NETHERLANDS - Dutch fraud police have arrested the former and current directors of real estate at PREIM, the real estate arm of the €14.5bn Philips pension fund, as part of their investigation into fraud connected with the scheme's property portfolio.

Arendt Jan Hesselink, a spokesman for the €14.5bn pension scheme, confirmed neither the pension fund nor its parent company, Philips NV, had been implicated in the fraud.

Moreover, the scheme is understood to have instigated the police investigation - involving more than 50 raids in three countries - after suspicions were raised about the sale of "less profitable" residential and office early in 2006. The pension fund then launched an internal inquiry that culminated in a forensic investigation.

"We were the victim in this case," he said.

The alleged scam is said to have involved internal surveyors agreeing a relatively low value with external surveyors before the sale of property subsequently sold at market value.

The arrested employee has been shifted to non-active duty until the investigation is complete but further - as yet unconfirmed - arrests are believed to have been made today.

A spokeswoman for Fortis, which was also raided by fraud police last week, said the insurer had been surprised by the police visit.  "It was unannounced," she said. "We're not sure how long the process will take."

A spokeswoman at the ministry of finance confirmed neither the scheme, Fortis nor a third raided company, Bouwfonds, was under suspicion of a fraud thought to be worth "possibly tens of millions of euros".

Hesselink said he could not guarantee against future attempts at fraud, property or otherwise. "Whether there's a safeguard is a difficult question. We're an old company and we've over the years spent a lot of time and energy ensuring our controls are up to snuff. But even in a well-managed organisation it just takes someone of ill will. It's possible that these things could happen. You just can't rule it out."

On the back of this fraud revelation, the Dutch Association of Property Participants (VVP) has called for more transparency around property transactions, to prevent fraud such as that now being investigated at the company pension scheme of electronics giant Philips.

Its plea follows the arrest last week of 16 representatives of the Dutch property investment sector on suspicion of being involved in a scam affecting the Philips pension fund.

"It should be made mandatory for pension funds to sell property through a public tender," commented Dion Bartels of VVP.

"This way, all market players can participate, and property can be sold to the highest bidder.