Khodorkovsky & Lebedev Communications Center

Morning Session.

The trial resumed with the court informing the parties that there were two witnesses summoned for today: Mr. Karpyak, former head of Kuybyshev Refinery, and Mr. Lyadin, head of Syzran Refinery. Judge Danilkin told the parties that Mr. Karpyak's summons was returned, while Mr. Lyadin received his summons and it remained to be seen whether he will appear in the afternoon. [In the afternoon the court will inform the parties that Mr. Lyadin called to let the court know he could not fly from Samara to Moscow due to family circumstances and promised to let the court know when he may be able to appear. -Eds.]

Next, Mr. Smirnov let the court know that the prosecution would like to respond to defense's motions later in the day. The court agreed.

Mr. Klyuvgant stood up and motioned the court to allow defense to question a specialist who came to court. The expert was Ms. Natalya Lopashenko. Ms. Lopashenko has a Ph.D. in Jurisprudence, is the head of the Saratov Center for the Study of Organized Crime and Corruption and is a professor at the Saratov State Academy of Jurisprudence.

Mr. Klyuvgant explained that Mr. Khodorkovsky testified that when he made his decisions while being the chief executive of YUKOS he was acting based on his understanding of the then current legislation, as well as based on consultations he received from internal and external consultants. Based on that information and his own understanding he considered and considers, still, his actions to have been in full compliance with the law.

Mr. Klyuvgant told the court that in order for the court to understand whether Mr. Khodorkovsky, indeed, had reasons to believe what he believed, the court should hear from a specialist with knowledge of the criminal law, as well as in other legal areas, who can connect the inter-discipline chain for the court. Mr. Klyuvgant added that one of the main objections voiced by the prosecution and used by the court to deny defense an opportunity to question Mr. Kevin Dages was that he did not know Russian jurisprudence. To help the court, defense asked a specialist in Russian jurisprudence to appear before the court. Before Ms. Lopashenko was asked to come inside the courtroom, Mr. Klyuvgant noted that numerous legal scholars have noted that in complex cases it was appropriate and even necessary for the courts to engage specialists with detailed knowledge of specific areas of law. Indeed, Russia's Constitutional Court made a practice to engage legal scholars as specialists and experts in every case, even in ones being examined on the merits.

Ms. Lopashenko entered the courtroom. After being explained her rights, she presented the court with her Ph.D. diploma, as well as her professorial certification. While the court and the prosecutors examined these documents, Ms. Lopashenko told the court that from the early 1990s she specialized in studying economic crimes. In 1997 she was the first scholar in Russia to receive a Ph.D. on a topic based on the newly added Section 22 of the Criminal Code. Her dissertation topic was "Crimes in Economic Sphere: Understanding, system, problems with qualification and punishment." She was published over 330 times, consulted prosecutors and defendants in criminal proceedings, and consults the Russian Duma as an expert. In addition to expertise in Criminal Law, Ms. Lopashenko told the court that in order to understand what an economic crime was one needed to know civil, tax, business, banking, securities, customs and currency. She did not pretend to be an expert in all of these areas, but told the court that she knew them well enough to be able to connect them with her primary discipline.

Mr. Klyuvgant asked Ms. Lopashenko to explain a little more about her work. She explained that this is the third session of the Duma in which she is being utilized as an expert for a committee tasked with developing anti-corruption strategies. In early 2000s she consulted a committee in the Upper House of the Russian Parliament. In addition to heading the aforementioned Center, Ms. Lopashenko told the court that she's worked on drafting regional legislation and is a member of the educational-methodological society of Russia's universities in jurisprudence and criminology. Ms. Lopashenko told the court that she wrote more than 10 expert conclusions for criminal cases, but this was going to be only her second experience in the courtroom.

Mr. Klyuvgant told the court that these were all the questions defense had concerning Ms. Lopashenko's competence and qualifications.

Mr. Smirnov asked whether Ms. Lopashenko had graduate degrees in disciplines other than jurisprudence. She did not. All of a sudden Judge Danilkin asked whether the specialist was going to evaluate and to give conclusions on the indictment. Mr. Klyuvgant assured the court that it was not defense's intent. He explained that the specialist was here to explain the legal doctrine in the sphere of economic crimes.

