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YUKOS vs. Rusal

January 11, 2010 1 comment

It was the best of times. It was the worst of times.

On Thursday, January 14th the European Court of Human Rights (ECtHR) is hearing the case of YUKOS Oil Company v. Russian Federation, the first time in six years of litigation that both sides will meet face-to-face in a legal battle on the Russian authorities expropriation of YUKOS and its assets beginning in 2003.  Foreign policy and Russian officials have acknowledged that the imprisonment of YUKOS’s CEO Mikhail Khodorkovsky was due to political reasons stemming from his support of opposition parties.

Meanwhile, the Rusal continues on its IPO path, even as more doubts about the process have surfaced. Its controlling shareholder Oleg Deripaska continues to be linked to organized crime, was refused a visa to enter the United States on those grounds and has received millions in government money funnelled through Russian state-run Vnesheconombank (VEB), controlled by Prime Minister Vladimir Putin.

YUKOS’s Mikhail Khodorkovsky is being charged in a second round of trumped up charges while Rusal’s  Oleg Deripaska is being rewarded for his cooperation and collaboration with the Russian government, stating publicly that he would transfer Rusal back to the government at any time saying, “If the state says we need to give it up, we’ll give it up.”

Der Welt – Khodorkovsky’s lasting shadow

December 15, 2009 Leave a comment

Via the EU-Russia Centre, Der Welt published an article on why Mikhail Khodorkovsky remains significant to Russia’s economic development. According to the article “at least one third of the population expressed according to the survey Institute Levada-Center at the beginning of the conviction that people like Khodorkovsky could help with their know-how of the country in crisis.”

The full article translated below via Google Translate:

Khodorkovsky’s long shadow
Yukos was once an example to be established early on ethics and years later Vladimir Putin again lives in fear of the dead and a group jailed billionaire
Eduard Stein
December 2009, 04:00 Clock 14h

For some reason, Vladimir Putin, sensing a need for clarification. After six years of evasive answers and arcane information about the rise and fall of the government-imposed oil company Yukos was Russia’s most powerful man on television two weeks ago suddenly on the offensive. For years, curious person urged the former President and current Prime Minister, a plausible explanation. Vain. Finally, it was a dish that had sent the once-largest oil company in the country several years ago in the bankruptcy, said Putin and his top officials free of the responsibility: Finally, the court on a repeated sentence or the release would be the Mikhail Khodorkovsky, once Russia’s richest decide.

But it was still Putin himself, who forestalled suddenly in the course of his TV Question Time the court and in unexpected detail, commented on the case. What should spontaneously appear, therefore, ultimately came more through-composed. Do not go there about when to release for whom, “said the Prime Minister go there so that repetition of such economic crimes. They also maintained that the money from the auction of Yukos assets RULE in social housing has been set, “Putin said to the astonished spectators”. Then, to dare the legal tightrope: the ex-security chief of Yukos, Alexei Pitschugin, who has been convicted of three contract killings in 2007 to life imprisonment without the guilt, “has clearly acted in the interest of and on behalf of the owner.

Since Putin knows his opponent over the court, “said Mikhail Khodorkovsky, who himself was never accused of murder, from prison. You may still call upon the Premier to give evidence.

In seven days on the beginning of the Causa Yukos, the topic is thus again a household word. For years, the Russian authorities had hoped that the interest in his most prominent prisoner, who was once estimated at 15 billion U.S. dollars assets, more and more abated. And in the end perhaps totally dies. Too much the case had tarnished the image of the rulers and the country already. No other matter beyond the Chechen war had made the perceptive world opinion against Russia’s development under Putin. No subject had clearly signaled observers abroad that began with Putin after a decade of attempts in a market economy and democracy in a new era of statism and the authoritarian power vertical in Russia.

None other than 25 October 2003 was so obvious. Early in the morning landed on that day a Russian Tupoljew with Khodorkovsky aboard in the Siberian city of Novosibirsk. A few minutes later, the domestic intelligence service FSB special forces stormed the plane. “When I saw the siege was everything to me clearly,” to the then forty-year multi-billionaire said.

Already months before a string of incidents had indicated that was the most modern and most efficient oil company in the country with his boss and major shareholder in the crosshairs of investigators. What followed after the arrest, was an unprecedented geheimdienstgeschulten tug of war between the Kremlin and the relentless head of a mega company with 105,00 employees. At the end Khodorkovsky was convicted of fraud and tax evasion in 2005 with eight years imprisonment in the remotest Siberia. Subsequently, Yukos was filleted and mostly incorporated into the state oil company Rosneft, which rose to the market leader.

