Russia's Khodorkovsky Goes on Trial

Russian billionaire Mikhail Khodorkovsky, the main owner of oil giant YUKOS, arrived at a court in Moscow on Wednesday for the opening of his trial on fraud and tax evasion charges.

Khodorkovsky, Russia's richest man, will be tried along with another YUKOS major shareholder Platon Lebedev.


The trial is seen by many as a government-inspired campaign to jail Khodorkovsky and strip him of his wealth.


His downfall is said by analysts to be the work of people in the Kremlin who fear he was using his wealth to sway public policy and mount a challenge to their authority.


Khodorkovsky, 40, wearing a brown leather jacket, arrived in a large blue van at a side entrance to the Meschchansky district court in Moscow and was led in by police. Inside the building, he waved to his parents, reporters and lawyers before being taken into the courtroom.


The trial, before a panel of three judges, is an important test case for President Vladimir Putin, who has said he wants justice to run its course in the YUKOS affair. He has also warned tax evasion will not be tolerated and other captains of industry may face prosecution.


YUKOS shares fell by up to 12 percent on Moscow's Micex stock exchange on Wednesday after at one point on Tuesday plunging 14 percent to $6 on the benchmark RTS exchange, its lowest level for more than two years.


Human rights activists accuse Putin of manipulating the judicial process to suit the state's interests.


Wednesday's hearing is part of a two-pronged judicial assault on YUKOS and its owners which comes to a head this week and could pitch the company into bankruptcy.


A Moscow court will hear an appeal on Friday by Russia's tax ministry aimed at forcing YUKOS to pay a $3.4 billion bill for back taxes immediately.


If the court finds in favor of the tax authorities, as expected, YUKOS says it may go bust because another court has frozen the company's assets, making it impossible for YUKOS to raise enough cash in time to pay the bill.


LAWYER EXPECTS CONVICTION


A member of Khodorkovsky's legal team said he was in little doubt both men would be convicted and receive jail sentences of up to 10 years.


"They are going to be found guilty. We know the outcome," Robert Amsterdam, a Toronto-based lawyer, told Reuters. "It is a show trial to help the government expropriate YUKOS."


Some analysts believe that if YUKOS is driven out of business, Khodorkovsky and his associates, who control the oil group through a company called Menatep, will be dispossessed of their prize asset.


Investors appear to be giving up hope of any chance of a negotiated settlement with the authorities that could let YUKOS off the hook. "I personally do not see any other scenario apart from bankruptcy," said Stephen Dashevsky, an oil and gas analyst at Aton brokerage in Moscow.


Opinions differ on whether a broken YUKOS would be taken over as a going concern by court-appointed administrators or carved up with the choicest morsels being thrown to Russian state energy enterprises such as Gazprom or Rosneft.

The trial is the most prominent of a business figure since the fall of the Soviet Union in 1991. Khodorkovsky has been held in pretrial detention since his arrest in October and Lebedev since last July.

Some western lawyers say Lebedev and Khodorkovsky, accused of making liberal use of offshore financial havens to conceal profits and minimise tax payments, may have a case to answer.

The two face seven criminal charges, including one of fraudulently obtaining shares in Apatit, a fertilizer firm which was privatized in 1994

Lawyers, acting for Khodorkovsky and Lebedev, say the defendants acted within the law.

Amsterdam said he believed the trial could be adjourned for a number of days to enable a member of the defense team to recover from medical treatment.

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