By Alan Cowell and Edmund L. Andrews

Douglas, Isle of Man -- With glittery new steel-and-glass offices, an imposing mansion and a high profile in yacht racing, Peter M. Bond has never quite been shy about his success. Indeed, as head of Valmet (Isle of Man) Ltd., Bond is now in the top ranks of one of this misty island's biggest industries: setting up offshore corporations that shield clients from taxes and regulation.

It is a booming market: Last year, Merrill Lynch & Company estimated that the world's wealthiest individuals might be keeping a staggering $6 trillion in off-shore shelters. Yet, in a globalized economy powered by freewheeling money transfers, havens like this also offer what a British Government report called "great scope for abuse of company vehicles to facilitate financial crime and money laundering."

Bond has been linked in court documents to Russian corporate machinations concerning potentially billions of dollars. At issue is whether companies he administers are part of attempts to siphon assets from some of Russia's biggest companies. A review of some of his dealings suggests just how the anonymity provided here makes it almost impossible to know who really controls these Russian companies and what their purposes are.

American investors charge in lawsuits that "shell" companies -- empty entities created here to hold other companies or investments -- are part of a scheme to defraud Russia's second-largest oil company, Yukos Oil. Under a plan adopted in March, Yukos tried to issue millions of new shares equal to a majority of its voting stock and transfer them to a series of offshore companies -- two of them now administered by Bond. No one has said publicly who the ultimate owners of these companies will be. One company has official headquarters in the mock-Tudor home of a 34-year-old accountant just outside of town. The other company, according to public records here, is owned by two other companies that are in turn owned by Bond and Valmet I.O.M. The trail stops there.

Bond, a burly 42-year-old who favors khakis and open-collar monogrammed shirts, denied wrongdoing and noted that no one has accused him of any crime. His company, he said, merely provides routine services to clients he refused to name. "We wouldn't wish to participate in any improper transaction, but I can't confirm whether these transactions were improper or not," he said. "There are two sides to every story."

Right or wrong, the transactions ignited a messy legal battle and prompted the island's high court to block the stock transfers from Yukos to the shell companies, at least temporarily. At the same time, the case has intensified the soul-searching on this Irish Sea outpost. Local leaders badly want to shore up the island's respectability, but they also recognize that its prosperity stems largely from its ability to offer foreigners low taxes and great discretion.

The quandary is clear enough. About 37 percent of the island's economy is based on financial services, much of that on behalf of foreigners. With a population of 72,000, the island's corporate registry boasts 42,000 companies -- well ahead of the rival tax havens on Jersey and Guernsey, in the sunnier Channel Islands to the south.

Like the Channel Islands, the Isle of Man boasts a sturdy sense of independence. It has its own parliament, the Tynwald; language, Manx-Gaelic; flag; currency, linked to the British pound, and legal system.

Though all three islands -- known as Crown Dependencies -- recognize the Queen of England as head of state, they remain broadly autonomous: when Britain joined the European Union, they all simply said no. Fittingly enough, the Isle of Man's emblem is a three-legged figure accompanied by a Manx-Gaelic motto roughly translated as "Wherever I'm thrown, I stand on my own feet." But with authorities in the United States and Europe digging more deeply into accusations of Russians using Western institutions to launder money, abuse of the island's status is under scrutiny. And the focus has narrowed to the hundreds of unregulated corporate service providers which, like Valmet, offer clients everything needed to set up and maintain a corporation based on the Isle of Man: legal paperwork, "nominee" directors and a local address.

Indeed, last year's British Government report on the Crown Dependencies called for regulation of such businesses, saying that a "troublesome minority" of them "usually in collaboration with others outside the Islands, have been associated with disreputable business such as money laundering, fraud, false booking of profits and tax evasion." Above all, it criticized the extent to which Manx laws permit companies to obscure their true ownership, meaning that "private companies have come to be favorite vehicles for criminals and money launderers."

Valmet, which vigorously denies any wrongdoing, is hardly the only company here linked to Russian activities. For instance, International Company Services Ltd., according to records here, set up a shell company for Peter Berlin, a Russian emigré who is a central subject of investigations into Russian money laundering through the Bank of New York. But Bond and Valmet had particularly extensive ties. Bank Menatep, a failed Russian bank at the center of investigations into Russian money laundering, owns 20 percent of Valmet's parent company, Valmet Group, which is based in Bermuda.

