Cypriot leader's law firm 'broke Milosevic sanctions'

Two Serbian bankers are threatening a law firm owned by the President of Cyprus with legal action, claiming it helped Slobodan Milosevic to funnel banned funds through offshore companies.

The investigations are a severe embarrassment to Tassos Papadopoulos, who was in Athens yesterday for the crowning moment of his three months in office, signing the treaty that brings the southern part of the divided island into the European Union.

His firm is embroiled in a legal battle over the establishment of offshore companies used to bypass UN sanctions during the Balkan war. The case reaches back to the 1990s, when an estimated $4bn (£2.5bn) was funnelled through Cyprus by Mr Milosevic, the former president of Yugoslavia.

Radmila Budisin and Ljiljana Radenkovic, former executives at the state- controlled Beogradska Banka, which was linked to the Milosevic regime, are determined to protect their reputations and sue partners in Mr Papa-dopoulos's firm over the use of their names.

The women are seeking to trace the records of two offshore companies, Antexol Trading and Browncourt Enterprises. Both were established by Mr Papadop-oulos's firm and the women are listed as directors.

Ms Radenkovic and Ms Budisin claim they were unknowing accomplices in the sanctions busting. Their case has been taken on by Pavlos Angelides, a respected Cypriot lawyer. He believes their signatures were faked.

Investigators from the UN war crimes tribunal have concluded that these companies, with six other offshore fronts registered by the same firm, purchased weapons, fuel and other materials on behalf of Mr Milosevic's regime, breaking a UN embargo.

Morten Torkildsen, a forensic auditor who studied the flow of funds from Belgrade on behalf of the UN tribunal, said the intricacy of offshore dealings used to sidestep sanctions was unprecedented. "In my career I have never encountered or heard of a finance structure this large or intricate," he said.

Mr Angelides wants to know what role partners at Mr Papadopoulos's firm played in the front companies. They say they were only legal advisers.

The firm has failed to respond to requests for the offshore companies' accounts and documents. If they are not produced, the perjury investigation could turn into charges of fraud and conspiracy.

Mr Angelides said: "This is not a story we should forget. We have to close this scandal but the authorities are trying to cover it up."