Abramovich faces fraud probe over sale of gold mine

Roman Abramovich, the billionaire owner of Chelsea Football Club, is being investigated by Russian authorities over the controversial sale of a mine in his Arctic governorship to London-listed Highland Gold.

The investigation coincides with the release on Friday of a report by Russia's financial watchdog alleging financial abuses running into millions of pounds in the province.

Russia's independent Audit Chamber - akin to the UK's National Audit Office - is understood to be examining whether Mr Abramovich had a financial interest in the sale of the Maiskoye gold deposit in the remote Chukotka province, where he is governor. It is also looking at whether public funds were misused to seal the transaction.

The probe comes during a broader inquiry by the Audit Chamber into public spending in the region. The Chamber's auditors alleged on Friday that £20m of financial and tax "abuse" had been perpetrated.

Since Highland bought the mine from a Russian company called Deerfield Universal in September last year, a Highland source has revealed that Mr Abramovich used the latter as a front company and was in fact the beneficial owner. As governor and using state funds, he is alleged to have offered incentives to encourage the deal.

Accounting investigators will be looking closely at comments made to the respected Moscow metals journalist John Helmer, by Christine Coignard, head of investor relations for Highland. In November last year she told the Russia Journal: "The official seller was Deerfield Universal. The person behind it was Abramovich. Abramovich was the beneficial owner and seller."

Her comments have deeply embarrassed Millhouse Capital, Mr Abramovich's holding company. But when asked to confirm her earlier assertions, Ms Coignard, speaking from Germany, referred questions to a London PR firm, which said her comments had been taken out of context. However, another Moscow source said Ms Coignard had made similar comments to him.

Ms Coignard also explained that Mr Abramovich gave an undertaking that the Chukotka administration would build, at state expense, a 100-mile road through remote forest and tundra to the mine. It also waived production targets and relaxed the terms of the mining licence.

AIM-listed Highland Gold is chaired by Lord Daresbury, the chairman of Aintree racecourse. The Jersey-registered company joined the gold rush by Western companies into the region when it purchased the mine for $35m (£20m).

The Maiskoye probe is significant in that, if evidence of wrongdoing in public office were to be discovered, Mr Abramovich would not be protected by parliamentary privilege and could be prosecuted.

However, John Mann, Mr Abramovich's spokesman in Moscow, was confident this would not happen, saying: "Let them investigate, they'll find nothing out of the ordinary."