Former Labour minister risks controversy by joining AFK Sistema group, which was implicated in 2010 WikiLeaks cable
Lord Mandelson risked courting controversy after he accepted nomination to the board of a Russian company with alleged links to organised crime and corruption.
The former Labour cabinet minister and European trade commissioner will become an independent director of AFK Sistema at the end of June, subject to shareholder approval at the company's annual meeting, it was announced on Thursday.
The oil-to-telecoms conglomerate was implicated in a leaked secret cable about criminal activity, sent in 2010 by the then US ambassador to Russia, John Beyrle.
Sistema, which is majority owned by its billionaire chairman and co-founder, Vladimir Yevtushenkov, is linked to one of Russia's largest organised crime gangs, Solntsevo, according to the cable released by WikiLeaks.
It is alleged that Evgeny Novitsky, the former president of Sistema and one of the current board members Lord Mandelson has been nominated to replace, is a member of Solntsevo.
Reporting on information he had been given, Beyrle said Novitsky "controlled the Solntsevo criminal gang".
If appointed Mandelson will join Roger Munnings, Britain's special representative for trade and investment between the UK and Russia, on the board of Sistema.
The cable from Beyrle more generally explored claims that Moscow's veteran mayor Yuri Luzhkov was at the top of a "pyramid of corruption" involving the Kremlin, Russia's police force, its security service, political parties and crime groups.
The ambassador wrote his cable in response to speculation that Luzhkov, who had been mayor since 1992, was about to lose his job. Luzhkov was subsequently sacked in September by the Russian president Dmitry Medvedev, who said he had lost confidence in him.
In the section of the cable relating to Sistema, Beyrle appeared to link Luzhkov's wife Yelena Baturina both to Solntsevo and indirectly to the company. Both Luzhkov and his wife vehemently deny allegations of corruption.
Beyrle said he had been told that Baturina "definitely has links to the criminal world, and particularly to the Solntsevo criminal group (widely regarded by Russian law enforcement as one of the most powerful organised crime groups in Russia). According to the internet article, 'On the Moscow Group,' Vladimir Yevtushenko, the head of the company Sistema, is married to Natalya Yevtushenko, Baturina's sister. Sistema was created with Moscow city government-owned shares, and Sistema initially focused on privatising the capital's real estate and gas."
A source close to the company said: "There is zero substance to these stories about Vladimir Yevtushenko. In fact he is more widely known as a person who steered clear of 90s privatisation and managed to build the business all on his own."
Sistema declined to comment on any of the allegations, including the specific points about Yevtushenkov and Novitsky. Mandelson's office did not respond to requests by the Guardian to comment.
Solntsevo is one of the largest and most international of the Russian organised crime networks, according to Mark Galeotti, a professor at New York University and an expert on Russian organised crime.
"It's based in Moscow but you'll also find it in the US, Israel and certain parts of Europe," he said.
"It's so large that it's a stretch to call it a gang. It doesn't really have a leadership or a hierarchy, it's more like a criminal club full of regional clubs."
Galeotti said that Solntsevo engaged in activities including "low-level thugs dealing heroin and shaking down kiosk owners, breaking legs where needed. But you'll also find people who've migrated almost entirely into the realms of business and politics."
"I disagree fundamentally that Novitsky could have run Solntsevo. But I'm entirely willing to believe he has been in bed with elements of Solntsevo," Galeotti said. "In the Russian context, what we're talking about is mutually advantageous connections in incestuous circles that span politics, business and crime, and that's where I think Novitsky fits."
It is not the first time Mandelson has been at the centre of controversy. He was appointed minister on three separate occasions in the former Labour government and was forced out twice. He resigned as trade minister in 1998 after it emerged he had failed to declare a £373,000 home loan from government colleague Geoffrey Robinson, and was again forced out as Northern Ireland Secretary in 2001 over allegations – subsequently disproved – that he had intervened in the passport application of an Indian businessman.
In the statement announcing his proposed appointment, the company emphasised Mandelson's experience negotiating trade agreements, and leading European negotiations in the WTO Doha World Trade Round. The company is a Fortune Global 500 business that reported full-year revenue of $34.2bn (£22.5bn) in 2012.
Yevtushenkov's net worth was valued at $6.7 billion by Forbes in March, placing him 175th on their worldwide list of billionaires. Forbes values him as the 22nd richest Russian.