Like the campaign against Mikhail Khodorkovsky, the inextricably connected campaign against the Yukos Oil Company was a matter of political diktat, pursued with recklessness, malice and bad faith. The Yukos affair signalled the resolve of Kremlin insiders to suppress domestic dissent and to capture and exploit the gains of the privatised energy sector in Russia. Corrupt state officials achieved these objectives through widespread abuses of their control over the levers of state power, and succeeded in building new empires of wealth for themselves in the process. Consequences of the Yukos affair included the destruction of billions of dollars worth of property, a significant step backwards from competition in the energy sector and from market-oriented reforms, and a de-legitimisation of Russia’s legal system.About Yukos
Due to mismanagement and underinvestment, Yukos’s infrastructure was crumbling and its wells produced a fraction of their peak capacity at inflated costs. When Khodorkovsky and his associates invested in a majority stake in the company, it was producing just half a million barrels of oil per day, compared to 1.4 million in 1987, at a cost of up to $12 per barrel. It also had between $2-3 billion in debt (read more in The Yukos Library).
Matters worsened with the 1998 Russian financial crisis. The price of oil was $8 a barrel, and the production cost was $12. There was no money to pay off debts or for salaries and many people were slipping into poverty. Demand on the domestic oil market plummeted and exports were blocked.
With his partners, Khodorkovsky implemented an historic turnaround. In the span of a few years, they reduced per barrel costs to $1.5 and increased production to over one million barrels per day. By 2003, Yukos and its subsidiaries had a market capitalization of $21 billion, and produced 20 percent of Russia’s oil – the equivalent of 2 percent of world production. The company had become the second-largest taxpayer in Russia after the state gas monolith Gazprom, contributing 4.1 percent of the Russian federal budget. Yukos was the envy of Khodorkovsky’s peers and many of his contemporaries began plotting the “Yukosisation” of their own companies. Shares could be acquired not only in Russia but also on the major stock exchanges of the United States and Europe. Yukos was considering full floatation on the New York Stock Exchange. By mid 2003 a merger with Sibneft had been agreed and talks for selling a major stake to Exxon Mobil or Chevron were well advanced.
President Putin himself congratulated Yukos on its 10th birthday in 2003. He was quoted saying: “Competently employing modern scientific and technical achievements, Yukos is confidently moving on a trajectory of stable growth.”
Falling Foul of the Kremlin
Since the late 1990s, Khodorkovsky had taken steps to transform Yukos along the lines of western business models. These steps included the introduction of corporate transparency, the adoption of western accounting standards, the hiring of western management, the creation of an independent board of directors with a corporate governance subcommittee, corporate growth through mergers and acquisitions, and increased western investments. These actions had marked Khodorkovsky as an outspoken leader who was pro-western and challenged the non-transparent means by which government and business operated in the Russian energy sector. These practices, along with the possibility of Yukos selling a major stake to Exxon Mobil or Chevron, deeply unsettled the Kremlin.
In 2002 and 2003, Khodorkovsky became increasingly outspoken on the country’s rampant corruption and on the need to create a more robust civil society. In February 2003, in a televised meeting between President Putin and the Russian Union of Industrialists and Entrepreneurs, Khodorkovsky cited numerous statistics on state graft in Russia showing that corruption cost the Russian economy over $30 billion per year. He said that the administration “must be willing to show its readiness to get rid of some odious figures” in the regime, to prove its readiness and ability to combat corruption. An angry President Putin would have none of it, and shot back with clear threats to Khodorkovsky, suddenly questioning the legitimacy of Yukos's growth (read more).
Through his success at Yukos and leadership on developing Russia’s civil society, by 2003 Khodorkovsky had become a public irritant and powerful opponent of Kremlin policies. Meanwhile, Yukos had become too attractive an asset for predators to resist expropriating.
Use of Tax Claims to Attack Yukos
Yukos consistently paid its tax obligations in full, and even though it benefitted from lawful tax optimisation methods, the company was the largest private taxpayer in Russia (read more). From 1995 to 2004, Yukos audits had been approved by PricewaterhouseCoopers (PwC) (by 2007, after intense coercion and threats from the Russian authorities, PwC withdrew their stamp of approval from Yukos’s audits – see Financial Times and Wall Street Journal and this Q&A. In July 2003 even the Russian Tax Ministry had approved Yukos’s good standing, with only minor adjustments. Nevertheless, in December 2003, the Tax Ministry launched the first of what would become a series of extraordinary audits of Yukos’s tax payments.
The Tax Ministry justified additional taxes and fines by inventing entirely new legal concepts, which were applied only to Yukos, and misapplying Russian tax law, notably by retroactively assigning profits made by Yukos’s trading subsidiaries to the parent company at a higher tax rate.
Yukos’s back tax bill ended up exceeding $30 billion for 2000 to 2004. According to an analysis by the Parliamentary Assembly of the Council of Europe published in January 2005, “the total tax burden for Yukos, including the retroactive reassessments, is indeed about triple that of its Russian competitors” and “the total tax burden for 2002 exceeds [Yukos’s] turnover for that year.”
In April 2004, Yukos was given just two days to pay the reassessed outstanding tax for 2000. However, the tax authorities did not even bother to wait: they froze all company assets, making it impossible for Yukos to pay even if simultaneously challenging the legitimacy of the reassessment (for more information, see The Yukos Library).
The spurious back tax claims, asset freezing orders and absurdly unrealistic payment deadlines ultimately led to the seizure of Yukos’s crown jewel production asset, Yuganskneftegaz (YNG), in June 2004. In November 2004, the Russian authorities announced an auction of YNG would take place in December 2004. This contravened Russian law, which required sale of non-core assets before core assets for the settlement of tax claims. Yukos had proposed to the tax authorities that the company sell its recently acquired shares in Sibneft, which would have allowed it to pay off most of the tax liability without affecting its core operations, but the tax authorities ignored the proposal.
At the time of its seizure, YNG was responsible for over 60% of Yukos’s total output. It had been valued by management at between $16.1 billion and $22.1 billion, and by Russian state-appointed evaluators Dresdner Kleinwort Wasserstein at between $14.7 billion and $17.3 billion. Nevertheless, prior to the auction, the Russian Ministry of Justice announced the value of YNG was no more than $10.4 billion.
Russian authorities justified this under-valuation by levelling new tax claims Yuganskneftegaz itself and by threatening its production licenses, all timed for Dresdner Kleinwort Wasserstein's valuation. The authorities deducted the total additional liabilities from the lowest valuation mentioned by Dresdner Kleinwort Wasserstein.
In an effort to block the sale of YNG, Yukos filed for bankruptcy protection in December 2004, in the United States Bankruptcy Court for the Southern District of Texas. While events in Russia ultimately made this effort unsuccessful, the Texas court issued a temporary restraining order that barred the participation of Gazprom and a consortium of banks in the auction. According to the order, the “weight of the evidence supports a finding that it is substantially likely that the [tax] assessments [of Yukos] and manner of enforcement regarding taxes were not conducted in accordance with Russian law.” The court also found that the “evidence supports a finding of the likelihood that Plaintiff’s shares of YNG will be sold for approximately half the value estimated by two different investment bankers.”
Despite the court order, Gazprom attended the auction, although it did not submit a bid. The only other participant in the auction was a company called Baikal Finance Group, incorporated on December 6, 2004 (two weeks prior to the December 19, 2004 auction) with share capital of some $300 and a letterbox headquarters in a building that served as a liquor store in the city of Tver. President Putin at the time said Baikal Finance Group’s shareholders were “exclusively individuals”, stating: “These individuals have been in the energy business for many years...As far as I have been informed, they intend to build relations with Russia’s other energy companies interested in this asset.”
Somehow, Baikal Finance Group was able to secure the $1 billion deposit needed to participate in the auction and financing for the $9.8 billion bid it needed to purchase YNG, against an auction starting price of $8.65 billion.
Two weeks after Baikal Finance Group purchased YNG, state-controlled Rosneft purchased Baikal Finance Group, its only asset being the stake in YNG. Tax claims against Yugnaskneftegaz were soon dropped and threats to its production licenses disappeared.
In December 2004, chief Kremlin economic adviser Andrei Illarionov described the unlawful expropriation of YNG as the “scam of the year”. Illarionov eventually resigned in December 2005, stating that there was “no free economic space remaining anywhere in Russia” and that Russia qualified as “a politically unfree country”.
When asked in 2006, “Why does the state use non-transparent schemes....[such as] the use of Baikal Finance Group to buy YNG?”, President Putin responded by claiming that the use of Baikal Finance Group to purchase YNG was necessary to protect the ultimate owner of the asset from legal claims of expropriation.
The Forced Bankruptcy of Yukos
Due to the freezing order on Yukos’s assets, the company defaulted on repayment of loans of $1.6 billion and $1 billion from a consortium led by Société Générale. Rosneft, in a confidential agreement with the consortium, agreed to purchase Yukos’s debts in exchange for the consortium instigating bankruptcy proceedings, which it did in March 2006. The Russian government became the main creditor of Yukos.
Following the appointment of a bankruptcy receiver, a creditors’ meeting was called for June 2006. At the meeting a restructuring plan was presented by Yukos that would have allowed the company to settle its liabilities and continue operating in light of rising oil prices. The plan was rejected, as the Russian authorities once again demonstrated that they were not interested in settling with Yukos. In August 2006, a Russian court declared Yukos insolvent.
