Pakistan: Dropped Corruption Case May Free Up Mansion Cash for Zardari

For more than 10 years a Surrey mansion, put on the market for £8.5m by its new owners, has been the most visible symbol of the corruption charges that have stalked Asif Ali Zardari, the new president of Pakistan, and his late wife, Benazir Bhutto. But since Bhutto's assassination last December and his improbable transformation from former prisoner to head of state, the saga of Rockwood House may soon be resolved.

Once the final legal details are sorted out, Zardari can expect to pocket around £3m from the property's earlier sale, which occurred in 2004 after it had been put into the hands of a liquidator.

That sum will be on top of the $60m (£32m) in frozen assets released to him by the Swiss authorities a month ago. Geneva prosecutors were obliged to drop their money-laundering investigation at the request of Zardari's government.

Likewise, corruption charges concerning Zardari, in Pakistan, have been discontinued and more assets unfrozen - all under the authority of the National Reconciliation Ordinance signed by the former Pakistani president Pervez Musharraf last November in the deal allowing Bhutto's return from exile. With one bound, the man known as Mr Ten Per Cent has become Mr Clean; the man courted by the west as the leader who can tackle the Taliban.

Rockwood House - known in Pakistan as Surrey Palace - and its two farms, standing in 135 hectares (335 acres) of prime home counties land, was bought in 1995 for £2.5m during Bhutto's second term as prime minister. The sale, handled by the Bhuttos' Swiss lawyer, Jens Schlegelmilch, was particularly opaque. The money came from the Geneva bank accounts of shell companies registered offshore in Panama and the British Virgin Islands. The purchasers were three Isle of Man firms owned by two local trusts which in turn were controlled by a foundation in Liechtenstein.

Suspicions about the true owners surfaced in 1996 with claims that the Bhuttos could have got the estate from the proceeds of corruption. It was one of the allegations that led to Bhutto being sacked as prime minister and to Zardari being jailed on charges of corruption and complicity in the murder of Mir Murtaza Bhutto, his wife's brother. A year later evidence of the Bhuttos' labyrinthine financial dealings came to light in documents from Schlegelmilch's Geneva office, which were sold to the government for a reported £1m.

In 1998, the new government got a freezing injunction in the Isle of Man and in 2002 the companies went into voluntary liquidation. Two years later, the English liquidator sold the estate to the current owner, a local businessman, for £4.3m.

Pakistan started lengthy, expensive civil proceedings to reclaim what it argued was stolen state money but for eight years Zardari and Bhutto denied they owned Rockwood House - despite the well-publicized arrival of crates of luxurious artifacts, including a stuffed Bengal tiger, from the Bhuttos' home in Karachi. Workers engaged on elaborate renovations at the property claimed Zardari told them he also wanted a stud farm and polo center.

It was only in 2004, when Zardari was freed from jail without trial, that his lawyers admitted, in an Isle of Man court, that he was the beneficial owner.

The case went to the high court in London and in 2006 Justice Collins declared there was a "reasonable prospect" of Pakistan establishing that Bhutto or her husband, or the pair together, bought and refurbished Rockwood with "the fruits of corruption".

The case then did not progress, largely because of Zardari's claims of ill health, issued from his home on New York's Upper East Side. Medical reports to the court between June 2005 and September last year, revealed by the Financial Times last month, paint a picture of a man with severe mental health problems including dementia, major depressive disorder and post-traumatic stress disorder. His supporters say he is now fit and well.

Along with the other cases, Pakistan dropped its claim over Rockwood this year, with the £4.3m eroded to £3m by paying off creditors and legal expenses.

But that is not quite the end of the matter. Last week, as Zardari visited Gordon Brown, the liquidator, Steven Taylor, of SPW Poppleton & Appleby, told the Guardian: "Who gets the money has yet to be resolved - and it could drag on."