Justice Under Pressure - The Pre Verdict

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JUSTICE UNDER PRESSURE PRE-VERDICT EXECUTIVE SUMMARY THE KHODORKOVSKY-LEBEDEV TRIAL OF 2009-2010 Prepared by Defense Counsel of Mikhail B. Khodorkovsky & Platon L. Lebedev

Transcript of Justice Under Pressure - The Pre Verdict

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J U S T I C E U N D E R P R E S S U R E ―

P R E - V E R D I C T E X E C U T I V E S U M M A R Y

T H E K H O D O R K O V S K Y - L E B E D E V T R I A L O F 2 0 0 9 - 2 0 1 0 ―

Prepared by Defense Counsel of Mikhail B. Khodorkovsky & Platon L. Lebedev

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CONTENTS

BACKGROUND................................................................................................................................. 3 I. THE FACTS AND THE LAW EXONERATE THE DEFENDANTS OF THE ABSURD

CHARGES……………………………………………………………….….……………… 5 Highlights of Fundamental Errors and Weaknesses in the Charges Exposed by the Defense.... 5 Former and Current Russian Government Officials Undermine Credibility of Charges........... 7 Highlights of Other Witness Testimony………………………….................................................... 8 Prosecution Witnesses……….…………….……………………….................................................... 8 Defense Witnesses………….………………………………………................................................... 9 Prosecutors’ Incomprehension of Case Materials........................................................................... 10 II. OFFICIAL MISCONDUCT AND DUE PROCESS VIOLATIONS……........................ 12 Prosecution’s Failure to Explain Charges........................................................................................ 12 Court Without Jurisdiction............................................................................................................... 12 Denial of the Presumption of Innocence........................................................................................... 13 Court’s Refusal to Admit Exculpatory Evidence Presented by the Defense................................. 13 Court’s Refusal to Assist Defense in Compelling Prosecutors to Produce Evidence or to Assist Defense in Compelling Third Parties to Produce Exculpatory Documents.................................. 14 Court’s Refusal to Exclude Illegally-Obtained Evidence................................................................ 14 Misrepresentation of Evidence………….......................................................................................... 15 Vanishing Evidence…………............................................................................................................. 15 Incomplete Evidence…………........................................................................................................... 15 Blocked Defense Witnesses and “No-Shows”…............................................................................... 16 Disqualification of Defense Experts.................................................................................................. 17 Defense Not Allowed to Cross-Examine Prosecution Experts........................................................ 18 Prosecutorial Mistreatment and Intimidation of Witnesses and Experts..................................... 18 Attempts to Compel Witnesses to Testify Against Defendants...................................................... 18 Attempts to Control Testimony of Prosecution Witnesses............................................................. 19 Abuse of Investigatory and Prosecutorial Powers through Coercion of PwC.............................. 19 Direct and Indirect Threats to Defense Counsel.............................................................................. 20 Denial of Defense’s Access to Official Trial Transcripts………………………............................ 20 Interference in Defendants’ Access to Counsel and to Case File................................................... 21 Extended “Pre-Trial” Detention: Reforms Flouted by Obsessive Persecution of Defendants... 21 CONCLUSION................................................................................................................................... 23

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This document has been prepared by defense counsel of Mikhail B. Khodorkovsky, former Yukos Oil Company CEO, and of his business partner and friend Platon L. Lebedev, who have been on trial since March 2009 in Moscow’s Khamovnichesky Court. The purpose of this document is to provide an overview of the pre-verdict trial proceedings, which ran from March 2009 to November 2010. More detailed information is available in a series of legal summaries issued by defense counsel as the case unfolded.1 Certain elements of the analysis herein may be impacted by the forthcoming verdict. A more detailed and definitive report, to be issued following the verdict, will supersede this document. For further information, the legal defense team may be contacted via the Khodorkovsky & Lebedev Communications Center.2

BACKGROUND In 2007, former Yukos Oil Company CEO Mikhail B. Khodorkovsky and his business partner and friend Platon L. Lebedev became eligible for release on parole under Russian law, having served half of their 8-year sentences since being arrested in 2003 and convicted in a politically-driven first trial that ended in 2005—while Yukos was destroyed through bogus tax reassessments, forced bankruptcy proceedings and rigged auctions. Given their eligibility for release on parole in 2007, or at the latest upon completion of their 8-year sentences in 2011, new charges were sloppily manufactured and proceedings were instigated against Khodorkovsky and Lebedev to extend the incarceration of the two men well into the future. The new charges, announced in February 2007 and brought to Moscow’s Khamovnichesky Court in a second trial that started in March 2009, are intended to keep Khodorkovsky and Lebedev isolated from Russian political and economic spheres, to stain their reputations and to conceal or whitewash corrupt and criminal actions committed by high-ranking Russian officials, many of whom are believed to have personally benefitted from the destruction of Yukos. In the pre-trial investigatory phase, the defense catalogued a series of severe abuses of the Russian criminal justice system in the new case, and asserted that these abuses were so numerous and so severe as to be irremediable. Facing charges that were both factually and legally untenable, on March 6, 2009 the defendants petitioned to terminate the proceedings. On March 17, 2009, the court rejected the petition and scheduled opening hearings for a new trial to commence on March 31, 2009. Khodorkovsky and Lebedev were accused of embezzling 350 million metric tons of oil worth over $25.4 billion and “laundering” over $21.4 billion, and embezzling $102 million in shares held by Eastern Oil Company (“VNK”, a Yukos subsidiary) and “laundering” the allegedly embezzled shares. In the prosecution’s closing arguments, the volume of oil allegedly embezzled was suddenly reduced by approximately one third, to 219 million metric tons valued at approximately $13.4 billion. By either measure, the allegations have no credible grounding either in the facts described or in the legal terms invoked by prosecutors. On April 21, 2009, Khodorkovsky and Lebedev pleaded not guilty, while emphasizing that the charges remained incomprehensible and unexplained.3

1 A summary of due process violations that occurred in the investigation of the current case is available at: http://www.khodorkovskycenter.com/content/defense-stay-motion-summary. Summaries of trial proceedings periodically issued by the defense are available at http://www.khodorkovskycenter.com/current-trials-legal-status. 2 Contact information is available under “Media Center” at: www.khodorkovskycenter.com. 3 See: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/MBK%20attitude%20towards%20the%20charges_April%2021%20statement_1.pdf. See also: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/21%20April%202009_PLL%20Statement%20Legalisation.pdf. In prepared testimony which Khodorkovsky was not allowed to read in court, although it has since been published in Newsweek, the defendant stated that he did not understand how the term

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The prosecution’s presentation of its case, which ran from April 21, 2009 to March 29, 2010, resembled a poorly-organized and unsuccessful fishing expedition rather than logically structured proceedings actually proving the occurrence of any elements of crime. Despite reading from a 188-volume case file of random Yukos materials, and parading various witnesses into the court for immaterial questioning, prosecutors were unable to prove how it was possible that Yukos covered its operating costs and invested heavily in capital expenditures and acquisitions and paid dividends when the entire oil production of Yukos over a period of six years was allegedly stolen, as charged. In fact, the prosecution’s witnesses proffered either no testimony germane to the accusations, or testimony that actually contradicted the accusations. Despite having over 11 months to read documents and question witnesses in court, the prosecutors plainly failed to prove their charges. This did not prevent prosecutors from proclaiming in their closing arguments that they had proven the guilt of the defendants—while being unable to sum up precisely how they supposedly did so. After the prosecution presented its case, The Economist described the “legal inadequacy” as follows: “The prosecutors have thrown every possible charge at Mr Khodorkovsky with little in the way of evidence. Instead, they caricature the entire Yukos operation as illegal. The indictment is vague, woolly and incoherent. But this has made Mr Khodorkovsky’s defence stronger....Kirill Rogov, a political observer, has argued that this is now a courtroom where the prosecutors, not Mr Khodorkovsky, are on trial.”4 In the face of official misconduct and due process violations, as the trial unfolded the defense presented highly substantiated motions for the recusal of prosecutors and of the judge—to no avail. The vast majority of motions filed by the defense were routinely denied. The “case-closed” mentality of the prosecutors ultimately reigned in the courtroom, given the judge’s biased handling of the multitude of due process violations that marked the proceedings. The defense’s protestations over the contradictions and outright absurdities of the case were brushed aside by prosecutors and the judge, who refused to address these issues directly. Independent observers visiting the trial described the proceedings as evocative of the works of Kafka and Gogol and an embarrassment to Russia. Nevertheless, despite each successive setback, the defendants made every effort to engage with prosecutors and the court to prove the new charges were nothing else but a continuation of political persecution, and they presented a vigorous, methodical, and meticulously substantiated defense from April 5 to September 22, 2010. Despite the efforts of the defense, which were notably bolstered by the candor of former and current government officials who supported the defendants through in-court testimony, the proceedings continued to be undermined by unfair and unlawful decisions and maneuvers that irreparably frustrated Khodorkovsky’s and Lebedev’s rights to a fair trial. Appearances of an adversarial trial were for the most part cosmetic. A feeling of futility reigned in the courtroom as the defense presented its closing arguments in what had become a mock judicial process devoid of meaningful adversarial engagement on the substance of the case.

