Khodorkovsky & Lebedev Communications Center

Morning Session.

The trial resumed with Mr. Lebedev filing a motion. Mr. Lebedev explained that Ms. Timoshenko, who testified on February 2, stated explicitly that her section drafted and submitted income tax statements for OOO Ratmir. Furthermore, tax regulators never raised any serious issues or concerns based on any audits they conducted. According to Mr. Lebedev, Ms. Timoshenko's testimony confirmed that Ratmir paid taxes from sales, because one can not pay taxes from having embezzled property. Same applied to the charges under Articles 174 and 174.1 of the Criminal Code, because Ratmir's activity could not fit "money laundering."

Mr. Lebedev reminded the court that Ms. Timoshenko fully affirmed all prior testimony. However, the transcript of the March 29, 2005, interrogation, which lasted over 2 hours, was only 3 pages long and contained only an excerpt of answer to one question. Mr. Lebedev argued that this proved the transcript was fabricated. He demanded the court order the Investigative Committee to produce the entire interrogation transcript, so that the court and the parties could find out what was it that Ms. Timoshenko fully affirmed in court. Otherwise, Mr. Lebedev concluded, the defense would demand for the court to fully acknowledge falsification of evidence and deception of the court.

The prosecution asked to examine Ms. Timoshenko's transcript. While the court secretary was looking for the case volume containing the aforementioned transcript, Judge Danilkin informed the parties that the court received a letter from Ms. Alla Karaseva, informing the court that she was unable to attend today's hearing due to health issues.

Ms. Ibragimova asked the court to allow the prosecution additional time to prepare a response to Mr. Lebedev's motion. Turning to Ms. Karaseva's letter, Ms. Ibragimova motioned to read transcripts of her interrogations, in view of the fact that Ms. Karaseva was unable to attend the hearing.

Judge Danilkin announced a break to let the parties examine Ms. Karaseva's letter and accompanying paperwork. As the hearing resumed, defense attorneys asked what transcripts the prosecution wanted to read. Ms. Kovalihina told the court that the prosecution would read all of Ms. Karaseva's transcripts - 8 in total.

Mr. Klyuvgant explained to the court that the defense had several objections to reading Ms. Karaseva's transcripts at this time. First, the documents accompanying her letter were not conclusive as to whether she would never be able to come to Khamovnicheskiy Court. Second, 7 out of 8 transcripts were of Ms. Karaseva's interrogations as a suspect and only one was as a witness. More importantly, all interrogations were conducted as part of another case and after the investigation into Mr. Khodorkovsky and Lebedev's case concluded. Finally, Mr. Klyuvgant told the court that even if Ms. Karaseva's transcripts were to be entered into record, the defense would have numerous questions. Mr. Klyuvgant asked the court to postpone ruling on Ms. Ibragimova's motion and to subpoena Ms. Karaseva at a later date.

Mr. Lakhtin demanded that the defense respect the Criminal Procedure Code and Ms. Karaseva's human right. He argued that the defense was ready to subject Ms. Karaseva to inhumane treatment and that no one should be subjected to torture. The courtroom burst out in laughter, which made Mr. Lakhtin even more determined in ordering everyone, including the gallery, to obey the CCP. He added that Ms. Karaseva's testimony was "legalized" by Basmanny Court's verdict. [Ms. Karaseva, who was 65 years old at the time, was arrested in November, 2007, and placed into Matrosskaya Tishina SIZO. After 4 months of interrogations, in a special trial at Basmanny Court and based on an agreement similar to a plea-bargain, Ms. Karaseva was found guilty and received a suspended sentence of 5 and a half years, including 4 years probation. -Eds.]

Mr. Lebedev reminded the court that Ms. Karaseva's investigation and trial were conducted in secret, with neither he nor Mr. Khodorkovsky being called to testify. He explained to the court that defense's inability to cross-examine Ms. Karaseva would prevent this court from "legalizing," to use Mr. Lakhtin's term, the ongoing proceeding. Mr. Lebedev reminded the court that Mr. Lakhtin was the supervising prosecutor during Mr. Aleksanyan's investigation and, with the number of ECHR decisions about that situation, it wasn't Mr. Lakhtin's place to argue [inhumane treatment and torture]. Finally, Mr. Lebedev added that Mr. Lakhtin was proud of being involved in Mr. Lebedev's arrest, but there was an ECHR decision about that, as well.

Mr. Klyuvgant replied to Mr. Lakhtin's assertions. First, he noted that Mr. Lakhtin was unprofessional in relying on a verdict that was announced in secret. Second, Mr. Lakhtin's touching concern for Ms. Karaseva did not prevent her from being placed under arrest, interrogated and tried. Mr. Klyuvgant reiterated the defense's position - reading of Ms. Karaseva's transcripts should be postponed, considering that her health may improve. If it does not, the court could always revisit this issue.

Judge Danilkin, relying on Ms. Karaseva's letter and accompanying documents, granted Ms. Ibragimova's request.

