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JUSTICEUNDERPRESSURE THESECONDKHODORKOVSKYLEBEDEVTRIAL EXECUTIVESUMMARY PreparedbyDefenseCounselof MikhailB.Khodorkovsky&PlatonL.

Lebedev

SEPTEMBER30,2011

Forme,asforanybody,itishardtoliveinjail,andIdonotwanttodiethere.ButifIhavetoIwill nothesitate.ThethingsIbelieveinareworthdyingfor.IthinkIhaveproventhis. MikhailB.Khodorkovsky, AmnestyInternationalPrisonerofConscience FinalWordstotheKhamovnicheskyCourt Moscow,November2,2010

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TABLEOFCONTENTS I. OverviewofKeyDevelopments..................................................................................................5 PreTrialInvestigatoryPhase......................................................................................................5 Charges......................................................................................................................................6 ProsecutionsShamCase............................................................................................................6 DefenseDeniedMeaningfulDueProcess...................................................................................6 VerdictandSentence.................................................................................................................7 TheAppeal.................................................................................................................................8 TransfertoPrison.......................................................................................................................9 II. KhodorkovskyandLebedevSupposedlyEmbezzledallYukosOiloveraSixYearPeriod.............10 YukoswasSupposedlyaHugeSham..........................................................................................10 RegulatoryComplianceisSupposedlyIndicativeofCriminalActivity..........................................11 III. FundamentalErrorsandWeaknessesExposedbytheDefense...................................................12 FormerandCurrentRussianGovernmentOfficialsTestifiedthatChargesWereNotCredible.....15 OtherWitnessTestimony...........................................................................................................17 IV. V. ProsecutionsFailuretoExplainCharges.....................................................................................20 DenialofthePresumptionofInnocence.....................................................................................21 CourtsRefusaltoAdmitExculpatoryEvidencePresentedbytheDefense..................................22 CourtsRefusaltoAssistDefenseinCompellingProsecutorstoProduceEvidenceortoAssist DefenseinCompellingThirdPartiestoProduceExculpatoryDocuments....................................22 CourtsRefusaltoExcludeIllegallyObtainedEvidence...............................................................23 DUEPROCESSVIOLATIONSANDOFFICIALMISCONDUCT...............................................19 THEAPPEAL...................................................................................................................19 WHYTHEFACTSANDTHELAWSHOULDHAVEEXONERATEDTHEDEFENDANTS............12 WHATTHECHARGESANDTHEVERDICTMEAN..............................................................9

BACKGROUND&TRIALOVERVIEW................................................................................5

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MisrepresentationofEvidence...................................................................................................23 VanishingEvidence.....................................................................................................................23 IncompleteEvidence..................................................................................................................24 BlockedDefenseWitnessesandNoShows.............................................................................24 DisqualificationofDefenseExperts............................................................................................26 DefenseNotAllowedtoCrossExamineProsecutionExperts......................................................26 ProsecutorialMistreatmentandIntimidationofWitnessesandExperts.....................................26 AttemptstoControlTestimonyofProsecutionWitnesses..........................................................28 UseofParallelInvestigationstoCircumventRulesonGatheringEvidence.................................28 AbuseofInvestigatoryandProsecutorialPowersthroughCoercionofPwC...............................28 DirectandIndirectThreatstoDefenseCounsel..........................................................................29 DenialofDefensesAccesstoOfficialTrialTranscripts................................................................29 InterferenceinDefendantsAccesstoCounselandtoCaseFile..................................................30 ExtendedPreTrialDetention:ReformsFloutedbyObsessivePersecutionofDefendants......30 ProsecutorsIncomprehensionofCaseMaterials.......................................................................31 CourtWithoutJurisdiction.........................................................................................................32 VI. VII. VIII. APPENDIX:THEKHODORKOVSKYLEBEDEVTRIALANDAPPEAL20092011ASSESSEDAGAINST INTERNATIONALCOMMISSIONOFJURISTSSTANDARDSONJUDICIALPROCEEDINGS................37
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DISMISSALOFCRIMINALCOMPLAINTFILEDSEEKINGINVESTIGATIONOFJUDGESAND PROSECUTORS...............................................................................................................33

IMPLICATIONSFORRUSSIA............................................................................................33

CONCLUSION.................................................................................................................36

This document has been prepared by defense counsel of Mikhail Khodorkovsky, former Yukos Oil CompanyCEO,andofhisbusinesspartnerandfriendPlatonLebedev.FromMarch2009toDecember 2010 Khodorkovsky and Lebedev were subjected to a trial centering on allegations that they had embezzled the entire oil production of Yukos over the sixyear period from 1998 to 2003. This document provides an overview of the trial. Additional information is available in a series of legal summaries issued by defense counsel as the case unfolded.1 The defense counsel also publicly released extensive official trial documentation, with English translations.2 For further information, thelegaldefenseteammaybecontactedviatheKhodorkovsky&LebedevCommunicationsCenter.3 I. BACKGROUND&TRIALOVERVIEW OverviewofKeyDevelopments In2007,formerYukosOilCompanyCEOMikhailKhodorkovskyandhisbusinesspartnerandfriend PlatonLebedevbecameeligibleforreleaseonparoleunderRussianlaw,havingservedhalfoftheir eightyearsentencessincebeingarrestedin2003andconvictedinapoliticallydrivenfirsttrialthat ended in 2005while Yukos was destroyed through bogus tax reassessments, forced bankruptcy proceedingsandriggedauctions.4Giventheireligibilityforreleaseonparolein2007,oratthelatest uponcompletionoftheireightyearsentencesin2011,newchargesweresloppilymanufacturedand proceedingswereinstigatedagainstKhodorkovskyandLebedevtoprolongtheirincarceration.The new charges, announced in February 2007 and brought to Moscows Khamovnichesky Court in a secondtrialthatstartedinMarch2009,wereintendedtokeepKhodorkovskyandLebedevisolated fromRussianpoliticalandbusinessspheres,tostaintheirreputationsandtowhitewashanddistract attention from corrupt and criminal actions committed by highranking Russian officials, many of whomarebelievedtohavepersonallybenefittedfromthedestructionofYukos.Khodorkovskyand Lebedev were found guilty in December 2010. Following a failed appeal in May 2011, their imprisonmenthasnowbeenextendedto2016. PreTrialInvestigatoryPhase Intheinvestigatoryphaseleadinguptothesecondtrial,thedefensecataloguedaseriesofsevere abusesoftheRussiancriminaljusticesysteminthenewcase,andassertedthattheseabuseswere sonumerousandsosevereastobeirremediable.Facingchargesthatwerebothfactuallyandlegally untenable,onMarch6,2009thedefendantspetitionedtoterminatetheproceedings.OnMarch17, 2009,thepresidingjudge,ViktorDanilkin,rejectedthepetitionandscheduledopeninghearingsfora newtrialtocommenceonMarch31,2009.OnApril21,2009,KhodorkovskyandLebedevplednot guilty,whileemphasizingthatthechargesremainedincomprehensibleandunexplained.
Summariesoftrialproceedingsperiodicallyissuedbythedefenseareavailableat: http://www.khodorkovskycenter.com/mediacenter/ongoingpersecutionsecondtrial. 2 Availableat:http://www.khodorkovskycenter.com/legaldocuments. 3 DetailsavailableundertheContacttabat:www.khodorkovskycenter.com. 4 MoreinformationabouttheYukosAffairisavailableatwww.theyukoslibrary.com.Theexpropriationof Yukosisnowthesubjectofthehigheststakeproceedingsininternationalarbitrationhistory:twosubsidiaries ofmajorityYukosshareholderGML,alongwiththeVeteranPetroleumpensionfundforformerYukos employees,areseekingredressbeforethePermanentCourtofArbitrationinTheHaguewithcombinedclaims for$100billionincompensationfortheRussianFederationsunlawfulanddiscriminatoryexpropriationof Yukosundertheguiseoftaxationmeasures.KhodorkovskyandLebedevarenotinvolvedinthoseproceedings.
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Charges Khodorkovsky and Lebedev were accused of embezzling 350 million metric tons of oil worth over $25.4 billion and laundering over $21.4 billion, and embezzling $102 million in shares held by EasternOilCompany(VNK,aYukossubsidiary)andlaunderingtheallegedlyembezzledshares. Intheprosecutionsclosingarguments,thevolumeofoilallegedlyembezzledwassuddenlyreduced by approximately one third, to 219 million metric tons valued at approximately $13.4 billion. By eithermeasure,theallegationshadnocrediblegroundingeitherinthefactsdescribedorinthelegal terms invoked by prosecutors. The indictment was a compendium of factual and legal impossibilities.Bothintheindictmentandattrial,theprosecutorsfailedtoconnectanyconductby the defendants to any viable legal theory of criminal liability. Instead the charges were sustained purelybyprosecutorialdiktat. ProsecutionsShamCase The prosecutions presentation of its case, which ran from April 21, 2009 to March 29, 2010, resembledapoorlyorganizedfishingexpeditionratherthanlogicallystructuredproceedingsactually provingtheoccurrenceofanyelementsofcrime.Despitefillingtimebyreadingfroma188volume casefile,andparading numerouswitnessesintocourt,prosecutorswereunable(anddid noteven try)toprovehowitwaspossiblethatYukoscovereditsoperatingcosts,investedheavilyincapital expendituresandacquisitionsandpaidtaxesanddividendswhentheentireoilproductionofYukos over a sixyear period was being stolen, as alleged in the indictment. The prosecutions witnesses proffered either no testimony germane to the accusations, or testimony that actually contradicted theaccusations.Despitehavingover11monthstoreaddocumentsandquestionwitnessesincourt, the prosecutors plainly failed to prove their charges. This did not prevent prosecutors from proclaimingintheirclosingargumentsthattheyhadproventheguiltofthedefendantswhilebeing unabletosumuppreciselyhowtheysupposedlydidso. DefenseDeniedMeaningfulDueProcess In the face of official misconduct and due process violations, as the trial unfolded the defense presentedhighlysubstantiatedmotionsfortherecusalofprosecutorsandofthejudgetonoavail. Appearances of an adversarial trial were for the most part cosmetic efforts by the authorities to portraytheprocessaslegitimate.Thedefendantswerepermittedtospeakincourtalmostwithout restrictions,butthejudgeblockedtheirlawyersfromintroducingexculpatorydocumentaryevidence and refused to hear many witnesses and experts. The defense was allowed to file motions and objections,butthevastmajorityofthesemotionsandobjectionswereroutinelydeniedorignored. Thesemotionsandotherdefensepleadingswere postedonlinebythe defense,alongwithEnglish translations,illustratingtheabsurditiesoftheprocessthatwasunfolding. The caseclosed mentality of the prosecutors ultimately reigned in the courtroom, given the judgesbiasedhandlingofthemultitudeofdueprocessviolationsthatmarkedtheproceedings.The defenses protestations over the contradictions and outright irrationality of the case were brushed aside by prosecutors and the judge, who refused to address these issues directly. Independent observersvisitingthetrialdescribedtheproceedingsasevocativeoftheworksofKafkaandGogol and an embarrassment to Russia. Nevertheless, despite each successive setback, the defendants made every effort to engage with prosecutors and the court, and they presented a vigorous, methodical,andmeticulouslysubstantiateddefensefromApril5toSeptember22,2010. Irrespectiveoftheeffortsofthedefense,whichwerenotablybolsteredbythecandorofformerand current government officials who supported the defendants through incourt testimony, the
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proceedings continued to be undermined by unfair and unlawful decisions and maneuvers that irreparablyfrustratedKhodorkovskysandLebedevsrightstoafairtrial.Afeelingoffutilityreigned inthecourtroomasthedefensepresenteditsclosingargumentsinwhathadbecomeamockjudicial processdevoidofmeaningfuladversarialengagementonthesubstanceofthecase. VerdictandSentence ThereadingoftheverdictwasinitiallyscheduledforDecember15,2010butanotepostedonthe courtroom door that day announced a postponement to December 27, 2010. The next day, December16,2010,PrimeMinisterVladimirPutinpubliclyintervenedinthecaseduringhisannual nationallytelevised questionandanswer session. With the judge still deliberating on the verdict, thePrimeMinisterdirectlymentionedthecurrentchargesandstatedthatKhodorkovskysguilthad beenprovenincourtandthathemuststayinjail. On December 27, 2010, Khodorkovsky and Lebedev were declared guilty of embezzling and launderingtheproceedsofalloilproducedbyYukossubsidiariesoverasixyearperiod.5Thecourt found the defendants guilty of having embezzled even more oil than prosecutors had alleged, ignoring the prosecutions reduction during closing arguments of the volume of oil allegedly embezzled.6 In convicting the defendants of massive embezzlement, the court notably ignored both the uncontestedprofitabilitydataofYukossproductionsubsidiaries,andthetruemarketpricesofoilin Russia.Thecourtthusavoidedproofoftheabsenceoftheharmthatwouldhavehadtohavebeen sufferedfortheembezzlementchargestohaveanyvalidity. SalesofoilbythesubsidiariestoYukostradingcompaniesweredeemedtoconstituteembezzlement simplyinsofarastheoilwassoldatapricelessthantheexportspotprice.Thisconcoctedtheoryof embezzlement ignored market pricing in Russia as well as industrystandard, lawful procedures for
AfullEnglishtranslationofthe689pageverdictisavailableat: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/2010%2012%2027%20%20MBK PLL%20Verdicten.pdf.TheoriginalRussiantextisavailableat: http://khodorkovsky.ru/files/_docs_/20ac84a43628a035f172b334f4f60bd4/2010.12.27._Prigovor_MBH PLL.doc.RegardingtheVNKshareallegations,aseparate189pagedecisionwasissuedsimultaneouslywith theverdictonDecember27,2010,concludingthattheshareswaptransactionsconstitutedembezzlement. ThecourtpreparedthisdecisioninviolationofRussianlaw,becausethestatutorytimelimitforprosecuting thedefendantshadexpiredtenyearsafterthenowdisputedVNKshareswapagreementshadbeenexecuted in1998.Inthetrialsclosingarguments,theprosecutionhadfinallyagreedwiththedefensethattheVNK chargesweretimebarred,butneverthelessaskedthecourttofindthedefendantsguiltyonthosecharges withoutanysentence.Thecourtdidpreciselyasasked,ignoringthelegalityoftheVNKsharetransactions, whichhadfollowedappropriatecompanyprocedures,wereendorsedbytheRussianMinisterofStateProperty andclearedinvestigatoryscrutinybetween1999and2001.KhodorkovskyandLebedevweredeclaredguilty nonetheless,butwithoutpunishment,duetotheexpiryofthestatuteoflimitations.AfullEnglishtranslation oftheVNKdecisionisavailableat: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/2010%2012%2027%20%20MBK PLL%20Judgment%20on%20VNKen%20(2)_0.pdf.TheoriginalRussiantextisavailableat: http://khodorkovsky.ru/files/_docs_/20ac84a43628a035f172b334f4f60bd4/2010.12.27._Post._o_prekr.ug.dela _MBHPLL_v_chasti_VNK.doc. 6 Inthetrialsclosingargumentstheprosecution,citingarithmeticerrorsandlackofevidence,hadsuddenly reducedthevolumeofoilallegedlyembezzledbyapproximatelyonethird,to219millionmetrictonsvaluedat approximately$13.4billion.Thejudgeneverthelessdisregardedtheprosecutionsbelatedbidforamodicum ofcredibility,andconvictedthedefendantsofembezzlingthevolumeofoiloriginallyallegedintheindictment: 350millionmetrictonsworthover$25.4billionirrespectiveofthearithmeticerrorsandlackofevidencethat eventheprosecutionconceded.
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corporate functioning undertaken by Yukos, involving a downstream and upstream structure of production subsidiaries and domestic and foreign operating companies. Rather than referring to openlyverifiablehistoricdomesticpricesforSiberianoil,theverdictascribedtheRotterdampriceto domestic transactions, in order to argue that the much higher Western price ought to have been applied. This ignored transport costs, customs duties and other expenditures that make up the differencebetweenthepriceofoilinSiberiaandthepriceofoilinRotterdam.Theverdictsimply brushed away these realities, with the judge stating that he did not agree that oil prices differ on domesticandglobalmarkets.7 The 689page decision is a hodgepodge of texts setting forth unsupported factual and legal assertionsthatfailtovalidatethefindingofguilt.Thedocumentismarkedbyobviouserrorsoffact and of law, unsupported leaps of logic, internal incoherencies, and major inconsistencies with the findingsofothercasesadjudicatedbytheRussiancourts.Despitethecloselywatchednatureofthe case surrounding the most highprofile prosecution in Russia, in the decision the court openly ignored applicable procedural and substantive laws as well as fundamental tenets of economics, establishedfactsandcommonsense.Thetrialjudgeevidentlycouldnotcontravenetheinstigators ofthetrial,andhefailedtomasktheenormouslacunaeandsloppinessoftheprosecutionscase. On December 30, 2010, with less than a year remaining before completion of their existing prison terms, Khodorkovsky and Lebedev were sentenced to an overall total of 14 years in captivity. Countingtimealreadyservedtheirreleasewasthereforepushedfrom2011to2017. TheAppeal The defense initiated appeal procedures on December 31, 2010. The appeal was heard by the Moscow City Courtand rapidly dispensed with in a ruling on May 24, 2011 that confirmed the lower courts guilty verdict, although the sentencing was reduced by one year. Khodorkovsky and Lebedevarenowscheduledforreleasein2016,onthe13thanniversariesoftheirrespectivearrests. AlthoughthetrialhearingsendedinNovember2010,thecourt didnot makethe completeofficial recordoftheproceedingsavailabletothedefenseuntilMarch2011,wellaftertheDecember2010 verdict and sentencing. This long delay cast into doubt whether the official record had been completed before the end of the trial, or whether it was really even needed by the judge in the preparationofapreordainedverdict. OnApril25,2011,thedefensefiled1,060pagesofobjectionscataloguingtheextensiveinaccuracies andomissionsintheofficialrecordoftheproceedings.Amongtheobjections:importantmotions bythedefensewereomittedfromthetrialtranscripts;thenumerousadmonitionsandcriticismsthe judge directed to the prosecution throughout the trial were wiped from the record; all defense allegationsthattheprosecutorswerecriminallyliablefortheirpursuitandhandlingofthecasewere alsoabsentfromtherecord;wordswereattributedtothedefensewheninfacttheywerespokenby the prosecution; and nonobjections by the prosecution were converted into objections. Judge Danilkin apparently breezed through and dismissed these defense objections in less than one day, standingbyhisofficialrecordoftheproceedingsandsendingthecasetotheMoscowCityCourtfor schedulingoftheappeal.OnApril27,2011,Russianmediareportedbeforeanyofficialnoticeto thiseffecthadbeenreceivedbythedefensethattheMoscowCityCourthadscheduledtheappeal hearingforMay17,2011.Onthatdatetheappealhearingwaspostponedbyoneweek,toMay24, 2011.8 The short duration which the appeal court had to examine the extremely voluminous case
Asstatedonpage616oftheverdict. Thedefensespeculatedthatthedelaywaspoliticallymotivated:becauseonMay18,2011President MedvedevwasscheduledtoshowcasetheSkolkovoInnovationCenterandtoholdamajorpressconference,
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fileapproximatelyonemonthmeansthatthematerialsinthefile,andthedefensesarguments, werenotsubjecttosubstantiverevieworrealconsideration. OnMay24,2011,thedaythattheirappealfailed,AmnestyInternationaldeclaredKhodorkovskyand LebedevtobePrisonersofConscience.9 TransfertoPrison InJune2011,KhodorkovskywassenttoPenalColonyNo.7,nearthetownofSegezhaintheregion ofKarelia,borderingFinland.ThecolonyislocatedonthewestcoastofLakeVygozero,ontheroute oftheWhiteSeaBalticCanal.ThecanalwasconstructedintheSovieterabyforcedlaborofgulag inmates,duringwhichover10,000prisonersdiedaccordingtoofficialfigures.Meanwhile,Lebedev wastransferredtoPenalColonyNo.14inthecityofVelskintheneighboringregionofArkhangelsk. II. WHATTHECHARGESANDTHEVERDICTMEAN In the verdict issued on December 27, 2010, the defendants were convicted on allegations of physicallyseizingandtakingintotheirpossessiontheentirecrudeoilproduction,oversixyears,of the three Yukos production subsidiaries: Yuganskneftegaz, Samaraneftegaz and Tomskneft. This embezzlement was alleged to have occurred at the wellhead, with the three subsidiaries thereby allegedly victimized. The size of the damage incurred was calculated as the amount of allegedly embezzledcrudeoilmultipliedbytheexportpriceofthecrudeoil,knownastheRotterdamcrudeoil spotprice.ThedifferencesbetweentheexportRotterdamcrudeoilpricesandtheamountsYukos production subsidiaries were paid by their parent based on domestic prices for unprocessed wellheadoutputwereruledtobecriminallywrongfulunderpaymentstantamounttoembezzlement. TheverticallyintegratedstructureofYukoswasconsideredtobeamassivecriminalenterpriseand thecorporatestructuresusedbythecompanytoexportoilwereconsideredtobeengagedinmoney laundering. In a separate decision delivered by the court simultaneously with the verdict, the VNK share swap agreements were deemed as charged to involve embezzlement and laundering of shares by the defendants.10 The verdict featured various untenable suppositions: that Khodorkovsky and Lebedev supposedly embezzled from Yukos production subsidiaries all Yukos oil over a sixyear period; that Yukos was supposedlyahugesham;andthatregulatorycomplianceissupposedlyindicativeofcriminalactivity. Eachofthesesuppositionsisdescribedbelow.

