Iran’s supreme leader vowed that there would be “no mercy” for anyone found guilty in the country’s biggest ever financial scandal, an attempt to address public frustration over corruption in state organisations.

“People should know that such things are investigated thoroughly, God willing …there should be no mercy on saboteurs and the corrupt,” Ayatollah Ali Khamenei said on Monday in his first public reaction to the alleged $2.8bn fraud that has engulfed some of Iran’s banks and politicians.

The scandal has become a topic of angry discussion for ordinary Iranians struggling with high inflation and unemployment, and text messages and blog posts on what could be done with the allegedly embezzled money, which amounts to 30,000bn Iranian rials, are rife.

“If Cyrus the Great [ancient Persia’s king] had saved 1bn rials every month, he would have owned 30,000bn rials after 2,500 years,” says one sarcastic post.

The scandal centres on a businessman, Mah-Afarid Khosravi, who is accused of forging letters of credit from the partially state-owned Bank Saderat, the country’s second-largest. He allegedly used the fake documents to access credit from seven other banks to help fund some 40 companies. He is also alleged to have tried to buy a large state-owned steel factory under a national privatisation plan with the support of president Mahmoud Ahmadi-Nejad.

The government has denied any link to the alleged fraud.

Ayatollah Khamenei did not blame the Mr Ahmad-Nejad’s government in his speech, which analysts say could be a sign of efforts to protect the presidency from possible collapse before Mr Ahmadi–Nejad’s term ends in 2013. But the supreme leader’s emphasis on punishment for anyone guilty in the case fuels suspicion that a senior official or banker could face legal action.

So far, four bankers have lost their jobs.

The scandal led to the resignation of the managing director of Iran’s largest state-owned bank, Bank Melli last week. The government also announced last week that a special committee investigating the scandal had removed the managing director of Bank Saderat.

Meanwhile, Iran’s central bank in a public statement published on its website on Monday, ordered the privately-owned Gardeshgari (Tourism) bank to dismiss its managing director “as soon as possible”, without providing any details. The same order was given to the privately owned Saman Bank on Saturday.

Mr Ahmadi-Nejad has defended his government as “the cleanest in Iran’s history” and has vowed to disclose details about the scandal should allegations against his government continued.

According to Dolatema.com news website, which is seen by analysts as close to the government, state television, which is run by authorities loyal to supreme leader, was reluctant to let Mr Ahmadi-Nejad address the country in a live broadcast this week.

Iran’s newspapers and websites are largely divided between pro- and anti-president forces and publish financial allegations about their political opponents. Analysts believe the political tension over the scandal is rooted in rivalry in the run-up to parliamentary elections in March.

Ayatollah Khamenei warned that the scandal and the subsequent furore in the media would make ordinary people as well as investors “lose hope” and “become disappointed” in Iran.

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