The prosecution faced a difficult task. First four of the transcripts were handwritten by investigator Prokhorov, whose handwriting Mr. Lakhtin had extreme difficulty deciphering. After Ms. Kovalihina, attempting to help, whispered "Aleksanyan" instead of "Anilionis," in a passage where Ms. Karaseva was describing upper management of SP RTT, Mr. Lebedev objected and Ms. Ibragimova took away the case volume from Mr. Lakhtin.

First transcript, from December 25, 2007, contained Ms. Karaseva's work history, beginning with her joining SP RTT in 1997. She was hired as an accountant and, later, began to supervise two other employees, also accountants. While at SP RTT, she worked with three companies, all registered in internal zones with preferential tax treatment. Ms. Karaseva prepared the companies' accounting and tax statements. After a while she became a nominal director for one of the companies, Virtus. Around that time she was transferred to YUKOS-FBC, where Ms. Golub became her manager. [In later interrogations she clarified that her career path was SP RTT - LFC - YUKOS-Invest - YUKOS-FBC. -Eds.] Her responsibilities stayed the same. In addition to Ms. Golub, she answered to Ms. Gareeva. Late in 1999 Ms. Golub asked Ms. Karaseva to become Forest Oil's director, which she was for about 2 months. During that time she signed off on a document authorizing Forest Oil's tax payment with a YUKOS promissory note. Ms. Karaseva told investigator Prokhorov that she never doubted the legality of paying with a promissory note, because YUKOS legal department previously vetted this payment. [Investigation alleged this was a fraudulent transaction committed by Ms. Karaseva as a member of an organized group led by an unknown person who answered to Messrs. Khodorkovsky and Lebedev. Ms. Karaseva was convicted of fraud. -Eds.]

Next transcript, from January 15, 2008, continued the topic of Forest Oil. Ms. Karaseva was reappointed Forest Oil's director in late 2000. According to Ms. Karaseva, she was not aware of Forest Oil receiving a refund based on a 1999 overpayment with the aforementioned promissory note. She testified that Lesnoy's City Council, where Forest Oil was registered, extended the company's preferential tax treatment in 2000, as well. In February 2001, Ms. Golub informed Ms. Karaseva that she should begin preparation for Forest Oil to be consolidated with other companies based in Lesnoy.

In the transcript dated January 17, 2008, Ms. Karaseva was asked about the process of Forest Oil's consolidation and paperwork transfers that were involved. Asked, again, about tax refund payment, Ms. Karaseva denied any knowledge and testified that she did not submit any refund documents to appropriate tax authorities. Investigator Prokhorov demanded to know why the payment was made with the promissory note. Ms. Karaseva explained that there was legislation and correspondence from tax regulators, both allowing for payments to be made with promissory notes, in lieu of cash. These government documents did not give her cause to be suspicious.

The January 23, 2008 transcript stated that Ms. Karaseva testified that she continued to work at YUKOS-FBC as a consultant until July 2003. In July, as she was planning to go on vacation, she was contacted by Ms. Panagushina, a friend who helped her find employment with SP RTT, and was told that she should fly to Cyprus for a couple of weeks. According to Ms. Panagushina, YUKOS was experiencing some difficulties. Ms. Karaseva testified that she suspected the request came from Ms. Golub. While on Cyprus, she saw Mr. Kartashov and Ms. Chernikova in the same hotel she was staying at. Instead of two weeks, she stayed on Cyprus through January 2004. According to Ms. Karaseva, she was visited by Mss. Golub and Kuchusheva. According to Ms. Karaseva, Ms. Kuchusheva told her not to take any steps on her own when Ms. Karaseva told her that she was planning to return to Russia. In January 2004 Ms. Karaseva was relocated to Kiev, Ukraine. Ms. Karaseva alleged that after she expressed desire to return to Russia, Ms. Kuchusheva, using harsh language, threatened her and her husband.

On January 24 2008, Investigator Iogan took over for investigator Prokhorov. Ms. Karaseva started from the beginning. This time Ms. Karaseva made more emphasis on her contacts with Mr. Kartashov and Mss. Kuchusheva and Chernikova.

Then on January 25, 2008 with Investigator Rusanova, Ms. Karaseva once again testified about her departure for Cyprus and subsequent stay there. During this interrogation, Ms. Karaseva added new information about her interactions with Ms. Golub. According to Ms. Karaseva, she was questioned by investigators in 2001 during investigation into Forest Oil and tax refund payment. Ms. Karaseva told investigator Rusanova that Ms. Kuchusheva provided her with a list of questions she should expect and answers she should provide. At the same time Ms. Golub assured her that everything would be fine and later advised her to write a letter to investigators demanding to know what, if anything, she was being accused of.

In the January 30, 2008 transcript, Investigator Prokhorov was back. So were the difficulties with his handwritten transcript. Ms. Karaseva testified that Ms. Kuchusheva continued to contact her, telling her to stay in Ukraine until Mr. Khodorkovsky's trial was over. According to Ms. Karaseva, all contact with Ms. Kuchusheva stopped in Spring 2005. Ms. Karaseva returned to Moscow in May 2007. She was arrested in November 2007. Finally, Mr. Prokhorov asked, after showing some documents, whether Forest Oil could take advantage of preferential tax treatment. Ms. Karaseva answered that, based on the documents he was showing her and which she never saw before, it could not. However, based on other documents she saw before, she thought the company could take advantage of preferential tax treatment.

