Democratic Movement said the report suggested a cover-up.

With acknowledgement to the Cape Argus and Independent Online.