Witness Testimony Summary: Vladimir Kudasov
Testimony Dates:
Bio:
Vladimir Kudasov is a former director of YUKOS-Moscow's directory of internal operations and former deputy to Mr. Leonovich, head of YUKOS Treasury Department.
Testimony Summary:
On direct examination, Mr. Kudasov was questioned about YUKOS budget, trading subsidiaries and dividend payments. Mr. Kudasov explained the company budget contained forecasted expenditures and other information. About crude oil trading subsidiaries, Mr. Kudasov explained that these companies had service agreements with YUKOS-FBC and YUKOS-Moscow, with the former providing bookkeeping and accounting services. Mr. Kudasov testified that Yuganskneftegaz, Samaraneftegaz, Tomskneft, as well as refineries, were some of the subsidiaries with which he was involved in questions of intra-company financing. According to Mr. Kudasov, although promissory noted were used for this purpose, his goal was to decrease the number of the notes being used. To do that, Mr. Kudasov proposed using finance loans, converting them to promissory notes only after substantial accumulation. Mr. Kudasov testified that supervision of dividend payments was his responsibility. He was the one who tracked all related operations and received summaries from the companies.
Mr. Lakhtin asked if Mr. Kudasov knew a Mr. Maslyukov. Mr. Kudasov testified that Mr. Maslyukov worked with him on dividends and was also supervised directly by Mr. Leonovich. Mr. Lakhtin used this opportunity to motion for the reading of Mr. Kudasov's interrogation transcripts. According to Mr. Lakhtin, Mr. Kudasov failed to provide details on Messrs. Leonovich and Maslyukov's involvement in dividend payments. The prosecution was allowed to read transcripts after questioning their witness for a little more than 30 minutes.
After prosecution read Mr. Kudasov's transcripts, Mr. Khodorkovsky lodged an objection, telling the court that reading from interrogations conducted after the charges were filed was nothing less than "a procedural fraud."
Furthermore, defense analyzed Mr. Kudasov's interrogation transcripts and counted 23 individual documents shown to him during interrogations. Only 5 of these documents were found in the case file. The court was asked to inquire of the prosecution where the other documents were, because defense would like to examine those, as well. No inquiry to the prosecution was made.
On cross-examination, Mr. Kudasov testified that crude oil prices never varied more than 20% from what they were in Khanty-Mansiysk region. Furthermore, Mr. Kudasov believed that, even with a discount, the price paid covered crude oil production costs. Mr. Kudasov explained that setting of crude oil prices in Khanty-Mansiysk at not more than with 20% variance from the average was done in order to comply with the tax code. Mr. Kudasov explained that it was logical that crude oil prices were lower in Khanty-Mansiysk than in Rotterdam. This was due, partly, to transportation and export costs involved. These costs were covered from YUKOS-RM's budget.
Mr. Kudasov testified that the only company to pay dividends outside of the YUKOS consolidation perimeter was YUKOS itself, when making payments to its shareholders. After examining the document disclosing ownership of YUKOS shares by YUKOS Universal and Hulley Enterprises, Mr. Kudasov confirmed that dividend payments were made to these YUKOS shareholders. Discussing dividend payments from domestic crude oil traders to non-resident shareholders, Mr. Kudasov testified that he was not aware of any instances when dividends paid out simply disappeared from the YUKOS perimeter. Mr. Kudasov explained the various procedures that were in place to ensure that no fraud could be committed with securities purchased by non-resident YUKOS subsidiaries. These included weekly reports to Mr. Misamore, as well as to YUKOS accounting department.
Mr. Kudasov testified that a switch to consolidated budget and centralized treasury operations began to take place after Mr. Soublin's arrival in 1998. According to Mr. Kudasov, consolidation presented several advantages. While shareholders of the consolidated company did not care which consolidated subsidiary had funds on its balance sheet, the treasury was able to better manage these funds and to develop better future investment strategy. Mr. Kudasov testified that at some point YUKOS became the sole shareholder of Yuganskneftegaz, Samaraneftegaz and Tomskneft. Mr. Kudasov testified that he knew that a subsidiary was required to follow all directives from its sole shareholder. Mr. Kudasov told the court that with a consolidated budget no one was particularly interested in what company had the funds, because they could have been allocated from YUKOS-Moscow, YUKOS-RM or YUKOS-EP budget. Mr. Kudasov confirmed that "the money was always there."
