BANK AUSTRIA CREDITANSTALT, the leading bank in eastern Europe, worked in Russia in the late 1990s through a network of subsidiaries, which were presented to investors as Creditanstalt Investmentbank (CA-IB) Russia. Its managing director was banker Yuri Lopatinsky. The network included various offshore entities based in Jersey, Guernsey and Cyprus. One called CIS Emerging Growth (CISEG) was based in Jersey.
In the summer of 1997, titanium company VSMPO made CA-IB Russia the agent for a deal to buy a supplier company called AVISMA. VSMPO wanted to buy 58% of AVISMA from owner the Menatep group. It wanted a transaction in which a group of foreign investors would buy the stake, then sell it on to VSMPO.
CA-IB Russia approached a group of investors, including Hermitage Capital Management, the Andersen Group, Dart Management and Gabriel Capital, to act as the buyers of AVISMA. According to the investors, Lopatinsky assured them that CA-IB would negotiate the best price for the AVISMA stake from Menatep, and that CA-IB Russia itself would take no spread on the deal.
In October 1997, the investors say, CA-IB Russia told them that the deal had gone through, for a price of $87.6