Since the spring of this year, Khodorkovsky is in Moscow again in court. Shake about the new indictment not only Putin’s critics around: the tycoon is the whole Yukos flow have been stolen. Previously he had been convicted solely because of tax evasion for the Yukos oil. Now the prosecutor has accused him of having illegally sold oil worth 20 billion euros. In extreme cases, this latest charge threaten to bring more than 20 years in prison.

One should remember the Mafia boss Al Capone, the “30 year old was formally sentenced in the U.S. for tax fraud – but in reality for all crimes he committed,” Putin initiated at the end of November in France. His answers to answer the questions about Khodorkovsky was drastic. He likened his rival on this occasion with the U.S. billion fraudster Bernard Madoff, who was sentenced to 150 years in prison. Nobody has felt the injustice and “even a beep given by itself,” complained Vladimir Putin. Why just the other Causa Khodorkovsky with a measure would be measured?

Because it was politically motivated to be Khodorkovsky’s lawyers never tires of stressing. That’s what Putin himself admitted behind closed doors, said a few months ago, none other than Mikhail Kasyanov, the beginning of the affair, Prime Minister under Putin. The former president had echauffiert about the fact that Khodorkovsky without permission of the Kremlin’s next Liberal parties also began to sponsor the Communists,’ said Kasyanov. Immediately after his assumption of office, Putin had called all the oligarchs to abide by political non-interference. All other tycoons, who like Khodorkovsky, seized during the privatizations of the 90s to questionable nature and at bargain prices, huge fortunes under the nail, and great power within the state itself, had understood Putin’s message – and Khodorkovsky was warned. The wealth had gone to his head and caused a feeling of integrity, he would tell later companions. “Was Chodor,” as his intimates call him, just a strong person with principles to keep his followers against it.

Khodorkovsky has indeed has strong international support. Unlike court proceedings, the lobbying machine of the volatile Yukos billionaire runs very fast. Together with lawyers, they instigated in an information war with the Kremlin, which they have won very early on. In early December, they also achieved a real part of success: An international arbitration tribunal in The Hague ordered former Yukos shareholders to legal action against the Russian government because it had allowed, despite binding to the International Energy Charter, the expropriation of the Group. As the claim will be circulated to the shareholders of 100 billion U.S. dollars.

“In the end, the European Court, but not 10,000 dollars compensation claim,” warns Alexei Makarkin of the Moscow Center for Political Technologies to realism in a new information war. But also includes Makarkin – such as Khodorkovsky’s supporters – not that Putin’s attacks against the detainee associated with the decision of the Court of Holland and the prime minister had once built a defensive line.

For just as likely, but observers think that is on the rise in the Russian government panic because the politicians are afraid because of the absurdity of the charge in the current second trial in Moscow for an acquittal.

Domestically, such a defeat would have to get over, however. The nation does not feel any great sympathy for Khodorkovsky. But at least one third of the population expressed according to the survey by the Institute Levada-Center at the beginning of the conviction, that people think Khodorkovsky could help with their know-how of the country in crisis. “If Khodorkovsky was set free, he would become perhaps less economically, but socially active,” says Sergei Guriev, rector of New Economic School in Moscow: “As a moral authority he could collect a lot of people around.”

An acquittal would have still another effect: When would this year have a pregnant Yukos lawyer suffering from AIDS and the former deputy leader of the group have been released from prison, the verdict further evidence of potential investors that the new president, Dmitry Medvedev, with the modernization seriously. “It would be a sign that the country does not drift to a halt,” says Guriev.

But that when it comes to power, the investment climate for the governance of secondary, Makarkin said: “Being a strong character Khodorkovsky is ready to fight. Putin has made clear with his recent statements that he did not want to see him in freedom.”

NEWS: Mikhail Khodorkovsky and Platon Lebedev Defense Team Seeks Testimony

December 14, 2009 Leave a comment

From the Khodorkovsky and Lebedev Communications Center

On October 28, 2009, Mikhail Khodorkovsky’s defense counsel served a federal subpoena on former PricewaterhouseCoopers (PWC) audit partner Douglas R. Miller, requiring the accountant to provide sworn testimony about his work in Moscow on behalf of the expropriated oil giant and the various legal proceedings initiated by the Russian authorities concerning PWC’s work for Yukos.

