Tax mechanics of Khodorkovsky as a physical person

Tax mechanics of Khodorkovsky as a physical person

Mikhail Khodorkovsky 'as a physical person' in the years 1998 – 1999 evaded paying taxes and insurance contributions in the amount of 53 million rubles (1.7 million US dollars). The website Prigovor.ru reminds its readers of what happened on August 12, 2004.

18 years ago, on August 12, 2004, in the Meschansky District Court of the Russian capital, an episode of personal greed was studied within the framework of the criminal case No 1-39/05 with regard to Mikhail Khodorkovsky, former head of the company Yukos, and Platon Lebedev, former head of the bank ‘Menatep’, i.e. the two richest people in Russia. The Court discussed tax evasion of these defendants, who, apart from large-scale machinations and tax dodging of their companies, were charged under Article 198, paragraph 2 of the Criminal Code of the Russian Federation (Evasion by a Natural Person of Paying a Tax or a Fee to the state non-budgetary funds on an especially large scale).

And this was, perhaps, one of the most characteristic episodes that demonstrated that the notorious ‘cleanness and transparence’ – be that in the company Yukos itself, be that around it, - is nothing more than a myth. Or rather, what else was to await from such ‘captains of business' who were directed only by one idea, namely – 'from such a state it's a shame not to steal.' Although, perhaps, the reason is banal avarice which was legendary in Yukos. It’s an episode from the series ‘one older woman – one ruble, ten older women – account in an offshore bank.’ One way or the other, the cunning scheme of tax evasion of a physical person emerged within the framework of the criminal case N0 1-39/05.

‘And illegally acquired a license of private entrepreneur…’

As it was reported in the press release of the Office of the Prosecutor General of Russia from October 25, 2003, Mikhail Khodorkovsky 'as a physical person in years 1998 – 1999 evaded paying taxes and fees to the Pension Fund in the amount of 53 million rubles (1.7 million US dollars). For that purpose, Khodorkovsky ‘had knowingly filled out false documents that he allegedly had rendered consulting services to a foreign company, and had illegally obtained the patent of a private entrepreneur. He didn’t provide this service, but, nevertheless, received 142 million rubles as recompense and then evaded paying income taxes and fees.’

This tax episode of Khodorkovsky, among other things, figured in a detailed document entitled ‘Background information on the criminal case No 18/41-03’, that was at the disposal of the business publication ‘Kommersant’ (see No 198 from 29.10.2003, page 18). In this document are described in detail all the mechanics of the ‘physical person’ of Khodorkovsky which, in a nutshell, consisted in paying to that oligarch money made by him at the main place of work, but through a foreign firm and was cross-casted as ‘consulting’. As the investigation noted, ‘it was known for a fact that the mentioned sums of money he had become in requital for his employment duties in the CJSC ‘Rosprom’ and JSC The Oil Company Yukos, and not for rendering service in the capacity of entrepreneur, and that as such allowed to evade paying taxes and other obligatory contributions to the budget.

Here are some extracts from this background:

‘On the whole, during the period from 1998 to 1999, M.B. Khodorkovsky illegally didn’t pay taxes and premiums to the Pension Fund from the personal income in the amount of 54 532 186 rubles (436 079 minimum monthly wages), including  53 024 274 rubles of income tax (418 018 minimum monthly wages), 1 507 912 rubles in premiums to the Pension Fund (18 061 minimum monthly wages)’…

'By his deeds, M.B. Khodorkovsky committed tax and premium fees evasion of a physical person to the state extra-budgetary funds on an especially large scale by way of including to a declaration false data on incomes which is a crime under Article 198, paragraph 2 of the Criminal Code of the Russian Federation (Tax episode, page 198, part 2).

In 2004, during the court process of the first case of Khodorkovsky and Lebedev, among other things, the results were unveiled of the commission-bookkeeping legal expertise which on demand of the Office of the Prosecutor General of Russia was carried out in 2003 by Pavel Kupriyanov, employee of JSC ‘Vneshauditkonsalting’ and Vsevolod Yeloyan, former employee of tax services. The main task of this expertise was to find out what amount of money Khodorkovsky had to pay as income tax and fees to the Pension Fund, had he paid them not as entrepreneur without the formation of the legal entity, but as a physical person. The experts came to the conclusion that this sum amounted to 54 million 532 thousand 186 rubles’.

Light assaults of forgetfulness

Of course, Mikhail Khodorkovsky himself denied all this, thinking of himself, perhaps, as the most disciplined taxpayer in Russia. Thereat, he didn’t deny his interacting with the foreign companies ‘Hinchley Ltd’ and ‘Status Services Limited’, and, as it was said, they had sent to him clients for consulting, and he had ‘rendered services’ to them. Khodorkovsky refused to name, at least, one such client taking advantage of Article 51 of the Constitution or the Russian Federation which gives the right not to testify against oneself and one’s close relatives. He could not remember the circumstances of the ‘signing of the contracts for consultations’, but this could not help him to escape from responsibility. According to the Verdict of the Meschansky District Court of Moscow from May 16, 2005, 'on this episode, a charge was filed against the defendant Khodorkovsky M.B. under Article 198, paragraph 2 of the Criminal Code of the Russian Federation and, ‘in spite of the refusal to admit guilt by the defendant Khodorkovsky M.B., his guilt with regard to this episode was proved by the evidence of the witnesses and by the materials of the court case’, notes the website Prigovor.ru.

