Russian tycoon faces prison for $1.4b 'fraud'

MOSCOW - The most important Russian court case since the collapse of communism is expected to reach its climax today when a Moscow court will decide whether Mikhail Khodorkovsky is guilty of fraud and embezzlement amounting to $1.4billion.

Khodorkovsky, once Russia's richest man, was arrested 17 months ago, charged with fraud and tax evasion and held in prison. His Yukos oil firm has since been crushed under the weight of a $38.48bn back-tax bill.

Analysts say 41-year-old Khodorkovsky's fall from grace and the legal assault on Yukos was Kremlin punishment for the tycoon's political ambitions.

His supporters expect him to be found guilty in what they claim is a show trial reminiscent of those orchestrated by Josef Stalin in the 1930s. They claim he is being punished for having dared question President Vladimir Putin, for having funded opposition parties and for generally getting too big for his boots when he was the chief executive of Yukos, formerly Russia's biggest oil exporter.

The Kremlin, which has seen its democratic credentials and international investment reputation take a battering on the back of the case, sees things differently.

It claims that Mr Khodorkovsky, who was once Russia's richest man, has avoided paying taxes and bought up the assets that made him wealthy for a fraction of their worth in a series of insider auctions.

The state prosecutor has asked that he be sentenced to 10 years for being part of a "criminal enterprise" that systematically defrauded the government. In reality things are not so clear-cut.

Mr Khodorkovsky, 41, did not accumulate the $15.2bn he was estimated to be worth last year by methods that most countries would consider "clean". The catch is, though, that neither did anyone else in Russia.

Like the other oligarchs, Mr Khodorkovsky took his share of the pie in a deal sanctioned by the then government of Boris Yeltsin. It was a trade-off. The oligarchs helped Mr Yeltsin by loaning his ailing government money in return for snapping up businesses at bargain basement prices.

Where Mr Khodorkovsky differs from most of the other oligarchs, though, is that he then did what Mr Putin told the businessmen they should never do: interfere in politics.

He has already paid a price for that. Yukos has been decimated. His wealth has shrunk from more than $20.7bn to $2.7bn and he has spent 18 months in a prison cell. The question that will be answered today is: does Mr Putin think that was enough?

Prosecutors have asked for the maximum 10-year jail term, but the decision lies with Judge Irina Kolesnikova. Russian judges usually deliver the sentence at the same time as the verdict, or straight after it.

Khodorkovsky's lawyers say their client is innocent but are resigned to a guilty verdict, which they say has already been dictated by the Kremlin, which denies unduly influencing proceedings.

"I visited him and he is very calm, and shows the courage and dignity that is typical of him," Khodorkovsky's lawyer Yuri Schmidt told Ekho Moskvy radio on the eve of the verdict. With a jail term inevitable in most observers' eyes, the focus is on its length and what that could show about President Vladmir Putin's rule.

Analysts say a two-year jail sentence rather than a 10-year stretch would show a softening in the Kremlin, but that Putin would prefer a sentence that keeps Khodorkovsky well away from politics until after 2008, when Putin must stand down.

Courtroom proceedings are due to begin tonight (NZ time), but it is not clear how long the judge will take to deliver her verdict.

Khodorkovsky will listen to his fate from the metal cage in the courtroom where he has watched the trial since it started last June, alongside his co-defendant Platon Lebedev, a Yukos minority shareholder facing almost identical charges.

Many other Yukos shareholders and managers have fled Russia, firing accusations and legal suits at the Kremlin from the safety of exile in Israel or the United States.

The fall of Yukos and Khodorkovsky has undermined investor confidence in Russia, home to vast mineral and energy resources, and sensitised the stock market to any official moves against companies that are seen as less than "loyal" to the Kremlin.

- INDEPENDENT and REUTERS