British former EU ambassador in fraud inquiry

EUROPEAN Commission fraud officers investigating Michael Emerson, a top British official in Brussels, are examining documents which suggest that European Union aid money earmarked for Russia has been misused.

Belgian police have launched their own inquiry into the affairs of Mr Emerson, a former EU ambassador to Moscow, it emerged yesterday, and sources said that the FBI was being kept informed.

In what is swiftly becoming one of the biggest EU corruption inquiries, investigators are following leads in Russia, Belgium, Canada, the United States, Jersey and Cyprus.

The European Commission, which confirmed last week that an inquiry was under way, has stressed that Mr Emerson is "innocent until proven guilty".

The documents received by the commission's fraud unit, the UCLAF, and also passed to the Independent on Sunday, contain transcripts of private letters, sent by electronic mail, allegedly from Mr Emerson to business contacts in Russia.

The letters suggest that Mr Emerson may have set up a consultancy company to pursue private business interests while posted to Moscow.

One letter allegedly written by Mr Emerson discusses a financial deal with a St Petersburg businessman, Ilye Baskin. The letter refers to "our consultancy company" and to a complex "project", apparently with connections in Kirghizia.

Also being examined by the commission and by Belgian authorities is a letter allegedly written by Mr Emerson to a "tax expert" in the Moscow office of Coopers and Lybrand, the accountancy firm.

This also refers to "our consultancy company" and outlines arrangements for sending payments to offshore accounts in Jersey and Cyprus.

The documents also include letters to the same business contacts allegedly written on the same computer by a Russian woman, Elena Prokhorova, who was employed at the EU Moscow embassy while Mr Emerson was ambassador.

Mr Emerson returned from his four-year posting to Moscow last month and now holds a senior commission job in Brussels. Ms Prokhorova is also now employed on a commission contract in Brussels.

Mr Emerson has not commented on the allegations. His wife, Barbara, said yesterday that her husband was not at home and she did not disclose his whereabouts. Mrs Emerson said she did not know Ms Prokhorova. She added: "He has always been scrupulously honest."

The investigators are currently working to verify the authenticity of the documents, which indicate that they were transmitted from Brussels last month.

The allegations, if substantiated, could prove highly damaging for the commission, and would severely undermine the EU's's foreign aid initiative in Russia.

Mr Emerson is the most senior EU official ever to fall under suspicion. Highly respected, he has been employed by the commission since 1973 and once worked as economics adviser to Lord Jenkins, the former President of the commission.

As EU ambassador to Moscow, he was responsibile for overseeing the distribution of pounds 400m in EU money, intended to support the Russian economy.

Fraud is a growing worry to the commission. The Luxembourg-based Court of Auditors, the EU's financial watchdog, revealed last year that pounds 2bn in EU funds was unaccounted for in 1994.

Last month, Belgian police arrested two EU tourism officials, and accused the commission of failing to tackle fraud among its own staff.

Under EU treaties, all commission staff are granted immunity from prosecution. It is understood that the Belgian police may ask the commission to lift immunity in the Emerson case.