“laundering” could be applied to oil. See: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/MBKFactSheetKafkaesque%2014%2009%202009.pdf. 4 The Economist, April 22, 2010, available at: http://www.economist.com/node/15959468.

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I. THE FACTS AND THE LAW EXONERATE THE DEFENDANTS OF THE ABSURD CHARGES

In the course of the trial, the defendants and their counsel exposed fundamental errors and weaknesses surrounding the allegations leveled in the indictment. The defense invoked applicable law, broadly-known facts, common sense and oil industry norms, and brought relevant evidence and witness and expert testimony to the court’s attention. Even though prosecutors and the court went to great efforts to exclude exculpatory facts, block documents and witnesses, and to ignore the substance of the defense’s arguments, by the end of the trial the judge was left with no credible basis for a guilty verdict. Highlights of Fundamental Errors and Weaknesses in the Charges Exposed by the Defense Among the fundamental errors and weaknesses surrounding the charges that have been exposed by the defense5 and unresolved by the prosecutors or the judge at trial: • The physical impossibility of the embezzlement of 350 million metric tons of oil by the

defendants—meaning all oil production of Yukos subsidiaries for 6 years was allegedly embezzled; not a single incident of oil disappearance or of the defendants taking possession of the oil was presented to the court by prosecutors. The prosecution’s sudden reduction of the amount of allegedly-embezzled oil by about one third, as alleged during closing arguments, is just as impossible and just as unproven.6

• Prosecutors and the court neglected the outcome of the first Khodorkovsky-Lebedev

trial and the tax proceedings against Yukos, in which the same oil that is now alleged to have been embezzled was in fact punitively and unlawfully taxed in order to drive Yukos into bankruptcy. If the oil was sold to generate taxable revenues, as established in those prior proceedings (and as now being concurrently argued by the Russian Federation before the European Court of Human Rights), then how can prosecutors simultaneously allege that the oil was in fact not sold by Yukos but embezzled by Khodorkovsky and Lebedev?

• The prosecutors and the court also ignored the fact that Yukos covered massive

operating expenses and invested heavily in capital improvements and acquisitions and paid dividends—all financial operations recorded on the books of Yukos and several other companies and banks—when all oil as the primary source of the funds necessary for these operations was allegedly stolen.

• The prosecutors ignored the lawful and transparent management and control structures

of Yukos that could never have permitted the company’s entire production of oil to be embezzled. The court complied with prosecution requests to block key Yukos witnesses and their declarations from being entered into the evidentiary record.

5 More information on these fundamental errors and weaknesses is available in a short briefing paper entitled “The Kafkaesque Prosecutions of Mikhail Khodorkovsky and Platon Lebedev”, available at: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/MBKFactSheetKafkaesque%2014%2009%202009.pdf. 6 The absurdity of this charge was highlighted by Khodorkovsky when he noted that the amount of oil alleged to have been stolen, 349,403,578 metric tons, if loaded on average tank cars, would stretch around the world then half way again (63,000 kilometers, based on a tank car length of 18 meters and capacity of 100 metric tons). Acknowledging numerous mathematical errors and unsubstantiated allegations in this absurd charge, at the very end of the trial the prosecution lowered the amount of oil allegedly stolen to 218,749,527 metric tons, which would go around the world in tank cars only once (approximately 40,000 km).

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• The prosecutors neglected that Yukos’s vertically-integrated structure was planned and approved not by an imagined rogue or criminal group, but rather by the Russian government itself, with support from the Kremlin, through a deliberate policy aimed at rescuing and developing Russia’s moribund oil industry in the 1990s. Official government records prove this.

• Prosecutors confused property rights in crude oil, and the crude oil itself, neglecting that

a transfer of ownership rights can occur without the oil physically changing hands. • Prosecutors also stubbornly neglected basic chemistry: confusing the value of wellhead

liquid—full of impurities—with the value of crude oil. • The prosecutors ignored lawful contracts made between Yukos production companies

with their parent company by arguing, in the alternative, that the domestic purchase price of oil was less than the export price at which the parent company sold the oil to the end purchasers of oil and oil products.

• Prosecutors further incorrectly asserted that the price of crude oil in Russian production

regions is comparable to prices of crude oil in Rotterdam or Augusta. • Prosecutors also ignored industry-standard transfer pricing practices that are used for

lawful tax optimization within vertically-integrated oil companies. Furthermore, in a string of previous court rulings involving Russian tax authorities and competition regulators, some of which were successfully entered into the evidentiary record of this trial, the structuring of Yukos transactions with production subsidiaries was scrutinized and judicially approved.

• When the embezzlement charges were brought in 2007, prosecutors pressured

PricewaterhouseCoopers (PwC) to withdraw their approval of a decade of Yukos audits, since observers worldwide could see the obvious incompatibility between the auditors’ reports and the prosecutors’ charges against Khodorkovsky and Lebedev.

• The impossibility of the embezzlement charges could have been proven had the

prosecutors or the court examined certain records of Transneft, the state-owned monopoly that tightly controls the movement of oil through Russia’s pipeline network. These records indicate that the allegedly embezzled Yukos oil was in fact legitimately sold and transported through the state pipeline network.

• The prosecutors or the court likewise could have examined financial operations

recorded on the books of Yukos production companies, several other companies, and banks—which prove that the entire oil production of Yukos over a period of six years was sold, not embezzled.

• The charges of “laundering” were shown by the defence to be completely empty.

Prosecutors used the term “laundering” presumptively, amateurishly and erroneously—for example, asserting the legal nonsense of “laundering of crude oil.” Prosecutors failed to establish fundamental elements of “money laundering” in criminal law: that a crime occurred and that the defendants acted to conceal the proceeds of that crime. If prosecutors were intent on a “trial by headline”, they may have succeeded in stigmatizing the defendants by having terms such as “embezzlement” and “laundering” associated with their names; but in the end the prosecution failed to show proof either of “laundering” or of any predicate offense.

• The court agreed to consider the prosecution’s allegations of improprieties surrounding

VNK share swap agreements executed in 1998—even though the statutory time limit for

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bringing charges expired in 2008.7 The defense underlined the legality of the now-disputed share transactions, demonstrating that they were fully in the interests of the company and indeed of the Russian Federation as a major VNK shareholder. The share swap agreements followed appropriate company procedures, were endorsed by the Russian Minister of State Property, and cleared investigatory scrutiny conducted between 1999 and 2001.

Former and Current Russian Government Officials Undermine Credibility of Charges In addition to comprehensive presentations in court by both Khodorkovsky and Lebedev, which destroyed the indictment piece by piece8, a succession of testimonies from widely-respected former and current government officials dealt heavy blows to the credibility of the prosecution’s case: • On May 24, 2010, Russia’s former Prime Minister Mikhail Kasyanov testified that the

Kremlin had ordered Khodorkovsky’s arrest because Khodorkovsky had angered then-President Putin by funding opposition parties without presidential approval. Kasyanov’s testimony was based on information he was privy to as prime minister, including face-to-face discussions with then-President Putin. Kasyanov further testified that at the time of the allegedly illegal activities involving Yukos, all Russian oil majors shared three attributes: vertical integration, the use of transfer pricing and preferential tax treatment in certain specially-legislated zones. He noted that Yukos was consistently one of the largest taxpayers in the Russian Federation, and that the company had its oil production and sales closely monitored by the government. When asked about whether the oil embezzlement charges were credible, he declared: “Absolutely not!”

