Mikhail Khodorkovsky’s Final Statement

Mikhail Khodorkovsky made his closing statement on Monday to the court where he is standing trial for tax evasion and fraud. The court will announce its verdict on April 27.

I am a patriot of Russia, and for that reason I am watching everything that is happening with Yukos, my partners, and myself personally, with Russia’s interests and values in mind above all else.

Let’s remember how this all started. Almost two years ago, my friend Lebedev was arrested in the hospital. I stayed in Russia after Platon’s [Lebedev] arrest, even though my friends and lawyers strongly advised me not to do so. I did this because I love Russia and believe in its future as a strong and lawful state.

Even though I made a conscious choice — to remain in the country and not to hide from anyone — a year and a half ago armed people in masks arrested me. Since that time, I have been held under guard in confinement, and denied release on bail, despite supportive references from dozens of the most respected citizens of our country: outstanding writers, scientists, actors and politicians.

A year ago, the planned and continuous destruction of Yukos started. The whole country knows how, by whom, and why the scandalous “Yukos case” was organized. It was created by certain influential people with the goal of seizing for themselves Russia’s most successful oil company; or, more precisely, the profits from the company’s cash flow.

When somebody says that the “Yukos case” led to the strengthening of the state’s role in the economy, it arouses in me nothing but bitter laughter. Those people, who are busy robbing Yukos’ assets today, do not have any real relationship with the Russian state and its interests. They are merely dirty-handed and self-centered bureaucrats, nothing more.

The whole country knows why I was put in jail: so that I wouldn’t prevent the company from being robbed. At the same time, the people who organized the prosecution against me personally, tried to scare the authorities and society with my mythical political ambitions. They openly deceived the president, as well as other representatives of the country’s highest political authorities and Russian society as a whole. I am convinced that in our global and transparent world there are no secrets that won’t be revealed with time. And the judgment of history will put everything in its rightful place. It is not a secret to anyone that the fabricated criminal cases against me and against other Yukos executives were damaging to the Russian economy. The amount of Russia’s lost capital has grown by six times, and Russian and foreign investors’ trust in our Motherland as an object for investment has been undermined. Well, let the full responsibility be laid upon those who designed my arrest and are now trying to send me to jail.

The whole world knows that the “Khodorkovsky case”, planned by certain representatives of a homegrown criminal bureaucracy, brought a heavy blow to the reputation of Russia and of its authorities. But nothing could stop these greedy people, who decided to grab for themselves the main enterprises and assets of Yukos at any cost. Nothing could stop them — not even the direct loss, which they have brought and are still bringing everyday to our country, to our statehood.

All of Russia knows that the prosecutors were unable to prove any of the charges against me. The attempts to blame me for a variety of crimes have turned into an obvious joke. And even prosecution witnesses were, in fact, testifying on my behalf.

Right now, the court has received all of the documents. The witnesses have delivered their testimonies. So what results do we see? Two years of searches, the interrogation of hundreds if not thousands of employees, the seizure of hostages by arresting absolutely innocent people, including women with young children — and the prosecution was still unable to find a single document, a single fact, a single testimony that would support the existence of secret illegal plans, terrifying secret orders, or underground meetings. There is nothing that reveals criminal activities or the existence of organized crimial groups.

There is not one, I repeat, not one document or witness that can indicate my illegal actions, or that Platon and I received money from criminal sources. The prosecution office has worked inhumanly hard for two years — and the result is nothing!

What does exist? There are legal, public documents about property, about public and official transactions, about civil law disputes and the protocols of business meetings; all of this information could be obtained easily with the minimal effort of browsing the Internet.

What else has the prosecution shown to Russian society and to the world? There are only the fantasies of prosecution officials, unconfirmed by facts and or by witnesses, which reveal only the prosecutors’ criminal thinking.

I have nothing to defend myself against in the independent court. These documents have revealed only normal, stable business activities with the purpose of producing goods, providing services, and earning legal revenue. None of these is punishable; but rather all are embraced in every country with a market economy, including Russia, of course. To confirm that fact it is enough to become familiar with the president’s speeches over the last five years.

