SFO to probe Young's Swiss links probe

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Secret payments allegedly made by a Swiss law firm will lie at the heart of a Serious Fraud Office investigation into disgraced Deutsche Morgan Grenfell fund manager Peter Young.

DMG plans to call in the SFO in the next few days after two weeks of investigations into a pounds 180m "black hole" at three of its top performing investment funds. Mr Young was sacked for gross misconduct last week, and his assets have been frozen.

Investigators at DMG have been examining money allegedly received by Mr Young from Zurich solicitors Wyler & Wolf to establish whether he made fraudulent personal gains from his hidden investment activities.

Wyler & Wolf set up a network of Luxembourg companies for Mr Young, and the payments are understood to have helped him buy a pounds 450,000 house in Buckinghamshire in April. "Much of our attention has been focusing on the property and payments from the Swiss law-yers," one source said.

This weekend, Mr Young was not answering his telephone after gaining injunctions to stop newspapers printing pictures of him with two prostitutes. The orders prevent publication of details of his visits to the girls, known as "Sandra" and "Tracy", at premises in Paddington, London, between June and December 1995.

DMG's parent, Germany's Deutsche Bank, has promised to compensate investors after its review, which may swell the cost by more than pounds 50m. It also faces hefty fines from City watchdog, the Investment Management Regulatory Organisation. The three funds were valued at pounds 1.4bn before the affair broke two weeks ago, but DMG has still to value holdings in speculative, unquoted stocks built up by Mr Young in breach of its rules.

Wyler & Wolf established 13 Luxembourg holding companies, through which Mr Young concealed the true size of his holdings in several unquoted Scandinavian and US firms.

Headed by solicitors Juerg Wyler and Marco Wolf, they were introduced by Fiba Nordic Securities, a specialist broker in Scandinavian stocks that also introduced investments to DMG, a key client. DMG has since suspended dealings with the broker.

All but one of the Luxembourg companies, Russ Oil & Technology, were so-called "twins" - pairs of firms with stakes in the same individual stock - and were owned by DMG.

One such pair invested in a US oil firm, Solv-Ex, which first brought Mr Young to the attention of US and UK regulators.

The US Securities and Exchange Commission is investigating dealings in the firm's shares, which rose tenfold to $38 (pounds 25) from May 1995 before collapsing to $6 in March.

Solv-Ex has hired Kroll Associates, the private investigator, to look at alleged stock manipulation by two convicted felons with organised crime links. Kroll, however, has refused an SEC subpoena to release its reports.

DMG is still investigating the ownership of Russ, suspected to be a key source of the alleged personal payments to Mr Young.

Russ shares in a personal account of Mr Young's at DMG in Jersey, were swapped in February for pounds 2.2m of shares in Sensonor, a Norwegian hi-tech firm in which DMG also invested.

Mr Young bought his new luxury house on 17 April in a massive step-up from the family's previous pounds 135,000 home.

He has stated that he received a loan, but investigators are curious that there is no mortgage charge on the property.

Last week, Mr Wyler and Mr Wolf, who are both directors of Russ, declined to talk about their relationship with Mr Young.