theappealhearingdelaywaslikelyanefforttoavoidmarringthepresidentialeventswithnegativenewsabout KhodorkovskyandLebedev. 9 AmnestyInternationalstatedthatforseveralyearsnowKhodorkovskyandLebedevhavebeentrappedina judicialvortexthatanswerstopoliticalnotlegalconsiderationsincourtsunableorunwillingtodeliverjustice. Seehttp://www.amnesty.org/en/newsandupdates/russianbusinessmendeclaredprisonersconscience afterconvictionsareupheld2011. 10 RegardingthedecisionpertainingtotheVNKshareallegations,seefootnote5.Detailedanalysisofthe misguidedVNKshareallegationsisbeyondthescopeofthissummary.Moreinformationisavailablethrough thecontactinformationreferencedinfootnote3.


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KhodorkovskyandLebedevSupposedlyEmbezzledallYukosOiloveraSixYearPeriod The core theory of the prosecutions case was that, between 1998 and 2003, Khodorkovsky and Lebedev,asleadersofanorganizedcriminalgroup11,(1)embezzledonagrandscalebytakinginto theirpossessionfromYukosproductionsubsidiariesalloilproducedbythematthewellhead;and(2) laundered the supposedly criminallyobtained oil through resales and other transactions within Yukossconsolidatedcorporatestructure. Khodorkovskyandhisassociatesaredeterminedonpage72oftheverdicttohavetakenpossession ofalloftheoilproducedbyYukosfrom1998to2003,andonpage74tohavedistributedthisstolen and legalized property amongst the coconspirators. These determinations are made notwithstanding: (1) the physical impossibility of taking into possession and distributing such quantities of oil; (2) proof to the contrary in the records of Transneft, showing that the allegedly embezzledoilwasinfactsoldbyYukosandtransportedthroughthestatepipelinenetwork;(3)that Yukosproductionsubsidiarieswerepaiddomesticpricesfortheoilsubjecttointercompanyoilsale andpurchase agreements; and (4) that not a single incident of oil disappearance or of the defendants taking possession of the oil was presented to the court by prosecutors or otherwise discoveredbythejudge. The credibility of the verdict is further undermined by simultaneously asserting on page 13 that Yukoswasfactuallynotthepurchaseroftheoilfromtheproductionsubsidiaries,andonpage660 thattheoiltransferredintothefactualownershipof[Yukos]. YukoswasSupposedlyaHugeSham To sustain the legal fiction that embezzlement occurred, in the verdict the judge subscribes to the audacious,untenableandunprovenprosecutiontheorythattheentirecorporatestructureofYukos was a huge criminal sham organized by a group led by Khodorkovsky and Lebedev to embezzle oil fromYukosproductionsubsidiaries.Theverdictisineffectdescribingthegreatestsuccessstoryof Russias oil industry as if it had been nothing better than a petroleum Ponzi scheme. Routine and legalmanagementdecisionsandcorporateprocedures,including,inparticular,allocationofprofits withinamajorverticallyintegratedoilcompany,arecharacterizedasembezzlementcommittedby anorganizedcriminalgroupledbyKhodorkovsky,Lebedevandothers.Onpage300oftheverdict, the judge asserts: The commission by the defendants of theft by way of embezzlementis confirmed by oil saleandpurchase agreements Yet he does not explain how an embezzlement convictioncanbebaseduponoilsaleandpurchaseagreementsthatinvolvedappropriateexchange forvalue,withoutinjurysustainedbytheseller. On page 78, the verdict admits that production costs were covered from proceeds of sales, even though those sales transactions supposedly constituted theft. The judge theorizes that the defendantscompensatedthesubsidiariesforproductioncostsonlytocontinuestealingfromthem, yet he does not identify any theft that actually occurred: With the objective of concealing the committedtheft...[KhodorkovskyandLebedev]accounted[theproceedsfromthestolenoil]onthe accountsofRussiancompanies,soastoensurecompensationofthecostofproductionofexpenses [sic] by enterprises and organizations [producing oil], the payment of taxes on their behalf on
UnderRussianlaw,thechargeofactingthroughanorganizedcriminalgroupextendsthestatuteof limitationsforthechargesandincreasespotentialpenaltiesuponconviction.Furthermore,bylabeling KhodorkovskyandLebedevasleadersofanorganizedcriminalgroup,theactsofothersareimputedtothem regardlessofwhethertheothersarecharged.Thereisalsoastigmatismattachedtobeingamemberofan organizedcriminalgroup,thuspromotingtheprosecutionsgoalofportrayingKhodorkovskyandLebedevas perniciouscriminals.
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accountofthesemonetaryfunds,havinginsodoingtheobjectiveofensuringreplacementoftheoil productionforitsfurthertheft According to the verdict, on page 133: The guilt [of the defendants in the theft of the oil] is confirmedbydatademonstratingthat[they]tookactivepartinbuildinguptheverticallyintegrated structure of [Yukos], establishing control over the activity of the company and distributing its capital; and, on page 140: The court connects the building up of the verticallyintegrated structureofmanagementof[Yukos]withtheintentofthedefendantsto[commit]theftoftheoil On page 669, the verdict states that expenditures on acquisitions of operational assets, field development and modernization of operational capacities were imperative to Khodorkovsky and Lebedevtoensuretheproductionandrefiningoftheoilbeingstolenbythembecauseincreasing the companys production volumescorresponded to their mercenary aspirations to receive ever greater profit, while page 670 continues with the assessment that through the payment of dividends, to which a very insignificant part of the profit received was directed, Khodorkovsky and Lebedevconcealedthecommittedtheftof[all]theoil[produced](Theinsignificantdividendsin factamountedto16.6%ofprofits,orsome$2.8billion.)Meanwhile,onpage674oftheverdict,the judgeassertsthattheacquisitionofoilfromYukossubsidiarieswascoveredupbytheintroduction of the term output, under the guise of which the oil produced by the subsidiary enterprises was acquired Asfarasthecourtisconcerned,thedevelopmentofaRussianandglobaloilmajorisinandofitself obviousevidenceofcriminalintent.Suchcynicismandpresumedguiltunderminethecredibilityof the court and reflect poorly upon the Russian judiciary. The verdict in effect establishes a judicial assumptionthatcriminalintentexistsintheRussianentrepreneurialDNA.12 RegulatoryComplianceisSupposedlyIndicativeofCriminalActivity Onpage612oftheverdict,thecourtasserts:Dualentrybookkeepingwasmaintainedat[Yukos] for accounting profit received: the first, under RSBU [Russian Accounting Standards]for the shareholders,thetaxandregulatoryagencies,inwhichaminimumamountofprofitwasaccounted; thesecondfortheauditorsandforeigninvestors,inwhichtheprofitreceivedastheresultofthe theftoftheoilwasalsoaccounted First, the judge appears to have erroneously used the standard accounting term dualentry bookkeeping, when from the context it is clear he means to assert that two sets of books were maintained. Second, it is nave to assert that the coexistence of RSBU reporting and US GAAP reportingissomehowimproperorindicativeofcriminalactivity;onthecontrary,thejudgeseemsto be unaware that in order to comply with rules of the Russian Ministry of Finance and Russian
Theimpactoftheartificialcriminalizationoflegitimatebusinessactivityisanincreasinglyprominentissue raisedbyadvocatesofanewpushforlegalandeconomicreformsinRussia.From2000to2009some15%of Russiasregisteredbusinessesfacedcriminalcharges,withasignificantproportionofthesecasesresulting fromcorruptedofficialsabusingthelawtofacilitateunlawfulseizuresofproperty.Therepressionoflegitimate businessinRussiathroughfabricatedcriminalcaseshasbecomeaseriousobstacletoRussiasmodernization. See:http://www.novayagazeta.ru/data/2011/044/14.htmland http://www.novayagazeta.ru/data/2011/044/13.html(bothinRussian).Theissuewashighlightedby KhodorkovskyinhislastwordstotheKhamovnicheskyCourtonNovember2,2010,availableinEnglishat: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/Last%2520Word%2520of%2520MB K%2520%2520Final%2520%2528English%2529%25202nd%2520November%25202010.pdfandintheoriginal Russianat: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/MBK%20Last%20Word%20RUSSIAN .pdf.
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taxation authorities, both sets of reports were required. Third, the courts admission of profit receivedastheresultofthetheftofoilexposestherecurringthemeofthetrial:thatnoharmwas proventogroundtheallegationsofembezzlement. Shortly thereafter, on page 613 the verdict states: Khodorkovsky and Lebedev maintained dual financialaccounting[underRSBUandUSGAAP]andconcealedtheconsolidatedfinancialstatements fromshareholders,forwhichtheypublisheditexclusivelyintheEnglishlanguageAlongwiththe assertion on page 612 that meeting multiple reporting requirements is somehow improper or indicativeofcriminalactivity,thecourtrevealsnotonlynavetbutalsoincompetencetohearacase requiringanunderstandingofthebasicsoflegalandregulatorycomplianceforlargecorporations. Addingtotheabsurdity,justfourpageslater,onpage617,theverdictconcedestheexactopposite ofwhatisstatedonpage613:Inordertosafeguardinterestsofshareholders,abilingualversionof theYukos.ruwebsitewascreatedonwhichthatinformation[consolidatedstatements]waspostedin accordancewithinternationalstandards. Inafurtherartificialcriminalizationoflegitimatebusinesspractices,onpage616,theverdictstates that the sale price for oil sold by [Yukos] production enterprises indicated in saleandpurchase agreementswasnotatransferprice,butaninternalcorporatepriceof[Yukos]Theverdictplays withwordstoobfuscaterealitydenyingthatYukosengagedinthesametransferpricingthatwas andislawfullypracticedbyotherRussianandinternationalenergymajors,includingstatecontrolled Rosneft.13 Furthermore, because the internal corporate price does not compare to inappropriatelyappliedglobalbenchmarkpricesforoil,thecourtfindsproofofawrongfulseizure bythedefendantsnotinvolvingexchangeforvalue(asstatedonpage72oftheverdict). III. WHYTHEFACTSANDTHELAWSHOULDHAVEEXONERATEDTHEDEFENDANTS In the course of the trial, the defendants and their counsel exposed fundamental errors and weaknessessurroundingtheallegationsleveledintheindictment.Thedefenseinvokedapplicable law,broadlyknownfacts,commonsenseandoilindustrynorms,andbroughtrelevantevidenceand witnessandexperttestimonytothecourtsattention.Eventhoughprosecutorsandthecourtwent to great efforts to exclude exculpatory facts, to block documents and witnesses, and to ignore the substanceofthedefensesarguments,bytheendofthetrialthejudgehadnocrediblebasisfora guiltyverdictalthoughthisdidnotpreventtheissuanceofsuchaverdictallthesame. FundamentalErrorsandWeaknessesExposedbytheDefense Amongthefundamentalerrorsandweaknessessurroundingthechargesthatwereexposedbythe defense14andunresolvedbytheprosecutorsorthejudgeattrial:

