Justice Under Pressure - First Month of Trial

7/31/2019 Justice Under Pressure - First Month of Trial

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J U S T I C E U N D E R P R E S S U R E

E X E C U T I V E S U M M A R Y : T H E F I R S T M O N T H A T T R I A L

Prepared by Defense Counsel of

Mikhail B. Khodorkovsky & Platon L. Lebedev

BACKGROUND

Mikhail B. Khodorkovsky, former chief executive of the Yukos Oil Company, and his businesspartner Platon L. Lebedev, were convicted and sentenced to eight years imprisonment in 2005 and

banished to Siberia. They were victims of severe abuses of institutions of Russian state power frominvestigatory, prosecutorial and regulatory authorities to the judiciary committed by a group offigures in the political establishment who viewed them as challengers or competitors. The interests ofpolitical and commercial adversaries had coalesced to orchestrate the states incarceration of the twomen and raiding of their companys assets. When Khodorkovsky and Lebedev became eligible forparole in 2008, those in power who still perceive them as a threat stepped up a long-dormant effort tofind new grounds to keep them incarcerated for a long time to come. In addition to keepingKhodorkovsky and Lebedev isolated from society, their adversaries seek to conceal the corrupt andcriminal actions committed against them and other victims of the Yukos affair with the participationand under the protection of high-ranking officials.

An enormous repository of data was seized from Yukos, and also accumulated in the course of

numerous investigations of individuals or companies connected to Russias most successful privateenergy company. Reams of documentation were sloppily compiled in a 188-volume case file.Lacking organization, analysis or any hallmark of investigatory diligence or competence, the case filewas presented to Khodorkovsky and Lebedev in February 2007 as the evidentiary basis for a new trialagainst them, on charges of alleged embezzlement and money laundering.

Khodorkovsky and Lebedev are accused of embezzling 350 million metric tons of oil worth over$25.4 billion and laundering over $21.4 billion. The allegations have no credible grounding eitherin the facts described or in the legal terms invoked by prosecutors. Ordinary, widespread businesspractices are blithely and ignorantly labeled by prosecutors as criminal. Since the time the allegationswere formally presented in 2007, Khodorkovsky and Lebedev have made consistent efforts to engagewith investigators and prosecutors in good faith, seeking to understand and respond to them as

required by law. While Khodorkovsky and Lebedev made every effort to engage through establishedprocedural rules, in contrast, the investigators and prosecutors consistently acted outside of theboundaries of the law. The basic duties of the investigators and prosecutors to investigate relevantfacts and to build a case grounded in law or to terminate a case where no actionable crimes exist remain unfulfilled.

By January 2009, the quantity and severity of the investigators procedural abuses against thebackdrop of bafflingly nonsensical evidentiary and legal grounds led the defense to request that thecase be terminated as incurably flawed. The request was rejected by the procuracy and the case wassent to trial. On March 6, 2009 Khodorkovsky and Lebedev petitioned Judge Viktor N. Danilkin ofMoscows Khamovnichesky Court to terminate the proceedings. On March 17, 2009, the courtrejected the petition and the trials opening hearings commenced on March 31, 2009. Since thendefense lawyers have filed over 40 motions. Of those, only two motions were granted, one of whichwas later repealed in part, and a third was partially granted. The court has consistently and summarilyrejected all other defense motions.


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On April 21, 2009, Khodorkovsky and Lebedev pleaded not guilty, while emphasizing that the chargesremain incomprehensible and unexplained.

DEFENSE MOTIONS OVERWHELMINGLY DENIED

From the outset of the trial the defense has diligently filed motions addressing both the substance ofthe prosecutors allegations and procedural failings. All defense motions are reasoned and groundedin accordance with Russian law. The most important of these motions, and related statements made incourt by the defendants, have sought to force the prosecution to explain how there could beembezzlement of oil when the same volumes of Yukos production were reported, accounted for andheavily taxed; or how there could be money laundering without any underlying crime.

Khodorkovsky noted that despite repeatedly requesting explanations from the investigators regardingthe charges, and despite signing a series of statements asserting that his questions had not beenanswered, Judge Danilkin nonetheless erroneously declared that answers had in fact been provided to

Khodorkovsky in conformity with the law.