A former top Bank Menatep executive is the husband of a Bank of New York official who was suspended without pay as a result of the money laundering investigation. Menatep was also a big shareholder in Yukos. While Bond will not divulge his clients' identities, Yukos's own shareholder documents listed companies now administered by Valmet as recipients of its new shares. Bond, a native who started a branch of Valmet here 10 years ago, has steadily built his business. In March, he opened a flashy new office building and boasted of revenue of about $16,000 a day -- a twentyfold rise from the first year. The island's Treasury Minister, Richard Corkill, took part in the opening celebration.

Until 1994, Riggs National Bank in Washington, owned 51 percent of Valmet Group, which operates through a chain of corporate entities in the Dutch Antilles, Switzerland and elsewhere and say it has an annual turnover of $15 million from some 8,000 clients around the world. But Riggs wanted out, so Valmet executives bought back most of its stake and sold a 20 percent stake to Bank Menatep. At the time, Western financial institutions were euphoric about Russia's embrace of capitalism and Menatep appeared to be one of the country's central players.

Christopher Samuelson, group president of Valmet Group, said that Valmet refused to give Menatep any seats on its board and demanded written commitments that it would not try to influence Valmet's business. In the wake of Menatep's collapse after the financial meltdown in Russia last year, Valmet is invoking its right to buy back its stake. That process is still under way.

Bond and Valmet were not the only ones involved in obscuring the Yukos transactions. Among the more curious players is Paul Mellor, a 34-year-old accountant who recently started his own corporate services firm in a suburb of Douglas.

In the summer of 1998, Mellor and his partner, Paul Gelling, received what seemed a routine request from a company in London to set up a company called Thornton Services Ltd. At roughly the same time, by its own account, Valmet got a similar instruction to establish a company called Brahma Ltd. Without knowing the real owner's identity, Mellor said, he and Gelling listed themselves as Thornton shareholders and listed Mellor's home as its official address. "It was routine," Mellor said. "We thought no more about it."

A few weeks later, he said, they resigned in favor of two new directors from yet another tax haven, the tiny island of Sark in the English Channel. The move is a common technique on the Isle of Man, because disclosure requirements in Sark are even weaker than here. The big surprise came this spring. Yukos -- a Russian oil giant with reserves worth billions of dollars -- said it would issue hundreds of millions of new shares in its operating subsidiaries and then transfer these to a series of offshore companies, including Thornton and Brahma.

According to the Russian company's shareholder documents, the offshore companies were not expected to pay any cash for their shares. In the case of a subsidiary called Yukansknefpegaz, for example, the payment -- 12.5 rubles a share -- would be in promissory notes issued by another Yukos subsidiary.

To American investors in Yukos, led by the family of Kenneth Dart, the billionaire industrialist, the move was a bare-faced attempt to move the assets out of the reach of minority shareholders, according to lawsuits the investors filed.

"We are not charging Bond personally with fraud," said Michael Hunter, president of Dart Management Inc. "We do believe that companies he is involved in administering are being used as instrumentalities in a scheme to defraud investors."

In Russia, the Yukos board pushed through shareholder resolutions approving the sale of oil for about $1.48 a barrel -- less than a tenth of its market price at the time -- to a list of obscure Russian companies. It was not long before the deal created turmoil here. The investors successfully sued in the Isle of Man and elsewhere to block the planned stock transfer. Apparently frightened by the lawsuit, the two nominee directors from Sark quit and left Thornton in corporate free fall.

Mellor says Thornton proposed two Russians as its directors, but was turned down by the Isle of Man's high court. Instead, at the court's behest, Valmet installed its own associates as directors -- in part, Bond said, because Valmet was "familiar with some of the principals behind the case." He insisted, though, that the entire Yukos affair was no more than "a transaction that never got beyond the early stages of contemplation." Bond now says the transactions will not go through anyway. "There is no intention of either of the companies under Valmet's administration participating in any share transactions relating to the operating subsidiaries of Yukos with or without the benefit of any injunction," he said.

Still, the case goes to the heart of changes envisioned by the Tynwald, the island's parliament. Under legislation now being considered, corporate service providers like Valmet would have to know their clients and authorities would have greater powers to investigate malpractice.

"The Isle of Man is streets ahead of other jurisdictions in this area," said John R. Aspden, head of the island's Financial Supervision Commission. But the entanglement with Russia still rankles. "Is the Isle of Man a satellite of Russia?" he said. "Of course, it's not."