Those facts, invented by prosecutors about organized groups, criminal intentions and so on, cannot be confirmed by anything or by anyone at all.

In fact, it is being proposed to the court that the creation itself, the managing or the owning of a successful business is proof of a crime. This proposition is, first and foremost, absolutely illegal. Second, it contradicts the normal vector of a country’s development. The law does not demand an arguement with cheap pulp fiction, sewn together by a group of fiction writers from the Prosecution Office. But in my preliminary speech I promised to prove how unlawful these charges are. And I did so with the help of my attorneys, despite the fact that I did not have to do so, considering our Constitution with its presumption of innocence.

I don’t want to speak about the law; my attorneys have already spoken about that. I want to speak about justice — a topic that has always been and continues to be the most important for Russia, for Russian people. I will not use quotes from the documents. These quotes have already been voiced in the defense speeches and will be published in the written text of my speech.

The prosecution insisted that the Apatit stocks were stolen, or, in other words, that they were obtained without payment. All of the documents provided to the court show the opposite.

The state received the money for those stocks that it, the state itself, had asked for. Why did it receive that price, and not another one? This is not a question for us, but rather for the state. Though, I do have my own version. Apatit at that time was lying in ruins and represented a constant source of tension for the regions. For that reasons the authorities were happy to give this enterprise to an owner, who would save Apatit and prevent hunger and cold rebellion of the workers. We were able to accomplish both things.

The documents proved that the money for investments was given by an investor, and returned, partially by the way, by the private enterprises of Apatit itself. And the money was returned publicly, with reflection on the reports, approved by the board of directors and stockholder’s meeting. The state received the full price. And nobody argues with that.

The Apatit company that had to build, purchase, design — in other words, to implement the investment — accomplished or exceeded the parameters specified in the conditions of competition, and on the volume of production, while maintaining the number of workers at the enterprise, maintaining the industrial base, the social programs with lower spending, and with other steps, that were indicated originally in the investment program. All these steps brought a profit to the stakeholders, revenue to the region and to the state, a stable salary to the workers. For the prevention of a social explosion they normally give awards, instead of making charges. Today this enterprise is blooming and is working successfully.

The same nature of accusations — and the same contradictions. Again the state itself makes a decision about the price of the sale. The price was paid to the state in full. The court has seen all the papers. And the price is completely justified, especially if you estimate the political and economic realities of those years.

The private enterprise itself — stockholder corporation ISRFIF — makes a decision to change the direction and terms of using investors’ money. This decision was again taken publicly, and was reflected in reports approved by the board of directors and the stockholders’ meeting. The money was returned. Again, what does the state have a problem with here when it received everything that it asked for?

The general director of the institute confirmed here in the court that the investment program was accomplished with changed terms and actions. The goals of the program were achieved. The changes were reasonable and they were supported by market demand for the institute’s services. It is clear that if the director had acted otherwise, the institute would have been bankrupt a long time ago. It would have been sold for debts and another nightclub would have appeared in its place. Besides, the prosecutors said the place was remarkable.

The results of the cooperation of the institute and investors are known: the ISRFIF assets are already accomplishing functions of a multi-industrial scientific center 10 years after privatization, and it is not an empty building site. There is an industrial base, doctoral candidates are preparing, and industry orders are being fulfilled. Anybody can see it for themselves.

There are not many private scientific centers of this kind that work in the interests of different industries in the country, where the Academy of Science, if things continue like this, will become an office for commercial real estate sales. Is it justified to prosecute someone for protecting the scientific base of the country? I think that neither law, nor justice demands this.

The prosecution, in fact, interfered in the trade activities of the private enterprise Apatit without any reason, imposing its subjective opinion about proper trade policy. In fact, the prosecution tried to replace the owners and the constitutionally lawful management organs at this enterprise.