Another series of motions addressed the evidentiary base of the prosecutions case. The prosecutioncontinues to bandy about the stigmatizing terms embezzlement and money laundering yet hasbeen unable to provide any rational explanation of the charges grounded in evidence. The defensetherefore motioned for the following:

That certain exculpatory evidence be added to the case file either documents readilyavailable to the defense, or documents being concealed or impounded by prosecutors;

That where illegal seizures of evidence had occurred, such materials be excluded fromthe case file;

That the court subpoenas over 250 witnesses to testify in support of the defense;

that the court avail itself of procedures available to obtain relevant evidence frompersons abroad, located in the United States and Europe, who have stated they arewilling to cooperate with Russian authorities;

That public records be subpoenaed in order to prove the whereabouts of the allegedlyembezzled Yukos oil in what was a tightly-controlled state-run pipeline network;

That publicly available Russian government documents from the 1990s be added tothe case file, to demonstrate that government policy had been geared towards thedevelopment and functioning of Yukos as a vertically-integrated energy company;

That the court consider a whole series of judgments in relevant cases adjudicated byother Russian courts; noting that official copies of the texts of several of these

judgments, germane to supporting the defense position on numerous issues, hadsuddenly become impossible to acquire from either public or private database sources.

In addition, the defense filed motions regarding problems in the case file that are illustrative of theslipshod nature of the prosecutions work. Motions have sought corrective actions regarding thefollowing:

Mathematical errors in the charges; A multitude of inaccuracies and fabrications in documents translated by the procuracy

from English to Russian; Numerous missing pages from documents in the case file; Entire documents referenced but absent from the case file.

The defense further pointed out the procedural ploys used by the prosecutors in order to ensure thatKhodorkovsky and Lebedev remain in the confines of strict incarceration, reducing their access tolegal counsel and family visits.


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The defense motions were challenged by the prosecution, who routinely asserted either that themotions were premature, trying to push the judge to rule on matters that should be dealt with later inthe trial; or that the motions represented delay tactics by the defense.

The defense maintained that its position that all matters raised demanded immediate resolution, bothfor a fundamental understanding of the substance of the charges and for a fair hearing of the defenseposition. The prosecutions assertion that the defense was engaging in delay tactics was whollydisingenuous, since many of the defenses requests had been made and ignored on multipleoccasions dating back two years. Furthermore, one effect of the investigators and prosecutorslongstanding refusal to seek and admit corporate records to the case file is that as document retentionperiods expire, critical exculpatory evidence from 1998-2000 can legally be destroyed by third partieswho are under no obligation to preserve data for the court.

Moreover, due to the prosecutors long delay in bringing this case to trial, the statutory time limit forbringing charges on certain alleged improper share transactions has expired. Despite the expiry of thisstatutory time limit, the court has agreed to hear the prosecutions allegations. The defense has andwill nonetheless vigorously defend the legality of those share transactions.

Almost every single motion filed by the defense was rejected by the court. Judge Danilkinoverwhelmingly sided with the prosecutors, making short rulings that did not address the relevant lawand legal reasoning presented by the defense. Such short rulings without reasoning are inconsistentwith the requirements of Russian law. The only concessions made to the defense were to allow certaincourt precedents from 1999 and 2000 to be added to the case file, and to admit a list of defensewitnesses although the judge reserved the right to reject any particular defense witness on a case-by-case basis when the defense seeks their testimony later in the trial.

No evidence presented or requested by the defense has been added to the case file. In contrast,investigators and prosecutors have previously been allowed to add materials to the case file as theydesire.

The defense noted that with the vast majority of their motions rejected by the judge, the capacity of thecourt to render a reasoned and lawful decision was substantially hampered if not eliminated.Khodorkovsky asserted that some of the prosecutors had in fact exposed themselves to futureprosecution for making false statements to the court.

The defense has posted the text of its motions and related documentation on the Internet(http://khodorkovskycenter.com/news-resources/from-the-courtroom), with English translations. Anyinterested person is free to conduct their own assessment of the validity of the new charges againstKhodorkovsky and Lebedev, the strength of the defense teams arguments and the fairness of the trialto which the defendants are being subjected.