Rosneft,meanwhile,hasnotbeenattackedbytheauthoritiesfornotsellingoilinternallyordomesticallyat Rotterdamprices.ThisrevealsnotonlytheartificialnatureofthecriminalizationofYukossoperations,but alsothediscriminatoryandunlawfultreatmentofYukoscomparedtootheroilcompaniesinRussia. 14 Moreinformationonthesefundamentalerrorsandweaknessesisavailableinashortbriefingpaperentitled TheKafkaesqueProsecutionsofMikhailKhodorkovskyandPlatonLebedev,availableat: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/MBKFactSheetKafkaesque%2014%2 009%202009.pdf.


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Theimpossibilityofthedefendantsphysicallyseizing350millionmetrictonsofoilat the wellheadmeaning all production of the Yukos subsidiaries for 6 years; not a single incident of oil disappearance or of the defendants taking possession of the oil waspresentedtothecourtbyprosecutors.Theprosecutionssuddenreductionofthe amount of allegedlyembezzled oil by about one third, as alleged during closing argumentsyetignoredbythejudgeinhisverdict,involvesquantitiesthatarejustas impossibleandjustasunproven. The prosecutors and the court neglected the outcome of the first Khodorkovsky LebedevtrialandthetaxproceedingsagainstYukos,inwhichthesameoilthatisnow allegedtohavebeenembezzledwasinfactpunitivelyandunlawfullytaxedinorderto drive Yukos into bankruptcy. If the oil was owned and sold by Yukos to generate taxablerevenues,asestablishedinthosepriordomesticproceedings,andasarguedby the Russian Federation in ongoing Yukosrelated proceedings abroad, then how can prosecutorsinthiscasesimultaneouslyallegethattheoilwasinfactnotownedand soldbyYukosbutratherembezzledbyKhodorkovskyandLebedev? The prosecutors invented injured partiesYukos production subsidiariesand the alleged theft of oil from them sustained the conviction against Khodorkovsky and Lebedev, despite these subsidiaries profitability and full compensation of their productioncosts.Thejudgedisregardedresponsesthecourtreceivedtoenquiriesit sent to the former Yukos production subsidiaries, which demonstrated their profitability with data for proceeds of sales against costs of production.15 Though massive embezzlement was said to have occurred, neither at trial nor in the verdict wastheconcomitantharmtothesesupposedlyinjuredpartiesestablished. The impossibility of the embezzlement charges could have been proven had the prosecutors or the court examined certain records of Transneft, the stateowned monopolythattightlycontrolsthemovementofoilthroughRussiaspipelinenetwork. TheserecordsindicatethattheallegedlyembezzledYukosoilwasinfactlegitimately soldandtransportedthroughthestatepipelinenetwork. In addition to examining the Yukos production subsidiaries, the prosecutors or the court likewise could have examined financial operations recorded on the books of several other companies and bankswhich prove that the entire oil production of Yukosoveraperiodofsixyearswassold,notembezzled. The prosecutors and the court ignored or dismissed the fact that Yukos covered massive operating expenses and invested heavily in capital improvements and acquisitionsandpaiddividendsagain,allfinancialoperationsrecordedonthebooks of several companies and bankswhen all oil as the primary source of the funds necessaryfortheseoperationswasallegedlystolen. Theprosecutorsandthecourtconfusedpropertyrightsincrudeoil,andthecrudeoil itself,neglectingthatatransferofownershiprightscanoccurwithouttheoilphysically

Indeed,theverdictcontradictsitselfbyadmittingonpage132andonpage674thatfrom2000to2003, productionsubsidiariesreceivedproceedsof297.7billionrublesandprofitsof50.5billionrubles.Noone challengedthehistoricdatasubmittedbyproductionsubsidiariestothecourtin2010includingdatafrom statecontrolledRosneftreportingonYukosproductionassetsitacquiredthroughforcedbankruptcy auctionsthatclearlyreportedthedataforproceedsofsalesagainstcostsofproduction.Thecourtitself includeddocumentaryproofofthesedatainthecasefile,whilenottakingsuchinformationintoaccount.


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changing hands. The object of the alleged embezzlement was never definitively identified. The prosecutors and the court also stubbornly neglected basic chemistry: confusing thevalueofwellheadliquidfullofimpuritieswiththevalueofcrudeoil. To arrive at their wildly inflated alleged sums embezzled, the prosecution incorrectly asserted that the price of crude oil in Russian production regions is comparable to pricesofcrudeoilinRotterdam,andthatthehigherforeignpricesoughttohavebeen charged in domestic transactions (ignoring transport costs, customs duties and other expendituresthataddvaluebetweenthepriceofoilinSiberiaandthepriceofoilin Rotterdam).Thejudgesimplyacceptedthisobviousfallacyasfact. Theprosecutorsandthecourtignoredthevalidityoflawfulcontractsmadebetween theYukosproductionsubsidiariesandtheirparentcompany. Theprosecutorsandthecourtalsoignoredindustrystandardintercompanysalesthat are used for lawful tax optimization within verticallyintegrated oil companies. Furthermore,inastringofpreviouscourtrulingsinvolvingRussiantaxauthoritiesand competitionregulators,someofwhichweresuccessfullyenteredintotheevidentiary recordofthistrial,thestructuringofYukostransactionswithproductionsubsidiaries wasscrutinizedandjudiciallyapproved. The prosecutors and court further neglected that Yukoss verticallyintegrated structurewasplannedandapprovednotbyanimaginedrogueorcriminalgroup,but rather by the Russian government itself, with support from the Kremlin, through a deliberate policy aimed at rescuing and developing Russias moribund oil industry in the1990s.Officialgovernmentrecordsprovethisbutwereignoredbythecourt. TheprosecutorsneglectedthatthemanagementandcontrolstructuresofYukoscould neverhavepermittedthecompanysentireproductionofoiltobeembezzled. When the embezzlement charges were brought in 2007, prosecutors pressured PricewaterhouseCoopers (PwC) to withdraw their approval of a decade of Yukos audits,sinceobserversworldwidecouldseetheobviousincompatibilitybetweenthe auditorsreportsandtheprosecutorschargesagainstKhodorkovskyandLebedev.16 The charges of laundering were shown by the defence to be completely empty. Prosecutors and the judge used the term laundering presumptively, amateurishly and erroneouslyfor example, asserting the legal nonsense of laundering of crude oil. The verdict failed to establish fundamental elements of money laundering in criminal law: that a crime occurred and that the defendants acted to conceal the proceedsofthatcrime.Ifprosecutorswereintentonatrialbyheadline,theymay have succeeded in stigmatizing the defendants by having terms such as embezzlementandlaunderingassociatedwiththeirnames;butintheendthetrial failedtoproveeitherlaunderingoranypredicateoffense.

FormoreonPwCsrole,seepages18,22,24,27andinparticularAbuseofInvestigatoryandProsecutorial PowersthroughCoercionofPwConpages2829.
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FormerandCurrentRussianGovernmentOfficialsTestifiedthatChargesWereNotCredible In addition to comprehensive presentations in court by both Khodorkovsky and Lebedev, which destroyedtheindictmentpiecebypiece17,asuccessionoftestimoniesfromwidelyrespectedformer andcurrentgovernmentofficialsdealtheavyblowstothecredibilityoftheprosecutionscase: On May 24, 2010, Russias former Prime Minister Mikhail Kasyanov testified that the KremlinhadorderedKhodorkovskysarrestbecauseKhodorkovskyhadangeredthen President Putin by funding opposition parties without presidential approval. Kasyanovs testimony was based on information he was privy to as prime minister, includingfacetofacediscussionswiththenPresidentPutin.Kasyanovfurthertestified thatatthetimeoftheallegedlyillegalactivitiesinvolvingYukos,allRussianoilmajors shared three attributes: vertical integration, the use of transfer pricing and preferential tax treatment in certain speciallylegislated zones. He noted that Yukos wasconsistentlyoneofthelargesttaxpayersintheRussianFederation,andthatthe companyhaditsoilproductionandsalescloselymonitoredbythegovernment.When asked about whether the oil embezzlement charges were credible, he declared: Absolutelynot! On June 1, 2010, former Soviet and Russian Central Bank chief Viktor Gerashchenko deridedthecharges,callingthemutternonsense.Henotedthatifthedefendants wereguiltyascharged,YukoscouldneverhavegrowntopreeminenceintheRussian oilindustry,andforeignoilmajorssuchasExxon,whichexaminedYukostothelast detail would not have made multibilliondollar offers for significant stakes in the company. Gerashchenko became Yukos chairman in 2004, the year after KhodorkovskyandLebedevwerearrested,andheldthepositionasthecompanywas dismantledthroughforcedbankruptcyproceedingsthatbenefittedstatecontrolledoil companyRosneft.HenotedthatnoneofthecompaniesthatacquiredYukosassets includingRosneftevercomplainedaboutallegedlargescaleembezzlement,andthat no one in government ever suggested that massive amounts of crude oil had disappeared or been embezzled. Gerashchenko boldly confronted the prosecution, exclaiming:Whyareyoudoingthisfoolishness? On June 21, 2010, German Gref, Chief Executive of Sberbank and Russias economic developmentandtradeministerfrom2000to2007,testifiedthatasministerhewould havebeenawareifmassivecrudeoilembezzlementatYukoshadbeentakingplaceas charged, in the vicinity of 20% of Russias annual production. Regarding the prosecutions erroneous assertion that Russias domestic pricing of crude oil was comparable to international market prices, Gref stated: To purchase at the same pricesasinRotterdamimpossible. OnJune22,2010,ViktorKhristenko,RussiasIndustryandTradeMinistersince2008, testified that he was unaware of any proof of the largescale embezzlement prosecutors alleged in their charges against Khodorkovsky and Lebedev. Prior to servingasIndustryandTradeMinister,KhristenkohadservedasIndustryandEnergy Ministerfrom2004.From1997to2004heservedasDeputyFinanceMinister,Deputy PrimeMinisterandbrieflyasactingPrimeMinister.From2000to2008heservedas Chairman of Transneft, the state pipeline monopoly. Khristenko was asked whether
AsummaryofKhodorkovskystestimonyisavailableat:http://www.khodorkovskycenter.com/news resources/stories/witnesstestimonysummarymikhailkhodorkovsky.AsummaryofLebedevstestimonyis availableat:http://www.khodorkovskycenter.com/newsresources/stories/witnesstestimonysummary platonlebedev.
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Yukos,itsproductionsubsidiariesor,now,RosneftthenewownerofYukosassets everreportedthatsome60millionmetrictonsperyearofcrudeoilhadgonemissing. Khristenkoanswered:No,Iamnotawarethatsomethinglikethiseverhappened. Khristenko was also asked about transfer pricing. He noted that as a matter of governmentpolicythesubjecthasbeeneverpresentsincethelate1990s,duetothe consequencesoftransferpricingonthefederalandregionalbudgets,andonminority shareholders, but that from his point of view transfer pricing practices were neither mysteriousnorillegal. ThislineupofdistinguishedformerandcurrentRussiangovernmentofficialsnotonlychallengedthe legitimacyofthetrial,butalsodemonstratedthemountingoppositionwithinRussiaselitesoverthe continuedabuseoflawenforcementandjudicialpowersinthecampaignagainstKhodorkovskyand Lebedev. Nevertheless,ultimatelytheverdictbrazenlyobfuscatedandmisrepresentedtestimonydeliveredin courtbysuchwitnesses.Forexample,inmultiplepassagesoftheverdict18JudgeDanilkincitesboth Gref and Khristenko to support misguided and misapplied judicial ruminations about corporate transferpricingpracticesofverticallyintegratedoilcompanies.19 The judges treatment of Gerashchenkos testimony is illustrative of the methods he employed to filteroutinformationthatfavoredthedefendants. Onpage623,theverdictstates:ThetestimonyofV.G.[sic]Gerashchenko[assertingtheabsence andimpossibilityofembezzlementascharged]isassessedbythecourtasuntruebecause[he]was notaneyewitnessofthecommissionoftheembezzlementandlaunderingoftheoilOnthissame basis,however,thejudgewouldhavehadtodismissthetestimonyofeverywitnesswhotestifiedat thetrial,includingthosecalledbytheprosecution,becausenoneofthemwereeyewitnessesofthe allegedembezzlementandlaunderingofoil. ThejudgedidnotaddressGerashchenkosstatementthatifthechargeshadanyvalidity,Yukoscould neverhavegrowntopreeminenceintheRussianoilindustry,andforeignoilmajorssuchasExxon which exhaustively examined Yukos would not have made multibilliondollar offers for significant stakes in the company. Nor did the judge address Gerashchenkos statement that none of the companiesthatacquiredYukosassetsthroughforcedbankruptcyauctionsincludingRosneftever complainedaboutallegedlargescaleembezzlement,andthatnooneingovernmenteversuggested thatmassiveamountsofcrudeoilhaddisappearedorbeenembezzled.Rather,thejudgeavoided such difficult indictmentdeflating realities by branding Gerashchenkos testimony untrue, on the grounds that Gerashchenko was not an eyewitness of alleged embezzlement that was in fact witnessedbynooneatall.