• On June 1, 2010, former Soviet and Russian Central Bank chief Viktor Gerashchenko

derided the charges, calling them “utter nonsense”. He noted that if the defendants were guilty as charged, Yukos could never have grown to preeminence in the Russian oil industry, and foreign oil majors such as Exxon, which examined Yukos “to the last detail” would not have made multi-billion-dollar offers for significant stakes in the company. Gerashchenko became Yukos chairman in 2004, the year after Khodorkovsky and Lebedev were arrested, and held the position as the company was dismantled through forced bankruptcy proceedings that benefitted state-controlled oil company Rosneft. He noted that none of the companies that acquired Yukos assets—including Rosneft—ever complained about alleged large-scale embezzlement, and that no one in government ever suggested that massive amounts of crude oil had disappeared or been embezzled. Gerashchenko boldly confronted the prosecution, exclaiming: “Why are you doing this foolishness?”

• On June 21, 2010, German Gref, Chief Executive of Sberbank and Russia’s economic

development and trade minister from 2000 to 2007, testified that as minister he would have been aware if massive crude oil embezzlement at Yukos had been taking place as charged, in the vicinity of 20% of Russia’s annual production. Regarding the prosecution’s erroneous assertion that Russia’s domestic pricing of crude oil is comparable to international market prices, Gref stated: “To purchase at the same prices as in Rotterdam—impossible.”

7 Russian law prohibits prosecution on charges that are time-barred. In their closing arguments, the prosecution finally agreed with the defense that the charges related to the shares of VNK were time-barred, but nevertheless asked the court to find defendants guilty on those charges without any sentence. 8 A summary of Khodorkovsky’s testimony is available at: http://www.khodorkovskycenter.com/news-resources/stories/witness-testimony-summary-mikhail-khodorkovsky. A summary of Lebedev’s testimony is available at: http://www.khodorkovskycenter.com/news-resources/stories/witness-testimony-summary-platon-lebedev.

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• On June 22, 2010, Viktor Khristenko, Russia’s Industry and Trade Minister since 2008, testified that he was unaware of any proof of the large-scale embezzlement prosecutors allege in their charges against Khodorkovsky and Lebedev. Prior to serving as Industry and Trade Minister, Khristenko had served as Industry and Energy Minister from 2004. From 1997 to 2004 he served as Deputy Finance Minister, Deputy Prime Minister and briefly as acting Prime Minister. From 2000 to 2008 he served as Chairman of Transneft, the state pipeline monopoly. Khristenko was asked whether Yukos, its production subsidiaries or, now, Rosneft—the new owner of Yukos assets—ever reported that some 60 million metric tons per year of crude oil had gone missing. Khristenko answered: “No, I am not aware that something like this ever happened.” Khristenko was also asked about transfer pricing. He noted that as a matter of government policy the subject has been ever-present since the late 1990s, due to the consequences of transfer pricing on the federal and regional budgets, and on minority shareholders, but that from his point of view transfer pricing practices were neither mysterious nor illegal.

This lineup of distinguished former and current Russian government officials not only challenged the legitimacy of the trial, but also demonstrated the mounting opposition within Russia’s elites over the continued abuse of law enforcement and judicial powers in the campaign against Khodorkovsky and Lebedev. Highlights of Other Witness Testimony Prosecution Witnesses Over a six-month period beginning at the end of September 2009, the prosecution paraded 51 witnesses into the courtroom. Their testimony was marked by prosecutorial coercion, manipulation, and, notwithstanding the foregoing, irrelevance to the allegations against Khodorkovsky and Lebedev. In the course of the witness questioning, some of the witnesses refuted the arguments of the indictment, for example testifying that Yukos production companies were indeed paid for their crude oil—undermining a fundamental prerequisite of the embezzlement and therefore money laundering charges against the defendants. Even the state-appointed Yukos bankruptcy receiver asserted that Yukos was well-organized and efficiently produced and sold large volumes of oil. Regarding the disputed VNK share exchange, one witness testified that Khodorkovsky’s efforts to protect VNK’s assets were well-founded. The defense catalogued over three hundred discrepancies in the transcripts and audio tapes of this witness’s interrogations. The court nevertheless allowed the prosecutors to submit this evidence into the trial record. Indeed, the court allowed prosecutors to enter interrogation transcripts into the evidentiary record even when these transcripts were culled from investigations of separate cases in which Khodorkovsky’s and Lebedev’s defense counsel were not present. Rather than properly cross-examine their own witnesses, prosecutors simply asked a few brief stock questions of certain witnesses before asking the court to submit prior interrogation transcripts as evidence. Under procedural rules, such transcripts may only be submitted into the evidentiary record where discrepancies exist with the testimony given by a witness in the courtroom. Prosecutors had prior interrogation transcripts entered into the evidentiary record despite objections of the defense, who pointed out that no discrepancies with the oral testimony existed. Perhaps afraid of what live witnesses might say on the stand, the prosecutors clearly preferred scripted statements prepared under controlled conditions—in some cases witnesses stated that they had been asked to sign documents prepared by interrogators who had drafted supposed summaries of their interrogations. Yet even using these transcripts as a crutch in their cross-examinations, the prosecutors seemed more concerned about appearing to bulk up the court file rather than actually proving their charges—in any event, none of the transcripts contained proof of the allegations against the defendants.

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The prosecution’s actions in manipulating its witnesses should also be considered in light of the indirect threats that the witnesses faced. Since 2004, investigations of various Yukos-related matters were indiscriminately launched, paused, restarted or dropped by investigators. Potential witnesses in a new case against Khodorkovsky and Lebedev were directly or indirectly pressured by the authorities in an attempt to corral a group of pliant witnesses and to accumulate whatever documents that could possibly be presented as evidence against Khodorkovsky and Lebedev. Against this backdrop, it is all the more remarkable that the prosecution’s witnesses were unable to provide a scintilla of evidence to prove the absurd embezzlement charges now being faced by Khodorkovsky and Lebedev. A few witnesses attempted to smear Khodorkovsky and Lebedev with stories of their past business dealings with the defendants, which were of no relation to the charges. Meanwhile, not a single of the production companies that were alleged “injured parties”—allegedly failing to have received proper payment in exchange for oil products—testified in court. Defense Witnesses Given the prevailing climate of fear after well-known cases of the authorities torturing, incarcerating or prosecuting people to extract false testimony in Yukos-related cases or to punish those who support Khodorkovsky and Lebedev,9 many potential witnesses stayed away from the trial. The law does not empower the defense to compel witnesses to testify or third parties to produce documents, and therefore efforts to compel witnesses or production of documents depend upon the court’s discretion. Despite these disadvantages, the defense called 30 witnesses to the court, all of whom provided support to exculpate the defendants of the absurd charges. The sole defense expert permitted to participate in the proceedings was Wesley Haun, a U.S. specialist in energy industry management who came to the stand on May 31, 2010, notwithstanding a pejorative declaration by prosecutor Gyulchekhra Ibragimova, who stated: “We don’t care what a foreign citizen will tell us.” Haun testified that Yukos was comparable with other Russian and international vertically-integrated oil companies, and that Khodorkovsky’s actions were consistent with “company leadership intent on building a model company that would achieve sustained growth and long term profitability.” Having carefully examined the structure and operating procedures of Yukos, Haun stated that Khodorkovsky’s reorganization and management of the company benefited all shareholders, the production subsidiaries, as well as the Russian Federation, and was consistent with industry standards, custom and practice. He stated that the charges brought against the defendants are disproved by the commercial achievements of Yukos: the company’s performance statistics and growth would have been impossible had crude oil been embezzled as charged. He further noted that the prosecutors erred in comparing the price of wellhead liquid to the end user price of crude oil. Unsurprisingly, the prosecution successfully motioned to have Haun’s expert report excluded from the evidentiary record.10 Jacques Kosciusko-Morizet served on the Yukos board of directors from 2000 to 2004. Kosciusko-Morizet is a member of France’s senior business elite, having served as vice president of the bank Crédit Lyonnais. He also served as France’s deputy minister of international trade. As an independent director Kosciusko-Morizet had direct knowledge of both Khodorkovsky and Yukos. Kosciusko-Morizet was formally interviewed as a witness by defense counsel in Paris in February 2009. Over the objections of prosecutors who sought to exclude the documentary record simply and automatically because the interview took place in a foreign country, defense counsel were permitted to read Kosciusko-Morizet’s transcribed statements in court. This was the first and last documented witness declaration that the judge allowed the defense to read in its entirety into the trial record.