The rejection of Yukos’s restructuring plan forced a fire sale of the company’s remaining assets, which included the production facilities Tomskneftegaz (including the Angarsk and Achinsk refineries) and Samaraneftegaz (with a further three refineries). The majority of assets were acquired at well below market value by Rosneft.
Rosneft included its stake in YNG in its IPO for floatation on the London Stock Exchange in July 2006. As stated by the Financial Times, the state-controlled company’s sweep of all of Yukos’s production units and refineries transformed the company from Russia’s number eight oil major, worth just $6 billion, into the country’s biggest producer, with a market capitalisation of $90 billion, spending a mere net $2 billion in the process (read more). The purchase of YNG was described at the time by Rosneft as “the most monumental bargain in Russia’s modern history.”
Yukos shareholders again received no benefit from the auctions throughout 2006 and 2007 as all Yukos liabilities were manufactured to match almost exactly the fire sale prices of all Yukos assets, leaving no balance to be distributed to the shareholders. American investors in particular lost nearly $7 billion.
In November 2007 Yukos’s liquidation was complete and the company was removed from the Russian register of enterprises.
THE FIRST TRIAL, 2004 - 2005
In a predawn raid on October 25, 2003, armed commandos stormed a Yukos chartered plane refuelling on the tarmac of a Siberian airport. Mikhail Khodorkovsky was arrested at gunpoint. He was ostensibly being arrested to appear as a witness in an investigation underway in Moscow, but within hours after being delivered to the authorities there who sought to question him, Khodorkovsky was charged with fraud and tax evasion and he has been in detention ever since. Khodorkovsky’s arrest came almost four months after his business partner Platon Lebedev was arrested. The first trial of Khodorkovsky and Lebedev began in June 2004 and concluded in May 2005. The defendants were subjected to grave injustices in the interpretation and application of Russian law, while the authorities concurrently pursued an attack on Yukos through the pretext of reassessments of the company’s tax payments. Moscow’s Meshchansky Court found both men guilty of almost every charge, sentencing them to nine years in prison, a sentence subsequently reduced by the Moscow City Court to eight years during a mostly unsuccessful appeal process in September 2005. Counting time served continuously since their arrests in 2003, Khodorkovsky and Lebedev were scheduled for release in 2011 – until they were convicted again in 2010 at the end of a second trial, pushing their scheduled release to 2016. By the end of the first trial, Russian and international human rights advocates, legislative and political bodies in Europe and the United States, and experts in Russian law gave rise to a global consensus critical of the arrests of Khodorkovsky and Lebedev and the patently unfair and politically motivated criminal proceedings against them.
Click here to read “Analysis of the Criminal Charges Against and the Trial of Mikhail Khodorkovsky and Platon Lebedev”, by members of the Khodorkovsky-Lebedev defence team, concerning the first trial
Click here to read “Legal nihilism in action”, an analysis of the first Khodorkovsky-Lebedev trial, by Otto Luchterhandt, Professor of Law, University of Hamburg
Click here for access to official trial documents, including the verdict, and other trial-related documents.
The criminal allegations brought against Khodorkovsky and Lebedev in their first trial involved an assortment of matters: the 1990s privatisation of the Apatit mineral fertiliser company; the sales of Apatit production; the privatisation of the Research Institute for Fertilisers and Insecto-Fungicides; the use of a specially-legislated zone for reducing Yukos’s tax burden; the tax implications of registration as private entrepreneurs; and the investment of Yukos funds in Media Most Corporation.
A popular misconception about Khodorkovsky’s arrest and first trial is that the allegations against him concerned the privatisation of Yukos. Indeed, in February 2003, in a televised meeting between President Vladimir Putin and the Russian Union of Industrialists and Entrepreneurs, Putin’s response to criticisms from Khodorkovsky over the huge scale of government corruption was to imply that Khodorkovsky himself had somehow improperly benefitted from the privatisation of Yukos. Yet neither the first nor second trial of Khodorkovsky involved charges over the privatisation of Yukos.
Instead, in their grab bag of an indictment, prosecutors relied upon misrepresentations of facts and misinterpretations of laws, calling for a conviction that would ultimately be grounded on untenable declarations and ominous insinuations rather than relevant evidence or cogent analysis.
TRIAL PROCEEDINGS, VERDICT AND SENTENCE
Proceedings in the first trial against Khodorkovsky and Lebedev began in June 2004 and continued for almost a year, concluding in May 2005. The defendants were subjected to grave injustices in the interpretation and application of Russian law, while Russian authorities concurrently pursued a fiscal attack on Yukos based on ludicrously unjustifiable tax charges. The Meshchansky Court found both men guilty of almost every charge, sentencing them to nine years in prison, a sentence subsequently reduced by the Moscow City Court to eight years during a mostly unsuccessful appeal process in September 2005.
The prosecutorial presumptions in the case, politically prescribed and based on bogus charges, sealed the defendants’ fate before the trial began. Even with all the unfair advantages it enjoyed, however, the prosecution could not avoid revealing itself as woefully incapable of understanding fundamental concepts of law applied to business. Nor could the court; vast tracts of the text of the verdict were copied verbatim from the prosecution’s indictment.
Due Process Violations
The trial was replete with due process violations. From a multitude of decisions made in the course of the trial, to the verdict itself, the court typically made unsubstantiated pronouncements that simply parroted the prosecution’s lines, ignoring obvious violations of Russian law and refusing to validate even the most undeniably decisive of the defence’s arguments. Extensive defence evidence was simply discarded by the court.
“The sheer number and seriousness of procedural violations…in my view exceeds a mere accumulation of mistakes that could be explained by a lack of experience or professionalism. During my mandate, I have been confronted with a number of examples of the serious problems from which the Russian judiciary suffers in general, including its notorious openness to corruption, lack of respect for the rights of the defence, and, in particular, the overwhelming influence of the procuracy, which in turn is a tool in the hands of the executive.” – Sabine Leutheusser-Schnarrenberger, Rapporteur, Parliamentary Assembly of the Council of Europe, former and current Minister of Justice of Germany
Due process violations at trial included the following:
- The court did not treat the prosecutors and the defence equally; the defence was not provided sufficient time to present their case and the overwhelming majority of defence motions and requests were denied.
- The prosecution was allowed to introduce impermissible evidence, including unauthenticated documents and materials obtained illegally.
- The defence was denied the opportunity to introduce exculpatory evidence, including key expert reports.
- The scope of direct questions of defence witnesses and of defence cross-examination of prosecution witnesses was restricted, and the defence was denied cross-examination of prosecution expert witnesses.
- The defence was denied requests to subpoena prosecution expert witnesses.
- Witnesses were harassed and improperly influenced, including through continued investigation and interrogation; threats of searches, arrests and prosecution; and improper questioning during trial.
- The court made motions on behalf of the prosecution.
- The court questioned witnesses on behalf of the prosecution.
- The defendants were denied effective assistance of counsel, including through interference with access; interference with confidential communications; and harassment of counsel.
- The prosecution failed to disclose exculpatory evidence.
Two notable aspects of the trial – the selective and retroactive application of laws – are illustrated by the charges surrounding the use of a specially-legislated zone for reducing Yukos’s tax burden. The Russian tax authorities were well aware that Yukos and other Russian oil companies operated with entities located in low-tax regions of Russia. Indeed, the low-tax regions had reduced tax rates to encourage companies to boost economic activity in these areas, which were suffering through the post-Soviet transition. The Russian tax authorities had previously approved Yukos’s use of such mechanisms for reducing the company’s overall tax burden. Moreover, other oil companies operating in Russia also used the methods used by Yukos to reduce their overall tax burden. Those companies were not subjected to a massive and punitive tax reassessment, or its forced execution, and their leading executives were not criminally prosecuted.
“In the case of Yukos, authorities reopened company tax returns from past years that had already been audited, then reinterpreted a key section of Russian law to rule that tax shelters widely used by Russian companies were no longer legitimate—even though the state’s own audit chamber had decreed those tax shelters legal just months earlier.” – Peter Baker & Susan Glasser, “Kremlin Rising”, 2005
In September 2004, even before the first trial had concluded, the Organisation for Economic Cooperation and Development (OECD), amongst others, described the proceedings against Yukos and its core shareholders as “a case of highly selective law enforcement.” The OECD also observed that the Yukos affair reflected that Russia’s “courts are subservient to the executive” and prosecutors are “highly politicised.”
The Parliamentary Assembly of the Council of Europe Committee on Legal Affairs and Human Rights also noted the discriminatory nature of the charges, and additionally pointed to the retroactive application of laws: a representative of the tax authorities confirmed that in 2000 the tax reduction methods in question were widely used and considered legal. The legislation was thereafter changed, with new rules entering into force in 2004. Khodorkovsky and Lebedev were thereby set up to become victims of a retroactive application of the new legislation.
Pre-Trial Detention & Degrading Treatment
Throughout not only the pre-trial investigation but also the trial itself, Khodorkovsky and Lebedev were jailed under harsh conditions of pre-trial detention. Investigators, and subsequently the Meshchansky Court of Moscow, on numerous occasions extended the duration of the pre-trial detention of Khodorkovsky and Lebedev. In several instances this was done even without a decision by the court or any pretence of due process.
