Centre Solutions (Bermuda) Ltd. has accused the beleaguered Asia Pulp & Paper Co. of fraud and diverting funds of more than $200 million, the Wall Street Journal reported yesterday.

An affidavit filed in Singapore July 9 accuses the company of inflating or fabricating accounts receivable by its customers. APP denied the allegations, but said it needed time to respond.

APP, a Singapore company controlled by members of Indonesia's Widjaja family, is $13.9 billion in debt and called a debt standstill in March of last year.

The group and its management, advisers and accountants have been named in several complaints seeking class-action status by shareholders in the United States, the Journal said.

"But the affidavit by the Zurich unit Centre Solutions (Bermuda) Ltd. may mark the first time that one of APP's creditors has alleged that it is the victim of fraud and conspiracy in a document filed to a court," the Journal wrote.

At a July 11 hearing in Singapore's High Court, Centre Solutions' legal counsel, Andre Yeap, detailed complex securitisation structures set up for APP in late 2000. APP was hampered by its low credit rating, which meant the company had to pay high interest rates on its debt.

According to the journal, APP's existing and future cash flows were to be used as payment for new debt, and these payments were insured by Centre. Centre provided a surety bond to guarantee timely payments of interest and principal on the notes, in case APP failed to collect the receivables.

However, Mr. Yeap claimed the receivables figures were inflated and so about $220 million was paid to APP when it shouldn't have been, the Journal reported.

The judge ordered APP to respond to the affidavit by this Friday, and APP's senior counsel, Davinder Singh, said the company would review the documents and bring them to the judge so he could decide whether the transactions were fictitious or not.