But on December 11, 2009, the Russian Prosecution attempted to disrupt Miller’s deposition. Its representatives filed a motion with the Khamovnichesky Court in which they asked the court to issue a decision finding Miller’s scheduled deposition inadmissible as evidence. The court found the motion did not comply with Russian law and denied it.

Miller was the lead partner on the Yukos account in Moscow for PWC, Yukos’ longtime outside auditor and consultant. At the end of 2006, the Russian authorities started a criminal investigation, which is ongoing, targeting PWC and its employees, including Miller, in connection with alleged illegal operating activities and tax evasion in Russia. As a result of increasing pressure on PWC by Russian authorities, in a manner clearly designed to undermine the reliability of the Yukos audited financial statements and to secure incriminating testimony from the management and employees of PWC against Khodorkovsky and Lebedev, PWC subsequently withdrew 10 years of audits of the Yukos financial statements. Miller signed one of the letters officially withdrawing PWC’s audits.

The subpoena already has provided dividends to the defense and established the Russian Prosecution’s further violation of Khodorkovsky and Lebedev’s rights. Miller has produced documents which reveal the prosecution selectively submitted records into the case materials and intentionally withheld documents containing exculpatory evidence.

Andrew Meier’s Interview on ABC Radio

December 14, 2009 Leave a comment

On December 11, 2009, Andrew Meier, author of the NYTimes article “Who’s Fears a Free Mikhail Khodorkovsky?” speaks with Ramona Koval of The Book Show on ABC Radio about writing the article and his decades-long relationship with Khodorkovsky.

During the interview, Meier mentions that Vladimir Putin has “lashed out at Khodorkovsky personally. Ennuerated what was latent in the piece, things that I had just sketched…and he’s gone far beyond what our fact checkers were concerned about, enunciating how much this case means to Russia.”

Listen to the interview here.

Witness Testimony Exposes Illegal Practices of Prosecution and Bias of Judge in Khodorkovsky and Lebedev Trial

November 24, 2009 Leave a comment

A witness in the trial of former Head of YUKOS oil Mikhail Khodorkovsky, and former Group Menatep Director Platon Lebedev, revealed in court on Monday 23rd November that a secret and illegal parallel investigation is underway for a new case against the two political prisoners, used by the prosecution to put pressure on witnesses.

Nadezhda Sheck, a former employee of the International Financial Alliance MENATEP said during her cross-examination in court that investigators: summoned her into the Prosecutors Offices on Wednesday 18th November, just two days before her testimony in court on Friday and was interrogated regarding a new investigation against Mikhail Khodorkovsky and Platon Lebedev. Ms Sheck signed a non-disclosure agreement and was prevented from sharing any additional information in court on the subject of her questioning last week.

This new information shared by the witness in open court on Monday is a clear example of how the prosecution continue to use illegal tactics and place undue pressure on witnesses before giving their testimony in court. Under Russian law, use of secret parallel investigations against defendants to obtain information or meet with witnesses in the ongoing trial is prohibited practice.

In response to the witness’ revelation, Judge Viktor Danilkin openly aided and abetted the prosecution, threatening Ms Shek with criminal liability if she discussed further details of her recent interrogation.

Commenting on the new evidence of corrupt practices by the prosecution and Judge Danilkin’s reaction, Vadim Klyuvgant, Khodorkovsky’s Lead Defence Lawyer, said:

“The whole time this second case has been going on, we have been relentlessly insisting that there is a parallel investigation taking place. What the witness Shek said – this is just one of a multitude of illustrations, evidence that there is a parallel inquiry going on – constantly, ceaselessly, secretly, and illegally.”

“…the behaviour of the presiding judge…shows a major shift in his position. If before he merely sat by silently and did not try to stop all this illegal activity by the party of the prosecution as a whole – both that of the prosecutors in the courtroom and that of the investigative bodies behind their backs, about which we are learning – today he openly aided and abetted them. He helped conceal the traces of this activity, even to the point of intimidating the witness, even to the point of obvious discrimination against the defence in relation to the prosecution during the questioning of the witness, when the prosecution has the opportunity to ask everything it wants, irrespective of whether this does or does not bear a relation to the case.”

“…the court has no right to intimidate a witness. A witness in court is obligated by law to answer all questions irrespective of any other circumstances whatsoever. Intimidating a witness with some kind of consequences of some kind of written undertaking, made with respect to some obscure case — this is simply a complete and total outrage.”

