The British Virgin Islands is preparing criminal charges against the Bermuda-registered IPOC Fund and is seeking to confiscate $40 million from the Fund.

The charges, detailed in an application to collect evidence that was filed at the US District Court for the District of Delaware two weeks ago, include four counts of "acquisition, possession or use of the proceeds of criminal conduct" against IPOC.

Similar charges are being prepared against Jeffrey Galmond, a Danish lawyer who has stated he is the beneficial owner of the Fund, and Michael Ludwig Rudolf North, a German banker who is president and a director of IPOC.

The "preliminary charges" drafted include charges of furnishing false information and perverting the course of justice against three BVI-domiciled entities Lapal Limited, Albany Invest Limited, and Mercury Import Limited, as well as the other three parties. Additionally, a perjury charge is being lined up against Mr. Galmond.

Years of legal battles in the courts of the BVI, Bermuda and Switzerland have resulted in claims that the fund is a money laundering vehicle for the Russian Telecommunications Minister Leonid Reiman.

And the court documents also outline why the BVI believes that $27 million in transactions that went through IPOC's Bermuda Commercial Bank account in the autumn of 2003 were suspicious.

News of the BVI's plans was revealed this week in the KYC News' web-based newsletter Offshore Alert. It is the latest twist in the long-running saga of the Fund, which is the subject of a winding-up petition submitted by Bermuda's Finance Ministry.

The winding up case is not expected to be completed until September next year. Finance Minister Paula Cox said earlier this year the legal action was necessary "to address seeming breaches of our laws and apparent regulatory infractions".

Most of the Fund's legal wrangling has resulted from its corporate tug-of-war with Russian company Alfa Group over a 25.1 percent stake, thought to be worth close to $4 billion, in the Russian mobile phone operator Megafon.

The Delaware court documents show that the BVI authorities intend to seek the confiscation of $40 million that IPOC previously deposited into court in the BVI as security for costs in a civil action brought by the Fund in 2003 against Alfa Group.

The BVI authorities claim the US$40 million, which was paid by IPOC's BVI attorneys, Smith-Hughes Raworth & McKenzie, now Maples and Calder, from an account at FirstCaribbean International Bank, represented the proceeds of criminal conduct.

The documents state: "Investigations revealed that on 11th September, 2003, IPOC's bank account ... with the Bermuda Commercial Bank (BCB) had a balance of $70.71, but within a 25-day period $27,050,000 were deposited into the said account from a number of corporate sources."

According to the request for assistance, the payments were made from September 12 to October 7, 2003, by three BVI companies and four Bermuda corporations Renaissance Advisory ($7 million), Leasing Telecom Ltd. ($6.2 million), Com Tel Eastern Ltd. ($5 million) and Convergence Capital Ltd. ($3 million).

While IPOC said the transactions were legitimate business dealings with companies unconnected with IPOC. But the BVI argues otherwise.

"The documents provided by IPOC, Mr. Galmond and Mr. North purported to explain the movement of these funds to IPOC in its Bermuda bank account and then onward transmission to SHR in its BVI bank account at FirstCaribbean International Bank, for IPOC's purposes," it was stated in the request for assistance.

"It is notable that the movement of the funds is coincidental with the security for costs application and order. It is an irresistible inference that the funds were moved to satisfy the order.

"The agreements were provided by IPOC to E&Y to explain the origin of very substantial cash flows. The counterparties to the agreements, including those incorporated in the USA, have been described variously as 'third parties', 'non Group entities' and 'non-affiliated companies'.

In essence, they are understood to be unconnected with IPOC or its affiliates.

"However, the results of various enquiries have given reason to doubt the authenticity of many of these agreements. For example, certain purported signatories to them have sworn testimony stating that their signatures were forged.

"Moreover, it appears at first sight that a number of other signatures may have been forged. The BVI authorities are obtaining the expert opinion of a handwriting expert on this point.

"Furthermore, online searches at the registries of Delaware, Kentucky and Oregon show that a number of these 'third party'" companies have registered agents and/or addresses in common, indicating that they may in fact be connected in some way."

The BVI backs up its intention to confiscate the $40 million held in a special account by the Caribbean territory's High Court and to lay charges with the argument that there is evidence that "IPOC and its group of companies are corporate shams or façades designed to conceal the true facts about the source of the revenues in IPOC's groups and its true beneficial owner."

There is overwhelming evidence that Minister Reiman is the owner of the IPOC Fund and related companies, the BVI argued, and that this evidence "may justify a Court of competent jurisdiction to lift the corporate veil."