The Russian oligarch, the Old Etonian billionaire and deeply disturbing questions about Lord Mandelson's integrity



Siberia in January is a very cold place indeed. What relief, then, for four weary travellers to be able to warm themselves in front of the furnace of an enormous smelter — all wearing hard hats bearing the corporate logo of Rusal, the world’s largest aluminium producer.



One of the men is Oleg Deripaska, the controversial Russian oligarch and boss of Rusal. He owns the gigantic Sayanogorsk plant near the tundra city of Abakan.



At his side is his youthful British friend and adviser, the Honourable Nat Rothschild. A billionaire financier in his own right.



A third member of the party is Peter Munk, the Canadian founder and chairman of the world’s largest gold-producing corporation. Mr Munk is a business partner of Deripaska and Rothschild.



Hard-headed businessmen (from left): Peter Munk, the Canadian founder and chairman of the world's largest gold-producing corporation, Lord Mandelson, oligarch Oleg Deripaska and financier Nat Rothschild as they visit the Siberian smelter

And the smiling man at the centre of this high-powered group?



None other than Peter (now Lord) Mandelson, architect of the New Labour project, former close adviser to Tony Blair and Business Secretary in Gordon Brown’s Cabinet.



At the time these photographs were taken, in January 2005, Mandelson was the EU Trade Commissioner.



But for all the formal poses, hard hats, heavy industrial surroundings and tycoon entourage, Mandelson was in Siberia on a very unofficial basis.

Certainly, his then Brussels chef de cabinet Simon Fraser — today the Permanent Under Secretary at the Foreign Office and Head of the UK’s Diplomatic Service — was told by Mandelson that it was to be a purely ‘recreational’ trip organised by Rothschild.



That is what Mandelson believed when he spoke to Mr Fraser.



But the pictures are compelling evidence that Rothschild escorted his influential politician friend on an altogether more business-like schedule.



Visit: This picture of the group being shown round the aluminium plant was commented on by the judge and was a crucial piece of evidence. It shows the group studying a map showing exports to the EU

They show something of the extraordinary, all-expenses paid (but officially undeclared) journey, in which Mandelson was taken to within a few hundred miles of the Mongolian border.



The circumstances of, and motives behind, this trip were the focus of a £1.25 million libel trial which ended yesterday in a milestone victory for the Daily Mail. The action had been brought by Nat Rothschild.



We had said that Rothschild encouraged an inappropriately close relationship between Mandelson and Deripaska; one which exposed the then EU commissioner to allegations of conflict of interest and endangered the dignity of his office.



This was politically explosive.



Mandelson’s fondness for the generosity of the super-rich had twice before seen him have to resign from British ministerial positions.



Russian tradition: Rothschild said that he, Mandelson and Deripaska were beaten with birch twigs during the trip to Siberia (file photo)

Rothschild sued for libel. The Mail stood by our allegations and the case was brought to trial last month.



Yesterday justice was done.



In his judgment in favour of Associated Newspapers, the Honourable Mr Justice Tugendhat found that the financier ‘had not been entirely candid throughout the different stages of the case, or in evidence’.



The judge further observed: ‘Mr Rothschild states that he took Lord Mandelson on the trip as a friend and not for any business reason.



‘I cannot accept that the position was as simple as that . . . I do not accept that there is a clear line between the business and the personal sides of Mr Rothschild’s relationship with Mr Deripaska.



‘They have very extensive business relationships. When asked about this, Mr Rothschild gave what I regard as quite unrealistic answers.’



We shall address Rothschild’s grasp of reality later. But the implications of our victory are enormous.



One of Britain’s richest men has had both his conduct and his candour found wanting.



An already controversial Russian oligarch’s apparent courting of a senior British politician for his own business interests has been exposed.



And thanks to his self-confessed enjoyment of the finer things in life and according to Rothschild’s evidence, Lord Mandelson has, once again, left himself open to questions about his integrity and conflicts of interest while serving in public office.



But first let us switch the scene to the azure waters of the Mediterranean.



An already controversial Russian oligarch’s apparent courting of a senior British politician for his own business interests has been exposed





The intriguing relationship between Mandelson, Rothschild and Deripaska first came to public attention in September 2008, due to the so-called ‘Yachtgate’ affair. Mandelson, Rothschild, the then shadow chancellor George Osborne and Tory fund-raiser Andrew Feldman all holidayed on Corfu that summer.



Oleg Deripaska’s super-yacht, on which Mandelson was a guest for three nights, lay off Corfu, where the Rothschild family has a villa.



