The Criminal Allegations
In 2003, the criminal allegations against Mikhail Khodorkovsky and Platon Lebedev included fraud, embezzlement and tax evasion. Most of the allegations revolved not around Yukos, but rather around the alleged fraudulent privatization of the nearly-bankrupt Apatit mineral fertilizer company - a state-owned producer of phosphorous concentrate used to make fertilizers.
The charges alleged that, when Apatit was privatized, Khodorkovsky and his associates did not fulfill their investment obligations under the privatization agreement. The facts do not support these or any other allegations of crime against Khodorkovsky and Lebedev. Today, Apatit is one of the largest fertilizer producers in the world. Its success is largely attributable to the investments made into infrastructure and efficient management by Khodorkovsky and his associates.
The prosecution's unprecedented attack, during the trial, on the lawful tax optimization practices used by Yukos was based on a retroactive application of new rules. During the course of the trial, many witnesses and experts, including witnesses for the prosecution, testified in favor of Khodorkovsky and Lebedev, confirming that they employed legal business practices commonly used by many other businesses in Russia at the time.
The proceedings against Khodorkovsky and Lebedev have been widely criticized as a politically motivated attempt by the state to silence these men and take control of the successful businesses they ran.
On February 5, 2007, Russian prosecutors filed new charges against Khodorkovsky and Lebedev. On June 30, 2008, investigators brought new charges which, with some amendments, repeated the charges of February 2007. The defendants were accused of embezzling the total amount of oil that Yukos produced from 1998-2003.
Specifically, 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 and "laundering" the proceeds of their sale.
The new charges contradicted the arguments put forward by the Russian Federation in the European Court of Human Rights, where it has argued (defending itself in a case brought by Yukos's former managers) that Yukos did not pay the correct amount of tax on the sale of the same oil that is supposed to have been embezzled by Khodorkovsky and his associates. Likewise, the charges contradicted a whole series of domestic court decisions that recognized Yukos as the taxable owner of oil that, therefore, could not have simultaneously been embezzled by Khodorkovsky and Lebedev.
In both trials, the courts characterized ordinary, lawful business activities as criminal acts. Evidence was manipulated - and in particular exculpatory evidence was ignored - and the defendants were deprived of fundamental rights of defense. The obvious goals were to remove them from public life and to take ownership and control of Yukos away from them.