MESSAGE TO MOSCOW: NO ONE BELIEVES YOU

Once again the Kremlin has pulled out its trusted old move of doing a highly unlawful raid late on a Friday night, right in the dead zone of the global media cycle. This time the victim is the accounting firm PricewaterhouseCoopers, whose offices were raided by KGB-style goons in an apparent new probe alleging tax evasion, part of the effort to further tighten the screws on Yukos and Mikhail Khodorkovsky. The message to Moscow is the following: no one believes you. The truth is out, and no matter how many more Friday night fiascos you pull, no one is fooled by these outrageous KGB tactics. There is no limit to what the Russian Federation is willing to do to desperately try to make the Yukos case look like a real Enron. The transparent intimidation and harassment of witnesses that has already been so well documented is simply demonstrated further by these actions. To put things into perspective, this raid on a leading accounting firm comes the same day as the FT trumpets the return of Western bankers to Russia. It seems that the lunatics have truly taken over the asylum. From the FT.

Moscow raids PwC over Yukos back tax By Neil Buckley in Moscow and Catherine Belton in London Russian investigators raided the Moscow office of PwC on Friday, stepping up pressure on the “big four” audit firm ahead of a crucial court case over allegations that it signed off on false accounts by Yukos, the bankrupt oil company. About 20 law enforcement officials from the prosecutors’ office and interior ministry combed PwC’s offices for documents relating to Yukos, and questioned senior managers including Mike Kubena, head of PwC in Moscow, the company said. Interior ministry officials also announced they were launching a criminal probe into alleged tax avoidance by PwC in Russia. The search came as PwC prepared for a court hearing on Monday in a lawsuit filed by Russia’s Federal Tax Service alleging PwC concealed tax evasion by Yukos in 2002-04. PwC denies all the accusations. The pressure against the audit group is seen as a key element in the state campaign against Yukos as the government prepares to sell off the oil company’s remaining assets and fight off multibillion-dollar lawsuits filed by Yukos’s former owners in courts in The Hague and Strasbourg. Prosecutors last month brought new charges against Mikhail Khodorkovsky, Yukos’s founder, of laundering more than $23bn in oil sales, which could add 10 years to his sentence. The raid appeared to be an attempt by Russia to press PwC into taking its side, which could help the government win its legal cases internationally, a former senior Yukos executive and lawyer said. Much is at stake for PwC. If found in violation of accounting procedures, it could lose its Russian licence and valuable clients including big state-controlled companies such as Gazprom, the natural gas giant, Sberbank, the savings bank, Russia’s central bank, and Unified Energy System, the electricity monopoly. PwC said on Friday it did not understand why the raids had been launched. The tax case against the company itself is an extension of an ongoing lawsuit that PwC lost in court last year. The firm said it had already paid charges for non-payment of taxes worth Rbs243m ($9.2m) in full, and was appealing against the ruling. The tax service last December brought further legal action claiming PwC had issued two different audits of Yukos in 2002. PwC refutes the charges.