Pages285,610,61516,64950and675. Itshouldbenotedthattheindictmentincludesnochargesofunlawfultransferpricing,andthatYukosstax optimizationstrategieswereincompliancewithevolvingtransferpricingrules.


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OtherWitnessTestimony Over a sixmonth period beginning at the end of September 2009, the prosecution paraded 51 witnessesintothecourtroom.Theirtestimonywasmarkedbyprosecutorialcoercion,manipulation, and, notwithstanding the foregoing, irrelevance to the allegations against Khodorkovsky and Lebedev. Inthecourseofincourtquestioning,someoftheprosecutionwitnessesrefutedtheargumentsof theindictment,forexampletestifyingthatYukosproductionsubsidiarieswereindeedpaidfortheir crude oilundermining a fundamental prerequisite of the embezzlement and therefore money laundering charges against the defendants. Even the stateappointed Yukos bankruptcy receiver asserted that Yukos was wellorganized and efficiently produced and sold large volumes of oil. Regarding the disputed VNK share exchange, one witness testified that Khodorkovskys efforts to protectVNKsassetswerewellfounded.20 Giventheprevailingclimateoffearafterwellknowncasesoftheauthoritiestorturing,incarcerating or prosecuting people to extract false testimony in Yukosrelated cases or to punish those who supportKhodorkovskyandLebedev,21manypotentialwitnessesstayedawayfromthetrial.Thelaw doesnotempowerthedefensetocompelwitnessestotestifyorthirdpartiestoproducedocuments, and therefore efforts to compel witnesses or production of documents depend upon the courts discretion.Despitethesedisadvantages,30witnessessoughtbythedefenseappearedincourtand providedtestimonyunderliningtheabsurdityofthecharges. The sole defense expert permitted to participate in the proceedings was Wesley Haun, a U.S. specialistinenergyindustrymanagementwhocametothestandonMay31,2010,notwithstanding apejorativedeclarationbyprosecutorGyulchekhraIbragimova,whostated:Wedontcarewhata foreign citizen will tell us. Haun testified that Yukos was comparable with other Russian and international verticallyintegrated oil companies, and that Khodorkovskys actions were consistent withcompanyleadershipintentonbuildingamodelcompanythatwouldachievesustainedgrowth and long term profitability. Having carefully examined the structure and operating procedures of Yukos,HaunstatedthatKhodorkovskysreorganizationandmanagementofthecompanybenefited allshareholders,theproductionsubsidiaries,aswellastheRussianFederation,andwasconsistent with industry standards, custom and practice. He stated that the charges brought against the defendants are disproved by the commercial achievements of Yukos: the companys performance statistics and growth would have been impossible had crude oil been embezzled as charged. He furthernotedthattheprosecutorserredincomparingthepriceofwellheadliquidtotheenduser price of crude oil. Unsurprisingly, the prosecution successfully motioned to have Hauns written expertreportexcludedfromtheevidentiaryrecord.22 Jacques KosciuskoMorizet served on the Yukos board of directors from 2000 to 2004. Kosciusko Morizet is a member of Frances senior business elite, having served as vice president of the bank Crdit Lyonnais. He also served as Frances deputy minister of international trade. As an
Thedefensecataloguedoverthreehundreddiscrepanciesinthetranscriptsandaudiotapesofthiswitnesss interrogations.Thecourtneverthelessallowedtheprosecutorstosubmitthetranscriptsintothetrialrecord. 21 SeeforexampletheprominentcasesofSvetlanaBakhmina,VasilyAlexanyanandAntonioValdesGarcia, describedat:http://www.khodorkovskycenter.com/historybackground/otherkeyindividuals. 22 Haunsreportwasnonethelessmadepublicbythedefense,anditisavailableat: http://www.khodorkovskycenter.com/newsresources/stories/specialisttestimonysummarywesleyhaun.In theverdict,thejudgeavoidedanysubstantiveconsiderationofHaunsincourttestimony.Onpage618ofthe verdictthejudgesimplyechoedargumentsprosecutorspresentedattrial,statingthatthecourtbelievedthat HaunisnotaspecialistinRussianlaw;thatHaundidnotworkatYukos;andthatheobtainedinformation aboutthecompanyfrompubliclyavailablesources.Haunstestimonywasthereforedeemeduntenableby thejudge.
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independent director KosciuskoMorizet had direct knowledge of both Khodorkovsky and Yukos. KosciuskoMorizet was formally interviewed as a witness by defense counsel in Paris in February 2009.Overtheobjectionsofprosecutorswhosoughttoexcludehiswrittenstatementautomatically because the interview took place in a foreign country, defense counsel were permitted to read KosciuskoMorizetstranscribedstatementsincourt.Thiswasthefirstandlastdocumentedwitness declarationthatthejudgeallowedthedefensetoreadinitsentiretyintothetrialrecord. KosciuskoMorizet also appeared in court on June 8 and 9, 2010 for questioning and cross examination.AccordingtoKosciuskoMorizet: Examined from any perspective, the accusations against Khodorkovsky and Lebedev werecompletenonsense.Yukosoilmovedfromtheproductioncompaniesthrough the downstream marketing companies in a manner consistent with the best industry practices and was sold by the production companies at a fair and reasonable priceYukos increased its revenues and profits by becoming a more efficient and betteroperatedcompanythatbettermanageditsassets. On the basis of his direct involvement in the YukosPwC relationship, Kosciusko Morizet ridiculed the assertion in the indictment that Khodorkovsky and Lebedev deceived PwC, and called this excuse by the auditors for withdrawing their endorsement of a decade of Yukos audits completely disingenuous. Kosciusko Morizet said that PwCs turning against Yukos was very damaging for PwCs reputation,fortheauditprofessioninMoscowandforinternationalconfidenceinthe Russianbusinessenvironment.Hefurthernotedthathehadspokenwithanumber ofPwCpartnerswhowereembarrassedbythebehaviorofPwCRussiainwithdrawing itsapprovalofYukosauditsforthetenyearsfrom1995to2004.23 In light of the damage inflicted upon the credibility of the charges by expert Haun and witness KosciuskoMorizet,theprosecutionandcourtsubsequentlyinvokedthethinnestofpretextstoavoid repeats of the spectacles of these first individuals who came at the request of the defense to Khamovnichesky Courtfrom verbally attacking the interpreter and his credibility to blocking defensewitnessesandexpertsandrefusingtoexaminetheirreportsanddeclarations. Intheverdict,anyincourttestimonythatsupportedthedefendantswasultimatelydisregardedby the judge on flimsy or nonsensical grounds. Such facts and views presented by witnesses were simplybrushedawaywithoutthoroughconsideration,usuallybychallengingthecredibilityofpeople even after they were approved to appear in court and sometimes adding suggestions of perjury motivatedbypastemploymentrelationships.Notasingleprosecutionwitnesswassubjectedbythe judgetothecredibilityteststhathesovigorouslyappliedtodefensewitnesses. Asforconspicuouslyabsentwitnesstestimony:notasingleoftheproductionsubsidiariesthatwere allegedinjuredpartiessupposedlyfailingtohavereceivedproperpaymentinexchangefortheir outputtestifiedincourt.

FormoreonPwCsrole,seepages14,22,24,27andinparticularAbuseofInvestigatoryandProsecutorial PowersthroughCoercionofPwConpages2829.
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IV. THEAPPEAL The defense initiated appeal procedures on December 31, 2010, the day after sentencing. These initialfilingsweresupplementedthroughApril2011.24 Theappealdocumentssetforthirrefutablegroundsforreversalofthelowercourtsverdictandfor termination of the case. The core argument to set aside the contested verdict was that it did not identifyanyactsbytheappellantsthatconstitutedcriminalconduct.Onthisbasisalone,theonly outcomeoftheappealifitwastobedecidedsolelyonanindependentapplicationofthelawtothe facts would have been acquittals for Khodorkovsky and Lebedev in the second case against them, clearingthewayfortheirscheduledreleasein2011.Althoughthetrialcourtsfailuretoidentifyacts constituting embezzlement or laundering was a sufficient basis to reverse the verdict and to terminatethecase,theappellantssupplementedtheirappealwithcomplaintsaboutthenumerous fundamental and irreparable violations of due process that culminated in a defective, unjust and unlawful verdict. The appellants further noted that the verdict contradicted rulings in prior Yukos cases in Russian courts as well as the Russian Federations lines of defense in Yukosrelated proceedingsabroad. The defense was not expecting a fair ruling from the Moscow City Court. The appeal nonetheless waspursuedtoexposethelawlessnessofthecaseandtorevealthedisregardfortheruleoflawin Russia that infected these proceedings and that infects thousands of others. Also, by exhausting hopesforlegalredresswithinRussia,theroadwouldbeopenedforKhodorkovskyandLebedevto appealtotheECHR. TheappealwasheardbytheMoscowCityCourtandrapidlydispensedwithinarulingonMay24, 2011thatconfirmedthelowercourtsguiltyverdict.25 V. DUEPROCESSVIOLATIONSANDOFFICIALMISCONDUCT Marred by due process violations and incidents of official misconduct, the proceedings failed to complywithfundamentalnormsoffairnessandjustice.Thesedueprocessviolationsandincidents ofofficialmisconductwerecommittedeitherbytheprosecutionorthecourt,orbybothintandem. For the vast majority of instances of prosecutorial abuses and misconduct, the court passively or activelycondonedtheongoingmiscarriageofjustice.Thisraiseddoubtsastothejudgescapacityto render a verdict independent of pressure from the prosecutors and, behind the prosecutors, the powerfulinstigatorsofthecase.Asbroadlyexpected,inhisverdictthejudgefailedtocureoreven totakeintoconsiderationtheselegaltransgressions. By his acts and omissions in the handling of the case, Judge Danilkin became complicit in and responsible for the official misconduct and due process violations that the prosecutors brought to thetrial.Anyindependentcourtwouldhavedismissedthecaseandterminatedthetrialonthebasis of the gross prosecutorial misconduct that occurred, or on the basis of the plain facts and legal reasoningadvancedbythedefense.Furthermore,acredibleguiltyverdictcouldnotbebuiltupon thedeficientlegalandevidentiarygroundsprovidedbytheprosecution.Theprosecutionfailedto
Theappealfilingsareavailablehttp://www.khodorkovskycenter.com/legaldocuments. AnEnglishtranslationoftheMoscowCityCourtsrulingisavailableat http://www.khodorkovskycenter.com/legaldocuments.TheoriginalRussiantextisavailableat: http://khodorkovsky.ru/cassation/.
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connectanyactsofthedefendantswithanythingwhatsoeverthatisproscribedinRussiancriminal law.Nordidtheprosecutionelaborateanyplausibletheoryofcriminalliability.Unabletoexplainor offer any proof, the guilty verdict is not anchored in properly applied law and facts, and clearly is motivatedbyreasonsalientojustice.26 In assessing the KhodorkovskyLebedev proceedings against international standards outlined in the Trial Observation Manual for Criminal Proceedings of the International Commission of Jurists, the overwhelming extent of the due process violations is readily apparent.27 In nineteen categories assessed for compliance vs. breach, the KhodorkovskyLebedev proceedings were marred by breaches in at least fourteen of the categories: right to a fair hearing; presumption of innocence; right to be informed promptly of the charge; right to defense, including access to documents or counsel and lack of interference with counsel; right to an interpreter and to accurate translations; righttoequalityofarms;righttocallandexaminewitnesses;exclusionofevidenceelicitedbyillegal means,includingtortureorilltreatment;righttobetriedwithoutunduedelay;principleoflegality ofcriminaloffences;prohibitionoftheretroactivityofcriminallaw;prohibitionofdoublejeopardy; righttoapublicandreasonedjudgment;andrightnottobepunishedotherwisethaninaccordance withinternationalstandards.Inonecategorynottechnicallybreachedrightnottosufferaheavier penaltythantheoneapplicableatthetimethecriminaloffencewascommittedandrighttobenefit from a lighter sentence subsequently introduced by lawthe compliance is moot if one considers thatthepenaltiesandsentencesimposeduponthedefendantswereforcriminaloffencesthatwere notinfactproventohaveoccurred. Inthefourremainingcategoriesrighttoapublichearing;righttobepresentattrial;rightnottobe compelledtoconfessguiltortotestify;andrighttoappealminimalrequirementsweresatisfied yet evidently only misleadingly to create the appearance of a legitimate trial. For instance, the defendantswerepermittedtospeakincourtalmostwithoutrestrictions;butthejudgeignoredthe substance of their statements, blocked their lawyers from introducing exculpatory documentary evidenceandrefusedtohearmanywitnessesandexperts.Likewise,illusionsofadversarialprocess and legitimacy were created by allowing the defense to file motions and objections to serious proceduralviolations;howeverthejudgeroutinelyquashedorsimplyfailedtoreacttothedefense pleadings.Consideringthefutilitycreatedbythepreponderanceofdueprocessviolations,thefew fairtrialrightsthatthedefendantsdidenjoywereguttedofmeaning. The following are examples of due process violations and official misconduct that marred these proceedings: ProsecutionsFailuretoExplainCharges WhenKhodorkovskyenteredhisnotguiltypleainApril2009,heemphasizedthatthechargeswere incomprehensibletohimdespiteaskinginvainforexplanationsandclarificationsforovertwoyears.
26

Incidentally,itistellingthatintheverdictthejudgefailedtoaddressnumerousfactualerrorsmadeby investigatorsandprosecutorsaboutthemostelementaryoffacts.Theseerrorscouldhavebeencorrectedin referencetotheevidentiaryrecord,repeatedsubmissionsfromthedefense,andobviousorpubliclyverifiable information.FromerroneousstatementsofkeydatesinthecorporatedevelopmentofYukostothepurported existenceofaGibraltarIsland,whereprosecutorspresumablymeanttorefertotheUKoverseasterritory firmlyattachedtoEurope,thenumerousexamplesofsucherrorsunderminethejudgescredibilityandare indicativeofhisdeferencetotheprosecution,lackofindependenceandpuresloppiness. 27 Seeappendedchart:InternationalCommissionofJuristsStandardsonJudicialProceedings KhodorkovskyLebedevTrial20092010,onpages3738.


