The head of Britain’s leading charity for survivors of child sexual abuse had a sordid sexual encounter in a restaurant toilet with a woman he knew had been molested as a youngster, The Mail on Sunday can reveal.

Peter Saunders, who founded the National Association for People Abused in Childhood, was arrested after the encounter, which happened during an alcohol-fuelled lunch paid for on the charity’s credit card.

Mr Saunders, 61, was not charged with any crime but last night said he was ‘deeply sorry’ and would carry the shame of the incident for the rest of his life.

The married father was also forced to resign from his post on the Victims and Survivors Panel of the Independent Inquiry into Childhood Sexual Abuse, the public investigation into systemic sexual abuse in schools, churches and other institutions.

Peter Saunders, 61, founded the National Association for People Abused in Childhood. He was arrested after having a sexual encounter in a restaurant toilet with a woman he knew had been molested as a youngster

An IICSA spokesman said he had failed to declare the incident when he joined in 2015, adding: ‘The inquiry holds our consultative panel members to the same high standards we expect of our staff. Peter Saunders offered his resignation and we have accepted it with immediate effect.’

Mr Saunders first saw the woman, who cannot be named for legal reasons, talking about the abuse she endured as a child on a TV interview. Impressed, he arranged a meeting to discuss the possibility of her working with NAPAC.

The charity said last night that it was standing by Mr Saunders. In February 2008, Mr Saunders travelled from his home in London to Manchester. After giving an interview to the BBC, he joined the woman and her female friend for coffee before the group headed for lunch at a branch of Bella Italia, during which they consumed at least three bottles of wine.

Before eating, Mr Saunders, a devout Christian who was appointed by Pope Francis as a member of a Pontifical Commission for the Protection of Minors in 2014, encouraged the group to join hands in prayer and thank God for ‘good fellowship’. Later, however, he went upstairs to use the lavatory where, he admitted, the sordid encounter took place in a cubicle.

Mr Saunders insists that the episode was initiated by the woman and was entirely consensual, but she later made a complaint to police that she had been raped.

It is understood Mr Saunders was arrested and questioned by officers for more than three hours, during which he vehemently denied her allegation. Detectives sent a file to the Crown Prosecution Service, which decided not to proceed due to ‘insufficient evidence’.

Last night, Mr Saunders – who was also sexually abused as a child – said: ‘The incident was not as [the woman] alleged. It was a totally consensual, albeit drunken encounter, the shame of which I will live with for the rest of my life. It was instigated by her.’

Describing the drunken encounter, Mr Saunders told The Mail on Sunday: ‘She pretty much took me into a cubicle and she performed what they call a sex act on me. I was too drunk to stop it.’

After lunch, the charity chief and the two women continued to drink in local pubs. Heavily inebriated, Mr Saunders ended up sleeping at Manchester Piccadilly Station, where he discovered the next day that his wallet had been stolen.

Mr Saunders founded NAPAC in 1997 and, even after stepping down as its chief executive in 2015, has remained its spokesman.

The charity, which has grown rapidly since the Jimmy Savile scandal prompted a raft of child sexual abuse allegations, receives £347,000 a year from a taxpayer-funded Home Office grant and further six-figure sums from the National Lottery. It runs a helpline and provides counselling.

Mr Saunders admitted he ‘had little doubt she [the complainant] was an abuse survivor’ and agreed research shows abuse victims are vulnerable, prone to mental health issues and, in some cases, seek to deal with trauma by behaving in a sexually inappropriate manner.

He expressed regret for paying the bill on NAPAC’s credit card.

‘For the past ten years I have berated myself for my stupidity,’ he said. ‘I was entrusted with a NAPAC debit card and on this occasion I abused it. I don’t know how much wine was drunk but I’m pretty sure I put it on the NAPAC debit card. I was reprimanded as much as anyone could be for my drunken mistake.’

The Bella Italia restaurant in Manchester where Mr Saunders met the woman. Mr Saunders founded NAPAC in 1997 and, even after stepping down as its chief executive in 2015, has remained its spokesman

According to sources, Mr Saunders offered to repay the money, but was told it was unnecessary because he worked long hours.

