How Mikhail Khodorkovskiy Robbed YUKOS' Foreign Shareholders
Famous Russian businessman Mikhail Khodorkovskiy, the former owner of Yukos Oil Company, spent 10 years in prison for tax evasion and fraud. He was released on December 20th, 2013 and left Russia soon after that.
FAN journalists have obtained unique documents which have never been published.
Thanks to the information received in the course of the journalistic investigation, US Really can take a closer look at Khodorkovskiy's illegal ways of earning his fortune and the secret schemes he used to deceive his foreign investors.
Yukos was founded in 1993 as a state oil company. Its creation was predetermined by the Decree of the President of the Russian Federation signed on November 17th, 1992 "in order to increase the efficiency of the oil complex of the Russian Federation, to ensure a reliable supply of consumers with oil and oil products." In 2003, the group of investigators working on the Yukos case under Salavat Karimov, the senior investigator of Prosecutor General's Office of the Russian Federation, brought two criminal cases to court. Several Yukos top managers including Mikhail Khodorkovkiy went to jail in connection with the tax evasion and numerous frauds. Several years ago, the Prosecutor General's Office of the Russian Federation launched a new large-scale investigation of the Yukos former owners. According to the reports, at the very start of their business, Khodorkovskiy along with his accomplices seized the Oil Company as a result of a carefully planned fraud.
"Here, it is absolutely proved that he owns his shares illegally and that he brings the profits offshore", said Salavat Karimov, Advisor to the Prosecutor General of Russian Federation.
On August 1st, 2007 the Company was declared bankrupt.
The Prosecutor's Office collected all the necessary evidence confirming the fact of the misappropriation of the state owned company Yukos by an organized crime group lead by oligarch Mikhail Khodorkovskiy. So the state company found itself in the hands of one man.
There were a number of schemes through which Khodorkovskiy made his fortune. Khodorkovskiy bought oil for Yukos' subsidies and sold it at the market price. However, he did it thorough his own firms, so the other Yukos shareholders got none of the profits from those sales.
Let's take a certain extractive company. It sells oil to one of Khodorkovskiy's fake companies for the price of 250 rubles per ton, which then resells it to another Russian company for 1,000 rubles per ton, receiving 750 rubles as a profit. The latter company then sells it to a foreign company, which also happens to belong to Khodorkovskiy and his group, for 1,100 rubles per ton. The last deal in this chain is made with a real buyer who gets oil for 2,000 rubles per ton. So the net profit is 900 rubles. And this money, in its turn, goes to the third structure, a foreign company also managed by Khodorkovskiy's team. According to this scheme, that really existed, the rest of the Yukos shareholders could only count on the profit of 250 rubles per ton. Everything else flowed straight to the pocket of Mikhail Khodorkovskiy and his partners.
According to Karimov, the proportion of Khodorkovsky’s people was initially 78% and 62% after an additional issue. The remaining shares were owned by the so called "minority shareholders", among which there were a lot of large foreign companies. Most of these companies are world famous, such as J.P. Morgan, UBS, Merrill Lynch, Raiffeisen Bank, Morgan Stanley, Credit Suisse, and Barclays.
"And the entire profit was accumulated not by Yukos itself, which owed to the shareholders to pay dividends, namely these companies that didn't belong to Yukos, through Cyprus and so on," Gitas Anilionis, Khodorkovskiy’s lawyer, stated.
$51 Billion was withdrawn.
As per Karimov, Khodorkovskiy used a dozen of schemes to deceive the minority shareholders. In order to safely hide the billions of dollars that his team pulled out of Yukos, numerous companies had been registered in offshore zones.
The foreign companies were outraged by such impudence and tried to get their money back. The minority shareholders, led by US citizen Kennah Darth, wanted to convince the foreign courts that Khodorkovskiy and other majority shareholders had been involved in embezzlement. In a hail of public accusations, the Yukos leaders were forced to restructure the embezzlement scheme and conditionally show that the oil traders, as well as the offshore companies in which the stolen funds were legalized, were controlled exclusively by the Yukos companies. Thus, they allegedly did not go beyond the perimeter of its possession. A corresponding fraudulent corporate structure was built on this.
Using the indicators of the Yukos high level of capitalization, Khodorkovskiy and his group sold the shares of Yukos on the securities market at a high price only in the interests of their own enrichment. During the years 2000-2003, Khodorkovskiy, Lebedev and other majority shareholders sold about 15% of their shares in Yukos Oil Company worth about two billion US dollars through ADR and GDR systems to the US and European citizens.
Moreover, when applying for the sale of shares of Form No. 6 to the US Securities and Exchange Commission (SEK), Khodorkovskiy and the Chief Financial Officer of Yukos, Bruce Mizomor, stated that the oil company had no risks that could result in the impairment of its shares. Thereby, they concealed that they had evaded paying taxes and had committed theft of its main product, oil.
Khodorkovskiy and his accomplices violated the laws not only in Russia, but also in the Netherlands. They sold shares to the citizens of the kingdom, having lied about the true state of affairs in Yukos. The actions of Khodorkovskiy, Lebedev and Mizomora, who sold Yukos shares to buyers in the Netherlands by lying about the real value of the securities, are subject to section 334 of the Criminal Code of the Kingdom of the Netherlands.
At the same time, the leaders of Yukos realized that, after the publication of facts of tax evasion and other financial frauds, the value of Yukos shares would fall sharply, so the situation had to be saved. The instruments for obtaining the money were the decisions of foreign courts. The oligarchs-criminals received them through false evidence represented by the Yukos top managers.
Bruce Misamore, Stephen Theedee and David Godfrey, controlled by the organized group led by Khodorkovskiy, were directly involved in tax evasion and taking company profits offshore. In 2004, after their criminal activities were exposed, they left Russia moving to the Netherlands. In order to evade tax sanctions, they transferred the Yukos foreign assets in favor of the leaders of the organized group. In particular, the assets of the Dutch company Yukos Finance B.V. were seized this way.
In 2013, the Khodorkovskiy’s group established the Quadrum Atlantic SPC foundation in the Cayman Islands with the help of trusts they practically owned. In 2013, the members of the organized group transferred this fund to the management of Quadrum Global, appointing Oleg Pavlov as its director. They used Quadrum Global to invest in real estate around the world. Thus, Khodorkovskiy and his partners laundered the money they had withdrawn from Yukos.
"Quadrum distributes the money into assets, creates companies, acquires real estate and so invest stolen funds and legalize them in businesses". Karimov explained.
Now Quadrum manages the assets worth over $2 billion.
According to British newspaper "The Daily Telegraph", American Intelligence Services have been closely watching Khodorkovsky's team since the acquisition of Yukos. For deceiving American shareholders and for misappropriating their dividends in the U.S. Khodorkovsky could face up to 25 years in prison. Posing himself as a victim of the prosecution from Russia, he is not asked any inconvenient questions in the West, but the law enforcement agencies in Russia do have the inconvenient questions with a full evidence base of proved actions of the former Yukos owners.