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Nowheredidtheindictmentsetforththeelementsofanyallegedcrimeorsucceedinconnectingany specificevidencetotheallegations.Onthecontrary,thechargeswereanartificeofcriminalization of lawful and widespread business practices. They stubbornly ignored legal and factual realities rangingfromthefundamentaldefinitionofcrimetothehighlyregulatedstructureandoperation of verticallyintegrated energy companies. Judge Danilkin just brushed aside requests for explanationsoftheallegations,claiminghehadnopowerovertheprosecutiontocompelthemto explain the charges. As a result, the defense had to fight against multiple mutually exclusive allegations.Eventhesubjectmatteroftheembezzlementchargeswasconfusedbytheprosecution who could not make up their minds whether oil, oil proceeds or rights to oil sale contracts were allegedlyembezzledbythedefendants.Theyweresilentonthemethod,timeandplacethealleged crimeswerecommitted.Asaresult,thedefensewasforcedtodefendagainstmultiple,mutually exclusiveallegationsinfearthattheprosecutioncouldchangeitslegaltheoryattheendofthetrial. SincetheindictmentwasfirstissuedinFebruary2007,allpleasbythedefendantsandmotionsby their counsel to have the charges clarified were rebuffed by investigators, prosecutors and judicial authorities. DenialofthePresumptionofInnocence Even though prosecutors produced no evidence that actually proved any crime, they repeatedly declared Khodorkovsky and Lebedev to be guilty of the alleged criminal acts, and the judge never censured the prosecutors for doing so. The Russian Constitution and the European Convention on HumanRightsaffirmtheprinciplethateveryonechargedwithacriminaloffenceshallbepresumed innocent untilprovedguiltyaccording tolaw.The RussianConstitutionadds thatanaccusedshall notbeobligedtoprovehisinnocence.However,infact,theburdenofproofinthiscasewasborne bythedefensefromthestart,toprovetheabsurdityofthecharges;ratherthanontheprosecution toproveguilt.WhenLebedevprotestedunlawfultreatment,aprosecutorsaidhiseffortstodefend himself were useless and added, just as we have planned, so will we proceed. Meanwhile, in courtandthroughthestatecontrolledRussianmedia,Khodorkovskywasportrayedasadangerous criminal,lockedupinaglassboothsurroundedbymachineguntotingguards.Tofurtheraddtothe demonizationofKhodorkovskyinthemedia,PrimeMinisterPutinpubliclycomparedKhodorkovsky withAlCaponeandYukoswithEnron. In their undisguised treatment of the defendants being guilty as charged, prosecutors insulted the KhodorkovskyandLebedevonnumerousoccasions,statingforexamplethatKhodorkovskysopinion didnotmattertoanyoneexcepthisdefenselawyersandhischeeringfansinthecourtroom(April21, 2009);orrespondingtoLebedevsdueprocessconcernsbystatingthathisentreatieswereuseless andadding,justaswehaveplanned,sowewillproceed(April27,2009);orcallingthedefendants socalled political prisoners (June 9, 2009). In response to Lebedevs reminder that in 2007 the Swiss Federal Tribunal ordered Switzerlands prosecutors not to cooperate with their Russian counterparts on the Yukos case due to grave politicallydriven human rights infringements, a prosecutorretorted:Sowhat?(July28,2009).Whenthedefendantsaskedtoviewcasematerials, aprosecutor objectedto passingacasevolumeintothelocked andheavily guardedaquariumlike glassboothwheretheywerebeingkeptinthecourtroom,statingtheycoulddestroytheevidence! (June 4, 2009) Prosecutors repeatedly made contemptuous and sarcastic statements about the defendantsinopencourt,displayingablatantlackofdignityandrespect.

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CourtsRefusaltoAdmitExculpatoryEvidencePresentedbytheDefense Thecourtrepeatedlydeniedallowingevidencepresentedbythedefensetobeaddedtothecasefile. The defense fruitlessly asked that exculpatory evidence in its possession be considered. Examples included: RSBU financial reporting of Yukos production subsidiariescertified by PwC and never withdrawn28; Yukoss US GAAP financial statements, which were missing from the case materials introducedintothetrialrecordforseveraloftheyearsrelevanttotheallegations;numeroussworn declarationsfromindividualsformerlyaffiliatedwithYukosandwithknowledgedirectlyrelevantto the charges; Yukos documentation describing production and sales processes and capital expenditures; legal explanations of Yukoss international corporate structure; and reports of the stateappointedYukosbankruptcyadministrator. Meanwhile, in contrast, investigators and prosecutors were consistently and repeatedly allowed to addmaterialstothecasefileastheywished. Courts Refusal to Assist Defense in Compelling Prosecutors to Produce Evidence or to Assist DefenseinCompellingThirdPartiestoProduceExculpatoryDocuments Throughout the trial, the court repeatedly refused to request or to compel the production of evidenceheldandconcealedbytheprosecution,andtorequestortocompelthirdpartiesidentified bythedefensetoproducedocumentsofanexculpatorynature.Ofparticularnote,thedefensewas deniedaccesstoevidencegatheredinaparallelcasewhichwasextensivelyusedbyinvestigatorsand prosecutorsasameansofcircumventingproceduralrulesandsafeguardsinthepresentcase.The judgedenieddefenserequeststocompeltheprosecutiontoprovidethedefenseaccesstofilesfrom that parallel caseeven though that case was a major source of materials accepted into the trial recordinthepresentcase. Furthermore,thedefendantsandeventhecourtitselfweredeniedaccesstowiretaprecordings beingdescribedbytheprosecutionattheproceedings.DefenseattemptsinJuly2009andagainin November 2009 to have the recordings submitted to the court were rebuffed by investigators and the Federal Security Service (FSB), and the judge was unable to compel the production of the recordings in question. Defense counsel asserted not only that a UK wiretap by the FSB was unlawful,butalsothattranscriptsprovidedbyprosecutorsshouldbecheckedagainsttherecordings, giventheprosecutionsestablishedpatternofdistortingevidenceinthecase.29Theconcealmentof therecordingsraisedseriousquestionsnotonlyabouttherealprobativevalueoftheprosecutions transcripts,butalsomorebroadlyaboutthemotivesandmethodsofworkoftheinvestigatorsand prosecutors, and the incapacity of the judge to compel the production of evidence held by the authorities. Withrespecttothirdparties,acaseonpointisTransneft.Thecourtrefusedtosubpoenaandtotake into account Transneft records sought by the defense. The defense asserted these records would indicatethattheallegedlyembezzledYukosoilwasinfactlegitimatelysoldandtransportedthrough the state pipeline network. Likewise, publicly available Russian government documents from the 1990s,demonstratinggovernmentpolicygearedtowardsthedevelopmentandfunctioningofYukos asaverticallyintegratedenergycompany,werenotsoughtoutbythecourtfromofficialsourcesfor
FormoreonPwCsrole,seepages14,18,24,27andinparticularAbuseofInvestigatoryandProsecutorial PowersthroughCoercionofPwConpages2829. 29 Inasimilareffortbythedefensetoconfirmtheaccuracyofaprosecutiontranscript,onFebruary26,2010, afterthedefensesuccessfullypleadedtohavethecourtplaybackanaudiorecordingoftheinterrogationof witnessGitasAnilionis,majordiscrepancieswererevealedbetweentheaudiorecordingandtheofficial prosecutiontranscript.
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inclusion in the case materials. Despite many efforts, the defendants were unable to enter such germane exculpatory evidence into the official case record and therefore could not use such documentsintheinterrogationofwitnesses. CourtsRefusaltoExcludeIllegallyObtainedEvidence Thecourtallowedprosecutorstosubmitevidenceillegallyobtainedthroughunlawfulsearchesand seizures. Despite the fact that this evidence did nothing to prove the charges, as a matter of principle and procedure the defense petitioned for exclusion of over 500 illegallyobtained documents.Initiallythedefensesrequestsforexclusionofthisevidenceweredeemedpremature thenwhenthedefenserepeatedarequestforexclusionattheendofthedefensephaseofthetrial, therequestwasdenied. MisrepresentationofEvidence In verbally presenting Yukos audit documents, the prosecution changed the words income and taxes paid to debt and taxes owed. In several instances the prosecutors falsely stated that documentsboreauthenticationmarkssuchasstampsandsignatures,whereinrealitynosuchmarks existed. In other instances signatures of the same people were different from one document to another. Multiple versions of documents were presented, with no indication of which, if any, was thefinalversion.TheprosecutorsdescribedaletterallegedlyfromLebedev,yetfailedtomention thatasthecourtsawwhenLebedevinsistedtheitembeexaminedtheoriginalletterwascrossed outbyhandwithalargeX,severalphraseswerealsocrossedout,therewereseveralhandwritten additions of unknown origin, the letter lacked a date and signature, and the prosecutions True Copy stamp was missing the required signature. Numerous documents of unknown origin were presented,havingbeenprintedfromcomputerdrivesforwhichthechainofcustodywasunclear.In severalinstancestheprosecutorsgavepartiallyorcompletelyinaccuratedescriptionsofdocument contents.Asanexample,insummarizingadocumentofSouthPetroleumLtd.,aprosecutorsimply assertedthatthedocumentshowedthatdefendantsweretakingfundsfromthatcompany,even thoughthedocumentshowednothingofthesort.Theprosecutorsfailedtoexplainwhatrelevance thedocumenthadtotheproceedingsatall.Afurtherexample,alsounexplainedbytheprosecution, wastheassertionthatthedefendantsembezzledavolumeofoilin2003thatinfactexceededthe actual sum produced by almost two million metric tons. In yet another example, one document presentedbytheprosecutorscontradictedtheindictmentbyrevealingthatthefoundingcapitalof theRussiancompanyFregatwasover154millionrublesnotthe14rublesstatedintheindictment. Furthermore, in arguing that Khodorkovsky and Lebedev should be kept in strict pretrial isolation, theprosecutionassertedthataSiberiancourthaddeterminedthatKhodorkovskyshouldbeheldin suchconditionstopreventhimfromdestroyingevidenceorintimidatingwitnesses;therewasinfact neveranysuchrulinginaSiberiancourt. VanishingEvidence A regional federal court decision relevant to the substance of the proceedingsand helpful to the defendantswas transmitted by the regional federal court to the prosecutors in Moscow. The Privolzhskiy Region Federal Arbitrazh Court confirmed that it sent the entire case file to the prosecutors.However,whenaskedtoproducethecasematerialsincourt,theprosecutorssimply statedthattheyhadneverreceivedthem,andrefusedtoconfirmwhethertheyhadrequestedthe materials at all. The judge was unable to compel the prosecution to produce the soughtafter decision,andapparentlydroppedthematterdespiteprotestationsofthedefense.
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IncompleteEvidence Inmanycasestheprosecutorsannouncedtheywerepresentingadocumentinfull,butinfactonly readthetitleofthedocumentorafewselectedsentences.Sometimesthefirstandlastpagesofa documentwouldberead,butnothinginbetween,thusleavingituptothedefensetocomebackto these documents several months later in order to provide the court the proper context of the materials.Thedefensewasthenaccusedbytheprosecutionofdelayingtheproceedings. Documents such as sales contracts were ostensibly read in fullbut in reality only cursory or irrelevantdetailsofthedocumentwereprovided,withnomentionofwhowerethepartiesorwhat was being sold. Shareholder meeting agendas were summarized, with no information on actual decisions taken at the meetingsand no indication of whether Khodorkovsky or Lebedev even participated.Companyproceduresweredescribedinpartomittinginformationabouttherigorous controlsinplacethatwouldhavepreventedtheallegedembezzlement.Sectionsofanindependent legal analysis of the acquisition and consolidation of Yukos shares were readthough the full approvalofthosesharetransactionsbytheRussiancompetitionauthoritywasnotmentioned.The prosecution likewise skipped over parts of a PwC memorandum they presented, which stated that the Russian government approved of the privatization and consolidation of Yukos.30 Some documents abruptly ended midsentence, with an unknown number of missing pages. When prompted by the defense to engage on the relevance of any given document, the prosecutors refused,andstatedthatthejudgewasfreetoassessthematerialsinhischamber,ratherthanin opencourtwiththebenefitoftheadversarialprocess. BlockedDefenseWitnessesandNoShows Fromtheoutsetoftheproceedings,thedefensewasatasignificantdisadvantagecomparedtothe prosecutionwithrespecttobringingwitnessestocourt,becausetheprosecutionfailedtoattachthe defensewitnesslisttotheindictmentasrequiredunderRussianlaw.Thejudgefailedtoremedythis omissionduringthepreliminaryhearings.Asaresult,atthebeginningofthedefensephaseofthe trial, the defense, unlike the prosecution whose list of witnesses was attached to the indictment, needed to petition the court with respect to every single witness they sought to call to the proceedings, to request that the court subpoena each individual. The attendant procedural and practical hurdles borne by the defense in bringing witnesses to the proceedings meant that the defensewasunnecessarilyandunlawfullydisadvantaged. Numerous potential key witnesses live outside of Russia, including former Yukos managers and employeeswhofledtheirhomecountryoutoffearofunjustprosecutionandwhohavesincebeen grantedpoliticalasylumabroad.Severalofthesepotentialwitnessesofferedtoprovidetestimony from outside of Russia, answering questions from the prosecution or the defense, for example through video conferencing with the courtroom. The court rejected these offers. In contrast, investigators questioned people abroad through international judicial channels without those witnessesbeingrequiredtoreturntoRussia. The court did not allow the defense to submit into evidence sworn declarations obtained from certain witnesses whom prosecutors sought to exclude because they were either accused or suspectedinothercriminalinvestigations.Yet,inablatantdoublestandard,whenrequestedbythe prosecution the court allowed witnesses, criminally accused or suspected, to testify in court or to havetheirinterrogationtranscriptsenteredintotheevidentiaryrecord.
FormoreonPwCsrole,seepages14,18,22,27andinparticularAbuseofInvestigatoryandProsecutorial PowersthroughCoercionofPwConpages2829.
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30

