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. Last Updated: 07/27/2016

Risking It All for a Couple of Billion

Mikhail Khodorkovsky, 39 and Russia's richest man with an estimated worth of $8 billion, makes it sound so easy to go from part-time construction work to building the country's No. 2 oil company Yukos.

Now the poster boy for corporate clean-ups, transparency and the joys of investor rights, he hasn't always been.

But he has managed to shed his past reputation as a rapacious oligarch who parlayed Komsomol connections into the creation of one of the nation's first banking empires. And largely forgotten are the accusations that he later diluted minority investors' stakes in Yukos through loudly disputed share issues that made headlines as one of the highest profile corporate governance scandals of the 1990s.

Khodorkovsky in 1991 told The Washington Post that the only ventures that could succeed at that time were those run by people with connections at the top. Now, he fast-forwards past that when describing his first steps on the way from his student days, when Russia sat on the cusp of capitalism, to the big time as one of the world's leading private entrepreneurs.

And he makes it sound as simple as painting by numbers: "When I was studying, I joined construction teams to earn extra cash. When I graduated, I opened a youth cafe. Then it became possible to trade in computers. Then Russia liberalized the currency trade. We moved into that because it was profitable, but we kept on trading in computers and cognac, too. Then the state allowed us to create banks, so we moved into that, handling credits. Then it decided to sell off industry, so we bought 50 or so enterprises," he says.

But when Khodorkovsky gets to how he bought a 40 percent slice of Yukos for $450 million -- other sources say 45 percent for $159 million -- in the notorious loans-for-shares auctions in 1995, he stops his pat narration. Allegations that he bought a crown jewel for a song in a rigged auction still clearly rankle. Why should he be known as a robber baron, when, as he sees it, he risked his life?

"We were taking a massive risk," he says. "We lent money to the government [in return for the stake]. But if the Communists had come to power we would have had to pay not just with losing this money but also with our lives," he says.

"We also risked our lives if we couldn't turn the company around. At that time, 30 percent of the oil didn't get to the final consumer. Bandits stole it. But now that we've restored order, it seems to everyone that we bought it cheaply."

Furthermore, he says, billions of dollars in debt and six months of wage arrears were strangling Yukos. He even tried to get the former head of the Republic National Bank of New York, Edmond Safra, on board for the deal, but Safra refused, saying it was too risky. Investor opinion of Khodorkovsky hit rock bottom in 1999 amid scandals over share dilutions.

But then he turned it around.

Following a series of high-profile battles, Khodorkovsky reached a settlement to buy out his biggest, and loudest, minority shareholder, foam-cup tycoon Kenneth Dart. Having gained full ownership control of Yukos, he says, he could launch a clean-up campaign at the company and on his own reputation. He pioneered, in Russia, the art of good PR, making the most of how Yukos was shaking its past, boosting transparency and improving relationships with minority shareholders.

As a result, Yukos' shares have soared from less than $1 in the bad old days of 1999 to almost $10 now.

"There is only one difference now between us and a global oil major," he says. "We are only effective in one country. Expanding internationally is a different experience all together. We still need to prove whether we can do this."

Investors say Yukos has gone from illustrating why to steer clear of Russia to leading most of the country in modernizing its production and management.

As Yukos has changed, so has Russia's investment climate and risk profile.

"Now we have gone from questions of building a state to questions of building pipelines," he says. "I don't have to go to the president anymore to ask whether there will be a redistribution of property. Now I go to the prime minister to hammer out details for pipeline routes."

As he tells it, he too has undergone a transformation. The tycoon has plowed millions not just into PR but into philanthropic projects such as a foundation called Open Russia that aims to build ties between Russia and the West.

"Before 2000, I thought business responsibility and social responsibility were separate issues. I've probably grown up now," he says. "Society expects not only success but social responsibility from its most high-profile members."

Statements like those are a far cry from the early 1990s when Khodorkovsky and his business partner Leonid Nevzlin published a book celebrating wealth called "Chelovek s Rublyom," or "The Man with the Ruble."

With the current emphasis on corporate governance as the key to higher company value, cynics might say that his interest in social responsibility is just a new way to turn a profit. Khodorkovsky, however, describes it as life-altering.

"It was a surprising revelation for me," he says. "I understood that this is something absolutely necessary not just for business but for me to be a normal person."

Not that the transformation is necessarily eternal: "Of course, I don't know if this will change in the future," he says with a wolfish grin.