An award-winning and honest founder of a pioneering eco-energy company killed himself after a council falsely accused him of stealing £115,000 of government funding, an inquest has heard.

David Green had established the Ecoisland Partnership community interest company (CIC) with the aim of making the Isle of Wight one of the first energy self-sufficient regions of the country.

But on October 3 last year, Mr Green was arrested by Hampshire Police after they had received information from the Isle of Wight Council that the money from a £240,000 government grant was unaccounted for.

Four days later, and after a front page article had appeared in the local newspaper about his arrest, Mr Green was found hanging from an oak tree in the garden of his home in Gurnard, Cowes.

His widow, Patricia Green, 59, and younger son, Luke, 29, from Plymouth, Devon, wept at the hearing in Newport as it became clear that the allegations made against Mr Green had been unsubstantiated.

Recording a verdict of suicide, Isle of Wight Coroner Caroline Sumeray said to Mr Green's family: ''This was cool, calm and rational and very distressing and now horrendous for you to discover that he felt driven to this by the humiliation he felt because he was arrested, because he was interviewed, because of the allegation that was made that was incorrect, false, inaccurate.

''I can't begin to imagine how you are feeling.''

Wiping away tears, Mrs Green said: ''It won't bring him back.''

Ms Sumeray added: ''I am very sorry to hear the sad tale behind this case.''

Ecoisland was awarded the money in January of last year following a successful bid by the Isle of Wight Council for Department of Energy and Climate Change funding to help householders on the island reduce their energy bills and to aid businesses to become more environmentally friendly.

The inquest heard that Mr Green was named as one of EDF's 11 Team Green Britain Heroes during the Olympics and his home on the Isle of Wight, which he renovated with environmentally-friendly principles, was highly-regarded with up to 50 people visiting each month to view how the work was carried out.

Mrs Green, who worked for her husband, said that he was ''devastated'' by his arrest and the following report in the local newspaper.

Speaking of his questioning by police, she said: ''David described the experience as the most humiliating and degrading in his life.''

She continued: ''He was a very honest and honourable man. He said he had overheard someone talking about 'the prisoner' and I think that hit him hard. Prison got to him.''

Speaking of the report in the newspaper of his arrest on suspicion of fraud, Mrs Green said: ''He was devastated, I think it was just the first negative thing that he had, it just threw him.

''He said 'I am not going to be able to walk down the road, I am going to be a pariah'. We (the family) were saying 'it's a small island, people soon forget'.''

Detective Constable Lee Stewart, of Hampshire Police, said that the decision to arrest Mr Green was made after it became known that the Isle of Wight County Press newspaper had received information about the allegation and it was deemed necessary to question him in case an attempt was made to destroy any evidence once the matter was made public.

He said that the false allegations were that Mr Green had falsely stated that stages of the project had been completed in order to gain the next funding payment. But Mr Stewart said that this had been a ''misinterpretation'' of the spreadsheets provided by Mr Green to the council.

The inquest was told by Mrs Green that Ecoisland had recently gone into administration and they were in the process of selling their house to cover some of the debts.

Mr Stewart said that Mr Green's explanation for the missing money was that the funding had not been ringfenced, and had not been required to be so, and had been used to pay off the company's other debts.

He added of the council's initial allegation: ''It wasn't factually incorrect, it was a misunderstanding, a misinterpretation.''

CICs were established by the Government in 2005 to enable social enterprises to be established with their profits being used for the public good and the benefit of the community.