Mr Saunders was an early supporter of Carl Beech, the fantasist known as ‘Nick’ who falsely claimed to have been a victim of a VIP paedophile ring that included politicians and establishment figures. Beech was last month jailed for 18 years after being found guilty of 12 counts of perverting the course of justice and one of fraud.

Mr Saunders has since rejected calls for a ban on publishing the names of people accused of sexual offences before they have been charged on the basis that naming suspects encourages victims to come forward. He has not, however, revealed he was himself the subject of a false rape allegation.

Challenged about that omission last night, he said: ‘I suppose you could say that when I’ve talked about false allegations, I should perhaps have said “I know because it’s happened to me”, but it would have opened a can of worms.’ He added that his own history of being abused may have rendered him ‘powerless’ to reject the woman’s advances, adding: ‘I was stupid, there was too much alcohol. Incidents of that nature should never happen, and my use of alcohol is still something I’m working thorough with my therapist.’

He said he had chosen not to disclose the incident to IICSA ‘because I hadn’t committed any crime’, adding: ‘The last thing I want to do is to destroy or hurt NAPAC. I don’t want my family to hurt.’

In a statement last night, John Bakker, the chair of NAPAC, said: ‘In 2008, the then board of NAPAC was made aware of an incident that occurred that year.

‘I am satisfied the board of trustees followed due process and dealt with the matter properly. Mr Saunders has shown consistent commitment and dedication for championing the cause of survivors of childhood abuse.’

Feted by TV bosses, MPs - and even the Pope

By David Rose

Smiling as he wraps his arm around the shoulders of Pope Francis in 2014, Peter Saunders had emerged as Britain’s leading advocate for adult survivors of child sexual abuse.

Despite struggling at school, in part due the abuse he suffered at the hands of Jesuit priests as a youngster, he had created the National Association for People Abused in Childhood in 1997.

The charity struggled financially for many years, but the emergence of Jimmy Savile’s crimes in 2012 and the child abuse scandals which followed created a growing need for NAPAC’s helpline and counselling services.

Over the past seven years, NAPAC has received more than £2.5 million from the Home Office and the National Lottery and Mr Saunders has become a regular guest on television and radio stations around the world.

The increasing profile of the devout Catholic led to what Mr Saunders described as ‘no-holds barred’ discussion with Pope Francis about child abuse in the Catholic Church in 2014 and the offer to join a special Pontifical Commission for the Protection of Minors.

At the time, Mr Saunders said: ‘I told [the Pope] that the Church needed to get its act together, that it needed to support survivors and to do more to protect children… I am going to raise issues around the cover-ups of the past. I want to try and help change the Church for the better.’

He approached the role with his customary vigour, but his uncompromising approach led to his departure from the commission in 2016. ‘A number of members… expressed their concern that I don’t toe the line when it comes to keeping my mouth shut,’ he said.

Uncowed by criticism, Mr Saunders then became a supporter of claims by a man called ‘Nick’ about a VIP paedophile ring operating at the heart of Westminster.

‘Nick’ was later unmasked as Carl Beech, a fantasist who had made up the claims, causing anguish to innocent men such as the MP Harvey Proctor and Lord Bramall, a former head of the British Army.

Beech, who was last month jailed for 18 years for fraud and perverting the course of justice, first emerged in NAPAC’s newsletter in 2012, where he wrote a poem under his real name about the fictitious VIP sex ring.

A year later, NAPAC appealed for abuse survivors to assist a Channel 5 documentary team making a programme about the claims.

The programme featured the first TV interview with Beech, then calling himself ‘Stephen’. In November 2014, Mr Saunders told MPs on the Commons Home Affairs Select Committee that there had been ‘a cover-up [of abuse] at the highest levels’ and of ‘abusers and perpetrators in positions of great power’.

Even by October 2015, when Nick’s false claims were beginning to unravel, Mr Saunders told the BBC’s Panorama programme that he found Beech to be ‘utterly credible’.

Yet Mr Saunders, 61, who argues that police should ‘believe’ those who say they have been sexually abused, last night admitted that he has never met Beech nor spoken to him on the telephone.

Indeed, the only contact ever between them was by email.