A former Kremlin minister who now runs Russia's biggest shipping company hired private investigators to gather evidence that would implicate a business rival, a court heard today.

Sergei Frank, who was Russian transport minister until he became chief executive of Sovcomflot, a state-owned shipping group, in 2006, hired investigators to build a dossier of evidence against Yuri Privalov, Sovcomflot’s former executive director, it was alleged.

Graham Dunning, QC, said that Mr Frank told Mr Privalov at a breakfast meeting on February 14, 2005, that if he did not co-operate with an internal investigation, Mr Frank would hire investigators to build a case against him.

Later that day, Mr Dunning said, Mr Frank instructed, via intermediaries, two firms of private investigators to begin investigating Mr Privalov.

Mr Dunning said the operation, codenamed Project Sturgeon, involved Mr Privalov’s bank, telephone and mortgage statements being obtained illegally by investigators.

Mr Frank repeatedly denied Mr Dunning’s accusations saying he was not involved in any investigations and had no detailed knowledge of them.

He said he was aware an investigation was going on but this was being handled by his legal team, which he trusted to act professionally.

Mr Dunning later referred to a document from a private investigator summarising instructions from Sovcomflot and including the item “to conduct a reconnaissance of [Mr Privalov’s] residential property”.

A later report showed that the investigator had approached Mr Privalov’s mansion in Highgate, North London, but due to the high level of security “physical penetration exercises could not be undertaken”.

Shortly after, Mr Dunning said, Mr Privalov’s home was broken in to and his laptop computer was taken.

Mr Dunning then showed the court an itemised statement from a firm of forensic computer analysts that had billed Sovcomflot for “analysing the hard drive of a laptop owned by Mr Privalov”.

Asked about the burglary at Mr Privalov’s home, Mr Frank denied any knowledge and said Mr Privalov was “at an interesting stage in life” and many people might want to break in to his “castle with wolves”.

Mr Dunning showed the court the minutes of a meeting held at the London office of Sovcomflot's lawyers Ince & Co on April 7, 2005.

The minutes show one of the attendees as “SF” prompting Mr Dunning to ask: “Who else could have been SF?”

Mr Frank said he did not know and repeated his assertion that he did not know any details of the investigation into Mr Privalov.

Mr Dunning also told the court that Mr Frank had threatened Mr Privalov by saying he would use MI6 to help build the case against him.

Mr Frank denied making any threats

Mr Frank was called to give evidence in the trial in which Mr Privalov and other former Sovcomflot executives are accused of defrauding the company out of as much as $800 million.

Last week the court heard that Mr Privalov, Dimitry Skarga, Sovcomflot’s former chief executive, and a Russian businessman named Yuri Nitkin conspired to steal hundreds of millions of dollars from Sovcomflot through a series of sham transactions.

Mr Privalov, Mr Skarga and Mr Nikitin deny any wrongdoing.

Mr Dunning is representing Mr Skarga.

The case continues.

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