9 See for example the prominent cases of Svetlana Bakhmina, Vasily Alexanyan and Antonio Valdes-Garcia, described at: http://www.khodorkovskycenter.com/history-background/other-key-individuals. 10 Haun’s report was nonetheless made public by the defense, even if it will not be considered by the court, and it is available at: http://www.khodorkovskycenter.com/news-resources/stories/specialist-testimony-summary-wesley-haun.

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Kosciusko-Morizet also appeared in court on June 8 and 9, 2010 for questioning and cross-examination. According to Kosciusko-Morizet: • Examined from any perspective, the accusations against Khodorkovsky and Lebedev

are “complete nonsense.” Yukos oil “moved from the production companies through the downstream marketing companies in a manner consistent with the best industry practices and was sold by the production companies at a fair and reasonable price…Yukos increased its revenues and profits by becoming a more efficient and better operated company that better managed its assets.”

• Contrary to the indictment, Khodorkovsky did not solely make all important decisions

for Yukos; rather, he listened to opposing views and ceded authority to others. Kosciusko-Morizet said: “My entire experience was absolutely the opposite of someone running the company on his own and being a dictator.”

• On the basis of his direct involvement in the Yukos-PwC relationship, Kosciusko-

Morizet ridiculed the assertion in the indictment that Khodorkovsky and Lebedev deceived PwC, and called this excuse by the auditors for withdrawing their endorsement of a decade of Yukos audits “completely disingenuous.” Kosciusko-Morizet said that PwC’s turning against Yukos was “very damaging for PwC’s reputation, for the audit profession in Moscow and for international confidence in the Russian business environment.” He further noted that he had spoken with a number of PwC partners who were embarrassed by the behavior of PwC Russia.

The prosecution’s response to Kosciusko-Morizet’s testimony plumbed new depths of incompetence and impropriety openly on display in the trial. Prosecutor Valery Lakhtin accused Kosciusko-Morizet of being “a conman” and raised his voice to declare: “What does this witness have to do with anything?! I don’t think he’s a witness, anyway!” The prosecutor also asked, “Who knows whether Kosciusko even respects our country?” Referring to the acquisition of Crédit Lyonnais by Crédit Agricole—irrelevant to the proceedings and occurring well after Kosciusko-Morizet had retired from the banking industry—Prosecutor Lakhtin demanded that the court be told of Kosciusko-Morizet’s role in the merger, asserting that the witness bore responsibility for the bank’s “insolvency.” Prosecutor Lakhtin asserted that it was “no wonder the bank went under—look at the executives it had.” Kosciusko-Morizet responded that he did not go to Moscow to hear the prosecutor insult him time and again, and asserted: “I have only one master, unlike some of the persons here. My conscience is my master. I have no interest in lowering myself to a lower level, to lose my dignity.” In light of the damage inflicted upon the credibility of the charges by expert Haun and witness Kosciusko-Morizet, the prosecution and court subsequently invoked the thinnest of pretexts to avoid repeats of the spectacles of these first individuals who came at the request of the defense to Khamovnichesky Court—from verbally attacking the interpreter and his credibility to blocking defense witnesses and experts and refusing to examine their reports and declarations. Prosecutors’ Incomprehension of Case Materials The credibility of the case was undermined not only by its lack of a legal basis or grounding in common sense, or even the multitude of due process violations, but also by obvious prosecutorial incompetence, as repeatedly pointed out by the defense. The prosecutors sometimes read documents apparently without understanding that in fact the documents undermined their own position. Several documents showed that company income was earned, dividends were paid, various large-scale purchases or loans were made, oil was transported through government-controlled pipelines, and massive sums were paid in taxes—rendering impossible the large-scale embezzlement allegations against the defendants. The prosecutors demonstrated only a

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superficial comprehension of the documents they considered pertinent to the case. They often had trouble pronouncing relevant words, repeatedly misstated numbers, and always shirked away from any discussion of the substance of the materials. Printed e-mail message chains were read backwards, starting with the most recent message, confusing the chronology and contents. Other documents were also read backwards—starting with the last page rather than correcting an erroneous reverse collation. A spreadsheet was read down column-by-column rather than across row-by-row, rendering virtually unintelligible the contents of the document and demonstrating that the prosecutor did not understand the meaning of the information.11 When Tatyana Lysova, the editor-in-chief of the Russian business daily Vedomosti, came to the witness stand in May 2010, Catherine Belton of the Financial Times observed that prosecutors “appeared not to understand some of the simplest points she made” about basic rudiments of the functioning of publicly-traded companies, the calculation of their value and the consolidation of their finances in international accounts. Belton described the “apparently stunned” reaction of the prosecutors to Lysova’s testimony before they reverted to impugning Lysova’s credentials as their only retort to her testimony. Belton concluded: “The trial judge will be making up his mind. But it seems clear that if President Dmitry Medvedev is to achieve his plans for modernizing Russian justice, he has a long way to go.”

11 See: http://blogs.ft.com/beyond-brics/2010/05/26/russia-prosecutors-versus-the-press-in-khodorkovsky-trial/.

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II. OFFICIAL MISCONDUCT AND DUE PROCESS VIOLATIONS The pattern of due process violations and incidents of official misconduct that emerged in the course of the trial has been wholly incompatible with fundamental norms of fairness and justice. The proceedings have been fraught with due process violations and incidents of official misconduct, committed either by the prosecution or the court, or by both in tandem. For the vast majority of instances of prosecutorial abuses and misconduct summarized below, the court has passively or actively condoned the ongoing miscarriage of justice. In these circumstances, doubts inevitably arise as to the judge’s capacity to render a judgment independent of pressure from the prosecutors or the political figures behind the case. Prosecution’s Failure to Explain Charges When Khodorkovsky entered his “not guilty” plea in April 2009, he emphasized that the charges were incomprehensible to him despite asking in vain for explanations and clarifications for over two years. Nowhere does the indictment set forth the elements of any alleged crime or succeed in connecting any specific evidence to the allegations. On the contrary, the charges are an artifice of criminalization of lawful and widespread business practices. They stubbornly ignored legal and factual realities ranging from the fundamental definition of “crime” to the highly regulated structure and operation of vertically-integrated energy companies. Judge Danilkin has just brushed aside requests for explanations of the allegations, claiming he has no power over the prosecution to compel them to explain the charges. As a result, the defense had to fight against multiple mutually exclusive allegations. Even the subject matter of the embezzlement charges was confused by the prosecution who could not make up their minds whether oil, oil proceeds or rights to oil sale contracts were allegedly embezzled by the defendants. They have been silent on the method, time and place the alleged crimes were committed. Since the indictment was first issued in February 2007, all pleas by the defendants and motions by their counsel to have the charges explained have been rebuffed by investigators, prosecutors and judicial authorities. This has been in stark violation of Article 6(3)(a) of the European Convention on Human Rights, which states: “Everyone charged with a criminal offence has the…minimum [right] to be informed promptly, in a language which he understands and in detail, of the nature and cause of the accusation against him.” Court Without Jurisdiction The case being prosecuted is in fact outside of the jurisdiction of Moscow’s Khamovnichesky Court. Pursuant to the Constitution of the Russian Federation, no one may be deprived of the right to have their case heard by that court and that judge under whose jurisdiction the case has been accorded by law. The European Convention on Human Rights similarly enshrines the right to proceedings in a tribunal established by law. The issuance of a verdict by an unlawfully composed court is an unconditional ground for its repeal, directly prescribed by the Code of Criminal Procedure of the Russian Federation. Indeed, it is prescribed by the rules on territorial judicial jurisdiction that a case shall be subject to being heard by a court at the place of the commission of the alleged act, and if several acts are alleged, then at the place of the commission of the most recent or the gravest of them. If the act was begun in one place and ended in another, then the case shall be heard by a court at the place where it ended. In the present case against Khodorkovsky and Lebedev, not a single one of the alleged acts, including the gravest involving alleged money laundering, was committed, or begun, or ended in the jurisdiction of Moscow’s Khamovnichesky Court. While the prosecution made references to actions of members of the law firm ALM Feldmans, located in the jurisdiction of Moscow’s Khamovnichesky Court, who