Persecution of Mikhail Khodorkovsky

November 17, 2009 Leave a comment

In 2003, in the blink of an eye, Mikhail Khodorkovsky (“MBK”) was transformed from Russia’s most respected businessman as head of Yukos Oil Company (“Yukos”), to Russia’s most famous political prisoner. And Yukos went from being Russia’s most progressive and profitable company, lauded for its transparency, corporate governance, and international business practices, to a bankrupt company under the burden of more than $40B in fictitious tax debt. The regime stole its assets, selling them in sham auctions to state-owned companies at knock-down prices. Its shareholders, many of them US citizens, lost $40 billion in equity.

MBK and his colleague, Platon Lebedev (“PLL”) were jailed, charged and convicted, in a show trial of theft, fraud and corporate and personal tax evasion. They were sentenced to eight years in a Siberian penal colony. The European Court of Human Rights has found that PLL’s rights were violated during the pre-trial phase of the proceedings. Appeals to the ECHR by MBK and PLL are pending. MBK and PLL became eligible for parole in 2007, which was denied.

Just before they became eligible for parole, the Russian government again charged both men, this time with embezzlement and money laundering. Specifically, the regime alleged that MBK and PLL embezzled all of Yukos’s oil production (350 million metric tons) and shares held by a Yukos subsidiary in six operating companies, and laundered the sales proceeds of the oil and the shares themselves. The trial on these charges began in March 2009 and is ongoing.

The current allegations against MBK and PLL go beyond meritless; they are absurd. The oil embezzlement charge requires that MBK and PLL physically stole the oil. However, the prosecution offers no evidence that any oil was ever missing or of where the defendants may have stored 20% of Russia’s annual production. In fact, the allegedly embezzled oil is more than Yukos produced in six years.

Contrary to what is alleged, Yukos booked all oil sales revenues on its independently audited financial statements. Yukos could never have paid operating expenses, taxes (Yukos was Russia’s largest taxpayer), capital expenditures, dividends, or acquired companies for cash, if they had embezzled the oil. The allegedly embezzled shares were actually moved for a legitimate business purpose, asset protection, as part of transactions that benefitted all of the company’s investors. What’s more, the allegedly embezzled shares remained on Yukos’s books as reflected in its independently audited financial statements. In essence, MBK and PLL, as part of the majority shareholder in Yukos, are accused of stealing from themselves! The new charges cannot be squared with the prior tax evasion conviction. The new charges are irreconcilable with MBK and PLL ‘s conviction in the first case. MBK and PLL could not have caused Yukos to evade corporate taxes on the sale of oil, i.e., the first case, if, as they are now being charged, they embezzled the same oil and laundered the proceeds for their personal gain.

The impetus for what is now known as the “Khodorkovsky Affair” was the fear among Russian President Putin and his supporters that MBK and Yukos’s success posed a political and personal financial threat. World leaders are united in condemning the attack on MBK, PLL, and Yukos as politically motivated. For example President Obama, VP Biden (then Senators) and Senator McCain co-sponsored a Senate Resolution 322 (in 2005) condemning the prosecution of MBK and PLL. German President Merkel publicly condemned Russia’s political prosecution of MBK and PLL. The Parliamentary Assembly of the Council of Europe has adopted reports and passed resolutions finding the attack violated human rights and was politically motivated. Recently, the Italian Parliament called for government officials in Italy and throughout Europe to use diplomatic channels to compel Russia to give MBK and PLL a fair trial.

Perhaps most telling, in July 2009, ex-Russian Prime Minister Mikhail Kasyanov, in a sworn affidavit to the European Court of Human Rights based on his first-hand knowledge, confirmed that the Yukos-related cases were politically motivated. Kasyanov was stating fact, not opinion, based on his direct conversations, as Prime Minister, with then-President Putin. The reliability of Kasyanov’s remarkably courageous testimony must be read in the light of Russia’s history of retaliation against political opposition.

Independent Courts in the United Kingdom, Switzerland, the Netherlands, Lithuania, Cypress, Israel, and the Czech Republic have ruled that the attacks on MBK, PLL, and Yukos are politically motivated and have refused extradition requests, denied Russian mutual legal assistance requests related to the attack, and refused to recognize related Russian Court Orders, respectively. Several courts expressly found that no one affiliated with MBK or Yukos could receive a fair trial in Russia.