Khodorkovsky Heads to Court Hearing

Jailed billionaire Mikhail Khodorkovsky returned to the defendants' cage in a Moscow courtroom Monday for the first time since the government moved last week to seize his giant oil company's assets against a huge bill for alleged back taxes.

The Russian government, meanwhile, reportedly was studying a proposal by Khodorkovsky's beleaguered Yukos oil company to pay $8 billion to settle the tax claim over a three-year period.

The Russian media reports, citing unidentified government sources, were the first indications that the government was considering a compromise in the tax dispute that Yukos says could drive it into bankruptcy.

Khodorkovsky, who was arrested in October, and his close associate Platon Lebedev are being tried on charges including tax evasion and fraud in connection with their activities as core shareholders in the oil company Yukos. Both face prison terms of up to 10 years if convicted.

Sitting in a cage in the courtroom, both defendants looked less upbeat than in their first joint appearance last month. Khodorkovsky wore a black polo shirt and jeans, while Lebedev, clad in a tracksuit, read newspapers and passed a bottle of what looked like milk back and forth between his hands.

All defendants in Russian courts are kept in cages during proceedings if they are not free on bail.

Their joint trial is just one component of a complex web of legal cases against Yukos and its owners, which the government insists is part of as a drive against corruption. Many observers, however, say the legal campaign has more to do with the Kremlin's displeasure over Khodorkovsky's political activities in the run up to last year's parliamentary elections and his increasing clout.

The Moscow Arbitration Court ruled last month that Yukos must pay $3.4 billion for a 2000 back taxes claim, and the Russian Tax Service sent the company a new demand for a nearly identical amount in back taxes for 2001. Prosecutor General Vladimir Ustinov said that the company could expect more tax claims for the following years.

Yukos says it does not have enough cash on hand to pay the 2000 bill and has sought to stagger the payments. The Interfax news agency reported that the three-year $8 billion payment proposal was made last week by Yukos CEO Steven Theede.

Why Yukos reportedly proposed paying $8 billion was not immediately clear but could reflect the wide expectation that the company faces even more tax claims.

Bailiffs last week began work to freeze accounts in Yukos' daughter production companies in Siberia.

A Khodorkovsky lawyer, Anton Drel, said Monday the tycoon's offer to settle the tax claim by turning over 44 percent of Yukos' stock still stands. The shares are held by Khodorkovsky and close associates. The offer was made public last week.

Russian officials have given no indication of considering that offer.

At Monday's hearing, the court rejected a defense-supported request from journalists and a rights organization to organize broadcasts of the proceedings by setting up a microphone in court, defense lawyer Yuri Shmidt said. He said the prosecutor had argued the broadcasts would distract participants.

Only a handful of journalists have been allowed into the courtroom for the trial, which President Vladimir Putin said should be open.

The judges also rejected three defense motions related to Lebedev's health - one requesting an independent medical exam, another his release from jail and the third a halt in the trial pending a diagnosis.

Outside court, Toronto-based lawyer Robert Amsterdam said Lebedev's health had deteriorated since his jailing last July, particularly in recent weeks. "He can hardly stand," Amsterdam said.

In a rare and minor victory for the defense, the court satisfied a motion to include information about Lebedev's health from a Western doctor, John O'Grady of the Institute of Liver Studies at King's College Hospital in London, in the case documents despite the prosecutor's opposition.

In a letter distributed by a representative of the defendants, O'Grady said that while the official diagnosis has been chronic persistent hepatitis, he believes Lebedev may be suffering from cirrhosis or cancer. A defense lawyer, Yevgeny Baru, said Lebedev had not been examined in four months.

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