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. Last Updated: 07/27/2016

Khodorkovsky and Lebedev Charged

Itar-TassThe prison in Krasnokamensk, where Khodorkovsky was incarcerated until his move to a detention center in Chita.
Prosecutors on Monday indicted Mikhail Khodorkovsky on fresh charges of multibillion-dollar money laundering and embezzlement that ensure the former Yukos chief will stay in a Siberian prison.

Khodorkovsky would have been up for parole later this year.

The charges were issued during a hearing at the regional prosecutor's office in the east Siberian city of Chita, said lawyers for Khodorkovsky and his associate Platon Lebedev, who is also behind bars. The city went into military lockdown for the hearing.

While prosecutors offered few details about the new charges, Khodorkovsky and Lebedev's lawyers said the two stood accused of embezzling and laundering up to $25 billion in oil revenues through offshore trading companies and Khodorkovsky's Open Russia foundation.

"All the lawyers agree that this is an insane process," Yury Shmidt, one of Khodorkovsky's lawyers, said by telephone from Chita. "To launder even close to that amount is absolutely impossible."

Lawyers for the two men said the new charges aimed to make sure Khodorkovksy and Lebedev are not released on parole in advance of the December State Duma elections and the March 2008 presidential vote.

Both men are serving eight-year sentences for fraud and tax evasion. They would have been eligible for parole after serving half their time -- October of this year for Khodorkovsky, and July for Lebedev.

The new charges mean both Khodorkovsky and Lebedev will be behind bars for the foreseeable future: Even if they were granted parole for their old charges, the new charges mean they must stay in prison until they go to trial. The date of the trial has not been set. Lebedev spent nearly one year in prison before his first trial began; for Khodorkovsky, it was almost nine months.

"I'm sure they will find a way to keep him in prison," Tim Osborne, the director of Yukos majority shareholder GML, formerly known as Group Menatep, said by telephone from London.

If convicted, Khodorkovsky and Lebedev face an additional 15 years in prison.

Spokesmen for the Prosecutor General's Office in Moscow declined to comment on the charges but confirmed the new charges in a statement.

Prosecutors earlier said that from 2000 to 2003 Yukos officials illegally transferred about $20 billion in crude oil sales through two trading subsidiaries, Fargoil and Ratibor, both registered in tax havens. The revenues from sales of the refined product were then said to have been transferred back to Yukos, and the profits were siphoned off by Khodorkovsky and his associates.

Shmidt put the figure between $23 billion and $25 billion.

Antonio Valdes Garcia, the former head of Fargoil, fled authorities in Moscow in mid-January, just days before he was due to be sentenced with former Ratibor president Vladimir Malakhovsky over their involvement in the alleged embezzling scheme.


Igor Tabakov / MT
Khodorkovsky and Lebedev listening to proceedings during their first trial in Moscow, which ended in May 2005.
"These revenues are all accounted for. They did not disappear. They were not embezzled. They were not taken from shareholders," Sanford Saunders, a member of Khodorkovsky and Lebedev's legal team, said in a conference call from Washington.

Saunders noted that it would have been impossible for Yukos officials to launder the amount of money they are accused of illegally channeling without catching someone's attention. In 2002, he pointed out, the company's total revenues, according to PriceWaterhouseCoopers, was $20 billion, he said.

The trial is to be held in Chita, which lies 5,000 kilometers east of Moscow near the Chinese border, Saunders added. The remote location makes it harder for lawyers to meet with Khodorkovsky and Lebedev and for reporters to cover the event, he said.

Chita regional officials deployed police and special forces to city streets in advance of the hearing, which was inexplicably delayed by several hours from its scheduled start at 2 p.m., Moscow time.

State television showed troops in riot gear and carrying submachine guns as the armed four-car convoy carrying Khodorkovsky and Lebedev arrived at the regional prosecutor's office.

Lebedev, who was serving his sentence at a prison in the Yamal-Nenets autonomous district, was transferred to a detention center in Chita in December as prosecutors prepared for the new case. Khodorkovsky was transferred from a labor camp in the region to the capital city at the same time.

"It was as though the city had prepared for a riot -- police in masks and guns were lining all the roads," Shmidt said. "The leadership has gone crazy. It's hard to believe what a circus they've built up."

Lawyers for Khodorkovsky and Lebedev reiterated their belief that the whole case was politically motivated. The initial 2003 arrests came months before Duma elections in December, for which Khodorkovsky had provided significant opposition funding. The arrests also came amid rumors that the former oil chief, once Russia's richest man, was on the verge of selling a major stake in Yukos to a U.S. oil company.

President Vladimir Putin has since reasserted state control over the country's oil and gas sector, and many Yukos assets have gone to state-run companies. A further 183 assets belonging to the company, declared bankrupt in August 2006, are due to be auctioned off this year.

The sale of Yukos assets played a role in Monday's charges, said Robert Amsterdam, another lawyer representing Khodorkovsky and Lebedev. The new charges, Amsterdam said, are "an attempt to legitimize the seizure of assets through the artifice of money laundering to ensure no possible funding of political parties or opposition through the electoral process."

The state is also seeking to seize Yukos assets abroad, said John Pappaladro, another member of the legal team. Prosecutors have issued and been denied requests for documents from Switzerland, the Netherlands and Lichtenstein. Pappaladro says prosecutors contend that the documents detail Khodorkovsky and Lebedev's embezzlement and laundering.

Cyprus, Lithuania and Poland have handed over some documents, he said.

The legal team sounded a pessimistic note, saying it was inevitable that Khodorkovsky and Lebedev would be convicted on the new charges.

GML chief Osborne was similarly bleak. "The court will bend over backward to assist the prosecution. The defense won't be given full freedom and the verdict will be a foregone conclusion."

Yelena Liptser, a lawyer for Lebedev, said that despite the new charges she would fly to Chita on Tuesday to attend a preliminary parole hearing Thursday.