Despite the fact that I was charged for crimes allegedly committed in 1999 to 2000, when I was not participating at all in Apatit activities and was working, as the whole country knows, in the limited corporation Yukos-Moskva — and then being a member of the board of directors of the corporation Yukos, but not Apatit — I still know that nobody from the members of the board of directors from Apatit, including the representative of the state, nobody form the Apatit stakeholders, including Western and Russian investors, the anti-monopoly organs of our country, which audited Apatit activities several times, and as the court knows, there was no charges of irregularities brought against the Apatit management regarding their trade policy.

It would be very surprising if they were charged. The enterprise, working at a loss until 1995, under their management became and remains profitable, pays out dividends, taxes and is developing production.

It is possible that if Apatit were run by prosecution officers or the people who stand behind them the business would be even better, but, they, as far as I know, do not offer their management services publicly. So what does it have to do with the charges brought against me and Platon Lebedev?

The representatives of the Apatit owner (board of directors) and stockholders were approving exactly this trade policy, exactly these reports at their open meetings. I don’t even mention the opinion of the independent auditor, invited by Apatit — the world-renowned and respected company Price Waterhouse Coopers, whose services were rendered many times to Gazprom and the Central Bank of Russia. The auditors’ opinion also contradicts the opinion of the Prosecutor General’s Office. What right do prosecutors, completely unfamiliar with business in general and this business in particular, have to impose on the court, on the owners of Apatit, its subjective faulty judgment, that contradicts the objective situation, as well as the opinions of enterprise owners, managers, and auditors? Is it normal from an economic and judicial point of view to supplement real reports with the illiterate reports of prosecution officers?

I never interfered into the prosecution procedures and do not intend to do so in the future. And I hope that in return, the prosecution officers will do me and the whole country a favor, and will stop interfering in the management processes of industrial enterprises. Because these enterprises learned to work well without any prosecution interference.

Again, this is an empty charge of the interest-free-funds transfer from Yukos and two other companies to enterprises of the Most group.

The court has received the agreements of these financial transfers which were intentionally hidden by the prosecution and recovered by the defense. These agreements are not closed but public ones, and not interest free.

The money, as it appears, was transferred in exchange, in particular, for bonds of the Most Bank, one of the largest commercial banks in Russia at that time. So, the prosecution intentionally hid these agreements, knowing that this transaction shows normal placement of the free funds of the business. The agreements were official and not contested by anyone. All the financial funds, that were given in accordance with an agreement with the enterprises of the Most group, were returned by borrowers. All of this information is also on the Internet.

By the way, knowing this, the prosecution did not accuse managers of these enterprises on this specific subject, and they didn’t accuse the owners either.

I was a stakeholder in Yukos — in other words a person who, more than anyone else, is interested in the success of the company in the absence of theft and fraud. And how can somebody come up with the accusation that I have defrauded my own funds. It’s absolutely unbelievable.

The next accusation — employees of a commercial organization disobeying a court order.

There never was and still isn’t a disobeyed order of the arbitrage court by the Wallton Company. And a disobeyed court order by a second enterprise — Volna — appeared in 2004 only due to the efforts of the Prosecutor General’s Office. The office itself, using ambiguous methods, managed to break a peaceful agreement between the Russian Fund of Federal Property and Volna, when Platon and I were already in jail.

Neither I nor Lebedev were employees of these organizations. The general prosecution confirmed that itself in front of the court.

Wallton Co. existed before 2002 and Volna, as it became known here in the court, has existed already for more than 10 years. There were no accusations, either to these organizations or to their employees. All of this is known to the court. So who disobeyed, and how? And what right do they have to accuse us?

Now I am moving towards a modern analog of Stalin’s infamous Article No. 58 — failure to pay taxes by an organization.

I’ll remind you that our law forbids falsification of reports, or simply put, deceit. And this is justified. If the authorities knew everything, then all that is the problem of the authorities, but not the taxpayers. I am being accused of failure to pay taxes from the organization by transferring Yukos bonds. The absurdity of this charge was established in court. The court received all the documents confirming the absence of this crime.