Lebedev repeatedly drew the attention of the courts to this unlawful practice. However, only his application to the Russian Constitutional Court forced the judiciary to recognise the problem. As a result of Lebedev’s efforts, the Constitutional Court found the practice of keeping arrestees in detention without a court decision to be contrary to the law and ordered that this finding be applied in Lebedev’s criminal case. Unfortunately, none of the court instances to which Lebedev applied did that.
From the start of their ordeal in the Russian justice system Khodorkovsky and Lebedev were treated in a degrading manner. While in the courtroom throughout the trial they were confined for long hours in a locked metal cage with a wooden bench. They had to consult with their lawyers through the bars of the cage. Upon leaving the cage they were handcuffed to guards. On days that the court was in session, they received only dry food and were deprived of adequate opportunities for exercise and fresh air.
In September 2005, the appeal of the verdict was rushed through at an impossible speed: in a one-day hearing the judges reached a decision in a case that had lasted a year and consisted of hundreds of bound volumes. The appeal was for the most part rejected, although the sentence was reduced from nine to eight years.
The purpose of the rushed appeal process was to deprive Khodorkovsky of his right to stand for election to parliament, by ensuring his conviction was confirmed before a certain date under the election timetable – which turned out to be the day after the appeal judgment. The authorities were eliminating any chance of Khodorkovsky being elected as a parliamentarian and thus having a political platform – denying him his right to civic engagement – and parliamentary immunity. In their rush to reject the appeal, the judges bulldozed over due process. When Khodorkovsky insisted on being defended by his appointed lawyer, one of the judges remarked: “You’re not in Strasbourg here!” The judge was referring to the Strasbourg-based European Court of Human Rights, and clearly informing Khodorkovsky that his rights in Russia were not considered as sacrosanct as they might be abroad.
This and all other appeals to Russia’s courts were futile. Having exhausted their options for justice in Russia, Khodorkovsky and Lebedev filed a series of applications to the European Court of Human Rights in Strasbourg, seeking vindication there.
BANISHED TO THE GULAG
After the trial and failed appeal, Khodorkovsky was sent to one of the most remote penal colonies in all of Russia, some 6,500 kilometres east of Moscow in the town of Krasnokamensk, close to Russia’s borders with China and Mongolia. The Krasnokamensk penal colony is situated near a uranium mine that has contaminated the area with radioactive waste. Lebedev, meanwhile, was sent to a remote penal colony in the town of Kharp, on the Yamalo-Nenets Peninsula, above the Arctic Circle.
PARLIAMENTARY ASSEMBLY OF THE COUNCIL OF EUROPE REPORT ON FIRST KHODORKOVSKY-LEBEDEV PROCEEDINGS
The Parliamentary Assembly of the Council of Europe Committee on Legal Affairs and Human Rights undertook the most comprehensive independent international analysis of the first Khodorkovsky-Lebedev proceedings, based on fact-finding visits to Russia that included communications with a range of Russian officials, with representatives of non-governmental organisations and with Russian legal experts. A report – highly critical of the proceedings – was published in November 2004.
Click here for more information about the report, and subsequent actions by the Parliamentary Assembly of the Council of Europe, which continued to pressure Russia over the Khodorkovsky-Lebedev proceedings and the broader implications of the Yukos affair.
THE SECOND TRIAL, 2009 - 2011
In 2007, Mikhail Khodorkovsky and his business partner Platon Lebedev became eligible for release on parole under Russian law, having served half of their eight-year sentences since being arrested in 2003 and convicted in a politically-driven first trial that ended in 2005 – while Yukos was destroyed through bogus tax reassessments, forced bankruptcy proceedings and rigged auctions. Given their eligibility for release on parole in 2007, or at the latest upon completion of their eight-year sentences in 2011, new charges were sloppily manufactured and proceedings were instigated against Khodorkovsky and Lebedev to prevent their release. The new charges, announced in February 2007 and brought to Moscow’s Khamovnichesky Court in a second trial that started in March 2009, were intended to keep Khodorkovsky and Lebedev isolated from Russian political and business spheres, to stain their reputations and to whitewash and distract attention from corrupt and criminal actions committed by high-ranking Russian officials, many of whom are believed to have personally benefitted from the destruction of Yukos. Khodorkovsky and Lebedev were found guilty in December 2010. Following a failed appeal in May 2011, their imprisonment has now been extended to 2016, precluding their release in 2011 upon completion of their initial eight-year sentences. Khodorkovsky and Lebedev are now serving combined sentences totalling thirteen years, counted from 2003.
Click here to read “Justice Under Pressure – The Second Khodorkovsky-Lebedev Trial – Executive Summary”
Click here for access to official trial documents, including the verdict, and other trial-related documents
Click here for access to daily and weekly courtroom reports published by the Khodorkovsky-Lebedev defence team
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 Eastern Oil Company (“VNK”, a Yukos subsidiary) and “laundering” the allegedly embezzled shares. The allegations had no credible grounding either in the facts described or in the legal terms invoked by prosecutors. The indictment was a compendium of factual and legal impossibilities. Both in the indictment and at trial, the prosecutors failed to connect any conduct by the defendants to any viable legal theory of criminal liability. Instead the charges were sustained purely by prosecutorial diktat obeyed by the court.
After the allegations were formally presented in 2007, Khodorkovsky and Lebedev made consistent efforts to engage with investigators and prosecutors in good faith and in compliance with procedural rules. In contrast, the investigators and prosecutors consistently acted outside of the boundaries of the law. The basic duties of the investigators and prosecutors – to investigate relevant facts and to build a case grounded in law or to terminate a case where no actionable crimes exist – were unfulfilled. By January 2009, the quantity and severity of the investigators’ procedural abuses against the backdrop of bafflingly nonsensical evidentiary and legal grounds led the defense to request that the case be terminated as incurably flawed. The request was rejected by the procuracy and the case was sent to trial. In March 2009 Khodorkovsky and Lebedev petitioned Judge Viktor Danilkin of Moscow’s Khamovnichesky Court to terminate the proceedings. The court rejected the petition and the trial’s opening hearings commenced that month.
The prosecution’s presentation of its case ran from April 2009 to March 2010. Despite filling time by reading from a 188-volume case file, and parading numerous witnesses into court, prosecutors were unable (and did not even try) to prove how it was possible that Yukos covered its operating costs, invested heavily in capital expenditures and acquisitions and paid taxes and dividends when the entire oil production of Yukos over a six-year period was being stolen, as alleged in the indictment. The prosecution’s witnesses proffered either no testimony germane to the accusations, or testimony that actually contradicted the accusations. Despite having over 11 months to read documents and question witnesses in court, the prosecutors plainly failed to prove their charges. This did not prevent prosecutors from proclaiming in their closing arguments that they had proven the guilt of the defendants – while being unable to sum up precisely how they supposedly did so.
DEFENCE DEPRIVED OF MEANINGFUL DUE PROCESS
In the face of official misconduct and due process violations, as the trial unfolded the defence presented highly substantiated motions for the recusal of prosecutors and of the judge – to no avail. Appearances of an adversarial trial were for the most part cosmetic efforts by the authorities to portray the process as legitimate. The defendants were permitted to speak in court almost without restrictions, but the judge blocked their lawyers from introducing exculpatory documentary evidence and refused to hear many witnesses and experts. The defence was allowed to file motions and objections, but the vast majority of these motions and objections were routinely denied or ignored. These motions and other defence pleadings were posted online by the defence, along with English translations, illustrating the absurdities of the process that was unfolding.
The “case-closed” mentality of the prosecutors ultimately reigned in the courtroom, given the judge’s biased handling of the multitude of due process violations that marked the proceedings. The defence’s 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 observers visiting the trial described the proceedings as evocative of the works of Kafka and Gogol 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, and meticulously substantiated defence from April to September 2010.
Irrespective of the efforts of the defence, which were notably bolstered by the candour of former and current government officials who supported the defendants through in-court testimony, the proceedings continued to be undermined by unfair and unlawful decisions and manoeuvres that irreparably frustrated Khodorkovsky’s and Lebedev’s rights to a fair trial. A feeling of futility reigned in the courtroom as the defence presented its closing arguments in what had become a mock judicial process devoid of meaningful adversarial engagement on the substance of the case.
VERDICT AND SENTENCE
The reading of the verdict was initially scheduled for December 15, 2010 but a note posted on the courtroom door that day announced a postponement to December 27, 2010. The next day, December 16, 2010, then-Prime Minister Vladimir Putin publicly intervened in the case during his annual nationally televised question-and-answer session. With the judge still deliberating on the verdict, the Prime Minister cited the embezzlement charges, claimed that Khodorkovsky’s guilt had been proven in court, and stated: “A thief must sit in jail.” (read more). This was not the first time that Putin had publicly made defamatory statements about Khodorkovsky. The timing of this particular remark obviously signalled the expected outcome of the trial.
On December 27, 2010, Khodorkovsky and Lebedev were declared guilty of embezzling and laundering the proceeds of all oil produced by Yukos subsidiaries over a six-year period. The court found the defendants guilty of having embezzled significantly more oil than prosecutors had alleged. The prosecution’s sudden announcement during the trial’s closing arguments that they were reducing by approximately one third the volume of oil allegedly embezzled – perhaps a last-minute bid for a modicum of credibility – was ignored by the judge. Indeed, a comparison of the indictment and the verdict reveals that the judge simply copied vast tracts of the indictment, verbatim, into the verdict (see page 56 and the Appendix of an analysis of the verdict prepared by Jeffrey Kahn for the Presidential Council of the Russian Federation for Civil Society and Human Rights).