The fallout began when a newspaper reported that Mandelson had been disparaging about the then Prime Minister, Gordon Brown, during dinner at Villa Rothschild.



The source of the leak was widely considered to be Osborne.



Rothschild was furious that his hospitality had been abused. He retaliated by sending a letter to The Times newspaper in which he claimed that Osborne had tried to solicit a donation of £50,000 from Deripaska.



As Deripaska is a Russian citizen a personal donation would have been illegal under British electoral law.



Osborne denied this and the Tories released a statement saying: ‘The allegations made in Mr Rothschild’s letter to The Times are completely untrue.’



They claimed it was Rothschild himself who had suggested a Deripaska donation.



Siberian visit: Sebastian Taylor, Peter Munk, Nathaniel Rothschild, pictured centre with Oleg Deripaska, second right and Peter Mandelson, far right, during a visit to a Siberian hydro-electric plant

As public interest in Mandelson’s friendship with the oligarch grew, the Trade Commissioner’s spokesman issued a statement. It said that Mandelson had previously only met Deripaska at social events in 2006 and 2007. And they had never discussed aluminium tariffs.



However, it soon became apparent that at least the first part of this rebuttal was untrue.



Mandelson had to issue a second statement in which he admitted to having first met Deripaska in 2004.



What else then was still deliberately obscured? (Deripaska also had question marks over his own past, which led to his U.S. visa being revoked in 2006, reportedly for suspected links with Russian organised crime. Deripaska denies such links.)



In early 2010, my colleague Neil Barnett and I began to investigate a dinner that took place at the Cantinetta Antinori, a Tuscan restaurant in Moscow, in January 2005.



It had been reported already that Mandelson had met Deripaska at the Cantinetta that night.



The accounts suggested a social occasion. We learned that a meal hosted by Deripaska’s Rusal company had been held in a private room in the restaurant to celebrate a £500 million deal for two aluminium plants. Rusal was selling them to the American aluminium giant Alcoa.



Libel action: Nathaniel Rothschild, left, brought the case against the Daily Mail over an article about a meeting he arranged between Lord Mandelson, right and Russian oligarch Oleg Deripaska

Senior members of the Alcoa board were at the dinner.

What was not disputed is that Mandelson had earlier been attending the World Economic Forum at Davos in Switzerland and had been flown to Moscow with Rothschild in the financier’s private jet.



He had, Mr Justice Tugendhat observed, ‘no official reason to do so’.



Mandelson, in the company of Rothschild, then made a brief, surprise, appearance in the room where the Alcoa dinner was under way. Deripaska was also present, as was his business partner Munk.



Of all the private rooms, in all the restaurants, in all the cities, in all the world, on that particular night, why did Mandy have to walk into that one, you might well wonder





As Mr Justice Tugendhat stated in his judgment yesterday: ‘It is agreed that before the Alcoa dinner, Lord Mandelson greeted the people at that dinner, and this was unknown to EU officials.’



As EU Trade Commissioner, Mandelson had a role in EU aluminium import tariffs. Rusal’s plants exported aluminium into the EU.



Surely his undisclosed attendance at such a gathering presented a danger of at least the appearance of conflict of interests?



Rothschild later claimed he had not then known that the Alcoa gathering was to mark what was a significant and politically sensitive deal. Mandelson did not stay for the meal itself.



But of all the private rooms, in all the restaurants, in all the cities, in all the world, on that particular night, why did Mandy have to walk into that one, you might well wonder.



Mandelson made no formal complaint about our story, which appeared in May 2010. Not so Rothschild.



He was ‘enraged’ by it, declaring that it was ‘detached from reality’. The thin-skinned and extremely rich Old Etonian sometimes appears incapable of reading anything written about him without calling his favourite libel lawyers, Schillings.



During the Corfu 'yachtgate' scandal, Deripaska found himself at the centre of a political firestorm between Lord Mandelson and shadow chancellor George Osborne. Details of private conversations between the two politicians aboard the Russian's super-yacht, the Queen K, thrust Deripaska into the limelight

And so it was a libel writ was issued. But in dismissing the reasons we had given for Mandelson’s trip to Russia, Rothschild had also to give his alternative version. Thanks to Rothschild’s own witness statement, a new and sensational element to the affair emerged.



The real reason Mandelson went with Rothschild to the Cantinetta Antinori was so he could have a private, unofficial and EU-undeclared dinner with the Russian Finance minister; a dinner also arranged, and attended briefly, by Deripaska.