When state organs of Closed Administrative Territorial Zones (CATZ) were providing special favorable conditions, they not only knew that the companies will not have terminals to unload the oil on the territories of these zones, but directly pointed out in the decision of the local duma that their activities will not be involved with industrial and raw material resources of the zones. The same state organs gave the companies the licenses to sell oil byproducts — without a right to dispose of it and to store it.

The reports that were given to the tax inspection were controlled during the audit and confirmed by all the witnesses questioned in the court — the prosecution witnesses and defense witnesses. Thus, the state organs had a full and exact understanding of the activities of the enterprises in the CATZ which actually was confirmed by representatives of the state organs.

The same goes for the paying off part of the taxes with the bonds, which was done not only according to decisions by the state organs. Those decisions we have seen in court and their presence and content is well known to the tax and financial services of the cities controlling the CATZ, which is directly seen from their reports and documents.

By the way, the witnesses from CATZ confirmed that the Ministry of Finance of the Russian Federation was informed by them as well.

So this means that there were no falsifications of the reports of any kind that would confuse state organs about the form of tax payments. And how could the prosecution investigate a method of tax evasion which could not exist?

The authorities made a lawful decision. The authorities gave incentives and the right to pay a part of the taxes with bonds. The authorities controlled the execution of its decisions by different audits. Nobody in this specific case was trying to confuse the authorities and there is documental proof of that.

The fact that the decisions on such matters was not adopted in an isolated way by CATZ authorities, but with the understanding and the approval of federal authorities, is confirmed with letters addressed to the local authorities and articles in the media by federal workers and testimonies of the witnesses and specialists interrogated in the court. These witnesses and specialists spoke about the practice adopted in Russia of giving incentives to the middle man and also about the legality of paying taxes with non-cash funds in local budgets in 1999. And because the tax and budget codes contradict each other, the constitutional and international treaties signed by Russia in this particular case were and are on the side of the local authorities.

What about the accusation of tax evasion by including in the reports intentionally deceiving information? Were Yukos bonds never paid off? They were paid off and with interest. The budgets of all levels got their money in full.

And the accusation of the theft of funds by using the scheme of overpaying taxes, paid by corporate bonds?

In the case files there are documents of financials organs about the return of overpayment, where it says in black in white: “overpayment… paid by cashed out bond.” So, who deceived whom?

More so, the prosecution is not arguing with the fact of the overpayment with the bonds. And the fact of a bond payout is confirmed by receipts, financial organ documents, the bond issuer receipts and witnesses. So, all the bonds were paid out, and paid out with interests. The return, of course, was going without interest. It is evident that the budget was returning not its own property, and, returning it not in full. And, of course, this return was made on the basis of the authorities’ decision, in other words, the owner, who knew the mechanism of tax payments and sum of the money received in reality.

I am not even saying that no witness mentioned me or Lebedev in this matter. Neither I nor Lebedev received a penny from these operations. Everything else is the fantasies of the authors of criminal pulp fiction. It is all in the Internet as well. Anybody can find out for themselves.

But what especially makes me mad is the obnoxious unlawful accusations against me and Lebedev, brought up by a little bunch of bureaucrats just because it might help their future careers. It is shameless and illegal. It brings damage to the prestige of the country and undermines trust in the authorities.

I was accused of the falsification or refusal to turn in a Personal Tax Declaration. I would like to direct your attention to some facts. In Russia there aren’t too many people who have been privately declaring their income since 1994. I did declare mine. You have seen all the necessary papers in court.

The prosecution has announced that it has proof that I was receiving money not from the clients for the consulting services, but from Rosprom or Yukos for work there. I was waiting for this highly advertised evidence for a year and a half. And I was waiting for this evidence in the not-so-comfortable-conditions of a jail cell. Where is it? They did not have it before, they don’t have it now.