On June 28, 2008, Ms. Kuchusheva was interrogated in a new role - as a witness. Investigator Lavrov was using December 27, 2007, transcript while asking same questions Ms. Karaseva answered before. Ms. Karaseva added more information, describing her work history as spanning SP RTT, then Legal and Financial Company (LFC), then YUKOS-Invest and, finally, YUKOS-FBC.

About half way through interrogation, Mr. Lavrov asked why Ms. Karaseva had to tender her resignation as director of Forest Oil to Ms. Golub. Ms. Karaseva's answer -"Companies in ZATO (Closed Administrative-Territorial Objects) were created to evade taxes. I know this now, but back then I never had any doubts about lawfulness of those companies' operations." According to Ms. Karaseva, Ms. Golub thought it would be advantageous to have all directors working nearby. Next, Ms. Karaseva told investigator Lavrov that out of everyone Ms. Golub had the closest relationship with Ms. Kuchusheva.

Afternoon Session.

The prosecution was ready to respond to Mr. Lebedev's motion for exclusion of all transcripts from interrogations conducted by investigator Nikandrov. Mr. Lakhtin argued that Investigator Nikandrov was used as participating witness in a case that was later merged with case #18/41-03. Messrs. Golubovich, Yurov, Anilionis and others were questioned by Mr. Nikandrov for case #18/41-03, and not for Messrs. Khodorkovsky and Lebedev's case, which has a different number. According to Mr. Lakhtin, the defense was misleading the court, arguing that Mr. Nikandrov was both an investigator and a participating witness in the same case. Therefore, the court should deny Mr. Lebedev's motion.

Judge Danilkin denied Mr. Lebedev's motion.

The prosecution was not ready to respond to the motion Mr. Lebedev filed in the morning and Mr. Lakhtin asked for more time.

Mr. Khodorkovsky made a statement. He pointed out to the court that prosecution's witnesses who come to court don't know anything about movement of crude oil and, some more than others, know about revenues and profits from transactions by "the so-called victims." He noted that it should be obvious that disposition of property rights without disposition of physical movement of crude oil does not fit with the subject of the indictment or Article 160 of the Criminal Code. According to Mr. Khodorkovsky, even Mr. Lakhtin should have seen by now that there was the oil-well, the crude oil preparation facility and the Transneft pipeline - into which the "victim" transferred the crude oil.

Mr. Khodorkovsky told the court that YUKOS and the victims having profit destroyed the concept of damages. Ridiculing assertions about actions against the "company's will," Mr. Khodorkovsky told the court that the prosecution could not even ask questions about this concept from witnesses, because they had the CEO of the only shareholder of the victims - YUKOS - as well as a majority shareholder of that shareholder. Those organizations did not have any other will.

Mr. Khodorkovsky told the court that he was left with a feeling that the prosecution, after realizing it lost in this process, is attempting to fabricate another criminal case and is using the courtroom as an interrogation room for a preliminary investigation. "Since they don't know what else to accuse me of, they are looking for it in this courtroom," Mr. Khodorkovsky explained to the court.

Mr. Khodorkovsky asked the court to strike questions which address topics unrelated to elements of the charges, even if they touch on an irrelevant topic in the indictment. Otherwise, Mr. Khodorkovsky told the court, that to protest he would begin asking questions about Messrs. Alyshev, Grin and others, whose words and actions are mentioned in the indictment. He told the court that this was not what everyone wants, but the indictment mentioned Mr. Lakhtin's actions, Mr. Putin's actions, and actions of many others.

Mr. Lebedev asked to make a brief statement about today's reading of Ms. Karaseva's transcripts. First, he noted that her testimony was about the "tax episode," which was tried in Meschanskiy Court in 2004-2005. Mr. Lebedev promised that the defense will have more to say about those transcripts' relevance, but wanted to specifically highlight the fact that Mr. Khodorkovsky and he were actually being re-tried for the same thing.

Mr. Lebedev pointed out that investigators in Ms. Karaseva's case did not contest the fact of taxing companies like Forest Oil. Mr. Lebedev told the court that the indictment contained many of these "poisoned pills" - dormant allegations without charges. Mr. Lebedev declined to speculate why that was done, but told the court that it wasn't only those in the courtroom who lost track of the subject of the indictment, but those in the government who follow this trial. Mr. Lebedev said that some of these people think defendants were being tried for tax evasion, while others think it's for illegal crude oil exports. According to Mr. Lebedev, either the issue was embezzlement of crude oil, or Mr. Khodorkovsky was correct in his suspicion that the courtroom was being used as an interrogation room for witnesses for some other criminal case.

The prosecution did not have any witnesses. Judge Danilkin, despite hinting otherwise, adjourned the trial until Monday.

The trial will resume on Monday, February 8, 10:30 Moscow Time.