The recruitment group, Marlborough International, has broken off takeover talks with US auctioneering website E-Pawn.com after the American company had its shares suspended by the Securities and Exchange Commission and its chief executive, Mr Eli Liebowitz, was arrested for alleged securities fraud.

Former Taoiseach Mr Albert Reynolds is a consultant to EPawn.com and is thought to have been instrumental in introducing the company to Marlborough. Mr Reynolds was appointed as an adviser to the board of EPawn.com last February.

At the time, Mr Liebowitz - who has resigned as president, chief financial officer and director of E-Pawn - said: "Mr Reynolds brings a tremendous amount of business savvy to the table and will assist E-Pawn in developing strategies in emerging markets around the world." There is no suggestion that Mr Reynolds was aware of the alleged fraud. He was travelling last night and was not available for comment on the developments at E-Pawn.com.

A spokesman for Marlborough said that the company had been involved in informal discussions with E-Pawn.com on a range of issues, but that these discussions have now been terminated permanently, as has a marketing agreement between E-Pawn.com and Marlborough's Internet subsidiary, fillthejobs.com.

The spokesman added that Marlborough had been completely unaware of the securities fraud allegations during its dealings with E-Pawn.com.

The investment fraud involving E-Pawn.com was revealed following a massive FBI investigation into the infiltration of Wall Street by organised crime. On Wednesday, 600 FBI agents began arresting defendants throughout New York, California, Texas and Utah. By the end of the day, 120 people had been charged in 16 indictments. The FBI said it was the largest number of people ever arrested at one time on stock fraud charges and one of the largest groups ever arrested by the federal government.

Members of all five of New York's Mafia families were arrested, showing the depth of the infiltration by organised crime. According to the FBI, members of The Mob recruited stockbrokers to inflate the value of companies in which they held secret ownership interest. The brokers then hired promoters and hyped the stocks, most of which were small or micro-cap stocks, on Internet trading sites. At least $50 million was involved, monies taken from mostly elderly investors.

Unsuspecting investors poured millions into companies they were told produced software, ran amusement parks or manufactured roofing materials, among other things. In fact, the companies either did not exist at all or were complete shell operations.

Among those arrested were 11 Mafia associates, 57 stockbrokers and a hedge fund manager.