Witness Testimony Summary: Irina Balayan
Testimony Dates:
Bio:
Ms. Balayan worked at ZAO YUKOS-RM from 1999 through 2007, where she worked in tax planning, and became the head of the tax department.
Testimony Summary:
Ms. Balayan began by testifying that YUKOS production subsidiaries transferred crude oil to Transneft. From her work at YUKOS-RM she knew that a portion of that crude oil went to oil refineries. Based on the accompanying documents, the refineries were aware of the crude oil's origins. She knew some of the companies which purchased the aforementioned crude oil and named YU- Mordovia and YUKOS-M as two of those.
Ms. Balayan testified that she knew the price in crude oil contracts between [YUKOS-M and YU-Mordovia] and production subsidiaries was considerably lower than the price of Urals blend in Rotterdam and Augusta. She testified that at various times, based on her analysis of the taxes that were paid, domestic petroleum products trading was profitable and other times it wasn't.
Ms. Balayan testified that YUKOS refineries were being fully utilized, which meant approximately 25 million tons of oil being shipped to refineries annually. During her work at YUKOS-RM none of the refineries ever closed or worked at below capacity. Ms. Balayan testified that the companies which paid to have oil shipped to refineries also paid expenses for logistics, refining and storage. She remembered two more companies to add to the list - Ratmir and Alta-Trade. She confirmed that these companies paid out the expenses from the price at which the sold the refined petroleum products, both domestically and for export.
Ms. Balayan explained in some detail the process of VAT refunds. She pointed out that YU-Mordovia, YUKOS-M, Ratmir and Alta-Trade did not get the refund deposited into their bank accounts - the government used the VAT refund due to offset the taxes owed by these companies into the Federal budget. Ms. Balayan testified that she did not remember an instance where the government would refuse to refund all of the VAT due for a particular shipment of petroleum products, although there were instances when a portion of VAT would not be refunded due to some documentary issue. Normally, the whole process took from six to nine months.
Ms. Balayan testified that her department received funds from YUKOS-RM's budget-planning department and ensured timely payment of taxes by YUKOS crude oil traders, including the aforementioned companies and Evoil and Ratibor. Ms. Balayan testified that she did not know how profits were allocated, but knew that there were investments, OPEX and CAPEX. Judge Danilkin asked the witness to clarify what she meant by the last two and Ms. Balayan explained that she meant operating and capital expenditures.
Ms. Balayan testified that she never encountered either existence of an organized criminal group at YUKOS, or of any other parallel system of management to the one that existed in the company. Ms. Balayan testified that she knew of Mr. Khodorkovsky as being the CEO of YUKOS, while Mr. Lebedev as the Chairman of the Bank MENATEP Group.
Ms. Balayan testified that export tariffs were paid either by commission agents - YUKO and YUKOS Export Trade, or by the companies which owned the crude oil - YUKOS-M, YU-Mordovia and others. Ms. Balayan testified that the last group of companies she listed paid Transneft's tariffs, also.
Ms. Balayan testified that YUKOS-RM was 100%-owned subsidiary of YUKOS. Ms. Balayan testified that her department examined the tax payments YUKOS oil traders paid. Her department worked closely with tax regulators and submitted planned tax payment reports based on the traders' prior activities. As a result, her department had access to revenue, profits and expenses of these companies, as well.
Ms. Balayan testified that her department was actively involved in tax planning of taxes which resulted from the traders' downstream activities. Tax figures from their financial activities were prepared and submitted by YUKOS-Moscow's tax department.
Ms. Balayan testified that YUKOS-RM, pursuant to agreements transferring management functions, managed refineries, terminals and distribution. In addition, the company provided support to YUKOS traders. Ms. Balayan testified that she never thought about the actual economic necessity of having YUKOS-RM to provide services to other divisions of YUKOS, but explained that the quality of work increased when a dedicate department handled particular functions.
Ms. Balayan explained that her department always made sure that crude oil traders paid taxes and never ended up being owed refunds from the Federal budget, as they had tax breaks from the regional authorities. Her department had more input on the pricing from one crude oil trader to another, with her superiors determining appropriate course of action to ensure that there was no sudden variations of 20% from the average.
Ms. Balayan testified that during the time she worked at YUKOS-RM she was never asked to perform on any instructions she thought to be illegal. She did not know anything about the alleged embezzlement of the entire YUKOS crude oil production from 1998 through 2003.
Ms. Balayan testified that companies which were incorporated in Mordovia were positioned as independent tax payers, with every company's bookkeeping being prepared in compliance with laws and regulations. Ms. Balayan testified that the tax regulators were fully aware that the companies were interdependent, even by seeing the documents which showed that the companies primarily traded only with each other. Ms. Balayan explained that her department and tax authorities were interested in these companies as tax payers. These companies had individual tax payer numbers, were included in the official company registry, undergone tax audits, and so on. As far as trading between the companies, tax authorities would have grounds for concern in the pricing was deviating by more than 20% in any direction.