New York Times: “A Fraudulent System of Asset Theft”

An article which we assume will be appearing in tomorrow’s edition of the New York Times:

New Charges Against Imprisoned Yukos Founder By C.J. CHIVERS Published: February 5, 2007 MOSCOW, Feb. 5 — Russian prosecutors brought new charges today against the imprisoned founder of the Yukos oil company and one of his business partners, opening a new line of legal attack against a Kremlin foe who was once regarded as Russia’s richest man. The former executive, Mikhail B. Khodorkovsky, and his partner, Platon A. Lebedev, were each charged today with embezzlement and money laundering. Mr. Khodorkovsky’s lawyers said the new charges carry maximum prison sentences of 15 years. The two men were arrested in 2003 and have been held since then. The original charges involved tax evasion and related crimes; they were convicted and sentenced to eight years in prison. According to their lawyers, the men could have qualified for parole late this year, when they would have completed half their terms. But the new charges appear to destroy any chance of that, and to open a new chapter in the long saga of Yukos’s legal troubles. The new charges — accusing the men of embezzling $20 billion in company revenue — were filed today under intense security but with little fanfare in the eastern Siberian city of Chita. Mr. Khodorkovsky and Mr. Lebedev were transferred to Chita in December from the separate penal colonies where they have been serving their sentences. Russian prosecutors said little about the matter today, and did not publicly release either the charges or any supporting documents. Essential details remained unknown, even to the defense lawyers, including the dates of the alleged embezzlements and the specific amounts involved. Defense lawyers immediately denounced the new charges as baseless. They said the charges were meant simply to keep Mr. Khodorkovsky and Mr. Lebedev in prison until after the Russian presidential election in early 2008, and until after Yukos, their former giant oil company, is liquidated by Russian receivers. Robert Amsterdam, one of Mr. Khodokovsky’s lawyers, said from London in a conference call with Western reporters that the charges were a continuation of Russia’s use of its prosecutors, courts and investigators in “a fraudulent system of asset theft.” “The present proceedings are a miscarriage of justice,” he said. In outline, the charges assert that Mr. Khodorkosvky and Mr. Lebedev used a series of internal transfers among Yukos and its subsidiaries to surreptitiously siphon off some $20 billion in oil revenue from the company. According to Mr. Khodorkovsky’s lawyers, some of the money is said to have passed through the Open Russia foundation, a charitable organization that Mr. Khodorkovksy founded. Open Russia has also been under investigation, and its accounts have been frozen since last year. The defense lawyers said the entire premise for the charges was absurd, and that Yukos’s financial statements, audited by PricewaterhouseCoopers, accounted accurately for all of the company’s oil production and sales. Before Mr. Khodorkovsky’s arrest at gunpoint late in 2003, Yukos was Russia’s top oil producer, Mr. Khodorkovsky’s wealth was vast and his influence was extensive. He had close relations with senior Russian officials, founded Open Russia, underwrote civil-society organizations and spoke of opening Russia to the West and to Western business practices. Fortune magazine declared him Russia’s richest man, and said he had $15 billion of personal wealth. But his business empire and stature were crushed by President Vladimir V. Putin’s Kremlin, which has defended his arrest and has presided over a parallel tax investigation that pushed Yukos into Russian bankruptcy proceedings, where it will be liquidated in a forced sale. Mr. Khodorkovsky’s critics labeled him a cynic and a fraud, saying that he controlled a faction of Parliament by purchasing legislators’ votes and that his fortune was built and secured by insider deals and crime. The Kremlin has sought to cast Yukos as Russia’s Enron, a once high-flying company brought to grief by extensive frauds and dubious accounting schemes. His supporters say he is the victim of a vendetta over his financial backing for some opposition politicians and groups. Mr. Khodorkovsky, who was popular and well regarded in Western business circles, has become an occasional point of contention between Russian and the West. But his cause and his public relations efforts have not attracted widespread support in Russia, where resentment lingers against a class of profiteers who amassed almost instant fortunes in Russia after the Soviet Union’s collapse. His lawyers have framed his case in ways that remain germane outside of Russia’s often murky and bruising business world, underscoring Russia’s spotty record on human rights or respect for the rule of law. No date has yet been set for trial on the new charges, the lawyers said. But it will be held at the remote detention center in Chita, under conditions that will make it difficult for lawyers to meet with their clients or for the public to scrutinize the proceedings.