Yukos Shareholder Threatens Litigation

Group Menatep Ltd., the main shareholder of OAO Yukos, threatened international litigation against President Vladimir Putin over the government-led legal assault that has reduced the value of the oil giant by some 82 percent.

The appeal to negotiate was sent to Putin at the end of last week in the name of Menatep's wholly owned foreign subsidiaries, Tim Osborne, a Group Menatep director, told The Associated Press on Thursday. Those subsidiaries control over 50 percent of Yukos.

"We want to work out a way to keep Russia's largest and most successful company in place as a valuable member of Russian society," Osborne said.

Osborne said the letter was an attempt to force the government to stop stonewalling Yukos' owners and enter into a dialogue. Under the terms of the Energy Charter - an international treaty that establishes a legal framework to protect investments in the energy sector - shareholders may initiate international arbitration to reclaim damages if an amicable agreement is not reached within three months.

The legal barrage against Yukos and its jailed former CEO Mikhail Khodorkovsky - a core shareholder in Menatep - has spurred a nosedive in the company's market value.

Many observers see the assault as Kremlin-led revenge for Khodorkovsky's political activities in the run-up to parliamentary elections last winter. Putin has countered that the company and Khodorkovsky's woes are punishment for shady bookkeeping and dubious tax-optimization schemes.

On Wednesday, Yukos' chief executive Steven Theede said a shareholders meeting would be held Dec. 20 to discuss the possibility of a bankruptcy filing in the wake of new tax bills that bring the company's total tax debt to $14 billion.

Though a signatory to the Energy Charter, Russia has yet to ratify the document, Tim Gould, senior adviser at the Energy Charter Secretariat in Brussels, told AP. For that reason, Gould said, it was unclear what sort of legal provisions Russia was obligated to follow.

Meanwhile, a court in the Far East Chukotka region ordered Yukos to surrender its 14.5 percent stake in Sibneft to the original owners of the failed merger partner, the ITAR-Tass news agency reported. Yukos had appealed an earlier decision that reversed a share swap used to facilitate the merger.

In return for the Sibneft stake, the company's former owners, who include oil tycoon Roman Abramovich, are to return 8.8 percent of Yukos to shareholders.

In October, Abramovich's holding company said it had regained control of 57 percent of Sibneft through similar litigation.

Yukos still owns 20 percent of Sibneft, which was purchased for $3 billion at the time of the original deal. Yukos officials have said they hope to recoup these funds in order to pay down its tax debts.

In the parallel fraud and tax evasion case against Khodorkovsky and business partner Platon Lebedev, defense lawyer Yury Shmidt said the prosecution had failed to prove Khodorkovsky's guilt.

"We could limit ourselves to arguing that Khodorkovsky's direct participation in the majority of episodes has not been proven." Shmidt said. "But we believe this to be insufficient. We therefore intend to demonstrate the complete lack of a criminal element in the events incriminating our client."

Khodorkovsky's legal team will begin to lay out its defense starting Nov. 9.

(From Forbes, 04.11.2004)