The Fate of Mikhail Khodorkovsky

With tycoon's conviction all but certain, the focus is on the the sentence -- and how much sympathy it will generate


On May 16, the judge in the trial of imprisoned Russian tycoon Mikhail Khodorkovsky finally announced the long-awaited verdict. Well, she started to, anyway. Advertisement

In Russian jurisprudence, reading a verdict sometimes requires several days, as is the case with Khodorkovsky's trial. Until the end, we can't say whether Khodorkovsky has formally been found guilty -- or what the sentence will be. But no one's holding their breath over what the final verdict will be. The judge's opening day remarks strongly implied that the court considers Khodorkovsky guilty of at least some of the charges against him, and most probably all of them.

Well before Monday's court appearance, Khodorkovsky's lawyers said that they saw little hope that the court would show any clemency toward the accused. Once Russia's richest man, the former CEO and owner of the Yukos oil company has languished in jail since his arrest in October, 2003, after which he was charged with seven counts of fraud and tax evasion.

NO SHOCK. In Russia, the trial is widely seen as having been ordered by the Kremlin to neutralize Khodorkovsky's political activities. Before his arrest, the tycoon had been funding political parties without the Kremlin's blessing. He hinted that he might personally get into politics or seek political office.

So no one is at all surprised that, in her opening remarks, Judge Irina Kolesnikova spoke of the court having "established" his guilt with regard to two instances of alleged fraud, according to Russian media reports. In her statement, the judge said that Khodorkovsky and partner Platon Lebedev had defrauded the state during the 1995 privatizations of an insecticide research institute called NIUIF, and a fertilizer factory called Apatit.

Khodorkovsky is accused of using front companies to acquire assets cheaply in uncontested privatizations, and of using transfer pricing schemes to transfer profits out of the acquired companies, to the detriment of the tax authorities and other shareholders.

MARKET'S VERDICT. The tycoon and co-defendant Lebedev have consistently claimed their innocence. What's clear is that, innocent or not, the key charges against them could be made against many other Russian companies, including state-owned ones.

With a guilty verdict pretty much a foregone conclusion, the only real intrigue concerns the sentence. Khodorkovsky stands accused of crimes that carry a maximum of 10 years. Some have speculated, though, that President Vladimir Putin's Kremlin might settle for less.

Recently, Putin has been trying to reassure Russian business that he is concerned about the investment climate. If the court shows some leniency in sentencing Khodorkovsky, that might be taken as a symbol that Putin is interested in restoring a friendly dialogue with Russian big business. But a stiff sentence still seems most likely, particularly given Khodorkovsky's refusal to plead guilty. "The market has of course fully priced a guilty verdict and a long sentence," Chris Weafer, chief equity strategist at Russia's Alfa Bank, said in a research note.

GROWING SYMPATHIES. When Khodorkovsky was arrested in 2003, many investors and businessmen argued that the upstart oligarch had brought the Kremlin's wrath upon himself. Their mood soured only when it became clear that the Kremlin was also set on the destruction of Yukos as a company, including the expropriation of its minority shareholders.

Yukos was literally torn apart, its assets confiscated by the government, in order to justify astronomical back-tax claims with scant legal justification. Whatever the verdict of the Khodorkovsky case, it won't do anything now to resurrect Yukos or reimburse its investors.

Still, the Khodorkosky verdict will have symbolic significance. Not least because there's more sympathy now for Khodorkovsky among the Russian elite, and the expat community in Moscow, than there was when he was first arrested.

SWISS-CHEESE PROSECUTION? Khodorkovsky has impressed some Russians by refusing to buckle to the Kremlin's crude and clumsy intimidation. True, some cynics regard the oligarch's discovery of principles as a calculating PR exercise. But Khodorkovsky gives a good impression of believing what he says. His closing speech on Apr. 11, in which he accused his accusers in eloquent terms, won him a standing ovation.

For the most part, Russia's press has been highly critical of the Kremlin. In an article devoted to the forthcoming verdict, the May 16 edition of the leading Russian business daily, Vedomosti, detailed the many holes in the prosecution's case. "Similar accusations could be made at will against thousands of entrepreneurs," the newspaper said. Meanwhile, the Moscow Times, Russia's main English-language daily, had some surprisingly strong praise for Khodorkovsky. "Speaking in his own defense, he has put to shame the prosecutors," it said.

Khodorkovsky's appearances in court have also attracted small crowds of vocal supporters, who see him as a victim of political repression.

PLAYING THE ROLE. Such public displays of devotion aren't common in a country where support for President Putin is high and dislike of oligarchs strong. But even the Russian public is not as hostile to Khodorkovsky as is widely assumed. A February poll by the Levada Center, a Russian polling agency, found that only 29% of Russians believed that the court had conclusively confirmed Khodorkovsky's guilt (22% thought the case unproven, and 49% didn't know). Still, there's doesn't appear to be much interest. In a poll taken at the end of last year, just 7% of Russians mentioned the trial as an important event of 2004 -- less than those who mentioned the Russian national soccer team's defeat in Portugal.

Such public indifference isn't much consolation to Khodorkovsky. Then again, his career as a political dissident may be just beginning. Many suspect he is consciously playing the martyr in order to go into politics still one day.

Who knows what strategy the wily business baron will come up with? He may soon have plenty of time to figure one out -- behind bars.


Jason Bush is Moscow bureau chief for BusinessWeek

(From BusinessWeek, 5.17.2005)