THEATRE OF THE ABSURD

On April 21, 2009, Agence France Presse described the unfolding trial as a theatre of the absurd.

Prosecutors have stubbornly stuck to a script their indictment which denies legal and factualrealities ranging from the fundamental definition of crime to the highly regulated structure andoperation of vertically-integrated energy companies. After eight days of reading the charges anddespite several requests by the defense for explanations and clarifications, they have failed to elucidatehow it was possible that Yukos covered its operating expenses and invested heavily in capitalimprovements and acquisitions and paid dividends all financial operations recorded on the books ofYukos and several other companies and banks when the funds necessary for these operations wereallegedly stolen. A rudimentary examination of the audited financial statements of Yukos renders theembezzlement allegations a factual impossibility. Furthermore, in their calculations of alleged theft,the prosecutors impute world prices for refined and transported oil to transactions for unprocessed


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wellhead output on the domestic Russian market denying that differences in price representrefinement, storage, transport, taxation, and other downstream costs. The prosecutors alsodemonstrate complete ignorance of the transfer pricing practices of Yukos, which continue to beemployed by Rosneft and other Russian and international companies today in full compliance with thelaw.

Khodorkovsky and Lebedev have explained these matters through in-court statements, yet theprosecutors avoid engaging on such facts, relentlessly pushing forward with their allegations.Ironically, the prosecutors will on one hand refuse to clarify major questions, such as whether they arealleging it was oil products that were stolen or proceeds of the sale of such products, and where thestolen goods or funds were taken; they will remain silent on the method, time and place the allegedcrimes were committed; yet on the other hand they will carefully read out ruble and dollar sumsallegedly embezzled to the level of detail of kopecks and cents. Prosecutors have been permitted todrone on for hours and days on end, reciting an indictment that everyone in the courtroom has alreadyread; yet when the defendants have attempted to address the substance of the indictment, they havebeen continually interrupted by prosecutors and their statements have been cut short by the judge.

The defendants have concluded that the prosecutors do not comprehend basic principles of law andbusiness management and fundamentals of the energy industry, and that they have a vested interest ina predetermined outcome at the trial and will exert enormous pressure on the judge to achieve thatoutcome.

On April 3, 2009, Sabine Leutheusser-Schnarrenberger, former German Minister of Justice andcurrent representative of the Parliamentary Assembly of the Council of Europe, stated, I cannotunderstand why Mikhail Khodorkovsky and Platon Lebedev have been put on trial a second time. Ihave the impression, however, that it is being done so as to keep them in prison as long as possible.

IS THERE HOPE FOR A FAIR VERDICT?

The behavior of the prosecutors in the courtroom has only weakened their credibility and reinforcedthe incongruity between obvious facts and the allegations of embezzlement and money laundering.With each ruling by the judge favoring the prosecution, the window of opportunity for a fair judgmentseems to be closing, although it still cannot be excluded.

The judge is undeniably in the unenviable position of being the focus of incredible direct or indirectpressure by the prosecutors, and those behind them, to rule against the defendants. On the other hand,in line with President Medvedevs declarations regarding the importance of an authoritative andindependent judiciary in Russia, the judge cannot render credible guilty verdicts on the deficient legalgrounds that have been provided.

This trial carries enormous symbolic value for Russia and the world. Will the tax terrorism, state-backed raiding of private property and trampling of human rights of recent years be validated andcontinued? What messages would guilty verdicts send about the competence and independence of theRussian justice system and the prospects of President Medvedevs desire to stamp out legalnihilism? What would be the effects on foreign investors, foreign governments and in foreign orinternational tribunals? If the court can ignore both facts and laws and render a judgment on order,will that not signal to law enforcement and judicial authorities across the country that they can do thesame, with impunity? As posited by Khodorkovsky, will the court understand that it is a court, andnot a cheap instrument for raiders and corruptioneers? Will it help the President and the country?Well see.

April 27, 2009*

*This summary covers courtroom proceedings from March 31 to April 27, 2009.

Documents

Justice Under Pressure - First Month of Trial