Temasek sent a brief e-mail message following a front-page report in the Thai daily The Nation on an investigation into the deal by Thailand's Commerce Ministry.

Temasek said: 'We have complied with all laws of Thailand. We are fully cooperating with the investigation by the Commerce Ministry.'

In January, Temasek bought a 49 per cent stake in Shin Corp for US$1.9 billion (S$3 billion) in a deal that sparked political unrest in Thailand.

The investigation has been focusing on whether the holding company Kularb Kaew acted as a nominee for Temasek.

If it is proved to have done so, that would push Shin Corp's foreign ownership above the legal limit.

Such a finding would not only threaten the whole deal, but would have implications for other similar deals in Thailand.

Temasek has denied that Kularb Kaew shareholders are nominees. The Nation quoted a leaked report from the Commerce Ministry, as saying that two Thai shareholders of Kularb Kaew were loaned money from Cypress, another Temasek-linked holding company.

Kularb Kaew, which partly owns Shin Corp through Cedar Holdings - is 68 per cent held by Mr Surin Upatkoon, a Chinese-Thai businessman based in Malaysia.

The investigation found he had received funds from overseas to enable him to buy shares in Kularb Kaew, according to The Nation.

Mr Surin declined comment for this article, but a senior financial adviser to the businessman said the investment in Kularb Kaew was completely above board.

'The allegation that money came from overseas and did not belong to Mr Surin is completely unfounded. It is a foreign company but the money is his,' said the financial adviser.

The other Thai shareholders named in the leaked document quoted by The Nation, Mr Pong Sarasin and Mr Suphadej Poonpipat, could not be reached for comment.

But a source close to the deal said the loans in question were bridging loans paid back in full within days, and legal under Thai law.

He told The Straits Times: 'The report is partially correct, but it is only half the report and refers to the investigation by the first committee which did not accept many of the documents.'

A new committee recently set up to investigate the deal more fully would consider all documents, he said, and then it would become clear.

The case is a political hot potato.

It is being closely watched by those opposing Prime Minister Thaksin Shinawatra.

A verdict casting doubt on the case's legality would certainly be used to further discredit the embattled billionaire, who is fighting for his political survival.

by the Straits Times/Asia News Network