Mr. Lakhtin wanted to know whether Ms. Lopashenko knew the case materials. Mr. Klyuvgant asked Ms. Lopashenko what, if anything, she knew about Messrs. Khodorkovsky and Lebedev's case. Ms. Lopashenko explained that she learned about the case as many other people did - from the newspapers when the defendants were charged. In 2008 she was contacted by Mr. Miroshnichenko who, pursuant to the Law on Advocate's Activities, submitted to her a written request to provide a report and conclusions based on a copy of Mr. Lebedev's complaint. After examining the original of the aforementioned complaint, Ms. Lopashenko confirmed that it was the same copy that she received from Mr. Miroshnichenko. She confirmed that her examination of that complaint was enough to be able to answer all questions concerning the legal doctrine. Mr. Klyuvgant added that while the report and conclusions Ms. Lopashenko provided in 2008 were found in the case materials because they were used as supplements when arguing against extension of Messrs. Khodorkovsky and Lebedev's arrest, defense did not intend to ask her any questions based on that document. Defense intended to ask questions based solely on legal doctrine and on understanding of inter-disciplinary concepts. Furthermore, Mr. Klyuvgant reminded the court that any questions which the court found as asking the specialist to analyze the indictment could be stricken.

Mr. Lakhtin began asking questions of his own. Ms. Lopashenko told the court that her contacts with Mr. Miroshnichenko began after he wrote her asking for her expert opinion. She knew Mr. Klyuvgant, as well. Ms. Lopashenko told the court that she did not hide the fact that she was provided expert consultations and that may have been the reason Mr. Miroshnichenko contacted her.

Mr. Lakhtin went for "the pocket," demanding to know how Ms. Lopashenko was compensated. Ms. Lopashenko told the court that she was paid her travel expenses and lodging while in Moscow. These were the only items she was compensated for. "That's not a very correct answer," Mr. Lakhtin told the witness and demanded to know what she was paid for writing her report pursuant to Mr. Miroshnichenko's questions. Without waiting for Ms. Lopashenko to answer, Mr. Lakhtin demanded to know who paid for her tickets and what train or plane Ms. Lopashenko took to Moscow. Mr. Klyuvgant demanded that prosecutor listen to what Ms. Lopashenko was answering and to not insult her. The court struck Mr. Lakhtin's question.

Ms. Ibragimova wanted to know how Ms. Lopashenko was paid for her report. Ms. Lopashenko told the court that she was not paid for her report, because it was submitted by an attorney pursuant to the Law on Advocate's Activities. Ms. Lopashenko added that as a scholar she was interested in being able to participate in this process. Ms. Ibragimova demanded to know whether Ms. Lopashenko formed an opinion on the case based on the report she wrote. Ms. Lopashenko told the court that in order for her to have formed an opinion on the case she would have had to examine all evidence, which she did not. She explained, once again, that she was asked questions related to criminal law theory in economic sphere, those were the questions she answered and, of course, had to from an opinion as to those questions in order to answer them. Ms. Ibragimova insisted that Ms. Lopashenko already formed an opinion, which would influence her answers. Ms. Lopashenko told the court that she will answer questions which will be asked and, as was said before, the report she wrote was not going to be the subject of her testimony.

Mr. Lakhtin wanted to know whether Ms. Lopashenko ever worked for crude oil production or refining companies, did she know the details of crude oil production, crude oil sales and such. Ms. Lopashenko told the court that she did not. Mr. Lakhitn wanted to know what the latest consultation she provided for the Duma. She corrected the prosecutor by telling him that she provided expert opinions to the Duma. The latest were on corrections to be made to sections of the Criminal Code on organized crime. "That's it?" Mr. Lakhtin asked, his tone dismissive. "You only asked about the latest," Ms. Lopashenko replied.

Judge Danilkin asked if Ms. Lopashenko was interested in the outcome of the case. She assured the court that she was not. She was here to help the court to examine the matter in accordance with the law.

