Observations from the Courtroom

May 27, 2005

The reading of the verdict in the case of Mikhail Khodorkovsky and Platon Lebedev inched toward its conclusion as the panel of judges from the Meshchansky Court nearly concluded its presentation of supporting evidence for charges relating to the two co-defendants. Two charges remain to be discussed before moving on to sentencing. One charge relating to the third defendant, Andrei Krainov. The other charge relates to the return of the 20-percent share of Apatit stock, which is expected to be thrown out due to the expiration of the statute of limitations.

The court today found Messrs. Khodorkovsky and Lebedev in violation of Article 159, grand theft property by an organized criminal group. The judges concluded that Directors General for subsidiary companies controlled by the defendants were able to convince tax officials that the companies had overpaid their taxes. As a result, some of the taxes paid were returned to the subsidiary companies and eventually transferred to the parent company, Yukos.

The court referred to analyses that established subsidiary firm Alkhanai was not engaged in business transactions of any type, owned no property or assets, and did not maintain an inventory of any kind. According to the court, this all suggests that the company was not legitimate and was used expressly by the organized criminal group headed by Messrs. Khodorkovsky and Lebedev to evade taxes. Judge Kolesnikova noted that the court sided with the testimony provided by tax officials from the Chita and Kirov Regions that testified to the illegitimacy of the activities of Alkhanai and other related companies. The funds refunded to the Yukos structure in 2000-2001 totaled more than 207 million rubles.

Shortly after Judge Kolesnikova concluded the reading of evidence that corresponds to Article 159, she shifted to Article 160, embezzlement of property.

The court reviewed the companies involved in the transfer of funds totaling more than 2.5 billion rubles belonging to Yukos to companies within the Media MOST structure then owned by Vladimir Gusinsky. In expressing its conclusion, the court qualified the charge in question since the wording of Article 160 changed. The difference is that the new wording does not include the words "multiple counts," which is nothing significant or meaningful in terms of the outcome of the trial. The court ended by saying that the defendants' intentions were clear - the removal of such funds from Yukos and transfer to Media MOST was premeditated and intentional.

The court announced the proceedings would continue on Monday, May 30 at 11:00. It is expected that the court will wrap up the reading of the verdict on Monday with the reading of the last violation involving Andrei Krainov and a dismissal of the failure by Messrs. Khodorkovsky and Lebedev to return Apatit's privatized shares. Sentencing may or may not follow immediately after the completion of the verdict.