Opposition leader Grant Gibbons is questioning how convicted felon Vidya Sharma was able to establish a mutual fund in Bermuda five years ago.

That fund ? IPOC International Growth Fund ? which is at the centre of a number of international money laundering probes is creating a credibility issue for Bermuda?s entire fund industry, he said.

?Reputationally this is massive,? Dr. Gibbons said in the House during the motion to adjourn on Friday evening. His comments followed a Wall Street Journal report which said the scandal allegedly goes all the way up to Russian IT and Communications Minister Leonid Reiman.

Citing prosecutors? letters, the paper said that Minister Reiman took advantage of his position to help transfer cash and telecommunications assets out of Russia and through a web of shell companies to the Bermuda-registered mutual fund. The paper said IPOC was actually a holding company which now controls Russian telecom assets valued at more than $1 billion.

Mr. Sharma, a former Merrill Lynch & Co. broker, was fired as IPOC?s president after three years when the fund discovered that he had been found guilty of fraud in Germany in 1998.

?What happened at the Bermuda Monetary Authority. Why wasn?t due diligence done?? Dr. Gibbons said.

?It is a serious reputational issue for Bermuda. A fund was allowed to be set up by someone who was apparently not fit and proper,? he said.

?There needs to be more of an explanation how it happened and what is being done now to resolve the issue because it is a fund issue for us as well and we are all concerned about the credibility of Bermuda?s entire fund industry.? asked the Bermuda Monetary to explain how Mr. Sharma came to set up IPOC given the BMA?s emphasis on ensuring people doing business here are ?fit and proper?. The BMA ? which is responsible for the regulation of all financial services ? was also asked what it was doing to resolve the situation.

?It should be noted that for legal reasons, the Bermuda Monetary Authority does not publicly comment on any investigation in relation to any specific Bermuda-regulated entity,? the BMA replied in a statement.

A spokesperson would not even confirm whether the WSJ was correct in reporting that the BMA is looking into whether IPOC violated relations that require mutual funds to have many shareholders.

Allegations against Mr. Reiman and IPOC first made their way to newsroom as part of a bitter Russian business dispute between billionaire Mihail Fridman?s Alfa Group and IPOC over a 25.1 percent stake in Megafon, Russia?s third largest mobile phone operator.

Jeffrey Galmond claims to be the primary owner of IPOC yet Mr. Sharma, who once worked for Mr. Galmond, has joined others in testifying that Mr. Reiman was in fact the real owner of IPOC.

Mr. Sharma has acknowledged in court that he had an agreement to receive compensation from the Alfa Group or its allies, however the Wall Street Journal said his testimony and that of former Galmond business partner Anthony Georgiu was consistent with ?voluminous financial records? it reviewed which show a series of large transfers totalling tens of millions of dollars which move assets of Russian telecom ventures to shell companies based in Cyprus, Liechtenstein, Switzerland and other jurisdictions.

The majority of the funds then flowed via the New York office of Barclays to Bermuda and into the IPOC fund, which Mr. Galmond says he owned.

Minister Reiman on Monday vehemently denied playing any role in a complex money-laundering scheme focusing on Russian telecom companies.

?I think as before that the article was initiated by unscrupulous shareholders who are seeking to influence the telecoms services market,? Reiman said on Monday at a news conference, adding that he considered the Journal article a form of ?pressure?.

Minister Reiman is not a criminal target of the case. The German probe actually focuses on the role of Germany?s Commerzbank AG and Mr. Galmond in the movement of funds and assets, and led to the resignation of a Commerzbank board member over the summer.

Mr. Reiman confirmed however that he met long-time associate Jeffrey Galmond in the late 1980s and that the two stay in touch, however during the press conference he denied having any bank accounts abroad.

He said that he had instructed his lawyers to determine whether his rights had been infringed by the newspaper. He said he did not exclude that he would ?resort to the necessary legal mechanisms.?

A spokeswoman for The Wall Street Journal yesterday dismissed Reiman?s allegations of foul play.

?The article was reported and written because it is important information for our readers,? she said in a written response. ?We are disappointed that we were not invited to a briefing that was about a Wall Street Journal article.?