Russian authorities drop 'Kremlingate' inquiry

The "Kremlingate" corruption investigation - concerning the payment of kickbacks to the family and entourage of the former president, Boris Yeltsin - was closed yesterday by Russian prosecutors who claimed there was not enough information to proceed with the case.

Russian and Swiss authorities had been investigating allegations that Russian officials, including the former presidential property manager, Pavel Borodin, were paid millions of dollars in bribes by the Swiss-based construction firms Mabetex and Mercata Trading to secure lucrative Kremlin refurbishment contracts.

Mr Yeltsin's wife, Naina, and his daughters, Tatyana Dyachenko and Elena Okulova, were originally implicated in the case, suspected of having received credit cards guaranteed by the director of Mabetex.

Announcing the closure of the inquiry, Ruslan Tamayev, the new head of the investigating group in the chief prosecutor's office, said a decision had been made not to open a criminal case against members of the ex-president's family on the grounds that there was no evidence of a crime.

Earlier this year, Swiss magistrates issued an international arrest warrant for money laundering against Mr Borodin, who was suspected of funnelling bribe money through Swiss bank accounts. Beghjet Pacolli, the Mabetex head, also faces money-laundering charges. Both men have denied the accusations.

Throughout the investigation, Swiss prosecutors have repeatedly complained that their Russian colleagues did not appear to be vigorously pursuing the case. But Mr Tamayev claimed yesterday that, in fact, it was the Swiss who had failed to provide sufficient evidence to support the case.

"Since 1998 we have been waiting for a response to our inquiries from them," he said. "But until now they have been unable to answer all our questions."

The former prosecutor who initiated the case, Yury Skuratov, expressed weary resignation when he heard it had been closed. He said he had long been convinced that the case had no future because "numerous government officials" were caught up in it.

The government "does not want to admit that corruption has penetrated to the highest reaches of the Russian leadership", he added.

Mr Skuratov pointed out that Mr Tamasov had been promoted just a few days before making yesterday's announcement.

Mr Skuratov's own career took a rather unfortunate turn after he launched the anti-corruption case; when several attempts by Mr Yeltsin to fire him failed, a security service video showing the former prosecutor having sex with two young prostitutes was aired on state television. He was suspended from his duties.

Several other senior officials in the prosecutor's office have also been sacked during the investigation.

Swiss magistrates said they would press on with an independent investigation into Russian money-laundering in Switzerland, which they launched in frustration at the reluctance of their Russian counterparts to pursue the affair.

Their inquiries are likely to focus on more than £40m in commission payments made by Mercata Trading, a company linked to Mabetex.

Swiss prosecutors have alleged that Mr Borodin's office paid Mercata $492m (£340m) to renovate official buildings, including the Kremlin. Their investigations into the use of credit cards by the Yeltsin family are also to be dropped.