MOSCOW (Reuters) ? Russian Telecoms Minister Leonid Reiman faced questions last week over whether he was behind an escalating dispute over the ownership of a strategic stake in MegaFon, the country?s third-largest mobile phone firm.

LV Finance, the firm at the centre of the row, alleged top Telecoms Ministry officials had instigated a criminal investigation over the company?s sale in 2003 of a one-quarter stake in MegaFon to the telecoms arm of Alfa Group.

MegaFon?s owners have been at odds since Alfa, owned by Mikhail Fridman ? Russia?s second-richest businessman according to Forbes magazine ? bought the MegaFon shares for $300 million from LV Finance.

Bermuda-based emerging markets fund IPOC has challenged the purchase, saying it had a prior option to buy the MegaFon shares from LV Finance. IPOC won a ruling in its favour last August from the International Chamber of Commerce in Geneva.

The dispute escalated last week when police visited the offices of Alfa Telecom to seek documents related to the case, while it emerged that prosecutors have opened a fraud probe against people linked to Virgin Islands-registered LV Finance.

LV Finance?s Chief Executive Leonid Mayevsky said he had been threatened with physical pressure and illegal detention when he was interrogated on March 11 over the case, and had been forced to leave Russia.

Mayevsky called on Russian prosecutors to investigate media reports Reiman is linked to IPOC and to establish whether the minister had any role in the investigations launched by police and prosecutors.

?We call on Russia?s law enforcement agencies to examine the possible involvement of the leadership of the Telecoms Ministry, and in this case the personal role of L.D. Reiman, in these events,? he said in a statement issued through LV Finance.

The Vedomosti daily reported last week that prosecutors had opened the fraud probe against Leonid Rozhetskin, who owned LV Finance when it sold the MegaFon stake, and two associates.

The Telecoms Ministry dismissed Mayevsky?s allegations.

?As the Telecoms Minister has said many times, neither he nor his relatives have any relationship with IPOC and ... the police, the tax service, the prosecutor?s office have no relationship with the ministry,? a ministry spokeswoman said.

Sweden?s TeliaSonera AB owns 35.6 percent of MegaFon, Telekominvest has 31.3 percent and IPOC 6.5 percent. Teliasonera also owns 26 percent of Telekominvest, boosting its overall interest in MegaFon to 43.8 percent.

The three teamed up two weeks ago to try force out Alfa and enable MegaFon, which has nearly 15 million customers, to launch an initial public offering. Alfa also has a strategic stake in Russia?s number two mobile phone firm Vimpelcom, which before the latest row faced a surprise back-tax bill for $158 million, which was later slashed to $17 million. At stake is whether MegaFon?s strategic investors will be able to cash in their investment via an IPO before Russia?s fast-growing mobile market reaches a plateau, as well as who comes out on top when state telecoms holding Svyazinvest is privatised.

Alfa and Telekominvest, which investors also believe is allied with the Telecoms Ministry, are likely bidders for the 75 percent in Svyazinvest being put up for sale.

IPOC also denied Reiman was linked to the Bermuda-based fund, whose main beneficial owner is Danish businessman Jeffrey Galmond.

?This is complete nonsense. They have made these allegations before and they have proven to be false in court proceedings,? said a spokesman for IPOC in London.