The 689-page decision is a hodgepodge of texts setting forth unsupported factual and legal assertions that fail to validate the finding of guilt. The document is marked by obvious errors of fact and of law, unsupported leaps of logic, internal incoherencies, and major inconsistencies with the findings of other cases adjudicated by the Russian courts. Despite the closely watched nature of the case surrounding the most high-profile prosecution in Russia, in the decision the court disregarded applicable procedural and substantive laws as well as fundamental tenets of economics, established facts and common sense.
In convicting the defendants of massive embezzlement, the court notably ignored both the uncontested profitability data of Yukos’s production subsidiaries, and the true market prices of oil in Russia. The court thus avoided proof of the absence of the harm that would have had to have been suffered for the embezzlement charges to have any validity.
Sales of oil by the subsidiaries to Yukos trading companies were deemed to constitute embezzlement simply insofar as the oil was sold at a price less than the export spot price. This concocted theory of embezzlement ignored market pricing in Russia as well as industry-standard, lawful procedures for corporate functioning undertaken by Yukos, involving a downstream and upstream structure of production subsidiaries and domestic and foreign operating companies. Rather than referring to openly verifiable historic domestic prices for Siberian oil, the verdict ascribed the Rotterdam price to 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 difference between the price of oil in Siberia and the price of oil in Rotterdam. The verdict simply brushed away these realities, with the judge stating that he did not agree that oil prices differ on domestic and global markets.
Click here to read Khodorkovsky’s January 2011 comments on citations from the verdict. His comments illustrate why the ruling has been so broadly criticised as absurd.
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, later reduced by one year on appeal.
The verdict contradicted prior Yukos cases in Russian domestic courts, as well as the Russian Federation’s lines of defence in Yukos‐related proceedings abroad.
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 subsidiaries was scrutinized and judicially approved. The determination of who owned Yukos oil was also recognized by the courts: according to all other courts in Russia, Yukos owned and sold that oil, and Yukos was therefore subject to taxation of its resulting revenues. Leaving aside arguments over the unfair and irrational punitive taxation of Yukos, these court decisions nevertheless stand today as Russian jurisprudence that cannot, under Russian law, be contradicted by inverse logic in other court rulings. The new criminal allegations against Khodorkovsky and Lebedev therefore created a juridical paradox: either Yukos owned and sold the oil, a legally settled fact under Russian law as determined by all previous courts; or Khodorkovsky and his alleged co‐conspirators embezzled the oil, in which case it could not have also been sold and taxed by Yukos. In finding Khodorkovsky and Lebedev guilty, the court created a massive and irreconcilable contradiction with an entire set of standing judgments.
At the European Court of Human Rights, a claim for unlawful expropriation was brought against the Russian Federation by former executives of Yukos, not involving Khodorkovsky or Lebedev (see “Yukos at the European Court of Human Rights”). In those proceedings, the Russian Federation defended the legality of punitive taxes on oil they asserted was owned and sold by Yukos, claiming that Russian tax authorities made punitive re‐assessments of Yukos on the basis 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 that would have normally been exempt. Simultaneously however, in the criminal proceedings against Khodorkovsky and Lebedev, the verdict concluded that the same oil was not owned by Yukos but rather stolen from the company’s production subsidiaries by the defendants, who were accused of physically embezzling at the wellhead. The incompatible positions – one version for the European Court of Human Rights and a different version for the Khamovnichesky Court – were thus absurdly argued concurrently on behalf of the Russian Federation in major parallel proceedings.
In an interview with Gazeta.ru released in February 2011, Natalia Vasilyeva, an aide to the trial judge and press secretary of the Khamovnichesky Court, spoke out about the verdict. Vasilyeva stated that the trial judge’s first draft of the verdict had been reviewed and rejected by outside judicial officials, of the higher-level Moscow City Court, who replaced the text with their own. She also stated that the trial judge had to consult with those officials throughout the two‐year trial. The Economist described Vasilyeva’s widely‐reported comments as “explosive”, and quoted her as saying that “everyone in the judicial community understands perfectly that this is a rigged case, a fixed trial.” (read more).
Then, in April 2011, a second official who worked at the court during the trial corroborated Vasilyeva’s account (read more). Igor Kravchenko, a former court administrator, stated in an interview with Novaya Gazeta that the trial judge, speaking about the Khodorkovsky‐Lebedev case, had admitted: “I don’t decide this.” Referring to outside judicial officials at the Moscow City Court who had no lawful basis to interfere in the trial outcome, the trial judge was quoted by Kravchenko as having said: “Whatever they say, that’s what will be.”
The appeal was heard by the Moscow City Court – and rapidly dispensed with in a ruling on May 24, 2011 that confirmed the lower court’s guilty verdict, although the sentencing was reduced by one year. Khodorkovsky and Lebedev are now scheduled for release in 2016, on the 13th anniversaries of their respective arrests.
Khodorkovsky and Lebedev did not expect a fair ruling from the Moscow City Court, given that it was this same higher-level court that was widely seen as having been ultimately in control of the proceedings in the court of first instance. Moreover, the Moscow City Court’s chair, Olga Yegorova, is reputed for doing the Kremlin’s bidding in politically sensitive cases, and for having purged dozens of independently minded judges from the bench. Yegorova, married to a general of the KGB’s successor FSB, also oversaw the first Khodorkovsky-Lebedev trial and unlawfully allowed second trial investigations to be displaced to Siberia. She has spoken out in the news media to oppose criticisms and stand behind the handling of the Khodorkovsky-Lebedev proceedings.
Khodorkovsky and Lebedev lodged a supervisory appeal against the Moscow City Court’s May 2011 ruling. The supervisory appeal was rejected by the Moscow City Court in November 2011. The same court rejected a subsequent supervisory appeal against the November 2011 decision in January 2012. Khodorkovsky and Lebedev then filed a supervisory appeal at the Russian Supreme Court, in February 2012, which in turn was rejected in a May 2012 ruling. Oddly, that ruling was signed by a single Russian Supreme Court judge who is a military judge.
Despite the apparent futility of pursuing these appeals to regain their freedom, Khodorkovsky and Lebedev were determined to continue exposing the lawlessness of the proceedings they endured, and to highlight the disregard for the rule of law in Russia that has infected not only their own cases but also those of thousands of others.
TRANSFER TO PRISON
In June 2011, Khodorkovsky was sent to Penal Colony No. 7, near the town of Segezha in the region of Karelia, bordering Finland. The colony is located on the west coast of Lake Vygozero, on the route of the White Sea-Baltic Canal. The canal was constructed in the Soviet era by forced labour of gulag inmates, during which thousands of prisoners died. Meanwhile, Lebedev was transferred to Penal Colony No. 14 in the city of Velsk in the neighbouring region of Arkhangelsk.
Click here for more information about Khodorkovsky’s prison, including photos and video.
The guilty verdict and failed appeal in the second trial triggered an outpouring of international support for Khodorkovsky and Lebedev, as well as criticisms of the Russian legal system.
Across the world the trial was viewed as a failure of then-President Dmitry Medvedev’s pledge to end “legal nihilism” in Russia, and it led Amnesty International to designate Khodorkovsky and Lebedev as prisoners of conscience. Commenting of the failed Khodorkovsky-Lebedev appeal in May 2011, Amnesty International stated: “For several years now these two men have been trapped in a judicial vortex that answers to political not legal considerations. Today’s verdict makes it clear that Russia’s lower courts are unable, or unwilling, to deliver justice in their cases.”
In September 2011, the International Bar Association’s Human Rights Institute (IBAHRI) released a report based on its own independent observation of the trial. The IBAHRI was the only organization with a full‐time observer at the trial. Highly critical of the numerous failings of the proceedings, the IBAHRI report concluded that “this trial was not fair”, and cited numerous legal failings and violations demonstrating that the proceedings “were incapable of producing clear proof” for a sound conviction.
Click here for more information about the IBAHRI trial observation report.
CREDIBILITY OF VERDICT UNDERMINED BY PRESIDENTIAL COUNCIL
In February 2011, responding to increasing public pressure, then-President Medvedev mandated his Presidential Council of the Russian Federation for Civil Society and Human Rights to conduct an inquiry into the case. The inquiry, conducted from April to December 2011, brought together a group of renowned Russian and foreign experts to examine the verdict and related materials. A report and recommendations were released in December 2011. The inquiry identified serious and widespread violations of the law, finding that there was no valid legal basis or evidence supporting the guilty verdict in the second Khodorkovsky-Lebedev trial, and that the proceedings were severely marred by violations of fundamental human rights. More broadly, the inquiry found that the Khodorkovsky-Lebedev case highlighted widespread systemic problems in Russia’s law enforcement practices and judiciary. The inquiry prompted calls for an annulment of the “illegal” guilty verdict and the release of Khodorkovsky and Lebedev, and also for a series of reforms to address the systemic problems illustrated by this case.
The Council’s report and recommendations have no judicial force and cannot compel the courts to reopen the second Khodorkovsky-Lebedev case for reconsideration, however the inquiry was a damning indictment of the credibility of the second guilty verdict and extended incarceration of Khodorkovsky and Lebedev.