(See also the previous article: Financial Times: ‘Yukos secretly provides support for the Communist Party.' Against the background of the criminal cases, Mikhail Khodorkovsky decided 'to strengthen his work with political parties. Comrade Syuganov, leader of the communists, tapped in person into the process of whitewashing Yukos. The website Prigovor.ru reminds its readers of what happened on August 11, 2003.

17 years ago, on August 12, 2004, in the Meschansky District Court of the Russian capital, an episode of personal greed was studied within the framework of the criminal case No 1-39/05 with regard to Mikhail Khodorkovsky, former head of the company Yukos, and Platon Lebedev, former head of the bank ‘Menatep’, i.e. the two richest people in Russia. The Court discussed tax evasion of these defendants, who, apart from large-scale machinations and tax dodging of their companies, were charged under Article 198, paragraph 2 of the Criminal Code of the Russian Federation (Evasion by a Natural Person of Paying a Tax or a Fee to the state non-budgetary funds on an especially large scale).

And this was, perhaps, one of the most characteristic episodes that demonstrated that the notorious ‘cleanness and transparence’ – be that in the company Yukos itself, be that around it, - is nothing more than a myth. Or rather, what else was to await from such ‘captains of business' who were directed only by one idea, namely – 'from such a state it's a shame not to steal.' Although, perhaps, the reason is banal avarice which was legendary in Yukos. It’s an episode from the series ‘one older woman – one ruble, ten older women – account in an offshore bank.’ One way or the other, the cunning scheme of tax evasion of a physical person emerged within the framework of the criminal case N0 1-39/05.

‘And illegally acquired a license of private entrepreneur…’

As it was reported in the press release of the Office of the Prosecutor General of Russia from October 25, 2003, Mikhail Khodorkovsky 'as a physical person in years 1998 – 1999 evaded paying taxes and fees to the Pension Fund in the amount of 53 million rubles (1.7 million US dollars). For that purpose, Khodorkovsky ‘had knowingly filled out false documents that he allegedly had rendered consulting services to a foreign company, and had illegally obtained the patent of a private entrepreneur. He didn’t provide this service, but, nevertheless, received 142 million rubles as recompense and then evaded paying income taxes and fees.’

This tax episode of Khodorkovsky, among other things, figured in a detailed document entitled ‘Background information on the criminal case No 18/41-03’, that was at the disposal of the business publication ‘Kommersant’ (see No 198 from 29.10.2003, page 18). In this document are described in detail all the mechanics of the ‘physical person’ of Khodorkovsky which, in a nutshell, consisted in paying to that oligarch money made by him at the main place of work, but through a foreign firm and was cross-casted as ‘consulting’. As the investigation noted, ‘it was known for a fact that the mentioned sums of money he had become in requital for his employment duties in the CJSC ‘Rosprom’ and JSC The Oil Company Yukos, and not for rendering service in the capacity of entrepreneur, and that as such allowed to evade paying taxes and other obligatory contributions to the budget.

Here are some extracts from this background:

‘On the whole, during the period from 1998 to 1999, M.B. Khodorkovsky illegally didn’t pay taxes and premiums to the Pension Fund from the personal income in the amount of 54 532 186 rubles (436 079 minimum monthly wages), including  53 024 274 rubles of income tax (418 018 minimum monthly wages), 1 507 912 rubles in premiums to the Pension Fund (18 061 minimum monthly wages)’…

'By his deeds, M.B. Khodorkovsky committed tax and premium fees evasion of a physical person to the state extra-budgetary funds on an especially large scale by way of including to a declaration false data on incomes which is a crime under Article 198, paragraph 2 of the Criminal Code of the Russian Federation (Tax episode, page 198, part 2).

In 2004, during the court process of the first case of Khodorkovsky and Lebedev, among other things, the results were unveiled of the commission-bookkeeping legal expertise which on demand of the Office of the Prosecutor General of Russia was carried out in 2003 by Pavel Kupriyanov, employee of JSC ‘Vneshauditkonsalting’ and Vsevolod Yeloyan, former employee of tax services. The main task of this expertise was to find out what amount of money Khodorkovsky had to pay as income tax and fees to the Pension Fund, had he paid them not as entrepreneur without the formation of the legal entity, but as a physical person. The experts came to the conclusion that this sum amounted to 54 million 532 thousand 186 rubles’.

Light assaults of forgetfulness

Of course, Mikhail Khodorkovsky himself denied all this, thinking of himself, perhaps, as the most disciplined taxpayer in Russia. Thereat, he didn’t deny his interacting with the foreign companies ‘Hinchley Ltd’ and ‘Status Services Limited’, and, as it was said, they had sent to him clients for consulting, and he had ‘rendered services’ to them. Khodorkovsky refused to name, at least, one such client taking advantage of Article 51 of the Constitution or the Russian Federation which gives the right not to testify against oneself and one’s close relatives. He could not remember the circumstances of the ‘signing of the contracts for consultations’, but this could not help him to escape from responsibility. According to the Verdict of the Meschansky District Court of Moscow from May 16, 2005, 'on this episode, a charge was filed against the defendant Khodorkovsky M.B. under Article 198, paragraph 2 of the Criminal Code of the Russian Federation and, ‘in spite of the refusal to admit guilt by the defendant Khodorkovsky M.B., his guilt with regard to this episode was proved by the evidence of the witnesses and by the materials of the court case’, notes the website Prigovor.ru.

(See also the previous article: Financial Times: ‘Yukos secretly provides support for the Communist Party.' Against the background of the criminal cases, Mikhail Khodorkovsky decided 'to strengthen his work with political parties. Comrade Syuganov, leader of the communists, tapped in person into the process of whitewashing Yukos. The website Prigovor.ru reminds its readers of what happened on August 11, 2003.

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