For example, the court not only rejected the defenses request to summon Bruce Misamore, Chief FinancialOfficerofYukosfrom2001to2005,totheproceedings,butalsorefusedtoenterhis53 page questionnaire into the evidentiary record. Misamores questionnaire had been produced in strictcompliancewithRussianlaw.Nevertheless,thecourtagreedwiththeprosecutionsargument that Misamores words had to be excluded from the proceedings because he was a suspect in anotherinvestigation.Russianlawcontainsnoprohibitionthatwouldblocksomeonefromtestifying just because that person is a suspect in another case, whether concerning prosecution or defense witnesses.Moreover,earlierintheproceedings,theprosecutionrequestedandthecourtallowedit toenterintoevidenceinterrogationtranscriptsofAlexeiGolubovichandAllaKaraseva,respectivelya suspectandanaccusedinothercases.Furthermore,thecourtallowedtheprosecutiontoquestion Ilya Yurov, an accused in another criminal case, as a witness in this trial. However, contrary to fundamentalcommonsenseandprinciplesofdueprocess,thecourtagreedtobewillfullyblindto testimony from the Chief Financial Officer of the company central to the allegations against KhodorkovskyandLebedev. The court further refused to enter into evidence sworn declarations of other foreign witnesses, including Michel Soublin (Misamores predecessor as Yukos Chief Financial Officer from 1999 to 2001, and subsequently Chairman of the Finance Committee of the Yukos Board of Directors until 2004), Frank Rieger (Vice President of Yukos RM, which oversaw refining and sales, from 2000 to 2002, and subsequently Financial Controller for the Yukos group of companies through 2005), BernardLoze(MemberoftheYukosBoardofDirectorsfrom2000to2006,ChairmanoftheBoards CorporateGovernanceCommitteeandMemberoftheBoardsNominatingCommitteefrom2000to 2001,andMemberoftheBoardsCorporateGovernanceandNominatingCommitteefrom2002to 2006),SarahCarey(MemberoftheYukosBoardofDirectorsfrom2000to2004)andMichaelHunter (former President of Dart Management Corporation and former head of Yukoss minority shareholderscoalition).WhereasinviolationofRussianprocedurallawtheprosecutionwasallowed tointroduceintotheevidentiaryrecordinterrogationtranscriptsofwitnessesmadeduringasecret parallel investigation, the defenses written questionnaires of key witnesses taken abroad, in strict compliancewithRussianprocedurallawanddirectlyrelevanttotheallegations,wererejectedbythe court. The prosecution argued that the Russian defense lawyers right to collect evidence was limitedtotheterritoryofRussiaandthedefenseviolatedthelawbyobtainingwitnessesstatements abroad.Whenthedefenserequestedthecourtsassistanceinobtainingwitnesstestimonyabroad pursuant to bilateral treaties for mutual assistance in legal matters, the court again sided with the prosecution and refused to assist the defense in its efforts. This was yet another instance of proceduralinequalitiesdisadvantagingthedefense. In addition, the court denied the defenses efforts to obtain testimony from Prime Minister Putin, DeputyPrimeMinisterIgorSechin(whoisconcurrentlyChairmanofRosneft)andFinanceMinister AlexeiKudrin.Theseofficialsdonotenjoylegalimmunityfrombeingcalledtotestifyincourt.The judgeruledthatthedefensesmotionstohavethemenappearaswitnesseswereprematureyet in the end the time never became ripe and the defense was not allowed an opportunity to question them in court. Meanwhile, Sergey Bogdanchikov, former Chief Executive of Rosneft, was summonedbythecourtbutdidnotappear.Rosneftwasthemainbeneficiaryofthedismantlingof Yukos,andalongwithSechin,Bogdanchikoviswidelyconsideredtohavebeenoneofthekeyfigures behindtheofficialdomsonslaughtagainstKhodorkovsky.Thejudgedeniedadefensemotiontore issueasummonsforBogdanchikovtoappearattheproceedings. Of 93 individuals summoned to appear pursuant to requests from the defense, only 13 of them attendedtheproceedingspursuanttoasummonsandthemajorityofthenoshowsdidnoteven explaintheirabsencetothecourt.Thecourtmadenoeffortstocompelthewitnessestoappearin court.
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DisqualificationofDefenseExperts Animportantaspectofthedefensestrategyentailedbringingtocourtaseriesofqualifiedexpertsto explain the factual and legal basis of why the charges against Khodorkovsky and Lebedev were meritless and absurd. The defense sought both Russian and foreign experts who could speak authoritatively to the court in piercing through the ambiguities and generalities of the indictment. Theseexpertsweretorevealnotonlythattheprosecutorsmadeenormouserrorsindrawingupthe charges,butalsotowhatextenttheprosecutionofthecasewashandledbyofficialslackingeventhe basic expertise required in formulating allegations related to the activities of a major player in the energyindustry. Theprosecutorsandthejudgeclearlydidnotwanttoconfrontorbeconfrontedwiththeexpert testimonythatthedefensehadlinedup.Despitetheseeminglyunassailableexperience,knowledge and reputation of each of the experts that the defense sought to bring to the stand, prosecutors repeatedlydemandedtheirdisqualificationcitingirrelevantorinventedpretexts.Prosecutorseven assailed the credentials of the interpreter retained for nonRussianspeaking foreign experts, even though the interpreter selected was among the most experienced of the profession. The judge overwhelminglyvalidatedtheprosecutionsassertions,leadingtoastringofdisqualificationsofboth Russianandforeignspecialists.Thecourtmadeitabundantlyclearthatregardlessoftheeducational background,professionalexperienceandskillspossessedbyanexpert,heorshecouldultimatelybe barredfromtestifyingintheKhodorkovskyLebedevtrialiftheywerebeingbroughttocourtbythe defense.Outofeightexpertsthatthedefensesoughttobringtothecourt,onlythefirsttoappear incourtfortestimonywaspermittedtostandforquestioningandthecourtrefusedtoincludehis written report in the evidentiary record, as it was prepared in advance of the trial and before the court agreed to qualify him as an expert. In contrast, the prosecution experts reports were automatically allowed into the trial record, irrespective of the fact that they too were prepared in advanceofthetrial,andwithoutthedefensebeingallowedtocrossexaminetheauthors.Various flawsinthosereportswereallthusautomaticallyallowedintothetrialrecord. DefenseNotAllowedtoCrossExamineProsecutionExperts The court did not permit the defense to cross examine prosecution experts despite the significant number of flaws in their reports pointed out by the defense. On four occasions the defense motioned the court to summon prosecution experts for crossexamination. On every occasion the motionwasdenied,leavingtheassertionsofprosecutionexpertsinthetrialrecorduntestedbythe defense. When the defense motioned for the exclusion of prosecution expert reports due to substantiveflawsandproceduralviolations,andbecausethedefensehadbeendeniedtherightto crossexamine the authors of the reports, these motions were denied. Two further motions, requesting the production of materials used by prosecution experts in their analyses, were also denied. ProsecutorialMistreatmentandIntimidationofWitnessesandExperts Theprosecutionintimidatedwitnessesandexpertsincourtinthecourseoftheirpresentationsand crossexaminations.Directlyorindirectly,thewitnessesandexpertswereroutinelythreatenedwith criminal prosecution, insulted and interrupted. Hints were made that they could share criminal liabilityiftheywereconnectedtoKhodorkovskyandLebedev.Shamefulincidentsofprosecutorial mistreatmentofwitnessesandexpertsoccurredinopencourt,concerningwitnessesTatyanaLysova, ViktorGerashchenko,JacquesKosciuskoMorizet,FaridKhamidullinandStephenWilson,andexperts KevinDages,LauraHardin,JohnRomanelli,NatalyaLopashenkoandElenaRossinskaya.Prosecutors
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frequently became emotional in their opposition to defense witnesses and experts, raising their voicesorshouting,steppingfaroutsidetheboundsofprofessionalandcourteousbehavior. OnAugust12,2010,StephenWilson,aformerinternationaltaxdirectoratPwCandformerHeadof International Tax at Yukos, testified that the vertically integrated structure of Yukos reflected international norms and laws, and that it was not possible for Khodorkovsky or Lebedev to have embezzled Yukos oil or siphoned off sales proceeds.31 Although Wilsons testimony directly challenged the validity of the charges, in response prosecutors avoided the substance of the testimony. Instead, Prosecutor Valery Lakhtin insinuated that Wilson had underpaid his own personal Russian income taxes, and aided Khodorkovsky and Lebedev in embezzlement and launderingactivities.Immediatelyafterhisappearance,asWilsontriedtoleavethecourtroom,two investigatorsattemptedtoservehimwithpaperssummoninghimforinterrogationbyInvestigator Tatiana Rusanova in connection with a secret parallel case. Rather than address the serious questions raised in Wilsons testimony, prosecutors brazenly attempted to intimidate not only Wilson,butanyotherpotentialwitnesseswiththecouragetospeakoutindefenseofKhodorkovsky andLebedev. OnAugust31,2010,formerYukosexecutiveVladimirPereverzinconfirmedonthewitnessstandthat the prosecution had offered him a chance to avoid a prison sentence if he testified against KhodorkovskyandLebedev.Pereverzinwasservingasentenceonchargesanalogoustothosethat Khodorkovsky and Lebedev were facing, having been convicted in a curiously separate trial for allegedlyactingillegallywiththe twomenandothersinembezzling Yukosoil.Pereverzintold the court that he was offered probation in return for testifying against the defendants. His testimony echoedthetreatmentofformerYukosvicepresidentandlegaldepartmentheadVasilyAlexanyan, arrested in April 2006 and held in pretrial detention until January 2009Alexanyan refused to provide false testimony against Khodorkovsky and Lebedev in exchange for desperatelyrequired medical treatment.32 In yet another example, Frank Rieger, a German national and former senior Yukosofficialwhowasnolongerworkingforthecompanyin2006,wasdetainedforinterrogationby investigatorsandpressuredtoagreetopreparedstatementsimplicatingKhodorkovskyinthetheftof billionsofdollars.Herefused. The prosecutions actions in manipulating its witnesses should also be considered in light of the indirectthreatsthatthewitnessesfaced.Since2004,investigationsofvariousYukosrelatedmatters wereindiscriminatelylaunched,paused,restartedordroppedbyinvestigators.Potentialwitnesses in a new case against Khodorkovsky and Lebedev were directly or indirectly pressured by the authorities in an attempt to corral a group of pliant witnesses and to accumulate whatever documentsthatcouldpossiblybepresentedasevidenceagainstKhodorkovskyandLebedev.Against thisbackdrop,itisallthemoreremarkablethattheprosecutionswitnesseswereunabletoprovide ascintillaofevidencetoprovetheabsurdembezzlementchargesnowbeingfacedbyKhodorkovsky andLebedev.
FormoreonPwCsrole,seepages14,18,22,24andinparticularAbuseofInvestigatoryandProsecutorial PowersthroughCoercionofPwConpages2829. 32 AttheRussianSupremeCourtonJanuary22,2008,Alexanyantestifiedthatwhenhewasbeingdenied medicaltreatmentindetention,SalavatKarimov,formerchiefinvestigatorintheKhodorkovskyLebedevcases, toldhim:[t]heleadershipoftheProsecutorGeneralsOfficeunderstandsthatyoumusthavemedical treatment,maybeevennotinRussia,youhaveagravesituationWemusthaveyourtestimony,becausewe cantsupportthosechargesthatweremakingagainstKhodorkovskyandLebedev.Ifyougiveevidencethat suitstheinvestigation,thenwellreleaseyou.Alexanyan,whohadalreadybeendiagnosedwithHIVinfection andwhodevelopedlymphaticcancerwhilebeingrefusedmedicaltreatmentindetention,furthertestified: ButIcantperjuremyself,Icannotframeinnocentpeople,Irefusedtodothis.AndIthinkthatnomatter howhorriblemyconditionmayberightnow,theLordwillprotectme,thatiswhyIdidnotdothis,Icannot buymylifelikethat
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AttemptstoControlTestimonyofProsecutionWitnesses Whenthetestimonyoftheprosecutionsownwitnessesbegantoveerawayfromtheprosecutions lineofargument,prosecutorssoughttoreplacelivetestimonywithtranscriptsofprioroutofcourt interrogations that they desired to be inserted into the court record. In certain instances, rather than properly crossexamine their own witnesses, prosecutors simply asked a few brief stock questionsbeforeaskingthecourttoacceptoutofcourtinterrogationtranscriptsasevidence.Over repeatedobjectionsbythedefense,thecourtallowedthereadingofinterrogationtranscriptsinto the court record even when the prosecutors could not, as required by law, point to any material contradictions between incourt testimony and the statements made in the outofcourt interrogationsastranscribed. Perhaps afraid of what live witnesses might say on the stand, the prosecutors clearly preferred scriptedstatementspreparedundercontrolledconditionsinsomecaseswitnessesstatedthatthey hadbeenaskedtosigndocumentspreparedbyinterrogatorswhohaddraftedsupposedsummaries oftheirinterrogations.Yetevenusingtheseoutofcourtinterrogationtranscriptsasacrutchintheir crossexaminations,theprosecutorsseemedmoreconcernedaboutappearingtobulkupthecourt fileratherthanactuallyprovingtheirchargesinanyevent,noneofthetranscriptscontainedproof oftheallegationsagainstthedefendants. UseofParallelInvestigationstoCircumventRulesonGatheringEvidence Oneoftheprosecutionsfavoredmeansofavoidingtheobligationsofdueprocessforexampleto circumventrulesongatheringevidenceistheuseofparallelinvestigations.Eveniftheseparallel investigations never result in cases going to trial, they provide opportunities for law enforcement authorities to employ any means necessary to gather evidence, including the threats of criminal prosecution, detention and torture to extract false statements. Numerous witnesses called by the prosecution in the KhodorkovskyLebedev trial revealed on the stand that they had been interrogatedinparallelinvestigationsopenedbyinvestigators.Someoftheseparallelinvestigations were conducted for secret cases; others led to convictions in trials that should instead have been joined with the KhodorkovskyLebedev proceedings. Efforts by the defense to ask questions sheddinglightontheparallelinvestigationswerecutoffbythecourt.Innumerouscaseswitnesses assertedthatduetonondisclosureagreementssignedwithinvestigators,theywerenotpermitted torevealinformationabouttheparallelinvestigations. AbuseofInvestigatoryandProsecutorialPowersthroughCoercionofPwC33 ManyobserversconsideredtheendorsementofadecadeofYukosauditsbyPwCtobestrongproof ofKhodorkovskysandLebedevsinnocenceandtheabsurdityoftheembezzlementcharges.Until June 2007, PwC publicly stood by its 1995 to 2004 Yukos audits. When the Russian authorities attackedPwCovertheauditsincourtinDecember2006,PwCstated:Wewillvigorouslydefendour position and reputation both in court and in dialogue with government authorities which are empowered to regulate [the] auditing profession. In January 2007, PwC insisted that its Yukos reportswereproperlypreparedtopresent,inallmaterialrespects,thecompanysfinancialposition and financial results in accordance with the relevant Russian accounting standards and that PwC concluded these audits according to the highest professional and ethical standards strictly in compliancewithRussian[law]andbest[auditing]practices.
33

