A memo to Mikhail Borisovich Khodorkovsky “On non-expediency to be guided by the norms of the Russian labor legislation". The website Prigovor.ru reminds its readers of what happened on October 17, 2003.
On this day 19 years ago, on October 17, 2003, his summons to appear before an investigator received Vassily Shakhnovsky, the head of the company “Yukos-Moscow”, personal fortune of whom was estimated at 1.29 billion U.S. dollars. As the result, Shakhnovsky was charged under Article 198, paragraph 2 of the Criminal Code of the Russian Federation – “evading payment of taxes on an especially large scale”. As a pre-trial restriction, a pledge not to leave town “was taken” from him. The sum of back taxes to the budget amounted to 29 million rubles. With account of fines and penalties, on the whole, he had to pay 53.366 million rubles.
Apart from taxes, in his case was mentioned Article 327, paragraph 2 – “Forgery, Manufacture, or Sale of Falsified Documents”. The materials of the criminal case of the “tax dodger Shakhnovsky” made up eight volumes.
According to the investigation, “in 1998 Vassily Shakhnovsky held the office of the vice-president of the JSC “Rosprom”, then, in 1998 -2000, he was the president of “Rosprom”, and, as from November 2000, – president of the JSC “Yukos-Moskva”. In all these entities Shakhnovsky received salaries and from them, without fail, paid taxes. At the same time, according to the investigation, in 1998, 1999, and 2000, Mr. Shakhnovsky handed in to the tax agency an application to give him “a patent for simplified tax payments”.
In the corresponding for that purpose documents, he included data concerning his rendering consulting and information services as an entrepreneur without forming a legal entity for corresponding compensation. Eventually, Shakhnovsky received the license allowing him not to pay a certain part of taxes, as well as to increase to a certain small amount payments to the Pension Fund of Russia.
Mr. Shakhnovsky argued that he had provided consulting and information services to the offshore firm “Status Services Limited”, The Isle of Man. According to the investigation, Mr. Shakhnovsky did not render such services and used this agreement for evading tax payments”.
“The Article imputed to Vassily Shakhnovsky”, pointed out the newspaper “Kommersant”, “envisages imprisonment for up to five years. However, in case of an agreement with the defendant and payment of arrears and penalties, it is possible to avoid criminal prosecution in connection with the so-called repentance”. Still, the newspaper also said that Shakhnovsky “does not admit his guilt”.
BUFFOONERY OF KHODORKOVSKY ABOUT “FUNNY SUMS”
Against the backdrop of the accusation with regard to Vassily Shakhnosaky, the press service of Yukos together with Mikhail Khodorkovsky rhapsodized, strenuously joked, and dramatically wondered. “We cannot comment the charges brought against Shakhnovsky as a physical person", told to the newspaper "Izvestiya” Alexander Shadrin, head of the "Yukos" press service. "Nevertheless, it is very strange that the case on non-payment of taxes by a physical person is opened by the Office of the Prosecutor General. It's difficult to divert oneself from the idea that this is all feverish efforts in order to find at least something criminal in actions of the shareholders and employees of our oil company".
“The actions of the Office of the Prosecutor General can be qualified as corroboration of the Yukos transparency, as accusations of Shakhnovsky related to past times, and the question is of some funny sums, but this means that they have nothing else to incriminate him”, clowned around Khodorkovsky on October 17, 2003, a week before the invitation to the interrogation “on the witness stand”.
Obviously, the bravado of Mikhail Borisovich Khodorkovsky was based on the “political component” – at the moment of the accusation, an operation was in full swing to provide Shakhnovsky with parliamentary immunity – and on October 27, 2003, the legislative branch of Evenkia (Suglan) delegated from the Evenkia Autonomous Area Vassily Shakhnovsky, “an Evenk” from Moscow, and in such a way he became a member of the Federal Council of the Russian Parliament.
However, it was quickly found out that the billionaire from Moscow had been nominated with breaches of procedures. So, on November 6, 2003, the Krasnoyarsk District Court recalled the judgment of the Parliament of Evenkia concerning the elections of Shakhnovsky to the Federal Council, and then Shakhnovsky himself wrote the declaration of waiver.
WHOLE YUKOS WAS CAUGTH
The prize of Khodorkovsky’s words that “apart from funny sums, there is nothing to file”, the wide public learned a bit later, already in the course of the court proceedings in the case of Vassily Shakhnovsky, in January 2004, when the evidential base was studied.
Very intriguing documents emerged. In particular, “the agreement on providing consulting services with the same offshore firm “Status Service Limited”, concluded in 1997-1999 by the other heads of Yukos – Mikhail Brudno, Platon Lebedev, Leonid Nevzlin, Viktor Kozakov”.
"In this case, there are also the receipts of received money from that offshore company. Besides, to this file documents has been added which testify that another top manager of Yukos Boris Zolotaryov concluded in 1997 a similar agreement and received a big sum of money from another offshore on The Isle of Man – Hinchley Limited”, - reported the newspaper “Kommersant" in the article entitled "The Isle of Man was consulted by the whole Yukos”.
Apart from that, in court was also studied another document testifying that “tax optimization” in Yukos was of task-oriented and systematic character. It was a memo addressed to Mikhail Khodorkovsky and seized in the company Yukos.
A MEMO ON REMUNERATIONS NOT FOR ALL
“The Court presented a memo called “Conclusion on remuneration”. The main idea relates to non-expediency to be guided by the norms of the Russian labor legislation while formalizing employer-employee relations.
