Deripaska

From Private Eye 1222 page 29 - also see 1179/39

Read it and decide whether you think that Deripaska is not a very dangerous crook and that Mandelson is not bent as a nine bob note. Keep it in mind that the Eye has passed this way before, been sued for Libel and even lost some but its City pages didn't get harassed because the truth is a defence to that kind of try on.

MOST Russian oligarchs believe money buys anything and everything - officials, journalists, judges, politicians, entire governments.

They are not great believers in nuance or discretion, more in the naked power of their money. That faith was clearly repaid by the attraction of aluminium tsar Oleg Deripaski's yacht and associated largesse to Lord Mandelson and George Osborne. But why did such high-profile political operators find the controversial Deripaska an appropriate host on so many occasions?

Anybody who has studied Deripaska's rise and rise to become Russia's richest man - a title that may now be history as western banks demand repayment and assets are sold or handed over to creditors - would have had plenty of reasons to pause before accepting an invitation.

To begin with, there is the little matter of the rather dim view taken of the Rusal boss by the American authorities, who are not known for their pickiness when it comes to the rich. Until late 2005 Deripaska had been refused a visa to enter the US despite his prominence since 2001 as the face of one of the world's largest aluminium groups. After much he was finally granted a visa for the first time since 1998, only for it to be revoked in July 2006 because of what were described as "concerns". The Wall Street Journal reported last year that FBI officials believed that Deripaska had not been "candid with them about his past business dealings". Britain had continued to allow Deripaska to visit during the US ban.

The reason for those concerns was the industry in which Deripaska made his money. During the 90s the Siberian aluminium industry was heavily infiltrated by the Russian mafia. Contract killings and extortion were regular business tactics used by the gangsters - obviously without the knowledge or involvement of the businessmen involved.

One of the mafia figures who featured in the bloody conflict was Anton Malevsky, head, of the Izmailovo crime group in Moscow. Malevsky was associated with Deripaska and the now Israel based Russian businessman Michael Cherney as what eventually emerged as a significant part of Rusal was created. Malevsky was never convicted of any crime and Cherney disputes that he was a mobster. However, Malevsky was deported from Israel back to Russia in the late 90s on suspicion of being a mafia boss.

Deripaska "denies that he was ever a partner, in any normally accepted commercial meaning of the word" with Cherney, according to Mr Justice Christopher Clarke in his recent high court ruling on an ongoing dispute between the two men. Deripaska claims Cherney and Malevsky were providing "protection" that he was forced to accept.

According to Mr Justice Clarke, "Mr Deripaska appears to have sought to hide any connection with Mr Malevsky from a Swiss investigating magistrate" to whom he gave evidence in 2005. "I know this person only by name," Deripaska had said.

However, Deripaska's attempts to distance himself from Malevsky and Cherney were contradicted by both Cherney and Malesky's widow - he died in a 2001 parachuting accident - during the recent high court case brought against Deripaska by Cherney, who claims he is still owed for a 13 percent stake in Rusal under a 2001 disputed agreement.

Cherney was at one time banned from entering Britain. This ban was lifted in 2006. Cherney, however, remained banned from the US. He has always denied any links to organised crime or any wrongdoing, saying that he has been the victim of a campaign of smears by his enemies.

But what went on in Siberia during the 90s did not only emerge with the Clarke judgment in July. 'The role of Malevsky and organised crime in the "aluminium wars" was no secret. The research available to European commissioners or British political parties would have easily discovered it, as it is well known to law enforcement experts and has been much publicised here, in the US and in Russia.

Osborne  could have consulted brothers Simon and David Reuben, who have given the Tories approaching £200,000 since last year. The Reubens were originally in partnership with Michael Cherney and his brother, Lev Chernoy, as well as Deripaska. The Reubens later split with Cherney before themselves becoming victims of the "aluminium wars" and losing control of their business and having to sell out.

They subsequently sued Deripaska and settled in 2005. They also sued Fortune magazine in London over a 2000 article, "Capitalism in a cold climate", which detailed their involvement with Cherney and mentioned Malevsky. This, too, was settled before trial in 2004. The Reubens denied any involvement with organised crime or wrongdoing but said that Cherney had links to "dubious individuals" in Russia.

Deripaska has form for settlements with former aluminium business partners. In addition to the Reubens, he and/or Rusal have settled with the Zhivilo brothers and Anatoly "The Bull" Bykov. Both had previously controlled valuable Siberian smelters. Another Russian businessman made a series of unproved allegations against Deripaska, some involving Malevsky, all of which he denounced as untrue. Several cases have been brought against Deripaska and Rusal in US courts using some of these allegations but were thrown out for lack of evidence or jurisdiction.

