Ukrainian authorities have frozen the assets a business owned by a Scottish shell firm embroiled in a corruption scandal.

In yet another blow for Scotland's international reputation as a place to do business, elite anti-corruption police have swooped on the affiliate of a Glasgow-registered business at the heart of a highly politically charged investigation in to alleged local government sleaze.

Detectives launched a criminal investigation after the local council in Ukraine's biggest port, Odessa on the Black Sea, last year bought the office block of a derelict factory as its new HQ for 46 times the price the building had sold for just auction just months before.

Officers from The National Anti-Corruption Bureau, or Nabu, in March raided Odessa's Mayor's office and are currently in a complex legal battle to keep a freeze order in place on accounts holding the £5.5m the city paid for what has been described as a ruin sold for just over £100,000 a month earlier.

For some months the controversy has rocked Odessa, despite its reputation as the "Mama" of corruption and criminality across eastern Europe. The state-owned engineering factory, called Krayan, had been a major employer and its collapse made big news.

Krayan's derelict admin block, Odessa

The Herald:

However, it has now emerged that the previously unheard-of local business which bought and sold the factory's office block was an affiliate of a Scottish limited partnership or SLP, one of tens of thousands of firms sold off-the-shelf in the former Soviet Union as secrecy and tax planning vehicles.

The old Krayan offices were sold to the council by a business called Development Elite. Ukrainian corporate documents reveal that 99.75 per cent of this firm was owned by Valton Group LP, registered at one of Scotland's biggest virtual offices at 272 Bath Street, Glasgow.

The open-source documents were unearthed by investigators at 368 media, an online anti-corruption project which called SLPs "scandalous offshore firms". After raids on the city's Mayor's Office in late March, Nabu said the administrative block of the complex was sold for 4m hryvnia or £110,000 in August Then in September 2016 the new owner offered the block to the council for 185m hyrvnia or £5.50m. That represented a profit margin of 4500 per cent a month.

The Glasgow virtual office where Valton Group LP is registered

The Herald:

Development Elite has made its own complaints that it is the victim of a crime while protesting its innocence. Prosecutors have kept freezing orders in place but have not made any formal charges against any official or politician in Odessa or any business person involved.

There is now way of knowing the ultimate owner of Valton Group or asking them for comment. Valton Group's official partners are two shell firms from the Seychelles, Monter Impex and Solter Management, which also feature as nominal partners in a series of other SLPs and English firms embroiled in other former Soviet scandals.

The real beneficiaries of such SLPs are able to be secret, pay no taxes and file no accounts provided they do no physical business in the United Kingdom and have formal partners in a traditional tax haven such as Panama or Belize. All Scottish political parties have urged the UK Government to reform SLPs. A review in to their future began before the general election.

Last month The Herald revealed that Ukraine was imposing a special regime on certain types of partnerships from the UK and other parts of the English-speaking world, including SLPs. This paper has exposed scores of SLPs named in corruption cases in Ukraine - including those involving multi-million-pound arms exports - as well as scores more involved in unethical or criminal behaviour elsewhere.