Since being arrested in 2003, Mikhail Khodorkovsky and Platon Lebedev have been held in a variety of pre-trial detention centres and prison colonies, in Moscow or in some of Russia’s most remote regions. Their conditions of detention have persistently violated their fundamental human rights.
View Mikhail Khodorkovsky Locations in a larger map
Khodorkovsky’s Current Place of INCARCERATION: PENAL Colony, Segezha, Karelia
Transferred to Segezha in 2011, after second trial
On June 10, 2011, Khodorkovsky was moved from the pre-trial detention facility in Moscow where he was held during his second trial to an undisclosed location. For eleven days his family and lawyers did not know where the prison authorities had moved him. Then on June 21, 2011, Khodorkovsky’s mother, Marina, received notification from the Russian Federal Penitentiary Service that her son had arrived at the FBU IK-7 penal colony, near the town of Segezha in the region of Karelia close to the border with Finland.
Segezha is located on the west coast of Lake Vygozero, on the route of the White Sea-Baltic Canal. The 227-kilometre canal was built in twenty months by prisoners of Stalin’s gulags. Some estimates suggest that up to 100,000 people died constructing the canal (watch video: a view from Segezha).
The Segezha penal colony is known as a “red zone” – a facility where the authorities allegedly exercise their power through a system of informers and where certain prisoners have impunity to commit acts of violence against fellow inmates at the behest of the authorities. Photos on the penal colony website show a mural with the words “The law is harsh but it is the law!”
According to penitentiary authorities, the Segezha penal colony can hold 1,342 prisoners.
The daily schedule for inmates includes a seven-hour work shift, eight hours of sleep and one hour of personal time. Khodorkovsky’s work assignments vary. He may be assigned to the penal colony’s plastics shop, wood shop, metal shop, farm or elsewhere. RIA Novosti reported that Khodorkovsky’s initial assignment was to a maintenance team, which involved work in a boiler room and other duties.
Human rights activists said the choice of the Segezha penal colony appeared to violate Russian prison laws, which call for convicts to serve their sentences as close as possible to home – Moscow, in Khodorkovsky’s case, over 900 kilometres away.
Khodorkovsky becomes a columnist
In August 2011, Khodorkovsky began writing a regular column for the Russian weekly New Times in which he describes his experiences behind bars and the lives of prisoners he has come into contact with. Motivated by the fact that there are three-quarters of a million people currently detained in Russia’s prisons, Khodorkovsky stated that society needed to know more about life behind bars in order to act to correct the system.
Transferred to Moscow for duration of second trial
On February 24, 2009, media reported that Khodorkovsky and Lebedev had been moved from a Siberian detention facility to Moscow, ahead of their second trial. Accounts suggested that Khodorkovsky was transferred to Moscow aboard a government aircraft used by top Kremlin officials and bearing Russia’s presidential standard.
During the second trial, court sessions were typically held four days per week, lasting eight hours each day. Due to security procedures and Moscow’s notoriously heavy road traffic, on average it took two hours to get to the court and two hours to get back to the detention facility, which meant that Khodorkovsky spent four hours being transported by truck, in a metal booth that measured just 1.2 metres by 0.76 metres by 0.46 cm. Once in the courtroom, Khodorkovsky and Lebedev were locked in “the aquarium”, a 1.5 ton bulletproof glass booth surrounded by guards with machine guns.
On days without court sessions, Khodorkovsky was kept in his cell at the detention facility for 23 hours per day. He was allowed out of the cell for one hour per day, to pace in an outdoor area covered with metal netting. He was kept under constant surveillance and the light in his cell was kept on around the clock. According to standard regulations he was allowed to shower once per week. Family members were allowed to visit twice per month, for one hour, and see him through a glass partition.
Reforms flouted by Khodorkovsky’s extended pre‐trial detention
Since October 2003 Khodorkovsky has been kept under harsh pre-trial detention conditions for inhumanely long stretches of time. To date he has spent a cumulative total of approximately six and a half years in the harsh conditions of physical restraint imposed under pre‐trial detention rules, with minimal exposure to fresh air and direct sunlight and inadequate opportunities for physical movement. Pre‐trial detention conditions are considered to be an exceptional form of incarceration, for short, temporary periods – not a long term form of incarceration. From Khodorkovsky’s transfer to a pre-trial detention facility in December 2006, when he was already serving his eight‐year prison sentence handed down in 2005, until his second trial and appeal were completed and he was sent back to a penal colony in June 2011, being held in extended pre-trial detention was redundant and excessive – effectively “double bars”, a compounded punishment to which he was never sentenced and which was not grounded in law.
In April 2010, reforms of Russia’s criminal code and criminal procedure code meant that courts could no longer order this harsh detention regime for allegations of certain economic crimes, such as those alleged against Khodorkovsky. Those reforms resulted from President Medvedev’s efforts to make Russia’s criminal justice system more humane and to halt widespread abuses by officials exploiting the criminal justice system to attack legitimate businesses. Nevertheless, in the most high‐profile and closely‐watched trial in Russia, the court openly ignored the recently‐amended law, repeatedly extending Khodorkovsky’s harsh measures of restraint for months on end. In May 2010, Khodorkovsky launched a hunger strike to raise awareness that the Russian justice system was failing to implement the reforms. Asserting that President Medvedev’s reform goals were being blatantly undermined, and that a dangerous precedent was being set, Khodorkovsky vowed to continue his hunger strike until President Medvedev had been seized of the matter. The hunger strike ended after two days, following public declarations that the Chair of the Russian Supreme Court and President Medvedev were to evaluate the situation. Finally, in rulings on April 15 and September 13, 2011, the Supreme Court of Russia handed rare victories to Khodorkovsky, agreeing that the court had acted unlawfully in prolonging his harsh pre‐trial detention conditions. With the trial then over, the Supreme Court’s rulings came too late to benefit Khodorkovsky after what by then totalled nearly four and a half consecutive years in pre‐trial detention from the time of his transfer to a Siberian pre-trial detention facility in December 2006.
Pre-trial detention: Chita, SIBERIA (2006 - 2008)
Transferred to Chita in advance of second trial
From December 2006 until their February 2009 journey to Moscow for their second trial, Khodorkovsky and Lebedev were held in Chita’s pre-trial detention facility No. 1 (IZ-75/1), approximately 6,000 kilometres east of Moscow.
Chita IZ-75/1 gained notoriety having been the subject of criticism by the Moscow Helsinki Group which had, in 2003, reported poor conditions and severe overcrowding of inmates, including sixty to eighty people being held in cells meant to hold ten to twenty. Khodorkovsky and Lebedev were held apart from most other prisoners, in a space refurbished prior to their arrival. They were kept under round-the-clock surveillance, including during meetings with their lawyers.
Improper venue designated for investigation
Although Chita was officially designated as the venue for the investigation of new charges against Khodorkovsky and Lebedev, in reality the case was administered from Moscow. All key procedural decisions were taken in Moscow and case-related documents were signed there and then transmitted to Chita. This was contrary to the legal requirement that the investigation actually be administered in Chita, the officially designated venue. In fact, Khodorkovsky was being purposefully isolated thousands of kilometres and six time zones away from Moscow, in a place that had no connection with the activities under investigation. This significantly restricted his participation in investigatory processes and complicated communications with his Moscow-based defence counsel. It also distanced him from the media and political centre of the country and from his family.
Extended stay in Chita pre-trial isolator
Furthermore, by holding Khodorkovsky for over two years in the Chita pre-trial detention facility, his regime of incarceration went from the more flexible conditions of his penal colony to the harsher conditions of pre-trial detention in a small jail cell. Holding him for so long as a criminal suspect under arrest allowed the authorities to isolate Khodorkovsky far more than if he was serving his prison sentence as stipulated in his 2005 sentencing. Under Russian law, even if convicted persons are under investigation for new allegations, they are to continue to serve their existing sentence as stipulated by the existing court verdict. Khodorkovsky should have been serving his sentence under a more flexible regime of incarceration and not in a pre-trial detention unit where the conditions of detention were far more restrictive and inhumane.
Hunger strike for Alexanyan
In January 2008, Khodorkovsky went on a hunger strike for two weeks in protest over the treatment in detention of former Yukos lawyer and executive Vasily Alexanyan. Alexanyan, who was suffering from full-blown AIDS and lymphatic cancer, was being denied medical treatment in detention. Khodorkovsky’s hunger strike lasted nearly two weeks. He called off the hunger strike when Alexanyan was transferred to a medical facility.
Khodorkovsky’s application for parole rejected
In July 2008, Khodorkovsky filed a request for parole, having served more than half of his initial sentence of eight years. The Ingodinsky District Court in Chita rejected the application, ruling that Khodorkovsky would not be “corrected” without completing his full sentence. The court cited Khodorkovsky’s alleged lack of enthusiasm for learning how to operate a sewing machine, as well as a reprimand that had been issued because Khodorkovsky allegedly failed to put his hands behind his back as required when returning from exercise. These pretexts denying him release on parole cost him three more years of imprisonment – until his overall prison term was extended after his second trial.
