SEATTLE (AP) _ Bail was set at $2 million for a Russian millionaire charged with tax fraud, despite warnings that he is likely to flee.

A judge said Monday the government was ``far short'' of showing Valeri Shegnagaev, 59, a fishing magnate charged with avoiding paying about $3.5 million in taxes, posed a threat to the community or witnesses.

Shegnagaev is the founder and majority stockholder of a Vladivostok fishery, Kolkhoz Volstok-1, and North Pacific Corp. of Seattle, which oversees its U.S. interests.

He pleaded innocent Thursday to charges that he failed to report $12.8 million in business funds that were used to buy real estate, luxury vehicles, jewelry and art for his personal use from 1994 to 1997.

If convicted, he could face up to 12 years in prison and $1 million in fines.

Assistant U.S. Attorney Jim Lord said Shegnagaev, a resident alien who has lived in the area for years, had been liquidating his U.S. assets, including a $6.5 million waterfront home in Medina.

``Shegnagaev was preparing to flee to Canada about the time he learned that he was to be arrested,'' Lord told U.S. Magistrate John Weinberg.

Defense attorney Angelo Calfo said Shegnagaev had several opportunities to leave since the investigation began in 1997 and surrendered to authorities when he learned he had been indicted.

He also challenged a 5-year-old document from Russian authorities who accused Shegnagaev of being linked to organized crime.

Shegnagaev also is the subject of a Russian tax investigation that led to a recent U.S. Circuit Court of Appeals ruling that upheld the ability of foreign governments to conduct criminal investigations on U.S. soil.