Financial Crime and Punishment
- By Richard Lourie
- Oct. 27 2008 00:00
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It is now in Russia's interest to release former Yukos CEO Mikhail Khodorkovsky from prison.
That wasn't always the case. Early on, the benefits outweighed the costs. Khodorkovsky was punished for his hubris. He dared to meddle in politics even though he was explicitly warned by then-President Vladimir Putin himself not to do this. This set a firm example for the other oligarchs, and they have taken it to heart. And Khodorkovsky's major oil company passed into Kremlin-friendly hands.
But things have changed in the five years since Khodorkovsky was arrested on Oct. 25, 2003. At the time, few were moved -- billionaires don't get much sympathy. People assumed that French novelist Honore de Balzac's dictum applied: "Behind every fortune there's a crime." But while Khodorkovsky behaved manfully in prison and elicited respect, his fortune dwindled.
Russia also changed in the interim, becoming the odd hybrid it is today. Though social freedoms have remained fairly robust, the holy trinity of democracy -- free media, opposition parties and independent judiciary -- was reduced to the bare minimum. Though Soviet leader Mikhail Gorbachev has recently founded a new political party, chances are it will remain marginal. Nor is any significant shift in media freedom likely. Russians will have to get by with the Internet, Ekho Moskvy radio and a few small-circulation newspapers. The judicial system is the only point where any change of substance can occur.
Though there are other worthy candidates for release, it is Khodorkovsky who has become the symbol of Russia's compromised judiciary. Politically and economically, that symbol has become too expensive to maintain.
A perfect example is Russia's most recent PR disaster, the Georgian war. I support Russia in that conflict. Its actions were justified, even if they were excessive at times. In the West, there was a knee-jerk reaction against Russia that was partially a residue of the Cold War but more the result of Russian thuggery in recent years. The murders of journalist Anna Politkovskaya and former security services officer Alexander Litvinenko cannot of course be laid at the Kremlin's door, but it was hard not to notice that it is the regime's critics -- and never its friends -- who are killed. Had Khodorkovsky been released from prison shortly before the conflict with Georgia, world reaction would have been more tempered.
Khodorkovsky's continued imprisonment continues to complicate relations with foreign leaders like Angela Merkel of Germany, who has been public about her displeasure. On Nov. 18, 2005, the U.S. Senate passed Resolution 322, sponsored by Senators Joe Biden, John McCain and Barack Obama, condemning the lack of impartial treatment for Khodorkovsky, saying that the "judiciary is an instrument of the Kremlin."
Russia may well weather the current financial and economic storm because of its vast hard-currency reserves, the third-highest in the world. But real damage will be done. There has been significant capital flight. Khodorkovsky's shadow falls across any business transaction that goes awry in Russia. If the richest man in the country can end up in jail, what about anyone else?
It's now clear that many oligarchs are better at building business empires than at building actual businesses. They once got rich swapping loans for shares and are now going broke from swapping shares for loans.
Khodorkovsky took a rusty Soviet enterprise and turned it into a sleek, profitable, relatively transparent 21st-century corporation. He was convicted of fraud and tax evasion, crimes that are perfectly quantifiable. He could work off his remaining debt by consulting ailing Russian firms or by teaching in one of the new business schools. If this is not possible, he could be allowed to live quietly in Moscow or to emigrate.
In any case, his release would win significant moral capital for Russia and its new president while removing a toxic liability from the country's books.
Richard Lourie is the author of "The Autobiography of Joseph Stalin" and "Sakharov: A Biography."