“The full observance of the labor legislation envisages considerable compensations in case of dismissal", pointed out the document. "In relations with employees, it makes impossible to carry out operative reconstruction of the company or its subdivisions and reduction of the number of the workforce". Attention was paid as well to other “inconveniences” of the Russian legislation.
In this document, pointed out the newspaper “Izvestiya”, various schemes were proposed for formalizing relations with employees, including payments of financial allowances. Among others, it was proposed to put employees on the staff according to patterns of hiring personal abroad, as well as to organize the payment of insurance monies with the use of the created for that purpose affiliate insurance companies in offshore zones, for instance, on Cypress – there it is possible to create such a company within a month.
Another way – "to pay wages to employees of the company as to individual entrepreneurs without forming a legal entity. Thereat, it was proposed to conclude agreements with such newly formed “entrepreneurs” with Yukos affiliates. It was proposed to use such scheme not for all, but only for the highest managers of the company. As to their official salaries, it was recommended to present "a reasonable number, for instance, 100 thousand rubles".
OFFSHORE LAPSES OF MEMORY
The verbatim reports of the interrogations of Shakhnovsky showed that there had been no "consulting services whatsoever", and the alleged activity had been used as a cover.
Here are some extracts from the interrogation of Shakhnovsky in the Office of the Prosecutor General, which were disclosed in court in presence of representatives of the press.
- What salary you received in Yukos?
- I don’t remember.
- Where you founded clients for consulting services?
- They by themselves contacted me.
- What are their initials?
- I don’t remember.
- Have you visited The Isle of Man or The British Virgin Islands?
- I haven’t.
- Do you have acquaintances there?
- I have a lot of acquaintances, I don’t ask them where they are from.
- In what form came orders?
- I don’t remember.
- Have you kept working materials of the fulfilled orders?
- I haven’t.
- I do not keep unnecessary documents.
- Why have you stopped consulting activity?
- I don’t remember. Perhaps, orders ceased to come.
It has to be said, that Mikhail Khodorkovsky was not more original. He assured that he had provided “real consultations”, but he could not remember which and to whom, and for leverage mentioned the right “non to testify against himself” according to Article 51 of the Constitution of the Russian Federation.
A LITTLE PENITENCE LETTER
However, after such a disavowal, at a certain moment, a change of paradigm took place. It is evidenced by the letter addressed to Salavat Karimov, senior investigator of the Office of the Prosecutor General:
“I regret that the state has not received 28 million rubles, with penalties and fines 53 million rubles. Taking into consideration that I have paid this sum, I ask to drop my criminal case, as I didn't present any false information". Shakhnovsky himself refused outright to talk about the circumstances of the emergence of this memo”, pointed out the newspaper “Izvestiya”.
It seems that the problem with Shakhnovsky was that in Yukos all the “main shareholders”, dollar billionaires, evaded taxes (See also the article “Tax mechanics of Khodorkovsky as a physical person”.
“PROFITS OF THE OIL COMPANY WERE TRANSFERRED TO ACCOUNTS OF FOREIGN COMPANIES SUBORDINATED TO YUKOS”
So, on February 5, 2004, the former president of the company “Yokos-Moskva” Vassily Shakhnovsky was pleaded guilty of tax evasion to the tune of 28.5 million rubles. The Moscow Meschyansky Court, taking into consideration rewards and children, sentenced him to one-year imprisonment.
“Although Shakhnovsky has not recognized his guilt, the Court considers it as proved by witnesses’ evidence and material evidence. The Court found that Vassily Shakhnovsky, in fact, didn’t provide services to a foreign company, i.e. he didn't conduct business having illegally obtained the patent of an entrepreneur without the formation of a legal entity, and in such a way he didn’t make additional payments to the Pensions Fund and income tax of a physical person. This is corroborated by the documents seized in the office of the former State Duma deputy Vladimir Dubov and in other offices located in the township Zhukovka of the Moscow Region. Among them, there are documents showing that services to the company "Status Service Ltd" also provided other shareholders of Yukos - P. Solotaryov, V. Dubov, M. Brudno, P.Lebedev, and others, as well as that profits of the oil company were transferred to accounts of foreign companies subordinated to Yukos".
Nevertheless, Shakhnovsky was freed of punishment in connection with the “changed circumstances” – the sum of “simplified” taxes together with penalties were discharged before the pronouncement of the verdict.
“As to defenders of the accused, namely Heinrich Padva, Yuri Klyachkin, and Vassily Aleksanuan, they looked black as thunder. They understood that this verdict would have very serious consequences for all owners and top-managers of Yukos, concluding consulting agreements with offshores according to similar schemes”, stressed the newspaper “Kommersant”.
And this understanding, as has shown further penal proceedings on criminal cases of the “main shareholders”, has turned out to be right.
EPILOGUE: A BACKUP STASH OF THE “PENSIONER” SHAKHNOVSKY
Soon Vassily Shakhnovsky left Russia and went to Switzerland where, as reported, he engaged in research projects on studying wild nature and declared himself a “pensioner”. But he still has retained a backup stash – through “Tucana Trust” he owes 7.8 % of “Group Menatep”, notes the website Prigovor.ru.
(See the previous article “On this day, in the Yukos case occurred “the Drel casus”. “False bottomed” lawyer. Drel for “civil society”. The end of the firm “Corbiere Private Office Limited”. The website Prigovor.ru reminds its readers of what happened on October 16, 2003.