Russian Tycoon Sentenced; System of Justice Indicted

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.

Khodorkovsky said he would use his remaining fortune, which dwindled from $15 billion to $2 billion when Yukos’ stock price plummeted after his arrest in October 2003, to create charitable organizations to support Russian poetry and philosophy, and to lobby for the rights of prison inmates. Lawyers for both defendants said they would appeal in Russian courts and in the European Court of Human Rights.

“I will work together with those who want to and can speak about the country, the people, of our reality and future. I will fight for freedom -- mine, Platon Lebedev’s, other friends of mine, all of Russia’s,” Khodorkovsky said. “And especially for the next generation, to whom our country will fully belong in a few years. For them, my fate should stand as a lesson and an example.”

The judge at one point asked Khodorkovsky if he understood the sentence. “Yes, I did; I consider this sentence a monument to Basmanny-type justice,” he replied, referring to the Kremlin-friendly local court that first sentenced him to prison.

Lebedev was asked the same question. “No sane person can understand what you are reading here,” he replied.

“Well, if you don’t understand it, I will sum it up for you,” Judge Kolesnikova said without changing expression, and then began to reread the charges at breakneck speed.

“Yes, I understand your crime,” Lebedev then said, using a Russian word that sounds nearly the same as the word for “ruling.”

“You mean our ruling?” the judge asked.

“No, I said I understood your crime,” Lebedev answered.

Inna Khodorkovsky continued to lock eyes with her husband and wipe tears from her face. “I don’t know what I will do now. It was really a shock to me. Despite all odds, I was expecting a different sentence,” she said after the session.

Boris Khodorkovsky, the defendant’s father, said he was also surprised by the penalty. “I am not an economist, but I never thought that buying something and selling something was a crime,” he said. “Whose fault is this? Well, I am to blame myself. It was my fault that I didn’t tell him to get out of this country while the going was good.”

Robert Amsterdam, a Canadian lawyer who is part of Khodorkovsky’s defense team, called the sentence “another attempt to legitimize the expropriation of Yukos.” The firm’s main production unit was seized by tax authorities last year to settle a $27.5-billion tax bill and sold at half its value to a state-controlled company headed by a senior government official.

In a nation where resentment against ultra-wealthy businessmen runs high, there has been little popular support for the entrepreneur.

“He made himself rich on the backs of other people. And if he’s a thief, why shouldn’t he be in jail?” said Ekaterina Ivanova, one of several dozen demonstrators who held signs with such messages as “Khodorkovsky, Give Back Our Money” along the only stretch of the street not blocked off by hundreds of police officers and barricades.

Dozens of Khodorkovsky supporters shouting “Freedom!” staked out turf on the other side of the street. Andrei Sidelnikov, coordinator of the youth group Pora!, named after the organization that helped inspire the recent “Orange Revolution” in neighboring Ukraine, said the large number of police on the streets was evidence of the government’s worry over the case.

“The authorities are scared. They’re afraid when people assert their civil rights,” Sidelnikov said. The outcome, he added, “means a totalitarian regime is on the way, democratic reforms will be put on hold, and people will be deprived of their basic liberties.”

Khodorkovsky will probably serve out his sentence in a prison labor camp once his appeals are exhausted. With credit for time served, he could be released in 2012, a date that coincides with the end of the next presidential term. That would quash any possibility that Khodorkovsky could organize an effective opposition to Russian President Vladimir V. Putin or his successor in the 2008 election, as has been widely speculated.

“This sentence is another indication that Putin intends to cling to power, at least until 2012,” said Mikhail Delyagin, a liberal economist and chairman of the Institute for Globalization Studies in Moscow.

“Today’s sentencing has drawn a deep and clear dividing line between the Kremlin and the Russian intelligentsia and business circles,” Delyagin said.

“And Judge Kolesnikova, by this incredible decision, made a new Russian revolution a reality.”

Times staff writer Sergei L. Loiko contributed to this report.