Khodorkovsky & Lebedev Communications Center

Appointed to oversee the fire-sale auctions of Yukos assets throughout 2006 and 2007, Eduard Rebgun should have been a star witness for the prosecution.

However, giving evidence last week, Rebgun's memory lapses have left onlookers once again wondering why the prosecution keep presenting witnesses who, directly and indirectly, confirm that the charges against Mikhail Khodorkovsky and Platon Lebedev are a joke. Faced with questions about YUKOS' management structure and arrangements implemented through YUKOS-EP and YUKOS-RM, which the prosecution consider to have removed full independence of YUKOS' subsidiaries, Rebgun said he was entirely satisfied with the arrangements and continued to utilize the same structure.

In a notable exchange, Rebgun said he had no knowledge of the charges against the defendants but he stressed that he had never been exposed to any evidence which could suggest that the oil produced by YUKOShad been embezzled: "We never considered questions of whether there were any signs that any crude oil was embezzled. I don't have information from my staff that crude oil was embezzled. We thought that all of the crude oil that you extracted was your crude oil; it was sold and appropriate taxes should have been paid."

Rebgun also alleged that YUKOS' liabilities exceeded the value of its assets. He declined however to comment on the valuation of the assets he was selling, several of which have since been shown to have been vastly undervalued. Tomskneft, for instance, was sold together in an auction lot alongside the Angarsk and Achinsk refineries, to Rosneft for a total of $6.83 billion against a starting price of $6.46 billion. But Tomskneft alone, using comparatives with Rosneft's subsequent IPO, should have been valued close to $20 billion.

Samaraneftegaz, including three refineries, was sold to Rosneft, bidding against a previously unheard of company, Versar, for $6.42 billion against a starting price of $5.97 billion. Russian Bankers and Brokers Report valued Samaraneftegaz alone between $6 billion and 7 billion, whilst MDM Bank analyst Nadia Kazakova commented her bank had valued the lot at $9.2 billion. Again, comparing to the valuation of Rosneft in its IPO, the value of the Lot should have been closer to $20 billion.

Cross examining the witness, defence attorney Boris Gruzd highlighted several instances where YUKOS assets, worth hundreds of thousands of dollars were sold for mere Kopeks. Gruzd highlighted a 90% stake in RAO Rus, acquired for $300,000 USD and sold, as one 3000 items in Lot 18 for 10 kopeks. Rebgun did not know what the company was bought and sold for.

YUKOS clearly had sufficient assets to settle its liabilities to creditors who, at that time consisted solely of Rosneft and the Russian Government. Rebgun did argue that YUKOS assets were not sold at liquidation prices - the appraisal was just the starting bid - and, in any event, the creditors could have increased starting bid if they so desired. This was less than likely considering Rosneft actually purchased the lion's share of YUKOS' assets during the auction.

YUKOS did not see a single Kopek of the proceeds.

Interestingly, Rebgun confirmed in court that YUKOS management had discussed with him proposals for financial rehabilitation of Yukos and told him that YUKOS Capital would be willing to forgive approximately $4 billion it was owed if the financial rehabilitation was to be implemented. This is in stark contrast to Rebgun's previous assertion, on Russia Today television in January 2008 that: "YUKOS had made no effort to save itself".

Not only were the tax claims against YUKOS entirely bogus, YUKOS' liabilities were artificially increased to match the proceeds earned through a bankruptcy process which, the District Court of Amsterdam confirmed in its August 31, 2007 judgment, was so fundamentally flawed that it could not be recognized in the Dutch Courts.

At the end of Rebgun's testimony the prosecution announced that they had finished presenting the written evidence and witnesses, nearly exactly one year after the start of the trial.