Mandelson had merely ‘greeted’ the Alcoa gathering while he waited on the minister, said Rothschild.

After leaving the restaurant, Deripaska, Mandelson, Rothschild and Peter Munk boarded Deripaska’s private jet and travelled 2,100 miles further east, into deepest Siberia.



There, they stayed at Deripaska’s country house and visited several industrial sites. Afterwards, Mandelson flew back to Brussels in Rothschild’s own, otherwise empty, jet.



His allegedly recreational trip took him some 6,000 miles in 24 hours in the lap of luxury provided by a Russian oligarch with significant interests in the EU market.



This was astonishing. What I had originally described as the ‘rabbit out of the hat’ appearance of Mandelson at the Alcoa soiree was revealed to be merely the opening trick of a full Las Vegas magic show.



Some of the Mail’s original article and our defence of the libel case had focused on Rothschild’s conduct in relation to the Alcoa dinner.



Without available witness evidence we had to accept there were some inaccuracies; Rothschild did not know the dinner was connected with an aluminium deal and therefore had not rushed Mandelson across Europe for it; the deal had, in any case, been ‘effectively closed’ before the meal.



Born into privilege: Nat Rothschild, a thin-skinned and extremely rich Old Etonian, sometimes appears incapable of reading anything written about him without calling his favourite libel lawyers, Schillings

But the revelation of the, until then, unknown Siberian leg of the trip only increased the impression — and strengthened our case — that Mandelson had been put in a very compromising position by his wealthy young financier friend. Mr Justice Tugendhat allowed the Mail to change its defence and put the Siberian trip at its forefront.



In effect, we would be defending ourselves with the claimant’s statement. This was a ‘very rare’ position, Tugendhat observed.



By the start of the trial, Rothschild’s original account of the Siberian trip had undergone some significant modifications. Andrew Caldecott QC, for Associated Newspapers, suggested to Rothschild that the differences between his own first and second witness statements were because he realised he had to distance Deripaska from Mandelson.



One element of his case was maintained: Lord Mandelson’s near 6,000-mile round trip by private jet was purely ‘recreational’.



The financier often cut a puzzling figure in the witness box. At times he mumbled in a monotone, or sat hunched as the questions grew more pointed.



Then there was the startling passage of cross-examination where he spoke so enthusiastically about their ‘delightful’ birch twig flogging visit to a banya (a traditional Russian sauna heated by a wood-burning stove).



One wonders how Oleg Deripaska views the publicity which resulted from Rothschild's decision to sue

In a state of undress, Mandelson, Deripaska, Rothschild and Munk ‘were beaten by a 25-year-old Russian banya keeper, man . . . who spends his entire life perfecting the art of the banya’.

If that raised eyebrows — it certainly made headlines — so too, did Rothschild’s attempts to diminish the relevance of Mandelson’s presence at the aluminium plants.



Some might have been left with the impression Rothschild himself had become ‘detached from reality’. Or at least detached from the world in which salaries are not in the tens of millions, nor Siberian smelters ‘recreational’ day-trip destinations.



He told the court his own paid role as a financial adviser to Deripaska’s Rusal, the world’s largest aluminium producer, was like ‘a hobby’. Why? Because the returns were ‘dwarfed’ by the rewards from controlling his own $26 billion Atticus hedge fund.



Mandelson had only visited the Sayanogorsk smelter for a ‘nanosecond’, Rothschild snapped. In which case the photographer must have had a very fast shutter speed.



The attached Sayanal aluminium foil plant, which Mandelson also toured, was ‘a tiny, tiny business… beyond insignificant’ in relation to the parent company Rusal, according to Rothschild.



He added that it was ‘a pathetic little plant . . . producing this completely kind of useless foil . . . I highly doubt whether it ever ends up on the shelves of Sainsbury’s or Tesco’.



Yet my simple research shows that the Sayanal plant is Russia’s biggest aluminium foil maker and exported 70 per cent of its product. This was of more than passing interest to the EU. In court, Mr Caldecott, for the Mail, set out the compromising facts about the foil plant that Mandelson had visited.



He said: ‘Lord Mandelson was appointed Trade Commissioner on November 22, 2004.



‘Importantly, on November 23, the EU appoints and announced its review of undertakings given by Sayanal in order to exempt itself from anti-dumping duties.



‘On December 20, 2005, Lord Mandelson signs a Commission decision releasing Sayanal from its undertakings.’



