A Swiss Arbitration Tribunal has found that Russian Communications Minister Leonid Reiman is the ?sole beneficial owner? of a Bermuda-based mutual fund which owns a large portion of Russia?s telecom industry.

The business and financial affairs of IPOC International Growth Fund and 11 affiliated companies are currently under review by the Bermuda Government via KPMG Bermuda.

The private commercial tribunal in Zurich found that Mr. Reiman, a close ally of Russian President Vladimir Putin, ?used his powers contrary to the interests of his office? and put his ?personal enrichment? before the interests of state companies he was supposed to protect.

The ruling by the three-member arbitration panel does not carry the authority of a court, but The Wall Street Journal notes it represents the most authoritative finding to date that Mr. Reiman took advantage of his official position to amass enormous wealth through the Bermuda-based IPOC International Growth Fund.

The ruling also represents a victory for Mikhail Fridman?s Alfa Group which has been embroiled in a nearly three-year legal dispute with IPOC over a 25 percent stake in Megafon, Russia?s third largest mobile operator.

Alfa Group bought the stake of MegaFon from LV Finance in 2003, however IPOC, which already owns an 8 percent stake in Megafon, claims it signed option agreements to obtain that same stock from LV Finance back in 2001.

?The tribunal?s decision has confirmed that the only beneficiary of the Bermuda-based IPOC fund and its alleged option over a 25 percent stake in MegaFon is Reiman,? said LV in a statement late on Monday.

IPOC has always claimed its owner is Jeffrey Galmond, a Danish lawyer who has been doing business in Russia since the 1990s and who is a close friend of Mr. Reiman. Mr. Reiman has denied having ownership in any of the assets but the tribunal, which did not have subpoena power, cited confidential documentary evidence and sworn testimony as giving Mr. Reiman?s denials ?no credibility?. The tribunal ruled he was the sole beneficial owner of IPOC while a minister in 2001 and 2002 when IPOC?s main asset was a large stake in Megafon.

The tribunal also found that he used his power to the contrary by forcing at least one telecom company owned by rivals to buy a company he owned for an ?exorbitant amount? in order to obtain government operating licences.

The dispute between Alfa and IPOC has led to a series of lawsuits in the Bahamas, the British Virgin Islands and Switzerland. In another ongoing lawsuit, KPMG Bermuda and its directors Malcolm Butterfield and Michael Morrison are seeking $1 million in compensatory damages and $10 million in punitive damages for fraud conversion, misappropriation and unjust enrichment from the Washington-based intelligence and risk management firm Diligence LLC. They accuse the company?s employees of using fraud and bribery to obtain confidential information gathered by KPMG Bermuda during its government-mandated review of IPOC. The Zurich ruling on the option agreement for 19.42 percent of Megafon counters a ruling in August 2004 when the International Chamber of Commerce?s Arbitration Tribunal ruled that Alfa Group were not bona fide purchasers of a 5.575 percent stake in MegaFon. LV Finance has appealed that ruling after it was upheld by the Swiss Supreme Court.

The Times Online deems the Swiss ruling an ?embarrassing blow? to Mr. Putin, whose wife once worked for one of Mr. Reiman?s companies. Mr. Reiman worked with Mr. Putin in St. Petersburg in the 1990s and became IT and Communications Minister in 1999. He has repeatedly denied being a direct or indirect owner of IPOC.

The ruling comes just two weeks after President Putin pledged to eradicate corruption in a state of the nation address. The Times says the finding will lend weight to critics who say that President Putin?s drive to re-centralise power has created a new generation of oligarchs ? within his own government.

An IPOC spokesperson said the company was ?surprised? by the ruling but IPOC is determined to assert its right over the Megafon stake and may possibly appeal to the Swiss Supreme Court.

?We are disappointed that Alfa?s concerted campaign to smear and hound those involved, not to mention derail legal proceedings with attempted bribery and corruption, seems to have impacted on the evidence underlying the ruling,? the spokesperson said in a statement.

?Our opponents have concocted a set of allegations because they do not have a coherent defence for their involvement in this fraudulent scheme.?

IPOC initiated the arbitration proceedings in 2003 on the grounds that Leonid Rozhetskin LV Finance?s CEO and Mr. Fridman?s Alfa Group had colluded to defraud IPOC of the Megafon stake. IPOC accused the companies of trying to frustrate its attempts to exercise its prior ownership rights.

?We have said from the outset that the integrity of contracts for investment in Russia is at stake. The principle we have constantly sought to uphold is a simple one ? no matter where you are in the world, you cannot sell the same stake twice,? the spokesperson said adding that otherwise companies can ride ?roughshod over agreements without recourse?.