By Mohammed Abbas
LONDON (Reuters) - British Defense Secretary Liam Fox resigned on Friday amid a furor over his friendship with a businessman with defense interests, dealing a blow to Prime Minister David Cameron's government and casting doubts on efforts to reform the military.
The British media have in the last week been awash with stories about the nature of the relationship between Fox and his former flatmate and best man at his wedding, Adam Werritty, who met frequently with Fox and falsely claimed to be his adviser.
Cameron had given Fox, 50, his support pending the findings of an inquiry, due within days, into whether he had broken ministerial rules by allowing Werritty to benefit from their friendship or have access to classified information.
"I mistakenly allowed the distinction between my personal interest and my government activities to become blurred," Fox said in a resignation letter to Cameron.
"The consequences of this have become clearer in recent days. I am very sorry for this."
Cameron said he was "very sorry" to see Fox go, and praised the "superb job" he had done.
"You have overseen fundamental changes in the Ministry of Defense and in our Armed Forces, which will ensure that they are fully equipped to meet the challenges of the modern era," Cameron said in a letter to Fox.
"On Libya, you played a key role in the campaign to stop people being massacred by the Gaddafi regime and instead win their freedom."
Werritty had no security clearance nor government role, but met Fox at least 40 times in the last 18 months at the defense ministry and abroad, where Werritty joined Fox's meetings with officials, dignitaries and at least one businessman.
Fox's role is particularly sensitive given Britain's role in Afghanistan, where there are some 10,000 British troops, and in Libya, where British fighter jets have been key in a NATO campaign to protect civilians.
Fox was also in charge of billions of pounds of military spending, and last year launched an ambitious and controversial plan to overhaul the military to fix a 38 billion pound ($60 billion) "black hole" of unfunded defense spending.
Fox had initially dismissed claims of impropriety regarding his relationship with Werritty as "utterly baseless" and "wild allegations," but later went on to apologize for allowing "distinctions to be blurred."
(Editing by Mark Heinrich)