German prosecutors probing an alleged money-laundering scheme linked to a Bermuda-based fund are seeking judicial assistance for their probe from counterparts in other jurisdictions, according to The Wall Street Journal.

Friday?s newspaper report cited letters from prosecutors in Frankfurt. They mention suspicions that Russian telecommunications minister Leonid Reiman was involved in a plan to milk Russian state owned companies for cash or divert their assets elsewhere. Mr. Reiman is a close ally of President Vladimir Putin.

The prosecutors suspect Mr. Reiman ?illegally enriched himself through a series of transactions?, and then set up a network of shell companies and trusts to secure and conceal more than $1 billion in assets, according to the report.

The Russian Telecommunications Ministry yesterday denied the reports and demanded an apology from the Journal.

The prosecutors are examining whether employees of Commerzbank AG may have helped the scheme. A bank board member has already resigned because of the Germany investigation and four other current and former officials of the bank including chief executive Klaus-Peter Muller are under suspicion for money laundering. A Commerzbank spokesman told the Journal that the bank fully backs its CEO believes no current staff are guilty of illegal activity in connection with the case.

The Journal reported that investigators are also probing whether the New York offices of Barclays Plc acted as middleman moving funds between firms in Cyprus and Bermuda.

Mr. Reiman, who has always maintained that he has done nothing wrong, says the allegations stem from a battle over a disputed stake in Megafon, Russia?s third largest mobile phone operator.

As previously reported in , billionaire Mikhail Fridman?s Alfa Group is fighting Jeffrey Galmond?s Bermuda-based fund IPOC for the Megafon stake. A former Galmond employee who is a convicted felon and Anthony Georgiou, who is Mr. Reiman?s former business partner, have given sworn testimony in the case although both acknowledge they have agreements to receive compensation from the Alfa Group or its allies.

Even so, the Wall Street Journal says their testimony is consistent with ?voluminous financial records? it reviewed which show a series of large transfers totalling tens of millions of dollars of 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, the newspaper reported.

The Journal reported that the letters as well as other documents show that the German prosecutors have embraced several of the allegations about how the alleged corruption scheme worked which allegedly relied on Mr. Reiman?s role in directing phone ventures part-owned by the state.

The scheme began before the post communist privatisations of the 1990s. Mr. Reiman, who was still an executive of a state-owned phone company in St. Petersburg, allegedly helped a number of entities set up by Mr. Galmond and Commerzbank to get stakes in lucrative ventures with the state owned phone company.

By the time Mr. Reiman was sitting in Moscow, more shell companies with opaque ownership were set up in the Caribbean and Europe and various Russian telecoms and other state-controlled entities under Mr. Reiman?s sway were allegedly forced to make large ?consulting? payments to these companies, the newspaper reported.

Mr. Galmond allegedly set up the holding company in Bermuda in the guise of a mutual fund which reinvested the telecom assets and cash in more Russian telecom assets, giving the Bermuda-based fund and its single owner control of Russian telecom assets valued at more than $1 billion.

Mr. Galmond, the former Commerzbank executives and Vidya Sharma are the key suspects in the German probe. Mr. Reiman is not a criminal target of Western prosecutors since they do not have jurisdiction over the alleged crimes, which occurred wholly in Russia. The Journal said Russian authorities have reviewed some of the transactions and found no significant legal violations.

Mr. Reiman is named in search warrants and requests for international judicial assistance since prosecutors have ?substantial evidence? that he participated in the initial crimes of stealing assets of the Russian companies and paying bribes to Russian officials, a spokeswoman for the German prosecutors told the Journal.

The German probe has caused similar probes in the US, Cyprus and Switzerland. The US Justice Department has begun its own investigation into the shell companies and the business dealings of the New York office of Barclays, which moved funds and converted currencies in many of the deals between firms in Cyprus and the Bermuda Commercial Bank which handles most of IPOC International Growth Funds operations in Bermuda, the newspaper said.

As previously reported, the Bermuda Monetary Authority is also investigating allegations involving that fund.