“Welcome to the Big World of Multinational Business,” Lebedev Begins Testimony
Platon Lebedev started giving his evidence in the trial against him and his business partner Mikhail Khodorkovsky in the Khamovnichesky court on Monday.
Lebedev began his testimony by giving the court a presentation, starting with a slide titled: "Welcome to the Big World of Multinational Business. Platon L. Lebedev, director, ‘Group MENATEP,' (1998-2003). Testimony 2010 ©".
His presentation highlighted the spurious nature of the indictment by clarifying that Group MENATEP Limited (GML), which according to the indictment was registered on "Gibraltar, a US island", was in fact registered in the UK overseas territory of Gibraltar. The Moscow Times described this as a courtroom geography lesson.
He added that Russia was not an ideal location for registering a multinational corporation as it lacked a convertible currency, had strict regulation and restrictions on foreign currency transactions and no legislation on double taxation. The risks of registering GML in Russia were many and unpredictable - as was proved by the country's 1998 default. In contrast, Gibraltar has easily understood rules for incorporating a company, professional administrative services by licensed secretary companies, and a jurisdiction with developed legal and judicial systems.
Lebedev told the court that it was right to register GML in Gibraltar, noting that "unlike the dismantled YUKOS, the company is still alive." He reminded the court that the company is seeking compensation from the Russian government for the forced bankruptcy of YUKOS, in litigation under the Energy Charter Treaty: "When in November 2009 the Tribunal in The Hague said the Group's suit was acceptable, the threat for Russia to repay a minimum $30 billion, or maximum $100 billion became real."
Lebedev went over the various bodies connected to GML including the company's International Advisory Board, made up of notable Western and Russian diplomats, advisors and ambassadors. GML also employed respected international law firm Clifford Chance as legal advisor, global investment bank UBS as investment advisor and Ernst & Young as their independent auditor. He noted that while Ernst and Young was GML's auditor, the other members of the Big Four - PricewaterhouseCoopers, KPMG and Deloitte - all worked with companies within the holding.
Explaining the corporate arrangement of GML and its subsidiaries to the court, Lebedev clarified that GML was exclusively involved in investment activity through its wholly-owned subsidiaries. The only income that GML received was from dividend payments from its subsidiaries or from interest payments from subsidized loans made to these companies.
Lebedev testified that the companies within the YUKOS consolidation perimeter included in the case materials - ZAO YUKOS-M, YU-Mordovia, Fargoil, Ratibor, Evoil and others - paid billions of dollars in taxes into the Russian federal budget, and the Russian authorities never issued complaints. This information was also forwarded to Swiss and Cypriot authorities, where international GML subsidiaries were registered. Lebedev highlighted the fact that Swiss and Cypriot authorities denied Russian investigators mutual legal assistance requests and completely excluded qualification of "intra-holding transactions" as "embezzlement" and "money laundering."
Lebedev reminded the court of the assertions presented by the authors of the indictment, Mssrs. Khatypov and Karimov who, when testifying in a Cypriot court, attempted to convince the judges that YUKOS' intra-company crude oil transactions were actually "embezzlement," while payments made, including tax payments, were "money laundering."
Lebedev told the court that despite the investigators' allegations about "fictitious Cypriot companies," Cypriot authorities provided the prosecution with the companies' audits from PricewaterhouseCoopers (Cyprus), which in stark comparison to their "scared" Russian counterparts, were never withdrawn and remained in full force to this very day.