The prison authorities’ persistent fault-finding, falsifications, invented violations and selective, intentionally cruel and unjust punishment have been particularly unfair given Khodorkovsky’s exemplary behaviour in detention. Khodorkovsky has been respectful and polite with prison authorities and fellow inmates alike; he has taught convicts in subjects of his expertise and ordered textbooks and periodicals for the prison library; and he has proposed being permitted to work in areas applying his knowledge and skills: research, teaching and writing. The prison authorities, meanwhile, have not appeared interested in their professed goal of Khodorkovsky’s “correction” or “rehabilitation”. Rather, their true intent appears to be “to snap the person in two” while keeping him in detention as long into the future as possible (read more).
Read Khodorkovsky’s statement on his petition for release on parole here.
Solitary confinement for interview published in Esquire magazine
In October 2008, the Russian edition of Esquire magazine published an interview of Khodorkovsky by famed Russian writer Boris Akunin. The interview had been conducted through the exchange of a series of letters. Although this correspondence did not break prison rules, Khodorkovsky was punished for the interview by being placed in solitary confinement for twelve days.
PENAL COLONY: KRASNOKAMENSK, SIBERIA (2005 - 2006)
Transferred to Krasnokamensk after first trial
On October 10, 2005, when Khodorkovsky’s lawyers arrived at the Moscow detention facility where he had been held in since his arrest in 2003, they were told that he was no longer there and had been moved. The authorities refused to clarify where Khodorkovsky had been sent. On October 20, 2005, Khodorkovsky’s spouse Inna received a letter (click here for an English translation) stating that Khodorkovsky had been moved to Chita, Siberia.
Khodorkovsky was assigned to the Krasnokamensk FGU IK-10 penal colony, some 6,500 kilometres east of Moscow. The Krasnokamensk penal colony is situated near a uranium mine that has contaminated the area with radioactive waste. Concentrations of radioactive elements in the environment have far exceeded Russian and international safety standards. Spills from storage centres have entered ground waters and migrated towards potable water reservoirs. A report produced by the Human Rights Monitoring in Russia project declared Krasnokamensk an area of environmental catastrophe. Statistics have shown low life expectancies with a high prevalence of tumour-related deaths, stillbirths, miscarriages and genetic mutations.
The trip to Krasnokamensk from Moscow involves a six-hour or nine-hour trip by plane followed by a fifteen-hour trip by train (read more). Alternatively, as reported in The Independent, one may opt for “a train ride from Moscow - 106 hours on an uninterrupted run, in tiny, Soviet-era cabins” or, after a nine-hour flight to Chita from Moscow, a 660-kilometer road trip, which takes from seven to ten hours on bad roads. Khodorkovsky’s family and lawyers bore the burden of this journey for the duration of his incarceration in Krasnokamensk.
Khodorkovsky spent days working at the penal colony’s mitten factory. At night he slept in a wooden barracks, where prisoners’ identical cots were placed about a metre apart.
Khodorkovsky slashed with a knife while sleeping in prison
In April 2006, while sleeping, Khodorkovsky was slashed across the face by a fellow inmate using a cobbler’s knife. The aggressor, Alexander Kuchma, serving a sentence for armed robbery, was in possession of the knife against prison regulations. “I wanted to cut his eye out,” Kuchma said shortly thereafter. Prison authorities placed Khodorkovsky in solitary confinement after the incident.
Five years later, in May 2011, Kuchma stated in an interview with Gazeta.ru that, under duress, he had agreed with law enforcement officers to stab Khodorkovsky in the eye, to gouge it out – but in the end he decided instead to slash Khodorkovsky’s nose. Kuchma said that the officers repeatedly beat him, and threatened to hang him in a staged suicide if he did not go through with the attack. He also said that the officers provided the knife to be used in the night-time assault. An allegation made by a senior prison official that Khodorkovsky had provoked the attack by harassing the assailant had no merit, according to Kuchma. The harassment of a fellow inmate could have stymied Khodorkovsky’s chances for release on parole. The authorities “beat me up, tortured me. Broke my arm. Forced me to sign all sorts of papers…they just wanted to pour dirt on him [Khodorkovsky],” Kuchma said, adding that he had been forced to file a false harassment suit and to give an interview to Kremlin-controlled NTV television saying that Khodorkovsky did not deserve to be released on parole.
Reprimands as pretexts to deny parole
Throughout Khodorkovsky’s time in detention, prison authorities have ensured that his behavioural record is peppered with reprimands to serve as pretexts to prevent his release on parole. The constant fault-finding by prison authorities has also repeatedly allowed them to place Khodorkovsky in isolated punishment cells.
Khodorkovsky’s reprimands have been in patent noncompliance with Russian and international laws on the treatment of prisoners. The reprimands have involved petty matters purposefully misconstrued as behavioural violations, as well as pure falsifications and misinterpretations of the law.
The following four incidents are illustrative of the authorities’ treatment of Khodorkovsky:
Broken sewing machine
While working in a penal colony sewing facility, comprised of several workshops, Khodorkovsky left his station to find an equipment mechanic in a nearby room to inform him of the breakdown of his machine. He was reprimanded for leaving his workplace without authorisation. The reprimand was issued even though the whole building in practical terms was his workplace. Moreover, had Khodorkovsky not sought the equipment mechanic to repair his machine, he could have been reprimanded for not working.
Prison rules as “prohibited” documents
Khodorkovsky was reprimanded for being in possession of “prohibited” documents – in fact, texts containing publicly available prison regulations. Prison officials seized, from Khodorkovsky’s bedside table, orders of the Russian Ministry of Justice governing the rights and duties of convicts in penal colonies. These documents had been received by post at the penal colony, addressed to Khodorkovsky, and they cleared inspection by the mailroom censor, who gave them to Khodorkovsky personally, as recorded by signature. It is difficult to justify treating such texts as “prohibited” documents – given the legally prescribed and intuitively rational right of convicts to information about rules governing their detention. Khodorkovsky was sent to an isolated punishment cell for five days.
Drinking tea in an improper place
Khodorkovsky was reprimanded for eating in an improper place – that is, this was the rule he was said to have broken when he drank tea near the kettle in a meeting room where inmates habitually drank tea. Khodorkovsky had just missed dinner in the canteen due to a meeting with his lawyer. The meeting with his lawyer was permitted only after his full-day shift in the workshop; Khodorkovsky had to forego dinner if he wished to meet with his lawyer, and this is why he drank the tea in question. Khodorkovsky was sent to an isolated punishment cell for seven days.
Two lemons and an apple
During an inspection, prison officials discovered that Khodorkovsky had in his possession two lemons and an apple given to him as gifts from fellow inmates after his return from a punishment cell and a hunger strike. Comparing the inspection report with a list of foodstuffs delivered to Khodorkovsky in parcels and purchased by him in the prison shop led the authorities to establish that Khodorkovsky had received these gifts from his fellow inmates. Khodorkovsky was reprimanded for unauthorised possession of the two lemons and the apple. He was sent to an isolated punishment cell for ten days.
Khodorkovsky has appealed to courts to protest his unjust treatment, and in fact several of his reprimands (including those concerning the broken sewing machine, possession of the prison rules and the two lemons and apple) were found unlawful and repealed. Other reprimands stayed on his record until being automatically removed after a year – until new incidents provided other pretexts to prevent release on parole (see “Khodorkovsky’s application for parole rejected”, above).
Harassment of lawyers
Conditions for lawyers visiting Khodorkovsky have amounted to a denial of his full rights to legal representation. For example, members of a four-person team of lawyers were permitted to see Khodorkovsky strictly one at a time, despite the fact that there was no law prohibiting visits to a client by a defence team as a whole (read more). Communication with Khodorkovsky was only permitted through a fine-meshed screen barrier, making it practically impossible to review documents. The visit of one of the lawyers was abruptly ended with no reason given. Due to this and other practical impediments that were imposed during their three-day stay in Krasnokamensk, the total time the lawyers spent with Khodorkovsky was five hours, rather than the twelve hours permitted by law. Meanwhile, prison officials repeatedly sought to examine the defence team’s confidential materials. Prison officials scrutinised the lawyers’ private notes made during discussions with Khodorkovsky. The personal papers and documents of one lawyer were seized when he left the prison grounds. Lawyers were subjected to body searches, stripped down to their underwear, and to meticulous inspections of all of their personal effects.
German Chancellor: “unacceptable prison conditions” for Khodorkovsky
In July 2006, German Chancellor Angela Merkel stated that her “government has repeatedly drawn the Russian side’s attention to the unacceptable prison conditions of Mr Khodorkovsky.”
Pre-trial detention: Matrosskaya Tishina, Moscow (2003 - 2005)
After arrest and for duration of first trial
Following his arrest in 2003, and for the duration of his first trial from 2004 to 2005, Khodorkovsky was held at the notorious Matrosskaya Tishina detention facility in Moscow.
The treatment of Khodorkovsky and Lebedev at Matrosskaya Tishina from 2003 to 2005, and in Lebedev’s case from July to October 2003 at Moscow’s Lefortovo Prison under the control of the FSB (formerly KGB), has been found unlawful by the European Court of Human Rights (ECtHR) in Strasbourg.
In 2011, the ECtHR found that Khodorkovsky’s “continuous detention was not justified by compelling reasons outweighing the presumption of liberty”, ruling in his favour on eight of fifteen claims submitted in an application that concerned his treatment from 2003 to 2005. In 2007, the ECtHR had also found numerous grave violations of Lebedev’s rights in detention. Subsequent applications by both men continue to work their way through the docket of the Strasbourg-based court.