Mr. Kudasov discussed payment procedures for crude oil purchase transactions. He explained that a payment order always contained reference to a contract. Next, Mr. Kudasov discussed expenditures YUKOS made from 2000 to 2003. He remembered that YUKOS received a syndicated loan from a group of foreign banks, but he did not remember the exact amount. However, he remembered that YUKOS made regular loan payments. Another major expenditure happened in connection with YUKOS/Sibneft merger, specifically the purchase of 20% of Sibneft's shares. In addition, YUKOS made an open tender for up to 10% of its shares.
Mr. Kudasov testified that payments from Fargoil, Energotrade and other traders were deposited into production companies' accounts. Mr. Kudasov testified that he was aware that majority of YUKOS revenue was derived from sales of crude oil and petroleum products. Mr. Kudasov confirmed that YUKOS Treasury only used company funds to invest in financial instruments. He testified that from 1998 through 2004 the only funds his department managed and operated with were from companies within YUKOS consolidation perimeter, not from Messrs. Khodorkovsky and Lebedev's personal accounts.
Mr. Kudasov explained that the company had a strictly regimented procedure on payment authorizations, implemented by the company's management. Mr. Kudasov testified that no payments or funds transfers were made unless authorizations from specifically authorized persons accompanied payment or transfer documents.
Mr. Kudasov knew of that YUKOS-FBC was the provider of accounting and bookkeeping services for YUKOS crude oil traders, such as Fargoil and Ratibor. Furthermore, for each of these agreements the treasury department acted as YUKOS-FBC's subagent, managing payments between the various companies. Mr. Kudasov testified that he was aware that crude oil traders contracted for services connected with purchase and sales of crude oil. Mr. Kudasov explained that all crude oil production subsidiaries and crude oil refining subsidiaries had management services agreements with YUKOS-EP and YUKOS-RM, respectively. Part of these agreements was terms specifying that the treasury department planned budgets for these companies. Mr. Kudasov testified that he was not aware of crude oil traders being "sham" companies, or that any crude oil purchases were "fictitious."
Mr. Kudasov explained that, based on his understanding, having YUKOS-EP manage all three production subsidiaries allowed for efficient planning for crude oil exploration and extraction, allowing for better cost optimization. According to Mr. Kudasov, lower production costs had resulted in the increase of YUKOS share price. Mr. Kudasov testified that YUKOS was the only company he knew of that owned Yuganskneftegaz, Samaraneftegaz and Tomskneft shares. YUKOS-EP, to the best of his knowledge, never owned shares in any production subsidiaries. Mr. Kudasov would not characterize YUKOS-EP as a "shell company." He testified that the company had employees, managed all production subsidiaries and was headed by Yuri Beylin, who was the company's executive director and not a "fictitious manager."
Mr. Kudasov provided similar testimony about YUKOS-Moscow. He testified that YUKOS-Moscow employed at least 100 persons, with treasury alone employing 25 to 30 people. Mr. Kudasov assured the court that no one imitated his work and everyone worked according to delegated responsibilities. YUKOS-Moscow did not have a "shadow manager," who was protected from any liability.
Mr. Kudasov was asked to compare capital expenditures made by YUKOS in 2001 and 2002 and, if he remembered, to tell the court whether 2003 figures continued the trend. Mr. Kudasov confirmed that 2003 expenditures continued the growth trend from 2001 and 2002.
Mr. Kudasov testified that no company he knew of worked without management, whether by single person or a committee, as required by Russian laws. Mr. Kudasov testified that after YUKOS accounts were arrested in 2004, YUKOS Capital S.a.r.l. became the only source of funds for YUKOS production subsidiaries.
Mr. Kudasov was not different from numerous previous witnesses in that he did not know what specific case he was interrogated for by investigators. He told the court that no one ever told him, so he thought it was "the YUKOS case."