Brussels refuses to let ex-Moscow man resign

EU fraud inquiry: Letters reveal links with Russian firms and off-shore accounts

Michael Emerson, the British official under investigation for his activities when he was the European Union's ambassador to Moscow, admitted yesterday that he had set up a private consultancy company to do business with Russian businessmen.

However Mr Emerson denied any corruption or conflict of interest. He said:"No money has changed hands," claiming that he had set up the company "in preparation" for retiring from his EU post.

It emerged at the weekend that Mr Emerson has attempted to resign from the European Commission. However, Commission sources said this was unlikely to be accepted while the investigation was under way.

Belgian police are also investigating the allegations against Mr Emerson. For criminal charges to be presented, the police must ask the Commission to lift the immunity which is granted to EU staff. Police sources said it was "too early" to say whether such a request would be made. A Commission spokesman said last night the inquiry would be completed swiftly and findings would probably be made public this week.

The controversy surrounding Michael Emerson could have come straight from a cheap thriller. The story unfolds in Moscow and Brussels. The main characters are a 55-year-old Oxford-educated diplomat, who allegedly has an affair with a Russian woman. The woman's husband, an American writer and former Nato planner, uncovers the affair.

In doing so, he also uncovers apparent evidence of the couple's involvement with big-league Russian businessmen. He informs the FBI, fearing threats from what he described as "KGB elements" or "Russian mafia". He takes the evidence to the European Commission and the Belgian police.

While elements of the story smack of the sensational, the implications for the credibility of the EU and Commission operations abroad could hardly be more serious. The main allegations against Mr Emerson, received by the Independent, come from a series of letters, apparently sent in January by him and his Russian lover, Elena Prokhorova, to Moscow and St Petersburg. One is to a businessman called Ilye Baskin in St Petersburg and talks of "our consultancy company". Another sets out plans for payments to offshore bank accounts.

The questions the Commission must answer include:

t Did Mr Emerson use his position to set up his own private business or take back-handers for EU contracts?

t Did he use his inside knowledge of EU aid policies for the former Soviet Union to secure lucrative contracts for his private business operations?

t Did this hitherto reliable official allow an alleged infatuation with a Russian employee to cloud his judgement?

Commission officials insist that Mr Emerson is innocent until proven guilty, and the possibility clearly exists that the evidence may be tainted because it has come from an aggrieved party.

Michael Emerson, married with three children, has worked for the Commission since 1973. He has a reputation as a solid, reliable official. Colleagues describe him as "unremarkable" and expressed surprise that he should be embroiled in sensational accusations.

Mr Emerson apparently met Elena Prokhorova, a 40-year-old Russian hired by the Commission as a translator, before he went to Moscow in 1991 as ambassador with responsibility for overseeing the EU's new pounds 400m aid programme, Tacis. Ms Prokhorova was also posted to the EU's Moscow embassy in 1991.

In August 1995 she married an American, a writer and retired airman who she had met while he was at Nato headquarters in Brussels. The American does not want his identity disclosed. Ms Prokhorova went to live with him in Brussels but returned to Moscow several times in the last six months.

Last month Mr Emerson returned to Brussels to take up a senior position in the Commission's foreign policy directorate. Soon afterwards, Ms Prokhorova's American husband, away in Washington, received a letter from his wife saying their marriage was over.

He returned to Brussels to find his wife had left home. On his computer he uncovered letters allegedly sent by his wife and Mr Emerson during his absence. In one, to Mr Baskin, reference is made to financial arrangements involving "Kirghizia gold and silver, to be used as guarantee for credit".

Another letter, apparently written to a tax expert at the Moscow office of accountants Coopers and Lybrand, refers to "the latest on the business project we have discussed". It says: "Mr Baskin is the one with whom I am directly dealing", and refers to the need to arrange for financial payments to made to offshore bank accounts.