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Russian Tycoon Sentenced; System of Justice Indicted

June 01, 2005|Kim Murphy | Times Staff Writer

MOSCOW — Mikhail Khodorkovsky, the oil tycoon who was once Russia's richest man, was sentenced Tuesday to nine years in prison and ordered to pay much of his fortune in penalties in a case widely seen as a barometer of the country's commitment to private businesses and political freedoms.

A panel of three judges convicted the former Yukos Oil Co. chief executive on charges of fraud, tax evasion and embezzlement, ending a marathon, 12-day reading of the verdict.

The oil magnate's lawyers said they would mount an international campaign to gain legal and political support for appeals and accused Western leaders of ignoring human rights abuses in Russia because of the nation's status as a major oil supplier.

Co-defendant Platon Lebedev, Khodorkovsky's business partner and chairman of Group Menatep, was also sentenced to nine years, and both men were ordered to pay a total of $615 million in taxes and fines.

The verdict against the 41-year-old Khodorkovsky, the most famous of the handful of billionaire "oligarchs" who dominate Russia's post-communist economy, was swiftly condemned by defense lawyers and human rights activists, who said it marked a dispiriting step back toward Russia's totalitarian past.

"This case speaks to the toughness of a regime that doesn't hear the voice of society, doesn't hear the voice of intelligentsia, and a regime that has made another step toward its own doom," Lev Ponomarev, head of the organization For Human Rights, said outside the courthouse.

U.S. Rep. Tom Lantos (D-San Mateo), who has sponsored a measure in Congress to suspend Russia's membership in the Group of 8 industrial nations, called the proceeding "a political trial before a kangaroo court, [which] has come to a shameful conclusion."

Lantos, in Russia for meetings with parliament members on a variety of issues, was ushered by a Khodorkovsky public relations agent and a U.S. Embassy official into the courthouse just after the sentence was pronounced. He predicted "tremendous congressional and public reaction" in the U.S. to the verdict.

"While we certainly want to maintain the very best relations with Russia that we can, it's self-evident that to label Russia under these conditions as a democratic country is inaccurate," he said.

In Washington, President Bush also expressed concern. "It appeared to us, at least people in my administration, that it looked like he had been judged guilty prior to having a fair trial," the president said of Khodorkovsky at a Rose Garden news conference.

In the small, crowded courtroom where the 1,200-page verdict was delivered, the judges took turns reading through the final pages so rapidly that their words were barely discernible.

In the indictment, whose charges the court largely endorsed, Khodorkovsky was accused of setting up a series of shell companies, transfer pricing schemes to funnel profits offshore and paying taxes through an illegal system of promissory notes. The former CEO contended that he was guilty of no more than attempting to minimize his taxes with methods that were widely used and legal at the time.

It is widely believed that Khodorkovsky was singled out for prosecution because of his financing of opposition political parties, his aggressive attempts to influence legislation in the parliament and his challenge to the Kremlin's energy policies. In the months before his arrest, he was exploring what would have been Russia's first privately owned oil pipeline and discussing the possible sale of a major stake in Yukos to a Western oil company.

During the trial, prosecutors depicted Khodorkovsky as a man who had privatized the massive state oil company for a mere $309 million in 1995 and failed to pay the state a legal share of his profits.

"We categorically deny any political underlining in this case. Concrete, serious crimes were committed.... Astronomical sums of money were stolen," said Natalya Vishnyakova, spokeswoman for the prosecutor general's office.

"It is time to stop telling tales about how transparent and law-abiding a company Yukos was.... We are talking about garden-variety fraud, garden-variety stealing and tax evasion," Vishnyakova said.

The judges agreed.

"Khodorkovsky set up an organized group whose goal was to illegally expropriate shares of companies, establish control over these companies and proceed to extract profits with the purpose of personal enrichment," Chief Judge Irina Kolesnikova declared.

After the sentence was pronounced, Khodorkovsky slipped from his usual smiling demeanor to a transfixed stare, his eyes locked with those of his wife. He hurriedly drafted a statement with his lawyers, saying he believed his fate had been sealed from the beginning.

"Today millions of our fellow citizens have seen how, despite announcements from the country's top leadership about strengthening the administration of justice, they are not yet hoping for that. It's a shame, a disgrace and the ruin of our state," the businessman declared.

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