Yukos Haunted by Charges of Past Misdeeds

Times Staff Writer

Yevgeny Rybin remembers the last time he was at the home of Leonid Filimonov, vice president of Yukos Exploration & Production. Not long after he walked out the door, two bursts of submachine gun fire were aimed at him.

The Russian oil industry executive, who represented an Austrian company involved in a joint venture with Yukos, escaped unharmed.

Six months later, on March 5, 1999, Rybin's car hit a mine in the road next to his house. Several men rushed out of the bushes and opened fire. Rybin's driver died on the spot and his two bodyguards were badly injured. But Rybin again was unhurt -- he had left the car 15 minutes earlier to attend his nephew's birthday party.

A former military commando was found guilty of the first attack and sentenced to 11 years in prison. But who hired him remains a mystery. The case went all the way to the Russian Supreme Court, which struck from the record suspicions that Yukos was involved, concluding there was "no proof" to support such allegations. No arrests have been made in the second case.

This week, Rybin returned to Moscow from Vienna for a rare visit to a city that is both his home and the place he fears most. The prosecutor general's office is questioning Rybin about the past business conflict that he believes made him a target.

Prosecutors' invitation to Rybin to come back to Moscow --where he is accompanied by an entourage of bodyguards -- underscores the government's commitment to probing every possible criminal allegation against Yukos and the oil company's billionaire former chief executive, Mikhail Khodorkovsky.

Prosecutors charge that Khodorkovsky and his business partners engaged in massive fraud. The men's defenders say the government is trying to turn them into scapegoats for Russia's lax laws and the freewheeling business climate that allowed a small number of people to become fabulously rich as the country dismantled its communist system.

"When it happened, I of course immediately realized where the danger was coming from," Rybin said in an interview this week, referring to the efforts to kill him. "In all my years, I never visited a police station, I never was under investigation.... There were no bandits or crooks in my circle. I never owed money to anybody. But I was very active in exposing the machinations of Yukos -- too active."

Yukos officials scoff at the idea that the company would target Rybin. They say he is attempting to discredit the company because he lost a long-running court battle with a Yukos subsidiary over a joint venture gone sour.

"It's unbelievably brazen that this man is walking around making these kinds of allegations," Yukos spokesman Hugo Erikssen said. "The question of the involvement of Yukos in the attempted killing of Mr. Rybin has been tried all the way to the Supreme Court, and the Supreme Court found that Yukos was not involved."

Prosecutors recently unveiled their case against Khodorkovsky, 40, describing a complex web of shell companies and tax deals he and his business partners allegedly set up to divert profits from stockholders, evade taxes and improperly take control of at least two companies.

The allegations involve not only the early years of post-Soviet capitalism -- when it is widely acknowledged that many companies engaged in all but unfettered privatization deals that skirted the law -- but include assertions of tax violations as recently as 2000 and 2001, when Yukos was operating as an internationally respected and highly Westernized company, poised to become Russia's biggest oil marketer.

Prosecutors are also investigating at least five cases of murder and attempted murder that may have involved Yukos employees, said spokeswoman Natalia Vishnyakova.

"This is unprecedented, fantastic fraud," Vishnyakova said in an interview Wednesday. "The young men who were running these companies have superb brains. They have superior intelligence. But they totally lack such notions as conscience and morals."

In one case under investigation, Mayor Vladimir Petukhov of the oil town Nefteyugansk was killed on June 26, 1998, after accusing the company of underpaying taxes to the city budget.

Prosecutors accuse former Yukos security director Alexei Pichugin of organizing attempts on the life of former Menatep employee Olga Kostina in 1998 and another man with whom Yukos had a business dispute. (Menatep is the holding company that controls most of Yukos stock.) He also is accused of organizing the 2002 slaying of a man, identified only as Gorin, who prosecutors believe knew about other attempted murders and threatened to tell authorities. Gorin's wife was also killed.

Pichugin's lawyer, Georgy Kagener, told the Interfax news service recently that there was no truth to the charges, saying he believed they might have been filed to pressure Pichugin into testifying against others.

Erikssen, the Yukos spokesman, rejected all such allegations. "Any accusation that Yukos is behind those assas- sination attempts is malicious slander," he said.

Indictments allege that Khodorkovsky and his partners at Yukos illegally obtained $1.35 billion in tax refunds in 2000 and 2001 by transferring assets among various shell companies. In 1999, prosecutors say, four Yukos companies improperly paid $176.4 million in taxes in promissory notes instead of money transfers.

The heart of the financial case goes back to 1994, when Menatep, controlled by Khodorkovsky and business partner Platon Lebedev, was involved in guaranteeing bids for the privatization of a lucrative, state-owned fertilizer company called Apatit.

With the state set to offer a 20% stake to investors, Khodorkovsky and Lebedev set up more than 100 small companies that consisted, Vishnyakova said, of "a general director, a desk and a chair. And all of them sit in Menatep bank."