Rusal was also no stranger to criticism in the British courts before Mr Justice Clarke decided in July that Cherney could bring his case against Deripaska in London because he would not get a fair trial in Russia. Deripaska is appealing that decision.

In November 2003 Mr Justice Jack found for Tekron Resources against the Rusal-controlled Guinea Investment Company in a dispute over a bauxite mine and refinery in the West African state. Tekron claimed it was owed $3.5m in commission payments; after acquiring GIC, Rusal had not honoured an agreement to make the payments. The judge described some of the Rusal/GIC evidence as "nonsense". Finding for Tekron, he declared: "It is apparent from these matters that under the threat of litigation in London Rusal have done what they can to blacken the names of Tekron and its principals in Guinea. On the evidence before me they have not only failed but have secured indirect evidence that the government considers that Tekron have behaved properly."

In October 2005, Mr Justice Blackburne was even more critical of Rusal's role in a dispute involving an aluminium smelter in Tajikistan. The state-owned Tajik company Tadaz sued its former partner Ansol, alleging corruption and fraud. Ansol in turn countersued its partner Rusal for squeezing it out of the smelter contract.

"The strong overall impression which 1 have gained is that, notwithstanding the joint venture, Rusal has decided to further its own interests through the exploitation of Tadaz's aluminium production capacity," the judge declared, adding:

"In short, from once being Ansol's partner. .. Rusal has now become Ansol's rival and, as part of the pursuit of its commercial interest, is promoting this litigation."

Another aspect of Rusal's behaviour also concerned the judge. "A further matter which strikes me as odd and unsatisfactory is that although Rusal is happy to assist Tadaz in the prosecution of Tadaz's claims in this jurisdiction against Ansol and others, it has indicated ... that it intends to contest the jurisdiction of this court to try that claim. That is not at all an attractive posture."

In October 2006, permission was given for a civil action to go ahead in which Rusal was accused of hacking into the computers at the London office for Ashton International, a company that provided consultancy services to the Guernsey-registered Ansol. Rusal strongly denied any involvement. But Jonathan Hirst QC, sitting as a deputy high court judge, said: "I am satisfied that the claimants have shown there is a serious issue to be tried ... In my view, significant damage occurred in England where the server was improperly accessed and the confidential and privileged information was viewed and downloaded."

The Rusal/Ansol litigation was settled in April last year. But three months later the Tajik company brought a new action in the British Virgin Islands against Rusal, alleging that the company was aware of bribes paid by Ansol. Rusal and Ansol deny these claims.

Against this welter of legal skirmishing, however, Mandelson and Osborne could put the Rothschild imprimatur. Nat Rothschild has long been close to Deripaska; his father, Lord Rothschild, was another fan, as he had been of jailed Yukos boss Mikhail Khodorkovsky. The Russian oligarchs quickly realised - like the American robber barons of old - that philanthropy covered a multitude of sins and opened many doors. Large donations for London exhibitions attract the great and the good and the glow extends to those who introduce those with bottomless wallets.

In 2003, Deripaska and Lord R sponsored an exhibition of historic chess sets at Somerset House. Rusal became a sponsor of the Bolshoi Theatre and financed its London season in 2006 at Covent Garden - an event attended by Mandelson.

Nat Rothschild has been a business partner as well as an adviser to Deripaska. He was a director of Eagle Capital Group, a BVI company that was renamed En+ Group and relocated to Jersey in 2005, becoming a key company through which Deripaska controlled his empire. En+ was the parent of another key Deripaska company registered in Jersey, Rusal Limited, which had formerly existed in the BVI as Rusal Holdings. In 2006, Rusal declared that the Jersey company controlled its aluminium interests and that Deripaska was the 100 percent owner. His other interests, such as cars and trucks, were said to be controlled through En+ in Jersey.

It may well be said that Deripaska is merely a tough businessman and as such attracts lawsuits and unfair allegations. It is also correct that he like his partner turned enemy Cherney - has never been convicted of any crime.

But politics is all about judgement and public perception - a test both Mandelson and Osborne appear to have failed. Which is why Mandelson says he will be more careful, though he is still prepared to meet Deripaska - in the public interest, of course - and Osborne has apologised for passing the Tory cap round on the oligarch's yacht.