After more than seven months behind bars, Russia's richest man, oil magnate Mikhail Khodorkovsky, appeared in a Moscow court Khodorkovsky for the first substantive hearing in a case that threatens to bring down the business empire he built.
The closed-door hearing was the first of two scheduled for the Meshchansky court Khodorkovsky, beginning a process that could ultimately end not only with a more than 10-year-long prison sentence for Khodorkovsky but also the transfer of Yukos, the company he transformed into one of Russia's largest oil producers, to state control. Khodorkovsky has been charged with fraud and tax evasion.
Russia's Tax Ministry won a key court decision Wednesday that requires Yukos to pay US$3.4 billion in back taxes and fines. The company warned that the claim could force it into bankruptcy this year, which could pave the way for the state to seize its assets. Yukos was expected to try to quash the claim Friday in the first of many expected court challenges.
PHOTO: REUTERS
Khodorkovsky was brought to the courtroom shortly before the hearing started, but no one other than his lawyers was allowed to enter. His parents and sister stood in a hallway crowded with journalists, and his mother stood on a bench in hopes of catching a glimpse of her son as he left the courtroom.
One of Khodorkovsky's lawyers, Genrikh Padva, said the main issue at the hearing would be the defense's motion to combine Khodorkovsky's case with that of another Yukos shareholder held on similar charges, Platon Lebedev.
The first hearing in Lebedev's trial was scheduled for yesterday afternoon.
However, another lawyer, Yuri Schmidt, later told reporters that the defense had not been able to make its motion because tax inspectors had asked for more time to study the case. Judge Irina Kolesnikova agreed to the request, which will cause a new delay in the trial.
"Formally, [these] people have the right to take part in the trial," Schmidt said. "Why they didn't decide to do this before, I don't understand."
The judge adjourned Khodorkovsky's trial until June 8.
Yukos shares dropped by 10.7 percent in trading yesterday, dragging the main Russian market indexes down with them. The stock had already lost close to half its value since the investigation started last year.
Adam Landes, an analyst at Renaissance Capital investment bank, said he expects both cases -- the tax claims and the criminal charges -- to play off each other, and into the government's hands.
"Once Khodorkovsky and Lebedev are standing in the docks and are staring at their own personal predicaments, the government may want to send them a reminder -- there will be nothing for you at the end," he said, predicting that the Yukos shareholders might capitulate by relinquishing their stake in the company in exchange for a lighter sentence and being able to retain some of their wealth.
The legal probe against Yukos and its shareholders is widely seen as a Kremlin-orchestrated campaign to punish Khodorkovsky for his political aspirations and his funding of opposition parties.
The crushing of Yukos' main shareholders and the stripping away of their assets would serve as an example to Russia's other billionaire businessmen not to meddle in politics, analysts say.
"This is so clearly a political order ... I don't know of one oil company in Russia that didn't take advantage of the tax loopholes that Yukos is being prosecuted for now," said Yevgeny Yasin, a prominent economic expert who served as economics minister in the 1990s.
The Kremlin denies any political subtext, insisting that the Yukos probe is part of its battle against the corruption that marked the sell-off of Russia's assets after the collapse of the Soviet Union.
Khodorkovsky was arrested at gunpoint on Oct. 25, and has been jailed since. Courts have repeatedly turned down his requests for release pending trial, accepting prosecution arguments that he could flee the country or seek to influence government witnesses.
Last month Khodorkovsky issued a penitent letter that praised Putin and said liberals must learn to cooperate with the popular leader. The letter followed a March article by Khodorkovsky in which he heaped words of praise on Putin and castigated himself and other tycoons for their failure to help the poor and for a lack of patriotism.
Khodorkovsky's supporters have tried to rally public opinion behind him, but the so-called oligarchs are widely hated in Russia.
"The fate of this one person will echo the fate of millions in the country if we don't stand up to defend our freedoms," warned Sergei Kovalyov, a prominent human-rights activist.
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