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were said to have participated in the alleged acts imputed to Khodorkovsky and Lebedev, no members of that firm are defendants in the present case, and none of the acts alleged in the indictment terminated in the firm’s premises. The legally-prescribed procedure that would have permitted a change in territorial jurisdiction was not initiated or applied in the case now before the Khamovnichesky Court. Under these circumstances, for want of jurisdiction, the Khamovnichesky Court lacks the competence prescribed by law for adjudicating the case against Khodorkovsky and Lebedev. Despite numerous objections by the defense and attempts to recuse the “specially appointed” judge, the court proceeded with the trial in violation of Article 47(1) of the Russian Constitution and Articles 6(1) and 18 of the European Convention on Human Rights. Denial of the Presumption of Innocence Even though prosecutors have produced no evidence that actually proved any crime, they repeatedly declared Khodorkovsky and Lebedev to be guilty of the alleged criminal acts, and the judge never censured the prosecutors for doing so. The Russian Constitution and the European Convention on Human Rights affirm the principle that everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law. The Russian Constitution adds that an accused shall not be obliged to prove his innocence. However, in fact, the burden of proof in this case has been borne by the defense from the start, to prove the absurdity of the charges; rather than on the prosecution to prove guilt. When Lebedev protested unlawful treatment, a prosecutor said his efforts to defend himself were “useless” and added, “just as we have planned, so will we proceed.” Meanwhile, in court and through the state-controlled Russian media, Khodorkovsky is portrayed as a dangerous criminal who is locked up in a glass booth surrounded by machine gun-toting guards. To further add to the demonization of Khodorkovsky in the media, Prime Minister Putin publicly compared Khodorkovsky with Al Capone and Yukos with Enron. In their undisguised treatment of the defendants being guilty as charged, prosecutors insulted the Khodorkovsky and Lebedev on numerous occasions, stating for example that Khodorkovsky’s opinion did not matter to anyone except his defense lawyers and his cheering fans in the courtroom (April 21, 2009); or responding to Lebedev’s due process concerns by stating that his entreaties are “useless” and adding, “just as we have planned, so we will proceed” (April 27, 2009); or calling the defendants “so-called political prisoners” (June 9, 2009). In response to Lebedev’s reminder that in 2007 the Swiss Federal Tribunal ordered Switzerland’s prosecutors not to cooperate with their Russian counterparts on the Yukos case due to grave politically-driven human rights infringements, a prosecutor retorted: “So what?” (July 28, 2009). When the defendants asked to view case materials, a prosecutor objected to passing a case volume into the locked and heavily guarded aquarium-like glass booth where they were being kept in the courtroom, stating “they could destroy the evidence!” (June 4, 2009) Prosecutors have repeatedly made contemptuous and sarcastic statements about the defendants in open court, displaying a troublesome lack of dignity and respect. Court’s Refusal to Admit Exculpatory Evidence Presented by the Defense The court has repeatedly denied allowing evidence presented by the defense to be added to the case file. The defense has fruitlessly asked that exculpatory evidence in its possession be considered. Examples include: RSBU financial reporting of Yukos production subsidiaries—certified by PwC and never withdrawn; Yukos’s U.S. GAAP financial statements, which were missing from the case materials introduced into the trial record for several of the years relevant to the allegations; numerous sworn declarations from individuals formerly affiliated with Yukos and with knowledge directly relevant to the charges; Yukos documentation describing production and sales processes and capital expenditures; legal explanations of Yukos’s international corporate structure; and reports of the state-appointed Yukos bankruptcy administrator.

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Meanwhile, in contrast, investigators and prosecutors have consistently and repeatedly been allowed to add materials to the case file as they have wished. Court’s Refusal to Assist Defense in Compelling Prosecutors to Produce Evidence or to Assist Defense in Compelling Third Parties to Produce Exculpatory Documents Throughout the trial, the court repeatedly refused: (1) to request or to compel the production of evidence held and concealed by the prosecution; and (2) to request or to compel third parties identified by the defense to produce documents of an

exculpatory nature. Of particular note, the defense was denied access to evidence gathered in a parallel case which was extensively used by investigators and prosecutors as a means of circumventing procedural rules and safeguards in the present case. The judge denied defense requests to compel the prosecution to provide the defense access to files from that parallel case—even though that case was a major source of materials accepted into the trial record in the present case. Furthermore, the defendants—and even the court itself—were denied access to wiretap recordings being described by the prosecution at the proceedings. Defense attempts in July 2009 and again in November 2009 to have the recordings submitted to the court were rebuffed by investigators and the Federal Security Service (“FSB”), and the judge was unable to compel the production of the recordings in question. Defense counsel asserted not only that a UK wiretap by the FSB was unlawful, but also that transcripts provided by prosecutors should be checked against the recordings, given the prosecution’s established pattern of distorting evidence in the case.12 The concealment of the recordings raises serious questions not only about the real probative value of the prosecution’s transcripts, but also more broadly about the motives and methods of work of the investigators and prosecutors, and the incapacity of the judge to compel the production of evidence held by the authorities. With respect to third parties, a case on point is Transneft, the state-owned monopoly that tightly controls the movement of oil through Russia’s pipeline network. To date, the court has refused to subpoena Transneft records sought by the defense. The defense asserts these records would indicate that the allegedly embezzled Yukos oil was in fact legitimately sold and transported through the state pipeline network. Likewise, publicly available Russian government documents from the 1990s, demonstrating government policy geared towards the development and functioning of Yukos as a vertically-integrated energy company, have to date not been sought out by the court from official sources for inclusion in the case materials. Despite many efforts, the defendants were unable to enter such germane exculpatory evidence into the official case record and therefore could not use such documents in the interrogation of witnesses. Court’s Refusal to Exclude Illegally-Obtained Evidence The court allowed prosecutors to submit evidence illegally obtained through unlawful searches and seizures. Despite the fact that this evidence did nothing to prove the charges, as a matter of principle and procedure the defense petitioned for exclusion of over 500 illegally-obtained documents. Initially the defense’s requests for exclusion of this evidence were deemed premature—then when the defense repeated a request for exclusion at the end of the defense phase of the trial, the request was denied.

12 In a similar effort by the defense to confirm the accuracy of a prosecution transcript, on February 26, 2010, after the defense successfully pleaded to have the court play back an audio recording of the interrogation of witness Gitas Anilionis, major discrepancies were revealed between the audio recording and the official prosecution transcript.

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The verdict should show whether the judge accepted any of the evidence argued by the defense for exclusion. Misrepresentation of Evidence In verbally presenting Yukos audit documents, the prosecution changed the words “income” and “taxes paid” to “debt” and “taxes owed”. In several instances the prosecutors falsely stated that documents bore authentication marks such as stamps and signatures, where in reality no such marks existed. In other instances signatures of the same people were different from one document to another. Multiple versions of documents were presented, with no indication of which, if any, was the final version. The prosecutors described a letter allegedly from Lebedev, yet failed to mention that—as the court saw when Lebedev insisted the item be examined—the original letter was crossed out by hand with a large “X”, several phrases were also crossed out, there were several handwritten additions of unknown origin, the letter lacked a date and signature, and the prosecution’s “True Copy” stamp was missing the required signature. Numerous documents of unknown origin were presented, having been printed from computer drives for which the chain of custody was unclear. In several instances the prosecutors gave partially or completely inaccurate descriptions of document contents. As an example, in summarizing a document of South Petroleum Ltd., a prosecutor simply asserted that the document showed that “defendants were taking funds from that company”, even though the document showed nothing of the sort. The prosecutors failed to explain what relevance the document had to the proceedings at all. A further example, also unexplained by the prosecution, was the assertion that the defendants embezzled a volume of oil in 2003 that in fact exceeded the actual sum produced by almost two million metric tons. In yet another example, one document presented by the prosecutors contradicted the indictment by revealing that the founding capital of the Russian company Fregat was worth over 154 million rubles—not the 14 rubles stated in the indictment. Furthermore, in arguing that Khodorkovsky and Lebedev should be kept in strict pre-trial isolation, the prosecution asserted that a Siberian court had determined that Khodorkovsky should be held in such conditions to prevent him from destroying evidence or intimidating witnesses; there was in fact never any such ruling in a Siberian court. Vanishing Evidence A regional federal court decision relevant to the substance of the current proceedings—and helpful to the defendants—was transmitted by the regional federal court to the prosecutors in Moscow. The Privolzhskiy Region Federal Arbitrazh Court has confirmed that it sent the entire case file to the prosecutors. However, when asked to produce the case materials in court, the prosecutors simply stated that they had never received them, and refused to confirm whether they had requested the materials at all. There has been no further indication that the prosecutors will attempt to find or obtain the lost appellate court materials. The judge has been unable to compel the prosecution to produce the sought-after decision, and apparently dropped the matter despite protestations of the defense. Incomplete Evidence In many cases the prosecutors announced they were presenting a document “in full”, but in fact only read the title of the document or a few selected sentences. Sometimes the first and last pages of a document would be read, but nothing in between, thus leaving it up to the defense to come back to these documents several months later in order to provide the court the proper context of the materials. The defense was then accused by the prosecution of delaying the proceedings. Documents such as sales contracts were ostensibly read “in full”—but in reality only cursory or irrelevant details of the document were provided, with no mention of who were the parties or what was being sold. Shareholder meeting agendas were summarized, with no information on actual decisions taken at the meetings—and no indication of whether Khodorkovsky or Lebedev even participated.