After a half an hour recess, which was extended for an additional half an hour pursuant to a request from Mr. Lakhtin, the prosecution was almost ready. First, Ms. Ibragimova wanted to know whether Ms. Lopashenko, when answering Mr. Miroshnichenko's questions, actually analyzed the classification of allegations against Messrs. Khodorkovsky and Lebedev. Ms. Lopashenko explained that all questions concerning application of criminal law were questions of classification. Mr. Lakhtin demanded to know who made the final decision on classification at the trial. The court struck the prosecutor's question, after Mr. Klyuvgant objected that Mr. Lakhtin asked a substantive question in a qualifying stage.

Mr. Lakhtin pushed Ms. Lopashenko on how she found out about the trial and whether she was really interested in the proceedings. She wondered whether there were a lot of people in Russia who were not interested in these proceedings. Another question from Mr. Lakhtin and Ms. Lopashenko confirmed that she never met Messrs. Khodorkovsky and Lebedev.

Holding a piece of paper, Mr. Smirnov stood up and made a statement, procedural posture of which was unclear. He told the court that defense's motion to question a specialist should not be granted. A specialist in jurisprudence should not be allowed to testify on the legality and the substance of the indictment which the court has been examining for over a year. [Mr. Smirnov was arguing the exact opposite of what Ms. Lopashenko and the defense assured the court she was not here for. -Eds.] In addition, according to Mr. Smirnov, Ms. Lopashenko had contacts with defense attorneys and, therefore, formed a biased opinion about whether defendants were guilty and whether the indictment was legally grounded. Mr. Smirnov asked the court to deny defense's motion.

Mr. Klyuvgant asked the court what it was that the prosecutor just read: a counter-argument to defense's motion or a motion to dismiss a specialist. If the prosecution saw grounds to dismiss the specialist then it had to file a motion to dismiss, otherwise everything what the prosecutor just read was irrelevant to the question of competence and should be argued after Ms. Lopashenko had a chance to testify.

Mr. Lakhtin was fuming, telling the court that defense was not allowing prosecution to speak. He continued, telling the court that Ms. Lopashenko was not a specialist - she did not work for any crude oil companies. She had no idea how crude oil was produced and she did not provide accounting services to any crude oil companies. [It remains to be seen how many of the prosecution's experts did any of the things Mr. Lakhtin was so concerned Ms. Lopashenko did not do. But since the court refused to summon prosecution's experts we'll let you know the answer - none. -Eds.] Once again the court heard that Ms. Lopashenko was here to testify about the soundness of the indictment and to examine the evidence, when only the court was allowed to do so. According to prosecutor Lakhtin, Ms. Lopashenko should not be allowed to testify when she did not examine all of the case materials.

"She cannot be objective. She was invited by defense, specifically by Miroshnichenko, who actually hired her to give some kind of a report, fed her questions and corrected the answers she was going to provide. We don't even know what the source of funds is that paid for her trip to Moscow. Therefore, Lopashenko, who admitted her own incompetence, is under the influence of the defense. She said herself that she felt flattered about being asked to participate in the case. I think that Lopashenko is looking to increase her reputational stature through this process, to better PR herself," Mr. Lakhtin went on a longwinded personal attack. Then the prosecutor told the court that she really wasn't a specialist, at all, and there were plenty of others in Russia. He stressed, again, that Ms. Lopashenko came to court to testify about the evidence and provide her opinion on the substance of the indictment. And, lest the courtroom forget, defense invited Ms. Lopashenko in order to delay the trial.

Judge Danilkin was still trying to find out whether the prosecution was going to file to dismiss the specialist. Mr. Smirnov finally did, formally asking the court to dismiss Ms. Lopashenko. Ms. Ibragimova added that Mr. Klyuvgant's real agenda was to question Ms. Lopashenko and to have her give an opinion on the substance of the indictment. Furthermore, the answers she provided to Mr. Miroshnichenko's questions showed that Ms. Lopashenko answered questions about the charges. This meant that Ms. Lopashenko could not be objective.

Mr. Shokhin told the court that even opinions of such authoritative and respected person as Ms. Lopashenko could not be substituted for the sole competence of the court to examine and to evaluate the evidence and to judge their validity and significance.

