Russia oil fight Trial Opens for Jailed Russian Billionaire

By MARA D. BELLABY,
Associated Press Writer

MOSCOW - After more than seven months behind bars, Russia's richest man, oil magnate Mikhail Khodorkovsky, right, briefly appeared in a Moscow court Friday for the first of two important hearings in a case that threatens to bring down the business empire he built. Before Khodorkovsky's lawyers could introduce a series of court challenges, however, tax inspectors asked for more time to study the case and Judge Irina Kolesnikova postponed the trial until June 8, lawyer Yuri Schmidt said.

The closed-door session began a process that could ultimately end not with Khodorkovsky serving more than 10 years in prison and the transfer of his oil company, Yukos, to state control. Khodorkovsky has been charged with fraud and tax evasion.

Russia's Tax Ministry won a key court decision Wednesday that requires Yukos, one of Russia's largest oil producers, to pay $3.4 billion in back taxes and fines. The company warned that the claim could force it into bankruptcy this year, which could pave the way for the state to seize its assets. Yukos had been expected to try to quash the claim Friday.

Khodorkovsky resigned as head of Yukos last year, and has a fortune estimated at $15.2 billion, according to Forbes magazine. He was brought to the courtroom shortly before the hearing started, but no one other than his lawyers was allowed to enter. His parents and sister stood in a hallway crowded with journalists, and his mother stood on a bench in hopes of catching a glimpse of her son as he left the courtroom.

One of Khodorkovsky's lawyers, Genrikh [Heinrich] Padva, said the main issue at the hearing would have been be a defense motion to combine Khodorkovsky's case with that of another Yukos shareholder held on similar charges, Platon Lebedev, right. The first hearing in Lebedev's trial was scheduled for Friday afternoon. But the defense never got the chance to submit its motion because of the request for a delay. "Formally, (these) people have the right to take part in the trial," Schmidt said. "Why they didn't decide to do this before, I don't understand."

Yukos shares dropped by 10.7 percent in trading Friday, dragging the main Russian market indexes down with them. The stock had already lost close to half its value since the investigation started last year. Adam Landes, an analyst at Renaissance Capital investment bank, said he expects both cases -- the tax claims and the criminal charges -- to play off each other, and into the government's hands. "Once Khodorkovsky and Lebedev are standing in the docks and are staring at their own personal predicaments, the government may want to send them a reminder -- there will be nothing for you at the end," he said.

The legal probe against Yukos and its shareholders is widely seen as a Kremlin- orchestrated campaign to punish Khodorkovsky for his political aspirations and his funding of opposition parties. The crushing of Yukos' main shareholders and the stripping away of their assets would serve as an example to Russia's other billionaire businessmen not to meddle in politics, analysts say.

"This is so clearly a political order ... I don't know of one oil company in Russia that didn't take advantage of the tax loopholes that Yukos is being prosecuted for now," said Yevgeny Yasin, a prominent economic expert who served as economics minister in the 1990s. The Kremlin denies any political subtext, insisting that the Yukos probe is part of its battle against the corruption that marked the sell-off of Russia's assets after the collapse of the Soviet Union.

Khodorkovsky was arrested at gunpoint on Oct. 25, and has been jailed since. Courts have repeatedly turned down his requests for release pending trial, accepting prosecution arguments that he could flee the country or seek to influence government witnesses. "Usually people in jail lose hope, but he has surprised me -- pleasantly surprised me -- by not showing any pessimism," said defense lawyer Karinna Moskalenko, adding that Khodorkovsky has kept busy by writing missives on the "fate of the country, the fate of business."

In April, Khodorkovsky issued a penitent letter that praised President Vladimir Putin and said liberals must learn to cooperate with the popular leader. The letter followed a March [2004] article by Khodorkovsky in which he heaped praise on Putin and castigated himself and other tycoons for their failure to help the poor and for their lack of patriotism. Many commentators interpreted the pieces as an attempt to strike a deal with his Kremlin foes, but so far none has been forthcoming.

Khodorkovsky's supporters have tried to rally public opinion behind him, but the so-called oligarchs are widely hated in Russia. At previous court appearances, only a handful of people -- most from Khodorkovsky-funded groups-- stood outside, holding placards with his picture. "The fate of this one person will echo the fate of millions in the country if we don't stand up to defend our freedoms," said Sergei Kovalyov, a prominent human rights activist.

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