But Rothschild insisted that at no stage during the January 2005 trip were business matters, let alone EU tariffs, discussed, adding: ‘That was the last thing on Deripaska’s mind.’



One can only puzzle on this while looking at another photograph from the trip. It shows the Rothschild-Mandelson group studying a wall map inside the smelter complex.



Multiple red arrows, pointing from Siberia into the EU, indicate where the finished product was heading.



The impression was strong enough for Judge Tugendhat to ‘find that they probably talked about aluminium. There are photos of their party wearing Rusal’s jackets and safety helmets on their visit to the smelter, and standing with a guide, to whom they appear to be listening,’ he found.



‘It is probable that on a visit to an aluminium smelter and foil plant they talked about aluminium.’



In his judgment, Mr Justice Tugendhat spoke of Rothschild being ‘clearly not comfortable’ giving evidence about the smelter visit and Deripaska’s lavish hospitality towards Mandelson.



Strong-arm tactics: Rothschild (right) indulges in some horseplay with Mandelson

Rothschild ‘didn’t recall’ whether he had told Mandelson they would visit an aluminium plant. Nor whether they would be flying on Deripaska’s jet.



Mr Caldecott put it to him: ‘The truth is, isn’t it, that Lord Mandelson was driven in Mr Deripaska’s cars . . . was shown Mr Deripaska’s plant, and the entertainment and the wining and dining was all presented by Mr Deripaska? On any ordinary person’s view, he was Mr Deripaska’s guest, wasn’t he?’ But then the Hon Nat is no ‘ordinary person’.



After Siberia, Mandelson flew back to Brussels, alone.



Meanwhile, Deripaska, Rothschild and Munk flew to Kyrgyzstan for a meeting with its president.



It might not surprise you to learn that the Siberian photographs Mandelson later showed his chef de cabinet were of snow scenes rather than smelter tours.



The latter would have raised far too many awkward questions.



Mr Justice Tugendhat felt Rothschild had initially failed to tell Mandelson about the trip’s potentially compromising details. The judge assumed that the EU trade commissioner had indeed planned it as ‘purely recreational’.



Some sources suggest Mandelson is furious at Rothschild exposing him to so many profoundly disturbing questions about his conduct





Yet the meeting Mandelson then requested with the Russian minister in Moscow was not. ‘That dinner was not recreational. Nor was it private in the sense of being part of his private life,’ said Tugendhat.



Since Lord Mandelson left politics, following Labour’s 2010 general election defeat, he has bought himself an £8 million London mansion and established a company trading on contacts he made during his years of public service, particularly in Russia.



Neither Mandelson nor Deripaska provided witness statements to support Rothschild’s case.

Andrew Feldman, now Lord Feldman and the Tory Party co-chairman, appeared to repeat his assertion it was Rothschild, not he, who tried to broker the Deripaska donation.



One wonders how Deripaska views the publicity which resulted from Rothschild’s decision to sue.



Some sources suggest Mandelson is furious at Rothschild exposing him to so many profoundly disturbing questions about his conduct.



For if Rothschild hadn’t compromised his friend by taking him to the Alcoa dinner, he certainly did so by taking him to a Siberian smelter . . . and launching a libel action that set out the whole affair in a public court.



Mr Justice Tugendhat said he accepted the Mail’s submission that ‘Mr Rothschild’s conduct was inappropriate in a number of respects’.



He added: ‘In my judgment, that conduct foreseeably brought Lord Mandelson’s public office and personal integrity into disrepute and exposed him to accusations of conflict of interest, and it gave rise to the reasonable grounds to suspect that Lord Mandelson had engaged in improper discussions with Mr Deripaska about aluminium.’



In Mr Justice Tugendhat’s judgment, there were ‘at the very least, reasonable grounds’ to believe that Deripaska had cultivated Mandelson for his own business interests and Rothschild ‘did appreciate this’.



‘By facilitating the development of a relationship between Mr Deripaska and Lord Mandelson, Mr Rothschild was, in my judgment, conferring a benefit on, and seeking to please, both Mr Deripaska and Lord Mandelson.



‘So far as Lord Mandelson was concerned, the benefit was the trip and the hospitality. So far as Mr Deripaska was concerned, it was a relationship with the EU Trade Commissioner.’



At a time of criticism of the print media, this was a landmark victory for investigative journalism and those who advocate transparency in high public office. It was also a defeat for big money’s conceit that it can shackle legitimate public interest examination of its behaviour.



The combative Mr Rothschild does not like to be challenged. One imagines his demeanour this morning will be chilly. If not Siberian.

