UPDATE 1-Turkey dismisses graft case against ex-minister's son - media

Fri May 2, 2014 6:28am EDT

(Adds details, background)

ISTANBUL May 2 (Reuters) - Turkish prosecutors dismissed a case against 60 suspects, among them a former minister's son and a construction tycoon, in the graft scandal swirling around Prime Minister Tayyip Erdogan's inner circle, media said on Friday.

The case, concerning the alleged award of illegal permits in building projects, was the less important of two dossiers in the scandal, which broke into the open on Dec. 17 when three ministers' sons and businessmen were detained in police raids.

Erdogan, who has cast the investigations as part of a plot to unseat him by a U.S.-based Islamic cleric, has so far weathered the fallout, with his ruling AK Party dominating nationwide local elections on March 30.

The case was dropped against Abdullah Oguz Bayraktar, son of former Environment and Town Planning Minister Erdogan Bayraktar, and prominent businessman Ali Agaoglu, along with 58 other suspects, Dogan news agency and other media outlets reported.

Court officials could not immediately confirm the decision.

The primary investigation is continuing into allegations of bribes paid to top Turkish officials by a criminal gang helping Iran to exploit a loophole in the West's sanctions regime against the Islamic republic. Using the loophole, Iran was able for a time to purchase gold with oil and gas revenues.

The Iran gold case has been the main focus of interest in the graft scandal, given the international dimension and the broader accusations of corruption against three former ministers and the head of a public bank. Those accused have denied wrongdoing.

Erdogan accuses cleric Fethullah Gulen of orchestrating the corruption investigations through extensive influence within the judiciary and police force. Gulen denies the accusation.

The government hit back at the probes by dismissing or reassigning thousands of police officers and hundreds of judges and prosecutors and by passing a law increasing government control of the judiciary.

Those questioned in the initial sweep in the building case included the mayor of Istanbul's Fatih municipality, which includes the city's historic peninsula, and Murat Kurum, the general manager of real estate firm Emlak Konut GYO, partly owned by state housing developer TOKI.

All were later released. Agaoglu's company said at the time no criminal evidence had been found. Emlak Konut said days later Kurum had returned to work. (Writing by Daren Butler; Editing by Nick Tattersall and Sonya Hepinstall)