Two academics at the centre of cash-for-places allegations at Oxford University resigned last night. The Reverend Dr John Platt and Mary Jane Hilton, both fellows at Pembroke College, are to leave their posts "with immediate effect", the college said in a statement.

"Both agreed that they were acting without authority in connection with the matters referred to in The Sunday Times and for this reason the resignations which they offered were accepted," the statement continued.

An investigation was launched yesterday into reports that an undercover reporter, posing as a wealthy banker, was offered preferential treatment for his son in return for a £300,000 donation. In a covert recorded interview with the Sunday Times, Dr Platt, a senior fellow, is said to have agreed to create an extra place on a law degree course in return for the donation. Dr Platt, the college chaplain, revealed that similar deals had been struck in the past in an attempt to alleviate Pembroke's financial plight.

Asked about such deals, Dr Platt is reported to have said: "If you're going to keep it absolutely, totally confidential, the answer is: in the past it has been done. Okay? You must understand that this is absolutely confidential. If this story gets out, we'd all be blown away... Normally there is a quota for the course which is decided depending up on the teaching resources of the college. So let's say there are 10 places, those 10 places only go to the very best students. Additional to that, if we agreed it is for the good of the college... then it may be that we could go over the quota."

He allegedly added: "You can't be in a position of turning away a good candidate because someone else is prepared to pay for it. What we try to do here is say that's over and above the quota." The Sunday Times said that Mrs Hilton, Pembroke's director of development and chief fundraiser, suggested to its reporter that he set up a trust fund for the donation so that would not seem to be in his name, reducing the risk of unwanted media attention.

Last night, Giles Henderson, the Master of Pembroke, said: "The speed and decisiveness with which the college has acted on this serves to underline Pembroke's commitment to the selection of students being made solely on the basis of academic merit and potential. The college will review its procedures for ensuring that all admissions decisions and business are conducted only by those authorised to do so. "If found to be true, the actions and conduct described are deeply shocking and totally unacceptable," he said.

Dr Colin Lucas, the university vice-hancellor, said that he was appalled by the allegations of "totally unacceptable behaviour".

Pembroke is known to be one of the poorest Oxford colleges despite being one of the oldest. It is one of the biggest beneficiaries of a scheme whereby wealthy colleges subsidise poorer ones, a university spokeswoman said, adding: "If it's true, it's got to be stopped. Neither the university or college endorses this behaviour because it goes against everything we are committed to."

A member of the Council of Academic Freedom and Academic Standards (Cafas) said last night that the incident highlighted the abuses possible in the absence of a proper code of conduct to monitor Oxbridge admissions. Gillian Evans, a theology lecturer, said that such "special deals" were undetectable in the present admissions system. Given the financial pressures on colleges, she said that similar arrangements were likely to have been made on many occasions in the past. "There is simply no guarantee, no safeguard, to ensure that all students have come through the honourable route and no special deals are being struck," Dr Evans said. "In the current system there is nothing to stop it happening. I'd like to think that it is rare, and that most colleges would react with horror at any attempt to bribe them, but it obviously can happen - and is."

Dr Evans, a Cafas member for ten years, said that the admissions procedure remained "too localised", since it allowed for the alleged proposal by two of Pembroke's fundraising staff to create an extra place on the law course without the college fellowship learning of the donation. "The problem arises from the historical fact that colleges are legally autonomous bodies. They have their own money and run their own affairs," she said. "A widespread code of practice is needed to ensure there are checks and safeguards so that, when the list of prospective undergraduates is agreed, it is clear that there have been no special deals. It would have as its central plank the notion that undergraduates are chosen on merit and that neither having a parent in the college, nor offers of money, could affect the outcome."

Founded Origins in medieval times, but became an official college by royal charter in 1624. It takes its name from its first Chancellor, William Herbert, Earl of Pembroke.

Ex-alumni Samuel Johnson, Lord Heseltine, and Sir Rocco Forte. Sir Roger Bannister was once Master of the college.

Strengths Academic rank 23 out of 30 colleges last year; excels at rugby and rowing.

Currently 80 graduates, 443 undergraduates and 36 visiting students; male/female 60/40

PEMBROKE'S apparent willingness to trade academic integrity for hard cash reveals the extent of financial pressures faced by a growing number of Oxbridge colleges (Sam Lister writes).

Despite manicured lawns and ivy-clad buildings, the college, one of Oxford's oldest, is among the poorest. It is one of the biggest beneficiaries of a scheme whereby richer colleges subsidise the less well-off. Pembroke earned £662,000 on its endowments in the past year, which is small in Oxford terms. St John's, one of the university's richest colleges, banked almost ten times that amount on its endowments.

Damian Green, the Shadow spokesman for Education, said yesterday that Pembroke's alleged offer of a place for cash was clearly wrong, "but it illustrates the increasing pressures that our universities are under, particularly universities like Oxford which are competing on a world stage. Oxford wants to be a world-class university and the funding it gets from the Government makes it very difficult to do that."

This month the Higher Education Funding Council for England said the university would get an after-inflation cut of 0.3 per cent in its annual grant. Its research budget was cut by nearly £40,000, with unions fearing widespread job cuts among academic staff.

Three months ago Philip Keevil, a banker, resigned as a fundraiser for Trinity College, Oxford, after his son was refused a place. In a letter to The Times Mr Keevil, who had given the college £100,000, argued that Oxford was "strangling the golden goose" by not providing support in admissions for its alumni families.