An ex-Government employee is being held in Bermuda after US prosecutors placed him at the centre of a $26-million fraud network stretching from the United States to the Cayman Islands and Hong Kong, it was revealed yesterday.

Michigan State prosecutors contend Lawrence Anderson, together with four co-defendants, ran a scam in which they claimed to be involved with a secret cartel which controlled the fashion industry in Europe and the Orient.

Anderson, 61, presented himself as a business consultant in contact with co-defendant Ilene Moses, and pretended to be a representative of the clothing cartel. The whereabouts of Moses and the other defendants is not known, but the offences are said to have occurred in Michigan.

It is also alleged that the group -- which is said by the US authorities to have created shell companies with phantom assets -- defrauded banks in Michigan, USA, and Switzerland.

The Royal Gazette has obtained a copy of the 26-page indictment, naming Anderson, who has just finished a five-month contract as a tourism and education management advisor with the Bermuda Government.

The indictment charges: "The defendants obtained more than $28 million in loans from Michigan National, Cantobank and Security Bank by convincing them that the loans would be secured by tens of millions of dollars in assets supposedly owned by Moses' companies.'' But the indictment claims: "In fact, these assets did not exist, or did not exist in the form that the defendants claimed they existed.'' It is understood that Anderson was not involved in financial matters in Bermuda, but in drawing up policy guidelines.

He was employed in Bermuda from Canada, not the US, and it is understood that the Bermudian authorities did not know he faced criminal allegations in the US.

Anderson is a former president of the Institute of Certified Management Accountants of British Columbia and vice-president of international trade of the national organisation.

He has also worked with Vancouver Police, assisting them with management and organisational issues.

Anderson's contract in Bermuda finished at the beginning of April, only days after he appeared in Magistrates' Court.

But he will not be allowed to leave the Island until a decision is made on whether there is a satisfactory case for extraditing him to face the charges in the US.

The indictment has been presented to the Attorney General's Chambers by Michigan prosecutors, who have asked for Anderson to be extradited to the US to face a Grand Jury. The charges span a period from 1982 to 1991.

Anderson, understood to be a Canadian citizen, appeared in Magistrates' Court last week after being arrested at the request of Michigan state prosecutors and US Consulate General in Bermuda.

Senior Magistrate Will Francis released Anderson on $25,000 bail, ordered him to surrender his passport and report to Hamilton Police Station daily.

According to the US Consulate General, extradition proceedings will not be undertaken by Canada.