In a bitter £650million legal battle at the High Court, aluminium tycoon Oleg Deripaska was alleged to have ties to brutal organised crime gangs which emerged after the collapse of Communism in the former Soviet Union.
He vehemently denies the allegations – revealed in legal papers filed as part of the case – and counter-claimed that he was the victim of an ‘old-fashioned protection racket’ run by the Mafia-style gangs.
Mr Deripaska, who has links to Chancellor George Osborne and former Business Secretary Lord Mandelson, said he had been forced to pay more than half a billion dollars to the gangs over seven years and had feared for his safety and that of his family.
The case is potentially embarrassing for politicians in Britain and Russia. Mr Deripaska, 44, has ties to Russian President Vladimir Putin and in 2008 he entertained Lord Mandelson and Mr Osborne, then Shadow Chancellor, on his yacht in Corfu.
The High Court case is set against the backdrop of Russia’s bloody ‘aluminium wars’ in the 1990s, when organised crime groups struggled for control of its immense resources.
Billionaire Michael Cherney, 60, claims he struck a business deal with the young Deripaska in 1994, in which he agreed to use his political influence to help him in return for a stake in his aluminium business.
The company went on to become part of Rusal, the world’s largest aluminium firm, and Mr Cherney claims Mr Deripaska then offered to buy his stake in 2001 in a deal worth $1billion (£650million), but paid him only $250million (£160million).
Mr Deripaska claims the deal, hammered out at the exclusive Lanesborough Hotel in London, was a ‘sham’ to disguise his $250million payment to terminate an extortion deal imposed on him by Mr Cherney since 1995.
Lawyers for the tycoon claim he was placed under a protection deal known as a ‘krysha’, a Russian word meaning roof which is slang for protection.
Lawyers for Mr Deripaska claim Mr Cherney is a criminal who was involved with two organised crime networks and extorted payments from businesses.
In written arguments submitted to the court, his lawyer Thomas Beazley QC said: ‘[Mr Deripaska] was a young man in charge of a major plant in Siberia, which was far away from big cities and where organised crime reigned.
‘The police were weak and Mr Deripaska was now an obvious target for gangsters and subjected to death threats. He had to take the threat from organised crime gangs very seriously.’
Mr Beazley said: ‘Mr Cherney explained that unless Mr Deripaska accepted the krysha, anything could happen: one cannot wear a bullet-proof vest all the time.’
Lord Mandelson was a guest on Mr Deripaska's yacht in Corfu in 2008
Lawyers for Mr Cherney said he had never been convicted of any criminal offence and insisted he had been a legitimate business partner in Rusal.
In their legal submissions, they said prosecutors in Israel, the US and Russia had been told that Mr Deripaska was a member of an organised criminal gang and had ordered the murder of a Russian banker in 1995.
Mr Cherney’s lawyer Mark Howard QC said: ‘Mr Deripaska has a particular status in modern life. He is one of the richest and most influential men in Russia with close ties to President Putin.’
In written submissions, he added: ‘His power cannot be overstated. No doubt for that reason he feels that even history must bow to his whim.’
Mr Deripaska and Mr Cherney have both faced criminal allegations but neither man has been convicted of any offence.
Speaking after the hearing, a spokesman for Mr Deripaska said: ‘Mr Deripaska vehemently denies these allegations.’
The case is being tried in Britain after the Court of Appeal backed a ruling that Mr Cherney should be protected from the risk of assassination or arrest.
He has said he would be an assassination target if he returned to Russia, and he will give his evidence by videolink from his home in Israel because of an outstanding arrest warrant relating to a money-laundering investigation in Spain, where he is wanted for questioning.
None of the key players attended yesterday’s hearing. Lawyers for both sides are expected to set out their arguments this week and the case will then be adjourned until September when witnesses will be called.
Parts of the case have been ruled so sensitive that judge Mr Justice Andrew Smith has allowed some witnesses to give evidence anonymously.
The hearing continues.