There is no evidence that I was paid by Rosprom or Yukos. There is no evidence of my mutual agreements with these companies. There is nothing except the prosecution statements. The law demands proof from them, not from me. And all that despite the fact that I was prepared to tell the court about my consulting services. I was ready to explain why consultation with internationally renowned business leaders cost as much as I was receiving, or more. But lawful arguments, as well as common sense, do not interest the prosecution.

I understand them. They, really, don’t need proof. I refused to name my clients, because people are afraid of pressure from the General Prosecutor’s Office and the Tax Service. And it is not a baseless fear. But nobody nullified Article 49 from the Constitution about Presumption of Innocence. And I hope, nobody ever will.

I did not tell the court in detail about my charity activities. Now everybody knows that it was billions of rubles annually. So, it is pretty funny form the point of view of a normal human being to accuse me of intentionally hiding $1 million.

I was receiving the exact amount that was necessary to maintain my family. I could earn and get paid much more, but I just didn’t have and don’t have such a need.

I, in comparison with the modest businessmen and employees, who stand behind the Yukos business, don’t have yachts, palaces, racing cars, and football clubs. Even the newspaper Komsomolka took a picture of a house that was not mine. Mine is so modest that the photographers didn’t even notice it among the typical “giants” standing along the Rublevsko-Uspenskoe highway. I don’t have any property overseas. You can ask the law enforcement agencies — they know it quite well now.

I did not belong to the group of people who obnoxiously and cynically demonstrate a barbaric culture of consumption to the poor people of our rich country. I was not a proper oligarch. That’s probably why the authorities not only took away Yukos, but also kept me in jail for a second year.

As I have already said earlier, as a result of the sale of Yuganskneftgaz in a circus-like action, as a result of the agreement signed by me and my partners from the Menatep group, 59.9% of Menatep’s stock went to the new trust of Leonid Nevzlin as a part of lawful procedure. In principle, for me it means I’m free from any control and any profit that I could receive from the enterprises of Menatep group.

I have no large property left. I stopped being a businessman and I am not a superrich person anymore.

All I have is knowledge of my own righteousness and a will for freedom. And also I have my business reputation, which allows me to attract money for charity projects. These projects would be really useful for tens of thousands of Russians — from veterans and invalids to students in schools.

All I had and have is my own understanding of a good way to develop the country. This way is not connected to a desperate attempt to catch up to developed countries because of its trade in raw materials, but connected to gifted young people who want to work and live in their Motherland, in their own country, in their cultural environment, in a free, democratic and civil society.

I am proud of the work that I have been able to accomplish in the last 15 years. I did not destroy the Soviet Union, I did not destroy Soviet industry. I was rebuilding this industry, through tens of hundreds of enterprises. They are all now working for the good of Russia. And even if I stopped being a co-owner of them, I am proud of their work.

I am proud that in the hardest days for the country, when oil did not cost $54 per barrel, but was $8.50, when there was not $100 billion worth of hard-gold currency and exchange currency reserves and stabilization funds brimming with easy money, I came into the oil industry and rebuilt the company that became in 2004, just before the termination, the biggest oil corporation of Russia. It was the number one company in producing and refining oil in the country. It surpassed, among others, Lukoil.

I am proud that I was one of the first in Russia who called for business transparency. We were able to make Yukos a transparent company, and our business has become an open one. Thus, we created a behavioral model for the rest of Russian business. And if the stocks of dozens of Russians companies are valued on the leading stock exchanges of the world, we deserved a little credit for that.

Yes, Yukos is plundered and pillaged by our ill-wishers, by those who put me in jail. But I still do believe that only transparency and openness is the way to independence from corrupt bureaucrats, from the uncontrolled bureaucracy.

I have a reason to be proud of my deeds as a social activist. The Federation of Internet Education, which was created with my help, has issued 150,000 school teachers. We have created hundreds of computer classes in dozens of regions in Russia. We provided, together with leading universities and institutes, training programs with specialists with the top qualifications in Tomsk, Moscow, and Samara. In addition, we built dozens of youth centers “New Civilization,” sport facilities, swimming pools, several high-class private schools for children who have lost their parents, including the school “Podmoskovny,” where my father works. Moved by the desire to see the country free and fair, I was supporting an independent media and different political forces, while I had a chance to do so. And I do not regret that at all.