Mr. Klyuvgant told the court that he found himself in a difficult situation, because all of what the prosecutors just said was beyond speculation and guesses. What they told the court was a lie. They lied in their interpretation of Ms. Lopashenko's answers - she was very clear that she did not provide expert conclusions on the legality and the substance of the indictment. Mr. Klyuvgant told the court that prosecution was required to provide specific grounds for dismissing the expert - not speculations and insults. It was a sorry sight to see the prosecution behave the way they did towards Ms. Lopashenko, with the court not warning them or stopping their lies.

Mr. Klyuvgant added that defense agreed completely with what Mr. Shokhin said - that was why the very first thing he told the court was that defense was bringing Ms. Lopashenko in to help the court. But the prosecution spent their time guessing and speculating about what defense may ask her.

Mr. Klyuvgant concluded by telling the court that the case contained interconnected questions from various areas of the law and it could not issue a verdict before resolving those. These questions were so confused that without in depth juridical knowledge the case could not be decided fairly and in good faith.

Mr. Khodorkovsky told the court that, as he understood it, when the law was subject to several competing interpretations, it wasn't automatic that prosecution's interpretation won. He already testified that the management decisions he made, including approving various agreements and building a particular management system in the company, were based on his intention to comply with the law. He was not a specialist and relied on consultations from jurists, who he thought, and continues to think, were acting in good faith.

He told the court that he expected Ms. Lopashenko, also acting in good faith, to explain to the court what kind of understanding he had of the laws that applied then. This should help the court make a decision about what consequences he should have foreseen and could foresee, and was he acting reasonably. After all, as prosecutor Lakhtin liked to point out, he was not charged with cutting into the pipeline, but with making specific decisions.

Mr. Lebedev began by lamenting that the court, although getting a promise out of Mr. Lebedev not to use the word "hoodlums" when referring to the prosecution, was not upholding the courtroom decorum, including when the prosecution was insulting a scholar. As far as prosecution's arguments - if crude oil sphere of the economy was the actual subject of the trial, then no one on the prosecution's team should be allowed to represent the government. None of them worked on an oil field, drilled wells, or worked at a refinery. Furthermore, not one investigator or prosecutor visited that mysterious place where happened that about which the indictment was falsified. They have no idea where that place is. Instead, prosecutors are given free reign to call a Doctor of Jurisprudence "incompetent," without basing any of their arguments on the Criminal Procedure Code. Except for the insults towards Ms. Lopashenko, the court did not hear anything else. Mr. Lebedev asked the court to deny prosecution's request to dismiss the specialist.

Ms. Lopashenko was brief. "I would like to object against the insults that I heard. Actually, I'm shocked, Your Honor. To hear in the courtroom such things being said about you... That Miroshnichenko corrected my conclusions. That's a lie. That he hired me. Forgive me, that's a lie. I began to doubt that I am present inside a courtroom's walls and that I actually heard these things from the prosecution. Except for a feeling of outrage I have nothing else to add. Insults, I think, should be driven beyond the court hearing. Thank you," Ms. Lopashenko, a scholar, met the reality of Courtroom #7.

The trial was recessed, with Judge Danilkin retiring to the chambers to write the ruling.

Afternoon Session.

Judge Danilkin entered the courtroom and began reading his ruling. Prosecution's arguments were provided in detail, with each prosecutor's arguments being repeated. Mr. Klyuvgant's arguments were summarized in short form, while Messrs. Khodorkovsky and Lebedev's comments were left out entirely.

The court GRANTED Mr. Smirnov's motion. According to Judge Danilkin, only the court was allowed to examine, to analyze and to rule on the evidence being presented at trial. A specialist could not be allowed to explain criminal law norms to the court. Since this was the only reason for inviting Ms. Lopashenko to testify, Judge Danilkin ruled that she did not have the required knowledge to help decide substantive questions of fact, which automatically prevents her participation as specialist.

Judge Danilkin informed the parties about the situation with Mr. Lyadin. While Ms. Lopashenko was still in the courtroom, Mr. Khodorkovsky objected to the actions of the presiding judge. Mr. Khodorkovsky told Judge Danilkin that in his ruling he failed to reflect the arguments he made, including the topics he intended to ask Ms. Lopashenko about. Basically, the court failed to address his position, at all.

