The disappearance of the leadership of the "Erlan" trading house in March 1995 became one of the most sensational business scandals of its time. The company, which over four years had grown from a small cooperative into the largest electronics supplier in the country, left creditors with debts of between $70 and $130 million.
The company's founding and rise
The closed joint-stock company "Trading House 'Erlan'" was founded in 1991 by four friends, all natives of Tbilisi: Nugzar Zhvania, Alexei Ivakin, Vasily Tsereteli, and Eduard Skogorev. Its founders included private individuals and the limited partnership "Nord," whose president was Nugzar Otarovich Zhvania.
According to later reports, the only officially registered founders, with a charter capital of 30,000 rubles, were Alexei Ivakin and Vladimir Cherchepov (50% each). No "trade and industrial syndicate," as the "Erlan" people liked to call themselves, was ever officially registered.
The founders already had business experience — since 1985 they had imported office equipment and video and audio gear into Georgia through their own cooperatives in Tbilisi. This experience let "Erlan" establish itself immediately as a solid trading company.
The company's registered legal address was: Moscow Oblast, town of Troitsk, Yubileynaya Street, building 3. About a dozen other firms were also registered at this same address.
The road to success
"Erlan" initially focused on trading office equipment, but gradually shifted toward supplying video and audio gear. By the end of 1992, the company had become one of the largest suppliers on the Moscow electronics market.
In 1993, the company's activities expanded significantly:
- A car showroom was opened.
- Trading in office furniture began.
- A chain of stores was established in Moscow.
- A project to manufacture night-vision devices for export was under consideration.
Tragedy struck when one of the founders, Eduard Skogorev, died in a car accident on June 2, 1993. Rumors circulated of a contract killing tied to criminal disputes, but these were never confirmed.
Business expansion and financial success
By 1994, "Erlan" had grown into a trade-and-industrial syndicate. In February 1994, the company became the exclusive distributor for Goesser and Heineken beer. At the same time, it launched a sales program based on the so-called "boomerang principle" — customers were promised their expenses would be fully reimbursed within a year.
The company paid particular attention to real estate. Taking out loans at several commercial banks, "Erlan" acquired a plot of land in the Matveyevskoye area, on the bank of the Setun River, and began building an elite cottage development.
Its relationships with banks
"Erlan" was always considered a reliable borrower. Its main creditor was Inkombank, where the company's settlement account was held, and which extended loans of up to $10–15 million. At Inkombank's fifth anniversary celebration in 1993, "Erlan's" leadership were among the guests of honor.
Other creditor banks included:
- Guta-Bank (which financed and oversaw construction of the cottages)
- Chasprombank
- Gloria-Bank
- Mytishchi Commercial Bank
- Rato-Bank
- Unikombank
- The Kyiv and Mytishchi branches of Moscow Sberbank (which lent $1.5 million)
A characteristic feature of "Erlan's" business was that profits were not reinvested in the company, but simply split among its leaders: Zhvania, Tsereteli, Ivakin, Cherchepov, and Navodnichy.
The onset of crisis
Trouble began in September 1994. By then, "Erlan's" debts had reached $40 million, yet the company kept taking on new loans. By year's end, the situation had worsened seriously — "Erlan" stopped even paying interest on its loans.
The main cause of the crisis was the failure to sell the cottages in Matveyevskoye. Of the planned 140 homes, about 20 had been built, and not one was sold. The reasons for this failure:
- Overpricing — each cottage was priced at $1 million, against a production cost of around $130,000.
- A poor location — the low-lying land by the Setun River required extra spending on roads and utilities.
- Legal problems — the land had been leased for 49 years, which put off buyers.
The mysterious disappearance
On February 28, 1995 (other accounts say March 10), an event took place that shook Moscow's business circles. After negotiations at Inkombank that ended in the evening, five of the trading house's leaders never returned home. Those who vanished:
- Nugzar Zhvania
- Alexei Ivakin
- Vasily Tsereteli
- Vladimir Cherchepov
- Georgy Navodnichy
Vladimir Piliya, head of public relations (running the ad agency "Erlan-Press"), initially counted among the fugitives, was quickly found, and declared he was "no fugitive at all." He said he did not know why the leadership had fled, and that the decision to flee had clearly been made in great haste.
The circumstances of the disappearance puzzled experts:
- The families of those who vanished remained in Moscow
- No advance evacuation of relatives had taken place
- No attempt had been made to move cash out beforehand
The response from authorities and creditors
On March 16, 1995, Sergei Soldatov, head of the Moscow police's Economic Crimes Directorate, stated that no official reports of the leadership's disappearance had been filed with police. He noted the situation didn't resemble a typical flight from creditors.
Creditors reacted to the disappearance instantly:
- Inkombank and Guta-Bank rushed to "Erlan's" warehouses to check on $4 million worth of beer
- Guta-Bank sealed 20 cottages in Matveyevskoye
- The Kyiv and Mytishchi branches of Sberbank filed a report with the Western District police
- Inkombank, Rato-Bank, and Guta-Bank filed reports with the Economic Crimes Directorate
Some banks initially denied having lent to "Erlan":
- Mytishchi Commercial Bank, through its representative Andrei Gaidl, stated it "hadn't suffered in this affair"
- Gloria-Bank first claimed "Erlan" had never been a client, but later admitted it had outstanding claims
The structure of the debts
By various accounts, the total debt came to between $70 and $130 million. It was structured as follows:
- 11 small and mid-sized banks — 3 to 5 billion rubles each
- 5 large commercial banks — $10 to $20 million each
- The Solntsevo gang — $45 million
Attempts to track down the fugitives
In Moscow business circles, rumors circulated that Rato-Bank's security service had found the trading house's general director, Alexei Ivakin, in Budapest. This finding indirectly supported the theory that the decision to flee had not been planned in advance — Ivakin hadn't had time to hide properly.
In Austria, the vice president of the joint venture "Ater," Vitaly Kamensky, and its president, a man named Dobzhevich, were arrested. Dobzhevich had previously served time in the USSR, then emigrated to Israel, where he was arrested on espionage charges.
Consequences and theories
The disappearance of "Erlan's" leadership had serious consequences for the financial market:
- Banks tightened collateral requirements for loans
- Distrust of trade-and-procurement companies grew
- Affected banks raised deposit rates to offset their losses
Various theories were floated to explain what happened, including ties to Georgian intelligence, but none were confirmed. The company's assets were never seized, and a criminal case was opened only belatedly.
The significance of the "Erlan" case
The story of the "Erlan" trading house became a symbol of the instability of Russian business in the 1990s. It showed how quickly an outwardly thriving company could collapse, and underscored the need for tighter control over credit risk.
The "Erlan" case also demonstrated the difficulties of regulating commercial activity during the transitional period, the inadequate protection afforded creditors, and the deep penetration of organized crime into 1990s Russian business.
"Erlan's" leadership was never fully located, and the fate of the $70–130 million in debt remains unknown. The Solntsevo gang threatened to hold their own "arbitration at Khovanka" (a reference to a notorious cemetery used for gang meetings), but their own attempts to recover the money likewise came to nothing.