FormoreonPwCsrole,seepages14,18,22,24and27.
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PwCwasthensubjectedtopoliceraids,partnerswerethreatenedwithimprisonmentfortheirwork on Yukos, and legal proceedings unrelated to Yukos were brought against the firm. When PwC suddenly reversed itself and withdrew its decade of Yukos audits in June 2007, the firms aforementioned problems evaporatedeven those problems ostensibly unrelated to Yukos. A broadlycitedthreathangingoverPwCasitadamantlydefendeditsYukosreportingthatthefirms RussianlicensecouldberevokedhasnotbeenraisedagainbyofficialssincePwCbackeddown,and Yukosrelatedinvestigationsintothefirmappeartohaveceased. PwCassertedthattheauditswerepulledduetonewinformationonYukosthattheyreceivedfrom prosecutors.However,documentsandwitnessstatementsprovethattheinformationprovidedby prosecutors was not new to PwC, and that in any case the issues raised did not affect the overall validityoftheaudits.TheKhodorkovskyLebedevdefenseteamhasassertedsince2007thatPwCs unusual and unconventional reversal was made in response to coercion and threats from Russian authorities. The Wall Street Journal and Financial Times undertook separate independent investigationsintoPwCsactions,andobtaineddocumentsdisprovingPwCsassertionaboutnew informationjustifyingthewithdrawaloftheaudits.Bothnewspaperspublishedmajorreportsonthe matteronSeptember7,2010.34 DirectandIndirectThreatstoDefenseCounsel Shortly after the authorities began to attack Yukos in 2003, lawyers acting for the company or for Khodorkovsky and Lebedev routinely endured unlawful searches and the confiscation of privileged andconfidentialdocuments.Lawyerswerethreatenedwithdisbarmentorprosecutionwithoutvalid cause, as a form of intimidation and vengeance for defending Khodorkovsky and Lebedev. Prosecutorswentasfarastoimplicatedefensecounselthemselveswithcriminalliabilityduetotheir professionalassociationwiththedefendants.TheprominentcasesofSvetlanaBakhminaandVasily Alexanyantwolawyerswhowereincarceratedand,inthecaseofAlexanyan,subjectedtotorture while he was terminally illrevealed the cruel depths to which the authorities could act with impunity. These incidents created fearful precedents for the lawyers working on the case. In the runup to the trial, prosecutors suggested that the defense counsels due processrelated interventions should be assessed against ethical and professional requirementsessentially threatening disbarment. Such was the response to the defenses reasoned and legallygrounded objections to prosecutorial misconduct in trying to hold the prosecution to the standards and requirementsofthelaw.Prosecutorsregularlybrandedsuchthreatsduringthecourseofthetrialas well,particularlywhentensionsroseinthecourtroomoverdefenseprotestationsofinjustice.These barely veiled threats of punitive treatment weighed against all counsel representing Khodorkovsky andLebedev.ThroughastatementmadeonSeptember29,2010,ProsecutorLakhtininscorning international counsel and foreign witnessesrevealed the position of Russian law enforcement authorities:thatanyonewhoassistsinthedefenseofKhodorkovskyandLebedevobstructsjustice andunderminesthefoundationsofthestate. DenialofDefensesAccesstoOfficialTrialTranscripts Citing the Russian Criminal Procedure Code, which stipulates that official trial transcripts are to be preparedwithinthreedaysofcourtsessions,thedefenserepeatedlymotionedthecourttoprovide copiesofthetrialsofficialtranscripts.InApril2010,thedefensearguedthatdelaysofseveraldays
PwCunderscrutinyoverYukosaudits,andaccompanyingarticles,TheFinancialTimes(Europe),September 7,2010;Oiltycoonsdefensesaysauditorcavedtopressure,andaccompanyingarticle,TheWallStreet JournalEurope,September7,2010.TheworldwideeditionsoftheFinancialTimesandtheUSeditionofthe WallStreetJournalpublishedversionsofthesereportswithslightlydifferentheadlines.
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orevenseveralweekscouldbeunderstandable,butthattherewasnocrediblejustificationforthe courtnothavingprovidedasingleofficialtrialtranscripttothedefensesinceOctober2009.InMay 2010, some additional official trial transcripts were provided to the defense, but only covering the proceedingsuptoNovember2,2009.FromMay2010untiltheendofthedefensephaseofthetrial, on September 22, 2010, the defense was provided no further official trial transcripts for the proceedingspastNovember2,2009.OnlyonSeptember24,2010wasthedefenseteamprovided withadditionalofficialtrialtranscriptsyetonlyfortheperiod fromNovember3,2009toJanuary 20,2010.EvenasthedefendantsbegantodeliverfinalargumentstothecourtonOctober27,2010, theyremaineddeprivedofofficialtrialtranscriptsforthelastninemonthsofthetrial.Thecourtdid notmakethecompleteofficialrecordoftheproceedingsavailabletothedefenseuntilMarch2011, wellaftertheDecember2010verdictandsentencing.Thislongdelaycastintodoubtwhetherthe officialrecordhadinfactbeencompletedbeforetheendofthetrial,orindeedwhetheritwasreally evenneededbythejudgeinthepreparationofapreordainedverdict. Amongtheconcernsthatthedefensesoughttoaddressthroughaccesstotheofficialtrialtranscripts was the courts habit of excluding the full text of motions and incourt statements, which instead weresummarizedalongthefollowinglines:Khodorkovskymadeastatementtothecourt,objecting to actions of the presiding judge. The exclusion of the defenses legal reasoning from the official transcriptswasabrazendistortionofthetrialrecord,anditwasallthemoreunfairconsideringthat prosecutorswerepermittedtoinsertdocumentsintotheofficialtranscriptsastheydesired.More broadly, official trial transcripts are a key tool that defense lawyers refer to in formulating their arguments and ensuring a robust defense strategy as a case unfolds, and in particular when formulatingclosingarguments. InterferenceinDefendantsAccesstoCounselandtoCaseFile In the courtroom, the defendants were constantly locked in a heavily guarded aquariumlike glass booth, making it difficult for them to consult with defense counsel and to view case materials. Documents, notes and even media clippings passed by counsel into the aquarium were under constant surveillance by armed guards. Meanwhile, in the defendants Moscow detention facility, their lawyers were repeatedly barred from visiting them in their isolation cells with a laptop computercontainingadigitizedversionofthecasematerials.Prisonofficialsignoredanunequivocal rulingbytheRussianSupremeCourtagreeingwithLebedevslawyersthattheyshouldbepermitted tobringelectronicmediaintotheisolationcell. ExtendedPreTrialDetention:ReformsFloutedbyObsessivePersecutionofDefendants FromDecember2006toJune2011,KhodorkovskyandLebedevenduredharshconditionsofphysical restraint imposed under pretrial detention rules. With minimal exposure to fresh air and direct sunlight and inadequate opportunities for exercise, the pretrial detention regime becomes extremelydifficultphysicallyandpsychologically,particularlyoverextendedperiods.The situation wasespeciallyhardduringMoscows2010heatwave,whencelltemperatureshoveredat50degrees Celsius(122degreesFahrenheit). Pretrialdetentionisconsideredtobeanexceptionalformofincarceration,whichiswhythejudge presiding over the trial had to rule every three months to extend the duration of the detention measures.ThelastextensionexpiredonNovember17,2010.AfterthatKhodorkovskyandLebedev should have benefitted from comparatively relaxed conditions of incarceration, but they did not. TheyremainedinpretrialdetentionuntilJune2011,whentheyweretransferredfromMoscowto northernRussianprisoncoloniesaftertheirfailedMay24,2011appeal.
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Added to the two years spent in pretrial detention before the end of their first trial and appeal, KhodorkovskyandLebedevhavespentatotalofapproximatelysixandahalfyearsdetainedunder these strict conditions of isolation, compared to just approximately one year in the less restrictive conditions of incarceration to which they were entitled under law. Because Khodorkovsky and Lebedev were concurrently serving their eightyear sentences handed down in 2005, the situation wasdescribedasdoublebarsacompoundedpunishmentnotgroundedinlaw. These detention measures were inconsistent with Russian criminal procedure law, the Russian ConstitutionandRussiasinternationalobligationsundertheEuropeanConventiononHumanRights, as confirmed by Russias Constitutional Court, the Presidium of Russias Supreme Court, and the ECHR. Furthermore, since April 2010, under amendments to Russias Criminal Code and Criminal Procedure Code, courts can no longer order detention as a pretrial measure of restraint for allegations of certain economic crimes, such as those alleged against Khodorkovsky and Lebedev. TheApril2010reformsresultedfromPresidentDmitryMedvedevseffortstomakeRussiascriminal justicesystemmorehumaneandtohaltabusesbyofficialsexploitingthecriminaljusticesystemto attack legitimate businesses. Nevertheless, in the most highprofile and closelywatched trial in Russia, the court openly ignored the recentlyamended law. This was an affront to President Medvedevs highlypublicized efforts to reform Russias criminal justice system and to address the countryslegalnihilism. In May 2010, Khodorkovsky launched a hunger strike to raise awareness that the Russian justice system was failing to implement the reforms.35 Asserting that President Medvedevs reform goals were being blatantly undermined, and that a dangerous precedent was being set, Khodorkovsky vowedtocontinuehishungerstrikeuntilPresidentMedvedevhadbeenseizedofthematter.The hunger strike ended after two days, following public declarations that the Chair of the Russian SupremeCourtandPresidentMedvedevweretoevaluatethesituation. Finally, in rulings on April 15 and September 13, 2011, the Supreme Court of Russia handed rare victories to Khodorkovsky and Lebedev, agreeing that the Khamovnichesky Court had acted unlawfullyinprolongingtheirharshpretrialdetentionconditions.Withtheirtrialover,theSupreme Courts rulings came too late to benefit Khodorkovsky and Lebedev after nearly four and a half consecutiveyearsinpretrialdetention,butthesewereimportantmoralvictoriesthatwillserveas precedents for thousands of others detained in unlawful conditions in Russia. Khodorkovsky and Lebedevhadpursuedtheirappealsonthisissuetohighlightandtoopposethewidespreadpractice ofcorruptauthoritiesabusingpowersofpretrialdetention. ProsecutorsIncomprehensionofCaseMaterials The credibility of the case was undermined not only by its lack of a legal basis or grounding in common sense, and by the multitude of due process violations, but also by obvious prosecutorial incompetence,asrepeatedlypointedoutbythedefense. The prosecutors sometimes read documents apparently without understanding that in fact the documentsunderminedtheirownposition.Severaldocumentsshowedthatcompanyincomewas earned,dividendswerepaid,variouslargescalepurchasesorloansweremade,oilwastransported through governmentcontrolled pipelines, and massive sums were paid in taxesrendering impossible the largescale embezzlement allegations against the defendants. The prosecutors
KhodorkovskysopenlettertotheChairmanoftheSupremeCourtoftheRussianFederationannouncingthe hungerstrikeisavailableat: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/17_May_2010_Khodorkovsky_Ope n_Letter_Hunger_Strike.pdf.
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35

demonstratedonlyasuperficialcomprehensionofthedocumentstheyconsideredpertinenttothe case. They often had trouble pronouncing relevant words, repeatedly misstated numbers, and alwaysshirkedawayfromanydiscussionofthesubstanceofthematerials.Printedemailmessage chainswerereadbackwards,startingwiththemostrecentmessage,confusingthechronologyand contents. Other documents were also read backwardsstarting with the last page rather than correctinganerroneousreversecollation.Aspreadsheetwasreaddowncolumnbycolumnrather than across rowbyrow, rendering virtually unintelligible the contents of the document and demonstratingthattheprosecutordidnotunderstandthemeaningoftheinformation. When Tatyana Lysova, the editorinchief of the Russian business daily Vedomosti, came to the witness stand in May 2010, Catherine Belton of the Financial Times observed that prosecutors appearednottounderstandsomeofthesimplestpointsshemadeaboutbasicrudimentsofthe functioningofpubliclytradedcompanies,thecalculationoftheirvalueandtheconsolidationoftheir finances in international accounts. Belton described the apparently stunned reaction of the prosecutors to Lysovas testimony before they reverted to impugning Lysovas credentials as their onlyretorttohertestimony.36 CourtWithoutJurisdiction ThecasewasisinfactoutsideofthejurisdictionofMoscowsKhamovnicheskyCourt. PursuanttotheConstitutionoftheRussianFederation,noonemaybedeprivedoftherighttohave theircaseheardbythatcourtandthatjudgeunderwhosejurisdictionthecasehasbeenaccordedby law. The European Convention on Human Rights similarly enshrines the right to proceedings in a tribunal established by law. The issuance of a verdict by an unlawfully composed court is an unconditional ground for its repeal, directly prescribed by the Code of Criminal Procedure of the RussianFederation.Indeed,itisprescribedbytherulesonterritorialjudicialjurisdictionthatacase shallbesubjecttobeingheardbyacourtattheplaceofthecommissionoftheallegedact,andif several acts are alleged, then at the place of the commission of the most recent or the gravest of them. If the act was begun in one place and ended in another, then the case shall be heard by a courtattheplacewhereitended. InthesecondcaseagainstKhodorkovskyandLebedev,notasingleoneoftheallegedacts,including the gravest involving alleged money laundering, was committed, or begun, or ended in the jurisdictionofMoscowsKhamovnicheskyCourt.Whiletheprosecutionmadereferencestoactions ofmembersofthelawfirmALMFeldmans,locatedinthejurisdictionofMoscowsKhamovnichesky Court,whoweresaidtohaveparticipatedintheallegedactsimputedtoKhodorkovskyandLebedev, nomembersofthatfirmweredefendantsinthepresentcase,andnoneoftheactsallegedinthe indictmentterminatedinthefirmspremises. Thelegallyprescribed procedurethat wouldhave permitteda changein territorialjurisdictionwas notinitiatedorappliedtoallowthecasetobeheardbeforetheKhamovnicheskyCourt.Underthese circumstances,forwantofjurisdiction,theKhamovnicheskyCourtlackedthecompetenceprescribed bylawforadjudicatingthecaseagainstKhodorkovskyandLebedev.Despitenumerousobjectionsby thedefenseandattemptstorecusethespeciallyappointedjudge,thecourtproceeded withthe trial.

36

See:http://blogs.ft.com/beyondbrics/2010/05/26/russiaprosecutorsversusthepressinkhodorkovsky trial/.
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VI.

DISMISSAL OF CRIMINAL COMPLAINT FILED SEEKING INVESTIGATION OF JUDGES AND PROSECUTORS

In parallel to the appeal proceedings, on May 17, 2011, Khodorkovsky, Lebedev and their lawyers filedacomplainttoRussianauthoritiesassertingthattheinstigation,handlingandoutcomeofthe second trial were so flawed as to be criminal in nature. Pointing to the verdicts irrefutable contradictions of law, obvious falsifications and mischaracterizations of facts and evidence, and irreconcilable internal inconsistencies, Khodorkovsky and Lebedev slammed the guise of criminal judicialproceedingsanddemandedacriminalinvestigationintotheperpetratorsofthetrial.37 In addition to an abundance of evidence from the trial proceedings, this complaint was further buttressed by candid posttrial accounts given by two court whistleblowers. In an interview with Gazeta.ru released on February 14, 2011, Natalia Vasilyeva, an aide to Judge Danilkin and press secretary of the Khamovnichesky Court, spoke out about the verdict. Vasilyeva stated that Judge Danilkinsfirstdraftoftheverdicthadbeenreviewedandrejectedbyoutsidejudicialofficials,who replaced the text with their own, and that Judge Danilkin had to consult with those officials throughout the twoyear trial. The Economist described Vasilyevas widelyreported comments as explosive, and quoted her as saying that everyone in the judicial community understands perfectlythatthisisariggedcase,afixedtrial.38Inasurprisingdeparturefromnormsofjudicial behavior, Judge Danilkin publicly engaged in the controversy through media interviews, denying Vasilyevas account and threatening legal action against her.39 On April 15, 2011, a second official who worked at the court during the trial corroborated Vasilyevas account. Igor Kravchenko, a formercourtadministrator,statedinaninterviewwithNovayaGazetathatJudgeDanilkin,speaking about the KhodorkovskyLebedev case, had admitted: I dont decide this. Referring to outside judicialofficialswhohadnolawfulbasistointerfereinthetrialoutcome,thejudgewasquotedby Kravchenkoashavingsaid:Whatevertheysay,thatswhatwillbe.Kravchenkoalsostatedthat Judge Danilkin consulted with the Moscow City Court when questions arose on how to handle the case. On June 20,2011, the Investigative Committee of the Russian Federation dismissed the complaint, brushingoffVasilyevasandKravchenkosaccounts.OnJune21,2011,thethreeMoscowCityCourt judgeswhoruledontheKhodorkovskyLebedevappealheldanunprecedentednewsconferenceto justify their ruling. These coordinated actions by the Investigative Committee and the panel of judgessoughttodiscredittheassertionsmadebywhistleblowersVasilyevaandKravchenko. VII. IMPLICATIONSFORRUSSIA Three predominant themes emerge from the verdict, transcending this case to be of systemic importancetoRussia: (1) Legitimate entrepreneurial activity is subject to artificial criminalization by corrupt stateofficials;
See: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/2011%2005%2017%20%20Report% 20of%20Crime.pdf. 38 See:http://www.economist.com/blogs/easternapproaches/2011/02/khodorkovsky_case. 39 Meanwhile,seniorRussianpresidentialadviserVeniaminF.Yakovlev,formerlyChairoftheRussianSupreme ArbitrazhCourt,calledforVasilyevasaccounttobethoroughlyexaminedbyjudicialauthorities.See: http://en.rian.ru/russia/20110224/162743489.html.
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(2) (3)

Applicationofthelawisnonuniformandcontradictory; Property rights, contract rights and human rights are not protected from political diktat and raiders acting with the collusion or complicity of law enforcement and judicialauthorities.

