UPDATE 1-Libya's Zarti files suit over Austrian asset freeze

Wed Mar 9, 2011 2:43pm EST

* Seeks immediate release of Zarti's frozen Austrian assets

* Says freeze based on false media reports

* Details of resignation letter to LIA emerge

(Adds content of resignation letter from wealth fund)

By Michael Shields

VIENNA, March 9 (Reuters) - A former official at Libya's sovereign wealth fund has asked Austria's top court to release his assets that Vienna froze in a hunt for offshore wealth of Libyan leader Muammar Gaddafi and his inner circle.

Attorneys for Mustafa Zarti, 40, filed an appeal on Wednesday with Austria's Constitutional Court against the March 4 asset freeze order from the central bank, a spokesman for Zarti said.

The legal action seeks the immediate release of his assets because the order was based on false media reports, the spokesman said.

Austria last week added Zarti, former deputy head of the Libya Investment Authority (LIA) sovereign wealth fund, to its blacklist of suspected Gaddafi cronies, calling him a "close confidant of the regime in Libya". [ID:nLDE72301R]

Zarti has told Reuters he resigned on Feb. 24 from the LIA, three days after coming to Austria to spend a holiday break with his family.

Zarti, who has an Austrian passport and lived for years in Vienna as a youth, has denied any links to the Libyan leader's clan other than Gaddafi's son Saif al-Islam, whom Zarti called a long-time friend. [ID:nLDE72408D]

The European Union agreed on Tuesday to add the LIA and several other financial organisations to its sanctions list. [ID:nLDE7272CI]

In his resignation letter to the LIA seen by Reuters, Zarti says he believed in the fund's mission to help young Libyans by investing the country's vast oil wealth for future generations.

"However, the current events in our beloved Libya as a result of unjustified violence against civilians, who seek nothing else than reform and change, have resulted in so many lives having been lost," he wrote to the LIA's chairman.

"As one of the close friends to the founder of Libya's future, I have never known him to be an advocate of violence, but rather of dialogue," it adds without being more specific.

"Under these circumstances I am submitting my resignation as vice chairman of the board of directors." (Reporting by Michael Shields; Editing by Janet Lawrence)

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