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Company procedures were described in part—omitting information about the rigorous controls in place that would have prevented the alleged embezzlement. Sections of an independent legal analysis of the acquisition and consolidation of Yukos shares were read—though the full approval of those share transactions by the Russian competition authority was not mentioned. The prosecution likewise skipped over parts of a PwC memorandum they presented, which stated that the Russian government approved of the privatization and consolidation of Yukos. Some documents abruptly ended mid-sentence, with an unknown number of missing pages. When prompted by the defense to engage on the relevance of any given document, the prosecutors refused, and stated that the judge was free to assess the materials—in his chamber, rather than in open court with the benefit of the adversarial process. Blocked Defense Witnesses and “No-Shows” From the outset of the proceedings, the defense was at a significant disadvantage compared to the prosecution with respect to bringing witnesses to court, because the prosecution failed to attach the defense witness list to the indictment as required under Russian law. The judge failed to remedy this omission during the preliminary hearings. As a result, at the beginning of the defense phase of the trial, the defense, unlike the prosecution whose list of witnesses was attached to the indictment, needed to petition the court with respect to every single witness they sought to call to the proceedings, to request that the court subpoena each individual. The attendant procedural and practical hurdles borne by the defense in bringing witnesses to the proceedings meant that the defense was unnecessarily and unlawfully disadvantaged. Numerous potential key witnesses live outside of Russia, including former Yukos managers and employees who fled their home country out of fear of unjust prosecution and who have since been granted political asylum abroad. Several of these potential witnesses offered to provide testimony from outside of Russia, answering questions from the prosecution or the defense, for example through video conferencing with the courtroom. The court rejected these offers. In contrast, investigators questioned people abroad through international judicial channels without those witnesses being required to return to Russia. The court did not allow the defense to submit into evidence sworn declarations obtained from certain witnesses whom prosecutors sought to exclude because they were either accused or suspected in other criminal investigations. Yet, in a blatant double standard, when requested by the prosecution the court allowed witnesses, criminally accused or suspected, to testify in court or to have their interrogation transcripts entered into the evidentiary record. The court not only rejected the defense’s request to summon Bruce Misamore, Chief Financial Officer of Yukos from 2001 to 2005, to the proceedings, but also refused to enter his 53-page questionnaire into the evidentiary record. The court agreed with the prosecution’s argument that Misamore’s testimony had to be excluded from the proceedings because he is a suspect in another investigation. Yet earlier in the proceedings, the prosecution requested and the court allowed it to enter into evidence interrogation transcripts of Alexei Golubovich and Alla Karaseva, respectively a suspect and an accused in other cases. Furthermore, the court allowed the prosecution to question Ilya Yurov, an accused in another criminal case, as a witness in this trial. Yet, contrary to fundamental common sense and principles of due process, the court agreed to be willfully blind to testimony from the Chief Financial Officer of the company central to the allegations against Khodorkovsky and Lebedev. The court further refused to enter into evidence sworn declarations of other foreign witnesses, including Michel Soublin (Misamore’s predecessor as Yukos Chief Financial Officer from 1999 to 2001, and subsequently Chairman of the Finance Committee of the Yukos Board of Directors until 2004), Frank Rieger (Vice President of Yukos RM, which oversaw refining and sales, from 2000 to 2002, and subsequently Financial Controller for the Yukos group of companies through 2005), Bernard Loze (Member of the Yukos Board of Directors from 2000 to 2006, Chairman of the Board’s Corporate Governance Committee and Member of the Board’s Nominating Committee from 2000 to

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2001, and Member of the Board’s Corporate Governance and Nominating Committee from 2002 to 2006), Sarah Carey (Member of the Yukos Board of Directors from 2000 to 2004) and Michael Hunter (former President of Dart Management Corporation and former head of Yukos’s minority shareholders coalition). Whereas the prosecution was allowed to introduce into the evidentiary record interrogation transcripts of witnesses made during the investigation, the defense’s written questionnaires of key witnesses taken abroad, directly relevant to the allegations, were rejected by the court. The prosecution argued that the Russian defense lawyers’ right to collect evidence was limited to the territory of Russia and the defense violated the law by obtaining witnesses’ statements abroad. When the defense requested the court’s assistance in obtaining witness testimony abroad pursuant to bilateral treaties for mutual assistance in legal matters, the court again sided with the prosecution and refused to assist the defense in its efforts. This was yet another instance of procedural inequalities disadvantaging the defense. In addition, the court denied the defense’s efforts to obtain testimony from Prime Minister Vladimir Putin, Deputy Prime Minister Igor Sechin (who is concurrently Chairman of Rosneft) and Finance Minister Alexei Kudrin. These officials do not enjoy legal immunity from being called to testify in court. Moreover, Sechin has been identified by Khodorkovsky as the main force behind his incarceration and the breakup of Yukos. The judge ruled that the defense’s motions to have the men appear as witnesses were “premature”—yet in the end the time never became “ripe” and the defense was not allowed an opportunity to question them in court. Meanwhile, Sergey Bogdanchikov, former Chief Executive of Rosneft, was summoned by the court but did not appear. Rosneft was the main beneficiary of the dismantling of Yukos, and along with Sechin, Bogdanchikov is widely considered to have been one of the key figures behind the officialdom’s onslaught against Khodorkovsky. The judge denied a defense motion to re-issue a summons for Bogdanchikov to appear at the proceedings. Of 93 individuals summoned to appear pursuant to requests from the defense, only 13 of them attended the proceedings pursuant to a summons—and the majority of the “no-shows” did not even explain their absence to the court. The court made no efforts to compel the witnesses to appear in court. Disqualification of Defense Experts An important aspect of the defense strategy entailed bringing to court a series of qualified experts to explain the factual basis of why the charges against Khodorkovsky and Lebedev are meritless and absurd. The defense sought both Russian and foreign experts who could speak authoritatively to the court in piercing through the ambiguities and generalities of the indictment. These experts were to reveal not only that the prosecutors made enormous errors in drawing up the charges, but also to what extent the prosecution of the case was handled by officials lacking even the basic expertise required in formulating allegations related to the activities of a major player in the energy industry. The prosecutors and the judge clearly did not want to confront—or be confronted with—the expert testimony that the defense had lined up. Despite the seemingly unassailable experience, knowledge and reputation of each of the experts that the defense sought to bring to the stand, prosecutors repeatedly demanded their disqualification citing irrelevant or invented pretexts. Prosecutors even assailed the credentials of the interpreter retained for non-Russian-speaking foreign experts, even though the interpreter selected was among the most experienced of the profession. The judge overwhelmingly validated the prosecution’s assertions, leading to a string of disqualifications of both Russian and foreign specialists. The court made it abundantly clear that regardless of the educational background, professional experience and skills possessed by an expert, he or she could ultimately be barred from testifying in the Khodorkovsky-Lebedev trial if they were being brought to court by the defense. Out of eight experts that the defense sought to bring to the court, only the first to appear in court for testimony was permitted to stand for questioning—and the court refused to include his written report in the evidentiary record.