Ms. Lopashenko left the courtroom.

Mr. Krasnov returned to announcing documents connected with the VNK subsidiaries shares exchanges found in the case materials. Some of the information included in these documents consisted of investigator Shumilov confirming that reverse exchanges took place, supported by contracts with reverse exchange clauses, and a written report from the Audit Chamber which found that VNK subsidiary shares exchanges were not the cause for the government not to have maximized effectiveness with which its VNK shares were managed.

Soon it was time for the prosecution to respond to Mr. Krasnov's motions from the day before. Mr. Lakhtin decided to be brief. According to the prosecutor Mr. Rivkin, who deposed Messrs. Misamore and Hunter, was not a person who was authorized to gather evidence outside of the Russian Federation. Furthermore, Mr. Hunter's deposition was attached to defense's motion to terminate the criminal proceeding against defendants and that motion was denied on March 17, 2009. This meant that the court did not consider Mr. Hunter's deposition as relevant. Mr. Lakhtin reiterated that Mr. Rivkin violated the Criminal Procedure Code by deposing Messrs. Misamore and Hunter in the United states and asked the court to deny both motions.

The defense motions were DENIED, with the court using "no legal grounds for granting" as justification.

Mr. Dyatlev renewed the defense's motion to obtain Samaraneftegaz inventory documents. Referring to the court's decision to deny defense's request to obtain Samaraneftegaz accounting documents as unsubstantiated, Mr. Dyatlev urged the court to grant defense access to inventory documents which should show whether and how much of Samaraneftegaz's crude oil went missing between 1998 and 2003.

In his next motion, Mr. Dyatlev told the court that defense was looking to get answer from the alleged victims to the following two questions: How much did you spend annually to extract the oil? How much money did you receive for that annual production volume? Defense made an effort to obtain these summaries from the alleged victims, but received no response. Mr. Dyatlev noted that even those excerpts of accounting statements found in the case file show that amount paid was more than the cost of production. He asked the court to forward a documents production request to Samaraneftegaz, Tomskneft and Rosneft (Yuganskneftegaz), ordering those companies to submit these reports to the court.

Mr. Lebedev, in support of Mr. Dyatlev's motion, noted that accounting statements of YUKOS production subsidiaries from 2001-2003 could be easily obtained from Basmanny Court, where they were attached and examined during the Malahovsky/Pereverzin/Valdes-Garcia trial. In any event, the tempo at which the proceedings were going, events that took place in 1998-2000 would soon loose their relevance. Mr. Lebedev added that another court in a trial on the exact same allegations already recognized the admissibility and relevance of the financial statements from 2001-2003.

Mr. Khodorkovsky added that the process reached a certain humorous stage - prosecution announced that the alleged victims did not have a shortage of crude oil. He was hoping they would not change their mind before the end of the trial, so the documents Mr. Dyatlev was asking about should be added to the case file.

Next, Mr. Khodorkovsky asked the court to take note as to why the prosecution decided that the crude oil was owned by the production companies. The contracts and transfer acts which they added to the case file did not support the totals found in the indictment. Also, Mr. Khodorkovsky reminded the court that the government alleged that these contracts were "fictitious," which meant that they shouldn't be relied upon. Therefore, the prosecution had to either present crude oil production licenses or production reports from the government agencies, or the RSBU statements. Mr. Khodorkovsky reminded the court that Mr. Afanasenkov, in charge of YUKOS geological activities, explained already that a lot of the production was done on YUKOS crude oil production licenses - meaning that crude oil was not owned by production companies, who acted as oil field operators only. Furthermore, some of the crude oil was produced using YUKOS equipment and only accounting statements could show how the ownership rights were allocated between YUKOS and its subsidiaries.

Finally, Mr. Khodorkovsky told the court he understood why prosecution was so adamant about not letting the production subsidiaries accounting statements in. "While I have utmost respect for Messrs. Malahovsky and Pereverzin, they are not specialists. But we are!" Mr. Khodorkovsky explained to the court the real reason behind prosecution's stubborn fight to exclude the accounting statements of the alleged victims.

The trial will resume on Monday, July 05, 10:30 Moscow Time.