In August 2005, when Lebedev, suffering from serious medical conditions, was moved to a punishment cell, Khodorkovsky started a hunger strike to protest the move. He ended the hunger strike after two days, when receiving word that Lebedev had been moved out of the punishment cell.
RUSSIAN PRESIDENTIAL HUMAN RIGHTS COUNCIL
About the Council
The Presidential Council of the Russian Federation for Civil Society and Human Rights is an official state consultative body established to assist the President in the exercise of his constitutional responsibilities as guarantor of human and civil rights and liberties. The Council informs, advises and drafts proposals for the President on matters within its mandate and facilitates the development of civil society institutions in Russia. This official institution of the Russian presidency was established in 1993, as Russia’s modern constitution came into force. The 40-member Council is composed of Russia’s most prominent and highly respected human rights and civil society advocates and experts.
About the Inquiry
In January 2011, in response to public criticisms of multiple abuses by state officials in the handling of the second Khodorkovsky-Lebedev case, and apparent contradictions between the outcome of the case and numerous standing judicial decisions in other cases related to Yukos, the Council elaborated plans for an independent expert assessment of the case. In February 2011, then-President Dmitry Medvedev agreed with the Council that an analytical report drawn up by an independent public expert group would be of interest in addressing public concerns about the case.
The Council’s inquiry on the second Khodorkovsky-Lebedev case was conducted by a multidisciplinary group of nine independent experts vetted for conflicts of interest and working without remuneration. The group of nationally and internationally renowned experts was constituted of six Russians and three foreigners. The foreign experts hailed from Germany, the Netherlands and the United States. This independent group was mandated to study the second Khodorkovsky-Lebedev trial for compliance with Russian and international norms, to identify trends in Russia’s judicial and law enforcement practice and to elaborate possible recommendations for reform. The subject matter of the experts’ analysis was the 689-page verdict and other official court documents. The inquiry was conducted from April to December 2011. A report and recommendations were released in December 2011.
The Inquiry’s Findings
The inquiry identified serious and widespread violations of the law, finding that there was no valid legal basis or evidence supporting the guilty verdict in the second Khodorkovsky-Lebedev trial, which ran from March 2009 to December 2010, and that the proceedings were severely marred by violations of fundamental human rights. More broadly, the inquiry found that the Khodorkovsky-Lebedev case highlighted widespread systemic problems in Russia’s law enforcement practices and judiciary. The inquiry prompted calls for an annulment of the “illegal” guilty verdict and the release of Khodorkovsky and Lebedev, and also for a series of reforms to address the systemic problems illustrated by this case.
The inquiry made the following findings in assessing the verdict, with respect to the legal and factual merits of the case and with respect to compliance with fundamental principles of human rights:
-- The court’s findings about the illegality of Yukos’s business operations were categorically rejected.
-- No evidence proved the allegations of embezzlement or money laundering.
-- The second Khodorkovsky-Lebedev case contradicted judgments in the first Khodorkovsky-Lebedev case and in dozens of other Yukos-related cases, which have not been overturned, and which condemned the defendants to criminal liability for tax evasion and subjected Yukos to punitive taxation on oil sales.
-- The defendants were deprived of the presumption of innocence.
-- The court lacked competence and independence.
-- Evidence favourable to the defendants was not considered or was rejected; evidence that was considered unfavourable to the defendants was of questionable relevance and admissibility.
-- The prosecution was unfairly and consistently granted procedural advantages over the defence.
-- The defendants’ detention in the courtroom and the conditions of their confinement on remand during the proceedings constituted inhuman or degrading treatment.
-- The proceedings exceeded a reasonable time.
-- The court’s interpretation of the facts and the law were unforeseeable.
-- The verdict lacked coherent reasoning.
-- The court failed to respect the statute of limitations.
Council Recommendations Based upon the Inquiry’s Findings
Based on the inquiry’s findings, the Council declared that the “miscarriage of justice” in the second Khodorkovsky-Lebedev case was so grave and so obvious that the verdict should be annulled through appropriate legal channels. Proceeding from fundamental requirements of the Russian Constitution and Russia’s international obligations, which do not permit convictions for acts not prescribed by criminal law, and where evidence of a crime is lacking and where due process is not observed, the Council declared it imperative that Russia’s General Prosecutor refer the case for supervisory evaluation with a view towards repeal of the verdict, and that Russia’s Investigative Committee also examine the grounds for a review of the case.
In terms of broader systemic reforms to restore public confidence in law enforcement and the courts, the Council recommend the adoption of numerous measures based upon the findings of the inquiry, including: expansion of the use of jury trials; reinforcement of measures ensuring judicial independence; protections of the right to an effective defence at trial; restriction of the broad interpretation and application of criminal law; increased certainty in the application of tax laws; removal of abusive administrative obstacles that prevent the release of prisoners on lawfully-earned parole; reduction in the use of pre-trial detention in cases of alleged economic crime; and implementation of a broad amnesty for wrongfully imprisoned entrepreneurs.
The Council’s recommendations have no judicial force and cannot compel the courts to reopen the second Khodorkovsky-Lebedev case for reconsideration.
In December 2011 and then in January 2012, Medvedev was scheduled to meet with the Council to receive and discuss the findings of the inquiry and the resulting recommendations. On both occasions the meeting was postponed, and by the time the presidency passed back to Vladimir Putin in May 2012, no substantive meeting on the Council’s inquiry on the second Khodorkovsky-Lebedev case ever occurred. At Medvedev’s last meeting with the Council, in April 2012, he accused the Council of focusing too heavily on high-profile cases, including the Khodorkovsky case, and ignoring lesser-known cases.
In March 2012, in response to public pressures and perhaps obliquely in response to the Council’s findings and recommendations, Medvedev ordered an official assessment by the prosecutor general of the legality of the cases against Khodorkovsky and several other political prisoners. Unsurprisingly, given that the prosecutor general was given less than a month to examine the cases, and that his office was engaging in a self-assessment exercise, no wrongdoing was identified.
Click here for a summary regarding the Council’s inquiry on the second Khodorkovsky-Lebedev case.
Click here for an English translation of the 400-page report issued by the Council on the second Khodorkovsky-Lebedev case.
Click here for the Council’s original documentation, in Russian, regarding the second Khodorkovsky-Lebedev case.
INTERNATIONAL BAR ASSOCIATION
About the International Bar Association’s Human Rights Institute
The International Bar Association’s Human Rights Institute (IBAHRI) is the human rights arm of the world’s main organisation of international legal practitioners, and is a leading voice in the promotion of the rule of law worldwide. It works to promote, protect and enforce human rights under a just rule of law.
The IBAHRI’s Trial Observation Findings
In September 2011, the IBAHRI released a 44-page report on the second Khodorkovsky-Lebedev trial. The report was based on the IBAHRI’s own independent observation of the trial. The focus of the IBAHRI’s trial observation was, as stated in the report, “on the quality of procedural justice displayed and practised as opposed to the substantive merits of the charges, judgment and verdict.” The IBAHRI was the only organisation that had a full‐time observer in the courtroom throughout the trial.
The IBAHRI’s report was highly critical of the numerous failings of the proceedings, concluding that “this trial was not fair”, and citing numerous legal failings and violations demonstrating that the proceedings “were incapable of producing clear proof” for a sound conviction.
The IBAHRI specifically criticised:
-- the “long, chaotic, mistake-ridden and self-contradictory” indictments that made the charges unclear;
-- the explicit breaching of Russian procedural law in the construction of the indictments;
-- the continual amending of the indictments throughout the trial;
-- the lack of “equality of arms” between the defence and prosecution in the court’s handling of trial witnesses;
-- Khodorkovsky’s and Lebedev’s detention conditions, which hindered access to their defence lawyers and “militated against them being able to mount a defence”;
-- the lack of trial transcripts that would have been necessary both for an effective defence and for the judge to construct a decision and sentence.
In a press release, the IBAHRI’s Co-Chair, Sternford Moyo, stated: “Russia is a party to both the International Covenant on Civil and Political Rights and the European Convention for the Protection of Human Rights and Fundamental Freedoms. However, there have been a catalogue of procedural errors in the trial which cumulatively violate the rights of Mr Khodorkovsky and Mr Lebedev to a fair trial under the provisions of the mentioned conventions.” (read more)
PARLIAMENTARY ASSEMBLY OF THE COUNCIL OF EUROPE
About the Parliamentary Assembly of the Council of Europe
The Parliamentary Assembly of the Council of Europe (PACE) has been a driving force behind many developments that have shaped the Council of Europe, from the European Convention on Human Rights to the integration of the new democracies of central and eastern Europe after the fall of the Berlin Wall. The PACE Committee on Legal Affairs and Human Rights has been on the vanguard of PACE’s promotion of the rule of law and defence of human rights throughout the member states of the Council of Europe, which include Russia.
PACE Report on First Khodorkovsky-Lebedev Proceedings
PACE undertook the most comprehensive independent international analysis of the first Khodorkovsky-Lebedev proceedings, based on fact-finding visits to Russia that included communications with a range of Russian officials, with representatives of non-governmental organisations and with Russian legal experts. A report on the proceedings published on November 29, 2004, entitled: “The circumstances surrounding the arrest and prosecution of leading Yukos executives”, questioned the objectivity of the Russian authorities, highlighted numerous procedural shortcomings and stated that the proceedings appeared politically driven.
