Observations from the Courtroom

May 26, 2005

The reading of the verdict in the case of Mikhail Khodorkovsky and Platon Lebedev continued today. Significant progress was made as the court concluded its presentation of evidence in finding the defendants in violation of Article 198 (personal income tax evasion) and likely concluded its analysis of Article 199 (conspiracy to evade corporate tax obligations by an organized group).

The court concluded that Platon Lebedev was in violation of Article 198 shortly into today's proceedings and proceeded on to Article 199, which monopolized the remaining time in the day.

The judges, all three of which participated in reading from the stack of paper that comprises the verdict, discussed the role of Yukos subsidiaries Business Oil, Forest Oil, Vald Oil, and Mitra in evading corporate taxes by registering in special tax zone Lesnoy. The court linked the defendants to the subsidiary companies through parent company Yukos and affiliated company Yukos- Moskva.

In another case of mistaken facts, the court concluded that Mikhail Khodorkovsky had held the position of head of Yukos-RM, a member company of the Yukos family. This statement by the court elicited laughter from Platon Lebedev because Mr. Khodorkovsky never held any position within Yukos-RM. Mr. Lebedev reached out his hand to facetiously congratulate his business partner and co-defendant Mikhail Khodorkovsky. The latter half-heartedly shook Mr. Lebedev's hand and offered a wry grin.

In reading the supporting evidence in conjunction with Article 199, the court reviewed for the third or fourth time the employment histories of Mikhail Khodorkovsky and Platon Lebedev. Interestingly, the court concluded that it does not trust or believe the testimonies provided by the Directors General of Yukos subsidiaries Business Oil, Forest Oil, Vald Oil, and Mitra. Specifically, the court objected to those witnesses' testimonies confirming that they acted independent of Messrs. Khodorkovsky and Lebedev in deciding to register their companies in Lesnoy or to use promissory notes to pay for taxes instead of cash.

It is not clear if the court concluded its analysis of Article 199, but the reading of the verdict will continue on Friday, May 27 at 11:30.