UPDATE 5-Turkey detains ministers' sons, businessmen in graft probe
* Three ministers' sons, businessmen detained
* Halkbank offices searched by financial police
* Influence of Islamic cleric seen behind moves
* Turkish shares slide on fear of political row
By Daren Butler
ISTANBUL, Dec 17 (Reuters) - Turkish police detained sons of three ministers along with some prominent businessmen in a corruption inquiry on Tuesday, state officials said, in what was widely seen as a challenge to Prime Minister Tayyip Erdogan by a powerful Islamic cleric.
Police carried out dawn raids in the main commercial city Istanbul, detaining around 20 people including business figures close to Erdogan, and searched the headquarters of state-run Halkbank in the capital Ankara, state officials and banking sources said. Halkbank shares fell 13 percent.
Turkish commentators linked the sweep to U.S.-based cleric Fethullah Gulen, whose followers have long held influential positions in institutions from the police and secret services to the judiciary and Erdogan's AK Party.
"Those who are supported by dark forces and gangs cannot set the course of this nation, of this country," Erdogan said in an apparent reference to Gulen's network during a speech in the conservative central Anatolian city of Konya.
"No one from outside or inside can stir things up in my country and lay ugly traps."
Gulen could not challenge Erdogan at the polls and has shown no intention of forming a party. But with his influence, not least in the AKP, he could undermine the authority of a man who has dominated politics for a decade. Erdogan's decline, though yet a distant prospect, would create huge uncertainty.
Gulen helped Erdogan's Islamist-rooted AK Party win a growing vote in three elections since 2002; but a bitter row between the two in recent weeks risks fracturing their support base before local and presidential elections next year.
Asked in Konya about the detentions, Erdogan declined to comment on an active legal process. The AK Party said in a statement it had always fought corruption and would continue to do so and that everyone was equal before the law.
Erdogan has infuriated Gulen supporters with plans to abolish private "prep" schools, many run by their Hizmet (Service) movement, providing funding and new followers.
But the rift has deeper roots in ideological differences, with many of Gulen's followers seeing him as a more progressive and pro-Western influence on Turkey than Erdogan, whose views on issues from abortion to alcohol consumption have led to growing accusations of interference in Turkish private life.
"It is a very bold move by the movement, one that you can't possibly ignore. It is a battle to curb each other's power," Ahmet Sik, a journalist detained for a year over his book on Gulen's life and influence, said of Tuesday's events.
There was no direct comment from the Hizmet movement.
"There are efforts to deflect attention and point to the Hizmet movement in the ongoing operation," Huseyin Gulerce, a columnist with the Gulen-linked Zaman daily, wrote on Twitter.
"How can people who are said to have been purged from the judiciary and police have carried out the deepest operation in the history of the Republic?" said Gulerce who, though respected in Hizmet does not speak for the movement.
VOTE OF CONFIDENCE
Turkey holds local polls in 2014 that will test Erdogan's power after a year that has seen unprecedented protests and riots against what some opponents see as an authoritarian style of government. He remains broadly popular but an open rift with Hizmet could make him vulnerable to challenge.
The main opposition Republican People's Party filed a parliamentary question asking Erdogan whether he would resign or seek a vote of confidence over the corruption operation.
Tuesday's operation, launched by the chief prosecutor in Istanbul, appeared to consist of three investigations.
One involved Halkbank, one of Turkey's biggest banks, which said it had been asked to supply information and documentation to the authorities. Police also searched the headquarters of the Agaoglu Group of construction magnate Ali Agaoglu, 59, its chief executive Hasan Rahvali told Reuters.
"We are talking about a wide-scoping investigation here. It is not focused on Ali Agaoglu," Hasan Rahvali, chief executive of Agaoglu Group, said. "They searched the company in the early hours this morning but could not find any criminal evidence."
He said Ali Agaoglu had been asked by the police to come and make a statement as part of the investigation.
Turkey's largest housing developer Emlak Konut GYO , partly state-owned, said its general manager had also been summoned by police. Its shares were down 12 percent.
DEEPENING POLITICAL ROW
The sons of Interior Minister Muammer Guler, Economy Minister Zafer Caglayan and Environment and City Planning Minister Erdogan Bayraktar were detained, according to state officials in Ankara and Turkish newspaper reports.
Officials from the three ministries could not immediately be reached for comment.
Istanbul Governor Huseyin Avni Mutlu told reporters the investigation was continuing and he could not comment. Officials from Erdogan's ruling AK Party could not immediately be reached and police also declined to comment.
The developments, and fears of a deepening political row, weighed on Turkish markets. The main stock index fell almost five percent, well below a 0.2 percent rise in the wider emerging markets index.
"These are fairly seismic developments. I guess inevitably people will link these to internal AK Party fissures and the battle between Erdogan supporters and the Gulen movement," said Timothy Ash, head of emerging markets research at Standard Bank. "The gloves will now be off."
Gulen runs a network of schools and other social facilities across the Middle East, Asia and Africa from a compound in the United States. He moved to the United States in 1999 after being charged with attempting to undermine the secular state.
He was later acquitted but has remained in Pennsylvania, an enigmatic figure who gives little hint of his intentions in Turkish politics.
AKP member of parliament Hakan Sukur, a well-known follower of Gulen, quit the AK Party on Monday in protest over the prep school plans.
Since he came to power, Erdogan has built his own body of wealthy loyalists, largely from the same religiously minded professional class that reveres Gulen.
Erdogan was first elected in 2002 and has introduced sweeping reforms that have broken the political power of the military and stimulated the economy. Some secularists accuse him of imposing Islamist values, something he denies.
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