The report concluded that “the circumstances of the arrest and prosecution of leading Yukos executives suggest that the interest of the State’s action in these cases goes beyond the mere pursuit of criminal justice, to include such elements as to weaken an outspoken political opponent, to intimidate other wealthy individuals and to regain control of strategic economic assets.”
The November 2004 report was followed by a series of follow-up actions by PACE which continued to pressure Russia over the treatment of Khodorkovsky and the broader implications of the Yukos affair. These actions included Resolution 1418 (2005) on “The circumstances surrounding the arrest and prosecution of leading Yukos executives; a report published June 3, 2005 on “Honouring of obligations and commitments by the Russian Federation”, and the associated Resolution 1455 (2005); and another report published September 18, 2006 on “Europe’s interest in the continued economic development of Russia” and the associated Resolution 1523 (2006).
The PACE Committee on Legal Affairs and Human Rights rapporteur responsible for the November 2004 report was Sabine Leutheusser-Schnarrenberger, who has served twice as Minister of Justice of Germany: from 1992 to 1996 in the cabinet of Helmut Kohl and again since 2009 in the cabinet of Angela Merkel.
On May 31, 2005, Leutheusser-Schnarrenberger issued a statement on the guilty verdict in the first Khodorkovsky-Lebedev trial, in her capacity as PACE Committee on Legal Affairs and Human Rights rapporteur on the proceedings. Leutheusser-Schnarrenberger stated: “The proceedings tainted by numerous shortcomings regarding the rule of law, as well as the sentence meted out by the court constitute a merciless act of revenge against a man who has openly stood up against the policies of Russia’s President Putin.”
PACE Report on Second Khodorkovsky-Lebedev Proceedings
Attending the opening of the second Khodorkovsky-Lebedev trial nearly four years later, in March 2009, Leutheusser-Schnarrenberger stated “Whilst I do not wish to interfere in pending judicial proceedings, I cannot help feeling bewildered by the fact that the two men are again being tried for facts which appear to be essentially the same as those for which they were condemned in 2005”.
A further PACE report was published on August 7, 2009, entitled “Allegations of politically motivated abuses of the criminal justice system in Council of Europe member states”. This report highlighted persistent systemic problems in Russia’s criminal justice system, with an emphasis on Yukos-related cases. Leutheusser-Schnarrenberger, who again served as rapporteur for PACE’s Committee on Legal Affairs and Human Rights, highlighted the Yukos affair as “emblematic” of the risks faced by investors who come up against state authorities. The report described the new charges that emerged against Khodorkovsky and Lebedev in 2007 as “bizarre” and “contradictory,” and asserted that Russian authorities were waging an “unrelenting campaign” against Yukos and its executives. The report also described many of the inconsistencies in the prosecutors’ arguments as “perplexing”.
On September 30, 2009, PACE Resolution 1685 (2009) was adopted, based on the June 2009 PACE report regarding politically-motivated abuses of the criminal justice system in Council of Europe member states. The resolution cited “a number of high-profile cases, such as the second trial of M. Khodorkovsky and P. Lebedev...[that] give rise to concerns that the fight against ‘legal nihilism’ launched by President [Medvedev] is still far from won.”
MOSCOW LEGAL TEAM
Lawyers Representing Mikhail Khodorkovsky
Anton Drel graduated from the Moscow State University Faculty of Law in 1992. He is a member of the Moscow City Bar. Drel has served as Mikhail Khodorkovsky’s lawyer since 2000. He was the first lawyer to consult with Khodorkovsky in jail after his arrest in October 2003.
Vadim Klyuvgant graduated cum laude from the Sverdlovsk Law Institute in 1979, and subsequently served for ten years as a criminal investigator and later the head of the investigative department of his hometown of Magnitogorsk. In 1990 he was elected to the Congress of People’s Deputies of the Russian Federation. From 1990 to 1993 he served as a member of the upper house of the Russian parliament, the Constitutional Commission and the Constitutional Council of the Russian Federation. As Executive Secretary of the Committee for Issues of Legality, Law and Order, and Fighting Crime, he participated in the development of laws on the investigative committee, police and procuracy and in the preparation of judicial reforms. In late 1991, still a member of the Congress of People’s Deputies, Klyuvgant became mayor of Magnitogorsk and worked successfully in this position during four of the most difficult years of Russia’s post-Soviet history. From 1995 to 2004 he served as a top executive in various Russian companies, including NOSTA, TNK, and SIDANKO. His spheres of responsibility included legal issues, safety and protection of assets, public relations and relations with state agencies, project management, risk management and international cooperation. In 2003 Klyuvgant successfully defended his PhD thesis in Historic Sciences, on “The Congress of People’s Deputies and Supreme Soviet of the Russian Federation in the Political History of the Country”. Since 2005 he has been practicing law to defend the rights and interests of his clients, which include large corporations, individuals and religious organizations. Klyuvgant has obtained acquittals from Russian courts and has had several cases terminated on rehabilitating grounds. In representing the victims of an anti-Semitic attack he won favourable rulings from both the Moscow City Court and the Supreme Court of Russia; this case has served as a precedent for subsequent criminal cases of religious extremism. Klyuvgant has appeared on numerous occasions in the Russian and international press. He has served as the lead trial lawyer on Mikhail Khodorkovsky’s Russian defence team since 2007.
After completing a degree at the Moscow State University Philological Faculty in 1994, Elena Levina went on to study law. She graduated from the Moscow State University Faculty of Law in 1999. She is a member of the Moscow City Bar. Levina has represented Mikhail Khodorkovsky since 2003.
Elena Lukyanova graduated from the Moscow State University Faculty of Law in 1980. She holds a doctorate in law and since 2005 has been a professor of constitutional and municipal law at her alma mater. Lukyanova has worked extensively for several convocations of the State Duma of the Russian Federation, and previously for the Supreme Soviet of the USSR, participating in legislative drafting in diverse areas, from youth policy, education and culture to the notarial profession, administrative law and public protests. She is an expert in Russia’s legal framework for elections, particularly with respect to constitutional compliance. In 2009 and 2011 Lukyanova was appointed by presidential decree to serve as a member of the Civic Chamber of the Russian Federation, where she has been heavily engaged in efforts to promote citizen interaction with the state, to protect rights and freedoms in the process of shaping and implementing state policies and to exercise public control over executive authorities. She has also worked in the private sector, including as head of the legal department of Slavneft from 2000 to 2002. In 2012 Lukyanova was awarded a prestigious Plevako Medal in recognition of her achievements in several spheres of the legal profession. She is a member of the Moscow Oblast Bar. Lukyanova has represented Mikhail Khodorkovsky since 2007.
Karinna Moskalenko earned a degree in jurisprudence from Leningrad State University in 1976. She later studied European law in the United Kingdom, at the University of Birmingham. Moskalenko has been a member of the Moscow City Bar since 1993. She founded the International Protection Centre in 1995, a non-governmental organisation seeking to defend human rights in Russia. The Centre has filed hundreds of applications before the European Court of Human Rights and won important legal victories on behalf of Russian citizens whose human rights have been violated by Russia. In 2000 Moskalenko received Russia’s prestigious Femida Award. Since 2003 she has served as a Commissioner of the International Commission of Jurists. When she received a recognition award from the International Helsinki Federation in 2006, the Federation stated: “Karinna Moskalenko is among the most outstanding human rights lawyers in the world, who has helped scores of victims in Russia fight for their rights in court.” Moskalenko has represented Mikhail Khodorkovsky since 2003.
Yuri Schmidt (1937 - 2013)
In 1960 Yuri Schmidt graduated from the Leningrad State University Faculty of Law and became a member of the Leningrad City Bar. In 1991 he formed the Russian Committee of Lawyers in Defence of Human Rights. In 1993 Helsinki Watch selected Schmidt to be one of the international monitors honoured by Human Rights Watch at its observance of Human Rights Day. In 1997 he was named Lawyer of the Year and received Russia’s prestigious Femida Award. In 1999 the International League for Human Rights bestowed upon Schmidt an honour for those having “courageously defended the rights of others, facing persecution themselves.” In 2010 Schmidt was awarded the Dr Rainer Hildebrandt Medal, an international human rights award in recognition of extraordinary, non-violent commitment to human rights. In 2012 Schmidt received the Commander’s Cross of the Order of Merit of the Federal Republic of Germany, for his decades-long commitment to achieving the rule of law and an independent justice system, as well as his international recognition as a defender of human rights. Schmidt began to represent Mikhail Khodorkovsky in 2004. When Schmidt died in 2013, Khodorkovsky described how Schmidt had supported him greatly, "not only as a lawyer, but also as a human being, someone who himself had been through much in his life and who knew people of the kind one can look up to as role models." Khodorkovsky stated: "I am never going to forget the long talks he and I had."
Natalya Terekhova graduated from the Krasnoyarsk State University Faculty of Law in 1988. She is a member of the Chita Oblast Bar. In 2007 she was a recipient of a Medal from the Federal Chamber of Lawyers of the Russian Federation for Service in the Defence of Rights and Freedoms of Citizens. Terekhova began to represent Mikhail Khodorkovsky when he was being held at a prison and pre-trial detention facility in Russia’s far east, from 2005 to 2009, and has subsequently remained on Khodorkovsky’s legal team.