A controversial restructuring of an Asian paper company has been challenged following allegations that its approval by the Bermuda Supreme Court last year was based on votes by people who may not have been legitimate creditors.

The Wall Street Journal reported yesterday that a letter has been sent to Puisne Judge Ian Kawaley by a company hired to track bondholders alleging that "one or more persons may have stuffed the ballot box" in the October 30, 2003 vote his company administered.

Bondholder Communications Group Inc. president Robert Apfel said in the letter that many of the suspicious votes allegedly were cast by Taiwanese employees of APP who worked for the company in Indonesia.

APP, owned by the Indonesian Widjaja family, was responsible for the largest ? $13.9 billion ? corporate default in the history of emerging markets, the Financial Times said.

In the scheme approved by Mr. Justice Kawaley last year over the objections of Fidelity Investments and John Hancock Funds, APP won creditor approval for a debt-for-equity swap that gave creditors 99.9 per cent of the equity in its Chinese holding company, APP China Group.

The vote effectively cut the corporate link between its now-expanding Chinese operations and its Singapore parent, which owes creditors $4.5 billion, according to a separate report on the Financial Times website.

"Despite suspicions raised by creditors that the company and its controlling shareholders, Indonesia's Widjaja family, were manipulating the company's ongoing restructuring via the vote, the company and its advisors had repeatedly claimed none of the bondholders who took part of the vote were related to it," the FT said.

The Wall Street Journal reported that in many cases Bondholder Communications was only able to contact relatives of the alleged bondholders, who refused to put the company in touch with the actual bondholders. "Often, Mr. Apfel wrote, these relatives said they had no idea that their family owned substantial amounts of APP debt."

"We find this so disturbing we must withdraw the prior set of affidavits we provided to the court," Mr. Apfel said in the letter. In a telephone interview with the Wall Street Journal, he said he had also informed the Director of Public Prosecutions and the Bermuda Monetary Authority, and added: "In my view, it appears that a fraud was committed."

According to Mr. Apfel, of the 300 creditors listed at the time of the Bermuda vote, 150 were Taiwanese individuals portrayed as holding debt between $200,000 and $2.25 million. In all, they were thought to hold $125 million of the $400 million in bonds issued by the Chinese holding company.

The Wall Street Journal said a letter to Mr. Apfel from APP admitted that some of the bondholders were APP employees and said it would take "all reasonable steps" to allay his concerns. It also warned him against pursuing the issue in the Supreme Court without APP's written consent.

Last November, Bloomberg News reported that the debt affected by the debt for equity swap represented less than five percent of the group's borrowings, and some creditors were angry at Asia Pulp's decision to divest a unit that generates about half of the group's revenues.

"The patent unattractiveness of the scheme to an independent creditor also goes to suggest that those creditors who approved the scheme may have had an ulterior interest or affiliation encouraging them to do so," said Nathan H. Van Duzer, Fidelity's senior legal counsel, in an affidavit submitted to the Bermuda Supreme Court.

Asia Pulp's representatives indicated that the company wanted the details of those creditors who supported the plan to be kept confidential, Mr. Van Duzer said. The debt-for-equity swap left Asia Pulp with less than one percent of APP China, while the Widjaja family and other undisclosed creditors would have had more than 99 percent.

In 2002, Centre Solutions (Bermuda) Ltd., which is no longer writing new insurance business, accused AP&P of fraud and diverting funds of more than $200 million.

An affidavit filed in Singapore accused the company of inflating or fabricating accounts receivable by its customers. APP denied the allegations.

Centre Solutions provided a surety bond to APP guaranteeing timely payments of interest and principal in case the company was unable to collect receivables and thus pay off its debts.

But Centre Solutions claimed in the court action that the receivables figures were inflated and so about $220 million was paid to APP when it shouldn't have been, the Journal reported.