The artificial criminalization of legitimate entrepreneurial activity by corrupt state officials constitutesamajorrestraintoneconomicgrowthandmodernizationinRussia.Since2003,agroup of powerful and corrupt figures in Russia have developed and honed corporate raiding methodologies in the course of their treatment of Khodorkovsky and Lebedev and the forced bankruptcy of Yukos. These methodologies are now being replicated throughout Russia by other stateofficialswhotaketheircuesfromtheverypublichandlingoftheYukosAffair. TheRussianjudiciaryislegallyrequiredtoensuretheuniformapplicationofRussianlaw.Uniformity intheapplicationofthelawisafundamentaltenetoftheruleoflawandprerequisiteforjustice,as wellasadriverofeconomicdevelopment,particularlyincountrieswithlegalsystemstransitioning towardsreliabilityandstability.TheKhodorkovskyLebedevverdict,however,isashowcaseofnon uniformandcontradictoryapplicationofthelaw. The verdict contradicts prior Yukos cases in Russian domestic courts, as well as the Russian FederationslinesofdefenseinYukosrelatedproceedingsabroad. The punitive taxes that bankrupted Yukos were validated in Russia by numerous rulings in cases brought before the courts. In those cases the structuring of Yukos transactions with production subsidiarieswasscrutinizedandjudiciallyapproved.ThedeterminationofwhoownedYukosoilwas alsorecognizedbythecourts:accordingtoallothercourtsinRussia,Yukosownedandsoldthatoil, andYukoswasthereforesubjecttotaxationofitsresultingrevenues.Leavingasideargumentsover theunfairandirrationalpunitivetaxationofYukos,thesecourtdecisionsneverthelessstandtodayas Russianjurisprudencethatcannot,underRussianlaw,becontradictedbyinverselogicinothercourt rulings.ThenewcriminalallegationsagainstKhodorkovskyandLebedevthereforecreatedajuridical Catch22:eitherYukosownedandsoldtheoil,alegallysettledfactunderRussianlawasdetermined byallpreviouscourts;orKhodorkovskyandhisallegedcoconspiratorsembezzledtheoil,inwhich case it could not have also been sold and taxed by Yukos. In finding Khodorkovsky and Lebedev guilty,thecourtcreatedamassiveandirreconcilablecontradictionwithanentirecorpusofprevious judgmentsoftheRussianjudiciary.40

EvenelementalfindingsoffactmadebytheKhamovnicheskyCourtcontradictthoseofothercourts.On page458theverdictstates:Ithasbeenestablishedbythecourtthatpracticallytheentirevolumeofthe [stolen]oilwassoldby[Yukos]onitsownbehalftothebenefitofRouthenhold[HoldingsLtd.],whichwas underthecontrolofthemembersoftheorganizedgroupYet,inaparallelYukoscasedealingwithmanyof thesamegermanefacts,thecourtsverdictstated:Routhenholdwascreatedandoperatedexclusivelyfor thebenefitof[Yukos](asstatedonpage100oftheMoscowBasmannyCourtverdictofMarch1,2007inthe caseagainstformerYukosexecutivesVladimirMalakhovskyandVladimirPereverzin).Thesecontradictory findingsdonotpreventJudgeDanilkinfromrelyingontheverysameparallelrulingtoassertonpage630ofhis verdictthattheunsustainabilityofthedefensecounselsargumentsisalsocorroboratedbytheverdictofthe BasmannyDistrictCourtoftheCityofMoscowregardingV.G.MalakhovskyandV.I.Pereverzin.Other standingcourtrulingsthatcontradictJudgeDanilkinsfindingsonYukosoilownershipandsalesincludethe decisionsoftheMoscowCommercialCourtofMay26,2004,October11,2004andDecember16,2004.A decisionoftheMoscowCommercialCourtofApril21,2005thatconfirmedthemassiveSibneftacquisitionby YukosislikewiseincompatiblewithJudgeDanilkinsfindings.
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40

At the ECHR, a claim for unlawful expropriation was brought against the Russian Federation by former executives of Yukos, not involving Khodorkovsky or Lebedev.41 In those proceedings, the RussianFederationdefendedthelegalityofpunitivetaxesonoiltheyassertedwasownedandsold byYukos,claimingthatRussiantaxauthoritiesmadepunitivereassessmentsofYukosonthebasis that oil bought by Yukos trading companies in fact belonged to Yukos. As a result, Yukos was assessed to corporate profit tax as if it, and not the trading companies, had made the trading companies profits. Because of the tax authorities assertion that Yukos was the owner of the oil produced by Yukos production subsidiaries, the company was further charged value added tax on export sales which would have normally been exempt. Simultaneously however, in the latest criminalproceedingsagainstKhodorkovskyandLebedev,theverdictconcludedthatthesameoilwas not owned by Yukos but rather stolen from the companys production subsidiaries by the defendants. The incompatible positionsone version for the ECHR and a different version for the KhamovnicheskyCourtwerethusabsurdlyarguedconcurrentlyonbehalfoftheRussianFederation inmajorparallelproceedings. The KhodorkovskyLebedev case and the broader Yukos Affair have underlined the ongoing vulnerabilityofpropertyrights,contractrightsandhumanrightsinRussia.Theserightsaretenuous andmayberevokedbyothersactingwiththecollusionorcomplicitywhetherpassiveoractiveof law enforcement and judicial authorities. The potential emptiness of legal guarantees, even constitutionalguarantees,undermineseconomicdevelopment,politicalstabilityandsocialpeacein Russia.

See:www.theyukoslibrary.com.Separately,theRussianFederationisfightingaseriesofapplicationsfrom KhodorkovskyandLebedevconcerningflagrantandpersistentviolationsoftheirhumanrights;see: http://www.khodorkovskycenter.com/legalpersecution/europeancourthumanrightscases.


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41

VIII. CONCLUSION Thistrialwaswatchedin Russiaandaroundtheworldforanswerstoseveralimportant questions. Wouldthetaxterrorism,statebackedraidingofprivatepropertyandtramplingofhumanrightsof recentyearsbevalidatedandcontinued?Ifthecourtcouldignorebothfactsandlawsandrendera judgment on order, would that not signal to law enforcement and judicial authorities across the countrythattheycandothesame,withimpunity?Whatmessageswouldaguiltyverdictsendabout the competence and independence of the Russian justice system and the prospects of President Medvedevs desiretostampoutlegalnihilism? Whatwould bethe effectsonforeign investors, foreigngovernmentsandinforeignorinternationaltribunals?AspositedbyKhodorkovsky,would thecourtunderstandthatitisacourt,andnotacheapinstrumentforraidersandcorruptioneers? WillithelpthePresidentandthecountry? In his initial reaction to the verdict, Khodorkovsky juxtaposed a series of assertions that illustrated thecoreabsurditiesoftheverdict,notingthattheKhamovnicheskyCourtmadeallofthefollowing contradictoryfindingsinasinglejudgment: Yukosboughttheoil,butYukosdidnotbuytheoilbecauseKhodorkovskyandLebedev embezzledit. Thesellers gavethatoilawaywithout payment,butthesellersgavethatoilawayin exchange for money. The sellers gained profits from those oil sales and thereby suffereddirectharmfromtheembezzlementofthatoil. Yukospublisheditsprofits,therebyconcealingthoseprofitsfromshareholders. Yukosdidnothaveprofits,butitspentitsprofitsondividends,taxesandinvestments. In the most highprofile trial in Russia, closely observed by legal experts, entrepreneurs, investors, thegeneralpublicandmediaallovertheworld,thecourtopenlyignoredapplicableproceduraland substantive laws as well as basic notions of fairness.42 This is testament to the power of those corruptofficialswhozealouslyseektojustifytheirseizure,controlandownershipofYukosassetsand toisolateKhodorkovskyandLebedevfromRussiasbusinessandpublicspheresandtokeepthem injailaslongaspossiblebelievingthiswillhelpthemtoachievethesegoals.Theverdictisaknowing andwillfulfictionaldescriptionofpurportedcriminalconduct,devoidofcorpusdelicti,blindtothe preponderanceofexculpatoryevidenceand builtuponabulldozingof due process.On December 27,2010,KhodorkovskysleaddefenselawyerVadimKlyuvgantdescribedthetrialasacharadeof justice. Upheld as expected upon appeal, the verdict stands as a monumental embarrassment to theRussianjudiciaryandtothosestateofficialswhoseektoportrayitasavalidactofjustice. The trial and its verdict were an open challenge and indeed an affront to President Medvedevs highlypublicizedeffortstodeveloptheruleoflaw,toreformRussiascriminaljusticesystemandto fightgovernmentcorruption.Theoutcomeofthiscasewasatriumphofcorruptofficialscontrolling Russias law enforcement and judicial bodies, and a setback for an entire country that aspires yet continuallyfailstomodernize.
OnSeptember20,2011,theInternationalBarAssociationsHumanRightsInstitute(IBAHRI)releaseda reportbasedonitsobservationofthetrial.TheIBAHRIwastheonlyorganizationwithafulltimeindependent observeratthetrial.Severelycriticalofthenumerouscriticalfailingsoftheproceedings,theIBAHRIreport concludesthatthistrialwasnotfair.Seehttp://www.ibanet.org/Article/Detail.aspx?ArticleUid=61CF8166 7CDF4159B52A9D8AC162D677.
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42

APPENDIX INTERNATIONALCOMMISSIONOFJURISTS S T A N D A R D S O N J U D I C I A L P R O C E E D I N G S 43 KHODORKOVSKYLEBEDEVTRIALANDAPPEAL20092011 STANDARD


Righttoafairhearing

COMPLIANCE

BREACH
X

SOURCE
ICCPRArt.14(1);ECHRArt. 6(1);UDHRArts.10,11;BPIJ Prin.5,6 ICCPRArt.14(1);ECHRArt. 6(1);UDHRArts.10,11 ICCPRArt.14(2);ECHRArt. 6(2);UDHRArt.11(1);GP Guid.13(b),14;SMRR. 84(2);BPDPrin.36;Rec.R Prin.26,27,30 ICCPRArt.14(3)(a);ECHR Art.6(3)(a);BPDPrin.10 ICCPRArt.14(3)(b);ECHR Art.6(3)(b),6(3)(c);UDHR Art.11(1);BPLPrin.1,58; SMRR.93;BPDPrin.18; Rec.2000Prin.I(5)(7) ICCPRArt.14(3)(f);ECHR Art.6(3)(e) ICCPRArt.14(3)(d);ECHR Art.6(3)(c) ICCPRArt.14(3),14(3)(e); ECHRArt.6(3)(d);UDHR Art.10;BPIJPrin.6;Rec.R Prin.29 ICCPRArt.14(3)(e);ECHR Art.6(3)(d) ICCPRArt.14(3)(g);BPD Prin.21;CATArts.13,16 GPGuid.15,16;BPDPrin. 27;Rec.RPrin.28;CAT Arts.15,16

Righttoapublichearing

Presumptionofinnocence

Righttobeinformed promptlyofthecharge Righttodefense,including accesstodocumentsor counselandlackof interferencewithcounsel Righttoaninterpreterand toaccuratetranslations Righttobepresentattrial

Righttoequalityofarms

Righttocallandexamine witnesses Rightnottobecompelledto confessguiltortotestify Exclusionofevidence elicitedbyillegalmeans, includingtortureorill treatment

InternationalstandardsapplicabletotrialproceedingsaslistedinTrialObservationManualforCriminal ProceedingsPractitionersGuideNo.5,InternationalCommissionofJurists,Geneva,2009.
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Righttobetriedwithout unduedelay Principleoflegalityof criminaloffences(nullum crimensinelege) Prohibitionofthe retroactivityofcriminallaw Prohibitionofdouble jeopardy(nebisinidem) Righttoapublicand reasonedjudgment Rightnottosufferaheavier penaltythantheone applicableatthetimethe criminaloffencewas committedandrightto benefitfromalighter sentencesubsequently introducedbylaw Rightnottobepunished otherwisethanin accordancewith internationalstandards

ICCPRArt.14(3)(c);ECHR Art.6(1);BPDPrin.38;Rec. RPrin.24(c) ICCPRArt.15;ECHRArt. 7(1);UDHRArt.11(2) ICCPRArt.15(1);ECHRArt. 7(1);UDHRArt.11(2) ICCPRArt.14(7);ECHRArt. 4,Protocol7 ICCPRArt.14(1);ECHRArt. 6(1);UDHRArt.10

X X X

ICCPRArt.15(1);ECHRArt. 7(1);UDHRArt.11(2)

ICCPRArts.6,7,10,11;ECHR Art.3;UDHRArts.3,5,9; SMRR.8,33,5683;BPTP Prin.7;BPDPrin.1,3,6;CC 5,6,8;CATArts.1,2,16 ICCPRArt.14(5);ECHRArt. 2,Protocol7;UDHRArt.8

Righttoappeal


Acronymsused: UnitedNationsandRegionalTreatyStandards ICCPRInternationalCovenantonCivilandPoliticalRights ECHREuropeanConventionfortheProtectionofHumanRightsandFundamentalFreedomsanditsProtocols CATConventionagainstTortureandotherCruel,InhumanorDegradingTreatmentorPunishment UnitedNationsDeclaratoryInstrumentsStandards UDHRUniversalDeclarationofHumanRights BPLBasicPrinciplesontheRoleofLawyers GPGuidelinesontheRoleofProsecutors SMRStandardMinimumRulesfortheTreatmentofPrisoners BPTPBasicPrinciplesfortheTreatmentofPrisoners BPDBodyofPrinciplesfortheProtectionofAllPersonsunderAnyFormofDetentionorImprisonment CCCodeofConductforLawEnforcementOfficials RegionalDeclaratoryInstrumentsStandards Rec.2000Recommendation2000(21)ontheFreedomofexerciseoftheprofessionoflawyeroftheCommitteeof MinisterstoMemberStatesoftheCouncilofEurope Rec.R.RecommendationNo.R(2000)19oftheCommitteeofMinisterstoMemberStatesoftheCouncilofEuropeon theroleofpublicprosecutorsinthecriminaljusticesystem

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