Berezovsky's Secret Benefactor. Special Investigation

Mark HOLLINGSWORTH's picture
Berezovsky's Secret Benefactor. Special Investigation

During the trial of the Oligarchs at the High Court, much of Boris Berezovsky's evidence concerned the technicalities of his past business relationship with Roman Abramovich. But his cross-examination burst into life when he admitted that he has recently borrowed millions of pounds from another Oligarch, Mikhail Cherney. Here 'RussianMind' profiles Cherney, the wealthy unknown businessman who suddenly became part of the courtroom drama in London.

Towards the end of sixth and final day of his evidence in the High Court, Berezovsky was asked by Jonathan Sumption QC, the lawyer for Abramovich, whether ‘he had borrowed $50 million from Cherney to fund his case, in return for five per cent of his damages, if he won?’

Berezovsky was surprised by the question but admitted accepting money from Cherney. He added that “the loan amounted to ‘much less’ than $50 million and was only to cover his extravagant living expenses, not his legal costs...Michael Cherney is much richer than me. He has helped me with my life. We never discussed the compensation as a result of my trial here. But if I win and Michael will not have enough money for his life, I will give him money for his life”.

Intriguingly, in his written submissions, Berezovsky agreed to pay five per cent of any damages to an unnamed ‘intermediary’ who passed on a secret recording of a meeting with Abramovich at Le Bourget airport near Paris in 2000. However, the oligarch denied having offered five per cent of his damages but said he had offered the unnamed intermediary one of his yachts, Thunder B. "They wanted me to pay something immediately, but I didn't have enough cash", he admitted. 

An investigation by RussianMind shows that while Cherney lives most of the time in Israel, he has also extensive assets and connections in the UK. His main property is Oakland House in the St. George’s Hill Estate, Weybridge, Surrey. It has six en suite bedrooms, an indoor heated pool and a garage for three cars. He also owns Draycott House, a former hotel just off Sloane Square, Chelsea, which he owns via a British Virgin Islands company. He bought this property for £10 million and has plans to convert it into separate apartments.

Cherney also purchased a number of other London properties on the advice of his former friend and advisor Frank Neumann. These include several flats at 'The Bromptons', part of the high-security, deluxe apartment complex at Rose Square on the Fulham Road; two apartments in The Knightsbridge development opposite Hyde Park and several flats on Arlington Street next to the Ritz Hotel. In the past five years he has invested £60 million in property in the UK. But he rarely visits the UK because of an international arrest warrant issued by Interpol in 2009, following a request by Spain’s law enforcement agencies, so he spends most of his time in Tel Aviv.

Like many Oligarchs, Cherney was born in Tashkent, Uzbekistan. He trained as a boxer and basketball player before being conscripted into the Red Army. He says he decided to become a businessman after leaving the army and started a lottery on the streets of Tashkent before working as a travelling sports official.

During the Perestroika era of the late 1980s, Cherney set up his private enterprises. He exported watermelons to the Siberian industrial city of Krasnoyarsk but was chased away by criminal gangs. He then teamed up with an Israeli to sell Russian honey in aluminium milk churns to the West, but dropped the scheme when his partner told him he would be paid in tomato sauce rather than dollars! 

Later, Cherney says, he sold shoes, acquiring materials by cultivating Soviet bureaucrats and factory managers; he then moved into ‘foreign rouble transfers and bartering’. This, he says, was his first real money making scheme. He told the Observer: “Using a Bulgarian company that negotiated foreign debt, I bought cloth from Korea through an Uzbek import body. My commission was 10 per cent. It was my first million. To get the money, I had to go to Austria. I remember standing in this spotlessly clean bank, staffed by coiffed blondes in this capitalist country. I was in a complete daze”. 

In 1987 Cherney moved to Moscow and went into business with a Ukrainian-American called Sam Kislin. Together they set up deals trading in metals; cars; coke and coal; food and sugar. After the fall of the Soviet Union the two men set up TransCommodities. Like the other early oligarchs, Cherney enriched himself by exploited the collapse of the Soviet state infrastructure, providing the much needed commodities for a profit. His own biography states: ‘By 1991, the centralised Soviet system of industrial supplies and deliveries had unraveled, leaving whole industries in a state of collapse. Supplanting the government, TransCommodities stepped into the breach’. 

In 1992 he went into business with David and Simon Reuben, two Indian businessmen who were brought in by his brother Lev Cherney. They famously made a fortune through the ‘tolling’ of Russian aluminium. Cherney explains tolling as follows: ‘The Cherney brothers with their Western partners offered the new Russian government a plan to prevent the stoppage: We will buy alumina; we will deliver it to smelters; we will pay wages; we will pay electricity and all other production expenses. Our conditions: your surplus product will be sold exclusively through us and at a price that will take into account our expenses’. 

Having acquired millions of dollars from commodity exchanges, Cherney then acquired formerly state owned assets under Yeltsin’s voucher system, taking control of some of Russia’s largest smelters. But then a company backed by the FSB security service began to pressurise him and his partners and so he fled to Israel in 1994. "By early 1994, a campaign against me was under way", he said. "During privatisation, we acquired factories that others wanted. Our aluminium business also caused a massive loss in profits to certain corporations in the West and consequently to their Russian partners. And, of course, we are Jews’.

One of his major investments was in the late 1990s in the aluminium giant Rusal with Oleg Deripaska who Cherney then regarded as a junior business partner. Cherney claims that he is due substantial dividends and revenue as a result of his shareholding and in recent years he has been suing Deripaska for $2 billion. The case will finally be heard in the High Court in London early next year. For the first time Deripaska and Cherney will be cross-examined in open court on the sources of their spectacular wealth and how they became so rich, so quickly. After the Berezovsky-Abramovich case, this one will be a worthy sequel.