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Defense Not Allowed to Cross-Examine Prosecution Experts The court did not permit the defense to cross examine prosecution experts despite the significant number of flaws in their reports pointed out by the defense. On four occasions the defense motioned the court to summon prosecution experts for cross-examination. On every occasion the motion was denied, leaving the assertions of prosecution experts in the trial record untested by the defense. This was a blatant violation of Article 6(3)(d) of the European Convention on Human Rights, which states: “Everyone charged with a criminal offence has the…minimum [right] to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him.” When the defense motioned for the exclusion of prosecution expert reports due to substantive flaws and procedural violations, and because the defense had been denied the right to cross-examine the authors of the reports, these motions were denied. Two further motions, requesting the production of materials used by prosecution experts in their analyses, were also denied. Prosecutorial Mistreatment and Intimidation of Witnesses and Experts The prosecution intimidated witnesses and experts in court in the course of their presentations and cross-examinations. Directly or indirectly, the witnesses and experts were routinely threatened with criminal prosecution, insulted and interrupted. Hints were made that they could share criminal liability if they were connected to Khodorkovsky and Lebedev. Shameful incidents of prosecutorial mistreatment of witnesses and experts occurred in open court, concerning witnesses Tatyana Lysova, Viktor Gerashchenko, Jacques Kosciusko-Morizet, Farid Khamidullin and Stephen Wilson, and experts Kevin Dages, Laura Hardin, John Romanelli, Natalya Lopashenko and Elena Rossinskaya. Prosecutors frequently became emotional in their opposition to defense witnesses and experts, raising their voices or shouting, stepping far outside the bounds of courteous behavior. On August 12, 2010, Stephen Wilson, a former international tax director at PwC and former Head of International Tax at Yukos, testified that the vertically integrated structure of Yukos reflected international norms and laws, and that it was not possible for Khodorkovsky or Lebedev to have embezzled Yukos oil or siphoned off sales proceeds. Although Wilson’s testimony directly challenged the validity of the charges, in response prosecutors avoided the substance of the testimony. Instead, Prosecutor Lakhtin insinuated that Wilson had underpaid his own personal Russian income taxes, and aided Khodorkovsky and Lebedev in embezzlement and laundering activities. Immediately after his appearance, as Wilson tried to leave the courtroom, two investigators attempted to serve him with papers summoning him for interrogation by Investigator Tatiana Rusanova in connection with a secret parallel case. Rather than address the serious questions raised in Wilson’s testimony, prosecutors brazenly attempted to intimidate not only Wilson, but any other potential witnesses with the courage to speak out in defense of Khodorkovsky and Lebedev. Attempts to Compel Witnesses to Testify Against Defendants On August 31, 2010, former Yukos executive Vladimir Pereverzin confirmed on the witness stand that the prosecution had offered him a chance to avoid a prison sentence if he testified against Khodorkovsky and Lebedev. Pereverzin is currently serving a sentence on charges analogous to those that Khodorkovsky and Lebedev face, having been convicted in a curiously separate trial for allegedly acting illegally with the two men and others in embezzling Yukos oil. Pereverzin told the court that he was offered probation in return for testifying against the defendants. His testimony echoed the treatment of former Yukos vice president and legal department head Vasily Alexanyan, arrested in April 2006 and held in pre-trial detention until January 2009—Alexanyan refused to provide false testimony against Khodorkovsky and Lebedev in exchange for desperately-required medical

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treatment.13 In yet another example, Frank Rieger, a German national and former senior Yukos official who was no longer working for the company in 2006, was detained for interrogation by investigators and pressured to agree to prepared statements implicating Khodorkovsky in the theft of billions of dollars. He refused. Attempts to Control Testimony of Prosecution Witnesses When the testimony of the prosecution’s own witnesses began to veer away from the prosecution’s line of argument, prosecutors sought to replace live testimony with transcripts of prior out-of-court interrogations that they desired to be inserted into the court record. Over repeated objections by the defense, the court allowed the reading of interrogation transcripts into the court record even when the prosecutors could not, as required by law, point to any material contradictions between in-court testimony and the statements made in the out-of-court interrogations as transcribed. The interrogation transcripts were only selectively provided to the court by prosecutors, and when provided the transcripts were often incomplete. One of the prosecution’s favored means of avoiding the obligations of due process—for example to circumvent rules on gathering evidence—has been the use of parallel investigations. Even if these parallel investigations never result in cases going to trial, they provided opportunities for law enforcement authorities to employ any means necessary to gather evidence, including the threats of criminal prosecution, detention and torture to extract false statements. Numerous witnesses called by the prosecution in the Khodorkovsky-Lebedev trial revealed on the stand that they had been interrogated in parallel investigations opened by investigators. Some of these parallel investigations have been conducted for secret cases; others led to convictions in trials that should instead have been joined with the current Khodorkovsky-Lebedev proceedings. Efforts by the defense to ask questions shedding light on the parallel investigations were cut off by the court. In numerous cases witnesses asserted that due to non-disclosure agreements signed with investigators, they were not permitted to reveal information about the parallel investigations. Abuse of Investigatory and Prosecutorial Powers through Coercion of PwC Many observers considered the endorsement of a decade of Yukos audits by PwC to be strong proof of Khodorkovsky’s and Lebedev’s innocence and the absurdity of the embezzlement charges. Until June 2007, PwC publicly stood by its 1995 to 2004 Yukos audits. When the Russian authorities attacked PwC over the audits in court in December 2006, PwC stated: “We will vigorously defend our position and reputation both in court and in dialogue with government authorities which are empowered to regulate [the] auditing profession.” In January 2007, PwC insisted that its Yukos reports were “properly prepared to present, in all material respects, the company’s financial position and financial results in accordance with the relevant Russian accounting standards” and that PwC “concluded these audits according to the highest professional and ethical standards strictly in compliance with Russian [law] and best [auditing] practices.” PwC was then subjected to police raids, partners were threatened with imprisonment for their work on Yukos, and legal proceedings unrelated to Yukos were brought against the firm. When PwC suddenly 13 At the Russian Supreme Court on January 22, 2008, Alexanyan testified that when he was being denied medical treatment in detention, Salavat Karimov, former chief investigator in the Khodorkovsky-Lebedev cases, told him: “[t]he leadership of the Prosecutor General’s Office understands that you must have medical treatment, maybe even not in Russia, you have a grave situation…We must have your testimony, because we can’t support those charges that we’re making against Khodorkovsky and Lebedev. If you give evidence that suits the investigation, then we’ll release you.” Alexanyan, who had already been diagnosed with HIV infection and who developed lymphatic cancer while being refused medical treatment in detention, further testified: “But I can’t perjure myself, I can not frame innocent people, I refused to do this. And I think that no matter how horrible my condition may be right now, the Lord will protect me, that is why I did not do this, I can not buy my life like that…”

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reversed itself and withdrew its decade of Yukos audits in June 2007, the firm’s aforementioned problems evaporated—even those problems ostensibly unrelated to Yukos. A broadly-cited threat hanging over PwC as it adamantly defended its Yukos reporting—that the firm’s Russian license could be revoked—has not been raised again by officials since PwC backed down, and Yukos-related investigations into the firm appear to have ceased. PwC asserted that the audits were pulled due to “new” information on Yukos that they received from prosecutors. However, documents and witness statements prove that the information provided by prosecutors was not new to PwC, and that in any case the issues raised did not affect the overall validity of the audits. The Khodorkovsky-Lebedev defense team has asserted since 2007 that PwC’s unusual and unconventional reversal was made in response to coercion and threats from Russian authorities. The Wall Street Journal and Financial Times undertook separate independent investigations into PwC’s actions, and obtained documents disproving PwC’s assertion about “new” information justifying the withdrawal of the audits. Both newspapers published major reports on the matter on September 7, 2010. Direct and Indirect Threats to Defense Counsel Shortly after the authorities began to attack Yukos in 2003, lawyers acting for the company or for Khodorkovsky and Lebedev routinely endured unlawful searches and the confiscation of privileged and confidential documents. Lawyers were threatened with disbarment or prosecution without valid cause, as a form of intimidation and vengeance for defending Khodorkovsky and Lebedev. Prosecutors have gone as far as to implicate defense counsel themselves with criminal liability due to their professional association with the defendants. The prominent cases of Svetlana Bakhmina and Vassily Alexanyan—two lawyers who were incarcerated and, in the case of Alexanyan, subjected him to treatment that the European Court of Human Rights found to be inhuman and degrading while he was terminally ill—revealed the cruel depths to which the authorities could act with impunity. These incidents created fearful precedents for the lawyers working on the current case. In the run-up to the current trial, prosecutors suggested that the defense counsel’s due process-related interventions should be assessed against “ethical” and “professional” requirements—essentially threatening disbarment. Such was the response to the defense’s reasoned and legally-grounded objections to prosecutorial misconduct in trying to hold the prosecution to the standards and requirements of the law. Prosecutors have regularly branded such threats during the course of the trial as well, particularly when tensions have risen in the courtroom over defense protestations of injustice. These barely veiled threats of punitive treatment weigh against all counsel representing Khodorkovsky and Lebedev. Through a statement made on September 29, 2010, Prosecutor Lakhtin—in scorning international counsel and foreign witnesses—revealed the position of Russian law enforcement authorities: that anyone who assists in the defense of Khodorkovsky and Lebedev obstructs justice and undermines the foundations of the state. Denial of Defense’s Access to Official Trial Transcripts Citing the Russian Criminal Procedure Code, which stipulates that official trial transcripts are to be prepared within three days of court sessions, the defense has repeatedly motioned the court to provide copies of the trial’s official transcripts. In April 2010, the defense argued that delays of several days or even several weeks could be understandable, but that there was no credible justification for the court not having provided a single official trial transcript to the defense since October 2009. In May 2010, some additional official trial transcripts were provided to the defense, but only covering the proceedings up to November 2, 2009. From May 2010 until the end of the defense phase of the trial, on September 22, 2010, the defense was provided no further official trial transcripts for the proceedings past November 2, 2009. Only on September 24, 2010 was the defense team provided with additional official trial transcripts—yet only for the period from November 3, 2009 to January 20, 2010. Even as the defendants began to deliver final arguments to the court on October 27, 2010, they remained deprived of official trial transcripts for the last nine months of the trial.