Four of the companies, allegedly posing as independent firms, bid on the tender, and one of them won -- a joint stock company called Volna. Menatep had provided letters of guarantee for all four firms pledging to meet a key condition of sale: that the buyer invest $300 million within two years to improve Apatit's infrastructure and that of the town in which it was based.

Shortly after the sale, prosecutors allege, Volna began transferring shares to other shell companies. "It goes without saying they didn't invest a penny in the investment commitments," Vishnyakova said.

By the time the two-year deadline for making the investments expired and regional authorities went to Volna to demand the public's 20% stake back, "it turns out Volna doesn't have the shares.... There was nothing there."

Anton Drel, a lawyer for Khodorkovsky and Lebedev, could not be reached Wednesday to discuss the charges in detail. He has said in the past that the fact that Menatep guaranteed the bidders does not mean the companies weren't independent, and if Volna did not live up to its investment commitment, it was because it was financially unable to do so.

Lebedev stepped forward to settle the matter in 2002, with Volna repaying the equivalent of about $15 million. Yukos executives have cited that agreement, and the prosecutor general's endorsement of it, as evidence that the current prosecution is unfounded.

"All the matters in dispute concerning the acquisition of OAO Apatit shares were settled.... It has remained unchallenged," Yukos said in a statement. "All of the above circumstances indicate that the [case] has been fabricated on somebody's orders, and is not supported by any evidence."

But prosecutors now say the agreement was invalid because it underestimated the value of the shares by $47 million. And the scheme didn't end there, they allege.

While Khodorkovsky and Lebedev controlled Apatit between 1995 and 2000, prosecutors say, they arranged to sell the company's products at below-market prices to companies they controlled. Those companies subsequently sold the goods to consumers at market prices, and Khodorkovsky and his partners allegedly "appropriated the difference."

The result was a loss to other shareholders of $205.6 million between 2000 and 2002, prosecutors charge.

Rybin says he discovered a similar scheme when a Vienna company he headed, East Petroleum Investment, was involved in a joint venture in Siberia with an oil company known as Tomskneft, in which Yukos later acquired a majority share.

Rybin said Yukos was driving down the price of the shares and forcing other shareholders to unload their holdings. "They took all the equipment out of Tomskneft and put it on the balance sheet of offshore companies they created," Rybin said.

He figured his share should have been worth $200 million, but he was forced to sell it for less than $3 million. Yukos officials, he said, offered to make up the difference by allowing him to share the off-the-books profits they were allegedly accruing.

The methods he described are similar to those outlined by prosecutors in the Apatit case: Oil was sold at below-market prices to shell companies that Yukos managers owned, then resold at market prices, "leaving fabulous dividends in those one-day companies."

"They would create dozens of companies in one week, and they would close down dozens of companies in one week. This way, they were taking billions of dollars out of the company," Rybin said.

"During eight months of negotiations, we watched the way this company operated, and when we realized how they operated, we became terrified," Rybin said. "And when I began to make noise about it, they came up with a plan to kill me so I wouldn't be in their way."

Yukos executives have said their books were reviewed by reputable international auditors and they deny Rybin's version of events. The matter, they say, had already been litigated in open court in their favor. They depict Rybin as a disgruntled investor who lost his claims at least twice in Austrian arbitration courts.

"Yukos is only using legal means to fight these kinds of battles," Erikssen said. "Yukos is fighting in Western courts, unsubornable courts, and abides by the results of those courts, and both decisions have been in Yukos' favor."

A number of independent analysts say prosecutors will have difficulty winning a conviction because most of what Khodorkovsky is alleged to have done was probably legal.

"Everybody was and is doing it. I think it is legal in the light of the existing taxation laws," said Viktor Burobin, a prominent Moscow attorney with no known ties to Yukos. "We are talking here not about tax evasion, really, but about the minimization of taxes, which is every company's main right."

As for the tax refund charges, Burobin said, Yukos cannot be held liable if local tax authorities approved the company's claims and refunded the money. "The state was too relaxed, and most businesses took advantage of it. If the state accepted candy wrappers for tax payment, we can't blame those who happened to have lots of candy wrappers handy."

The fact that so many companies probably engaged in similar conduct is what raises flags for those who believe the prosecution is politically motivated.

"The problem is the loopholes in the law," said Yulia Latynina, an analyst with the Echo of Moscow radio station. "Well, why not fix those loopholes instead of selectively putting businessmen in prison? Khodorkovsky paid $4.5 billion in taxes last year. He paid more than any Russian firm.

"To take Yukos to court for tax evasion is like taking the barons of the Middle Ages to court for bloody feuds. This is their way of life," Latynina added. "Because this is not just a political campaign -- Khodorkovsky will go to jail, and his property will be confiscated. But where will his property go? Hardly to the people. Most likely it will go to the people who were interested in putting him in prison."

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