I didn’t do all that for the popularity (before my arrest nobody knew very much about the social programs that I named), but because of the will of my consciousness, my upbringing. Because, I think that to live like this is right and honest.

I made my tangible contribution to the rebuilding of the Russian economy, to the establishment of a civil society. Sometimes I made mistakes, somewhere I did something wrong. But I was sincerely trying to work for my country, for its welfare and not for my pocket.

Everybody knows that I am innocent of those crimes of which I am being accused. And for that reason I do not intend to ask for leniency. It is shameful for me and for my country if the process of direct and open deceit, conducted by the court prosecution, is considered to be legal. It was a shock for me when the court and attorneys explained that to me. It is lamentable if all of the country is convinced that the court works under the influence of the Kremlin and prosecution officials.

And I really hope that the court process that will end today will help change the situation and public opinion. The publicity, the attention to the case from all of Russian society, from the lawyers of the world, give me the foundation for my thinking. I believe that my country, Russia, will be a country of justice and law. And for that reason the court should make its decision with justice and the law in mind.

I am grateful to everybody who supported me in this difficult time, for those who helped me withstand the hardships of prison, to live through the pillage of a successful company, the creation of which I gave a large part of my life. The support from the people with different views, members of the different generations, the representatives of different professions that helped me live through this, to think over a lot in my past and open a new page in my life. Hundreds, thousands of my colleagues behaved according to their consciences, despite the hard pressure and direct threats from the prosecution. In fact, many of my colleagues have been thrown in jail and turned into hostages, but they have not lost their human decency and they continue to walk the righteous path. Thank you for everything! I am with you! I will always support you!

Thank you everyone — politicians, journalists, famous people from the culture and scientific fields, entrepreneurs — everybody who was not afraid to speak up openly in my defense. My friends, we are defending justice, and we will get the truth! I would like to thank tens of thousands of regular Russians, who support me with their letters. They, using sacred Evangelic words, have chosen the righteous path.

A special thank you I would like to say to my parents, who have experienced everything. They withstood the flow of mud that was poured onto them. And it was not easy for these elderly and ailing people. Thank you, my dears, and forgive me for making you worry and upset.

Thank you my wife, who really conducted herself as a real friend, a real Decembrist. I want to tell all of the members of my family — I love you!

I have three children and I want to give them a good education. I want to, and I will work with new meaning: not as the owner of an oil company, but for the good of my country and my people. Whatever the court’s decision will be.

Transition of the Soviet socialist economy to some form of capitalist economy they have now was not smooth, easy, or straightforward. The system was crumbling and some more energetic and better connected individuals well benefited by opening their pockets to falling parts of the old system. A similar transition in the East Europe was (by all accounts) a bit less chaotic and somewhat more transparent. But its hard to imagine any transitional process involving human beings where connections and inside information won't result in some people to be better positioned than others. It is utopian to demand from them a transparency of American bidding system (that is not immune from subverting anyway).

Why do I say all of this? Because Mikhail Khodorkovsky is not a saint. He had to work in a shady economy, and I am sure he used at one point some shady dealings, bribes, kickbacks, whatever.

But I am cynical about it, because even proved true (and I have no info to accuse him of anything), it would not make him any different from anybody else. What does make him different is what he did with his acquisitions: out of the chaos he and his friends built a working system that employed tens of thousands of people (or more?), saved some regions from devastation, invested in infrastructure of the company and the regions they operated, moved toward transparency by employing western audit firms and satisfying requirements of the western investors.

I wish Russians and all former Soviets successes in building their lives, but on their difficult way to capitalism as we know it here, his [Khodorkovsky's] way was better than others. They need more, not less, talented businessmen and entrepreneurs like him.

The fact that he is still alive, makes me somewhat more hopeful.

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