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Among the concerns that the defense seeks to address through access to the official trial transcripts is the court’s habit of excluding the full text of motions and in-court statements, which have instead been summarized along the following lines: “Khodorkovsky made a statement to the court, objecting to actions of the presiding judge.” The exclusion of the defense’s legal reasoning from the official transcripts is a brazen distortion of the trial record, and it is all the more unfair considering that prosecutors have been permitted to insert documents into the official transcripts as they desire. More broadly, official trial transcripts are a key tool that defense lawyers refer to in formulating their arguments and ensuring a robust defense strategy as a case unfolds, and in particular when formulating closing arguments. Interference in Defendants’ Access to Counsel and to Case File In the courtroom, the defendants have been constantly locked in a heavily guarded aquarium-like glass booth, making it difficult for them to consult with defense counsel and to view case materials. Documents, notes and even media clippings passed by counsel into the aquarium are under constant surveillance by armed guards. Meanwhile, in the defendants’ Moscow detention facility, their lawyers were repeatedly barred from visiting them in their isolation cells with a laptop computer containing a digitized version of the case materials. Prison officials ignored an unequivocal ruling by the Russian Supreme Court agreeing with Lebedev’s lawyers that they should be permitted to bring electronic media into the isolation cell.

Extended “Pre-Trial” Detention: Reforms Flouted by Obsessive Persecution of Defendants For approximately six of the last seven years the defendants have suffered the restrictions on access to legal counsel and the limitations on family visits imposed under “pre-trial” detention rules. Under these rules, combined with minimal exposure to fresh air and direct sunlight and inadequate opportunities for exercise, the detention regime becomes extremely difficult physically and psychologically, particularly over extended periods. Circumstances were especially harsh during Moscow’s summer heat wave in 2010, when cell temperatures hovered at 50 degrees Celsius (122 degrees Fahrenheit). Khodorkovsky and Lebedev have repeatedly petitioned for removal from their unnecessarily onerous confines of isolation, requesting the less restrictive conditions of incarceration to which they were sentenced in their first trial. Their extended “pre-trial” detention amounts to a violation of Article 3 of the European Convention on Human Rights, which prohibits torture or inhuman or degrading treatment or punishment. Recent legal reforms brought forth by President Dmitry Medvedev have eliminated pre-trial detention for certain economic crimes in an effort to humanize the Russian criminal justice system. Changes to the Russian Criminal Procedure Code and Russian Criminal Code were signed into force on April 7, 2010, following the deaths in pre-trial detention of 37-year-old lawyer Sergei Magnitsky in November 2009 and 53-year-old entrepreneur Vera Trifonova in April 2010; both detainees were denied medical treatment after refusing to cooperate with corrupt officials. These reforms were ignored on May 14, 2010 when the Khamovnichesky Court granted the prosecution’s request to extend the “pre-trial” detention of Khodorkovsky and Lebedev for another three months. Khodorkovsky and Lebedev had been held under harsh “pretrial” detention conditions—normally intended for short periods of time only—for a total of five and a half years since their arrest in 2003. In response to the May 14, 2010 ruling, Khodorkovsky launched a hunger strike to raise awareness that the Russian justice system was failing to implement the reforms.14 Asserting that President

14 Khodorkovsky’s open letter to the Chairman of the Supreme Court of the Russian Federation announcing the hunger strike is available at: http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/17_May_2010_Khodorkovsky_Open_Letter_Hunger_Strike.pdf.

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Medvedev’s reform goals were being blatantly undermined, and that a dangerous precedent was being set, Khodorkovsky vowed to continue his hunger strike until President Medvedev had been seized of the matter. The hunger strike ended after two days, following public declarations that the Chair of the Russian Supreme Court and President Medvedev were to evaluate the situation. On May 21, 2010, the Judicial Collegium for Criminal Cases of the Moscow City Court issued a ruling confirming the validity of the extension of the detention measures. To do so, the Collegium had to deny that Khodorkovsky and Lebedev were on trial for alleged acts committed in the course of their business—an obvious fallacy and disingenuous means of preventing the defendants from being freed of the constraints of “pretrial” detention. This not only placed the Khodorkovsky-Lebedev case outside of the scope of the recent legal reforms, but also opened the door to similar misinterpretations of the law being applied in other cases across the country. Concerned members of the Russian Duma have begun to examine why the courts have refused to apply the new law, but in the meantime, on August 16, 2010 the Khamovnichesky Court yet again extended the “pretrial” detention of Khodorkovsky and Lebedev for three months, to November 17, 2010. The defendants’ appeal to the Moscow City Court was rejected on September 2, 2010.

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CONCLUSION When prosecutors with a track record of thuggish behavior openly brandish the threat that anyone who opposes them may fall victim to arbitrary detention and prosecution, the prosecutors may scare away witnesses and experts, but they do nothing to bolster the credibility of their allegations. Moreover, these same prosecutors seem so emboldened by their epaulets, or by powerful figures behind the instigation of this case, that they have neglected to prove their own charges, failed to explain their central theses and avoided confronting the defense’s counterarguments. For these prosecutors, professionalism, rigor and courtesy towards the defendants have been trumped by misconduct, sloppiness and mockery. This suggests that the outcome of the trial will not and cannot depend upon the indictment or upon the case as presented by prosecutors. Any independent court would have dismissed the case and terminated the trial on the basis of the plain facts and legal reasoning advanced by the defense since the proceedings began. By his acts and omissions in the handling of the case, Judge Viktor Danilkin has been drawn into complicity with and responsibility for the official misconduct and due process violations that the prosecutors brought to the trial. At the fulcrum of the adversarial balance, the judge has effectively abrogated any real equality of arms, unfairly tilting the proceedings to favor the prosecution. Given the prosecution’s failure to prove their case, any guilty verdict will lack grounding in facts and properly applied law, and will be motivated by reasons alien to justice. The judge is undeniably in the unenviable position of being the focus of incredible direct or indirect pressure by the prosecutors, and those behind them, to rule against the defendants. Nevertheless, in line with President Medvedev’s declarations regarding the importance of an authoritative and independent judiciary in Russia, the judge cannot render credible guilty verdicts on the deficient legal and evidentiary grounds that have been provided. This trial carries enormous symbolic value for Russia and the world. Will the “tax terrorism”, state-backed raiding of private property and trampling of human rights of recent years be validated and continued? What messages would a guilty verdict send about the competence and independence of the Russian justice system and the prospects of President Medvedev’s desire to stamp out “legal nihilism”? What would be the effects on foreign investors, foreign governments and in foreign or international tribunals? If the court can ignore both facts and laws and render a judgment “on order”, will that not signal to law enforcement and judicial authorities across the country that they can do the same, with impunity? As posited by Khodorkovsky, will the court “understand that it is a court, and not a cheap instrument for raiders and corruptioneers? Will it help the President and the country? We’ll see.”

November 2, 2010