Moscow, Jul 10 (IANS/RIA Novosti): Police in Russia have opened a criminal investigation into the alleged misuse of 565 million rubles ($17 million) of state funds set aside for a satellite navigation system.

The interior ministry's anti-corruption department has "unearthed facts of the unreasonable spending of 565 million rubles, earmarked by the state for the development of the space system Glonass", the department said Tuesday.

Senior officials at the company Russian Space Systems, a contractor to the Glonass project, are suspected of signing fake contracts with commercial firms.

Russian Space Systems has dismissed the accusations. But its offices were searched by police.

The firm was also at the centre of a public spat earlier this year after accusing the head of state space agency Roscosmos, Vladimir Popovkin, of "illegal audits" and setting up "uncontrolled structures." Roscosmos hit back, saying the allegations were part of a "media campaign" against Popovkin.