“The OJSC VNK “without filling”. The scheme of transfer price setting in Yukos – profits to offshores, expenses to shareholders of “affiliates” and state. The website Prigovor.ru reminds its readers of what happened on June 21, 2010.
On this day 13 years ago, on June 21, 2010, in the Khamovnichesky District Court of Moscow to the process pertaining to the criminal case against Yukos former head Mikhail Khodorkovsky and former leader of the International Financial Association MFO “Menatep” arrived the head of the Russia’s bank “Sberbank” Herman Gref. The mentioned defendants were accused of oil theft and laundering of money acquired by illegal means, and Herman Gref was announced as a “witness of the defense” on the initiative of the lawyers of swindlers from Yukos, as in 1998-2000 he had worked as a first deputy of the minister of state property of Russia and could explain some issues. During two hours, the witness Gref H.O. answered the question of participants of the process.
(See also the article “They carried out criminal activity in the oil complex of the country”).
The business press that, obviously, lost the sense of reality, told to its audience how Herman Gref “justified Khodorkovsky on the main charge count”. Publications with typical “telling headlines” filled all business media outlets and portals. In fact, the testimonies made by the witness Herman Gref “in favor of Khodorkovsky”, were to the advantage of the prosecution.
“The head of the bank “Sberbank” Herman Gref, summoned as a witness, answered the questions posed by the former head of the company Yukos Mikhail Khodorkovsky. In particular, answering the question about control methods of the Ministry of State Property with regard to delivering of oil to pipelines and for export, Herman Gref said: “It was not part of my functions to prove such information, other state agencies were responsible for that. But if embezzlement had taken place, this fact would have been known to me”, reported the newspaper “Kommersant” and other business media outlets.
KENNETH DART GAVE YUKOS SCHEME
Gref’s lack of knowledge about oil theft didn’t exonerate Khodorkovsky from responsibility. Didn’t exonerate because oil theft in physical meaning was not imputed to Khodorkovsky, although the defense, as well as Khodorkovsky himself, replicated this invented accusation at every step. The question was false.
According to the materials of the case, Khodorkovsky was charged of organizing oil theft by way of it juristic reissuing trough agreements of sale and purchase, and not of its stealing by way of pouring oil from barrels into canisters and then throwing them over a fence.
Thus, the answer of Herman Gref in this part was from the series “as the question, so the answer”. By the way, the scheme of oil embezzlement through its juristic reissuing which had been used by the organized criminal group of Khodorkovsky, was “exposed” by the United States citizen Kenneth Dart. His group didn’t like at all that they, being shareholders of “affiliates”, were being looted by Moscow’s robber-barons.
HOW THE OJSC “VNK” WAS EMBOWELED
One more piece of “justification” from Herman Gref dealt with machinations with the shares of the OJSC VNK. The shares of the VNK’s “affiliates” were exchanged for Yukos shares and pledged to foreign companies. It was referred to the episode when the cunning “major shareholders” of Yukos through false agreements had grabbed from the state a 38% stock of shares of the OJSC “VNK” worth 36 215 633 049 rubles.
“At that time, we had plans for privatization of the company VNK, and we found out that inside VNK there was no filler”, said Herman Gref. In his words, he had met with Khodorkovsky and proposed to him to give back “the filling”.
Khodorkovsky proposed to buy the OJSC VNK for $18 million without “the filling”. Gref said it was impossible, VNK could be sold only with its shares.
“It turned out that there was a claim from a third side that hindered (bringing back of the shares). Then, a proposal emerged to sign an agreement that would oblige to bring the shares back”, explained to the court Herman Gref. The agreement that had been compiled with participation of a Yukos representative, Khodorkovsky the ripper didn’t sign. Gref, according to his words, warned that the shares “would be recovered by other means”, reported the media outlet “Gazeta.ru” and specified that the witness Herman Gred didn’t took part in the further destiny of VNK shares, as he changed his place of work and didn’t follow the situation, but he knows that “this stock of shares was given back and the company was sold”.
(On this episodes, following persons were sentenced: Mikhail Khodorkovsky, Platon Lebedev, business manager of the company “Yukos EP” Ramil Burganov and Leonid Nevzlin. See also the article “On this day, investigators searched traces of Nevzlin. “Leonid Nevzlin in 1998, as part of the organized group of persons, pocketed 38% of the portfolio shares of “Tomskneft", VNK, and “Achinsk NPZ”).
DUBIOUS PRACTICE OF YUKOS
Not less “justifying” were Herman Gref’s testimonies on transfer price formation. According to the press, Gref’s testimonies came down to the statement that Russian price, for objective reasons, had been lower than European, and, because of that, price difference was a usual thing.
“It could be explained by a whole range of factors. In the first place – by export taxation”, explained the head of Sberbank. The conclusion was in the headline: “Sberbank’s head acknowledged that Yukos acted within the pale of law”.
They would not present in detail the testimonies of the witness Gref H.O. about transfer price formation, as they exposed the other side of this question that Khodorkovsky and his lawyers called “normal international practice”. The practice turned out not that normal.
PROFITS TO OFFSHORES, EXPENSES TO RUSSIA
(From materials of the Khamovnichesky District Court of Moscow)
“The witness Gref H.O. told the court that questions of transfer price formation for Russia, at that time, had been a big problem. The use of transfer prices is a subject of strict regulating in all countries, there are corresponding rules of the OECD. Nevertheless, the problem included in itself two components: non-receipt of tax payments to budget and violation of the rights of shareholders. Non-receipt of tax payments to the Russian budget was the result of the fact that profits, received from selling of oil produced in Russia, were transferred to foreign offshores, i.e. in the so-called “centers of profit”, and expenses connected with production remained on Russian companies, i.e. in the so-called “centers of expenses”.
Violation of the rights of producing companies’ shareholders, including the state, was manifested by the fact that they turned out to be “centers of expenses”, was pointed out in the testimonies of “the defense witness” that rather precisely described colonial methods of working of “the most transparent” and very “progressive” oil company”, notes the website Prigovor.ru.
(See also the previous article “On this day, Yukos became “a big case”. The Office of the Prosecutor General launched a criminal case No 18/41-03 over fraud, embezzlement and tax evasion on an especially large scale. The website Prigovor.ru reminds its readers of what happened on June 20, 2003).
*On May 20, 2022, the Russian Ministry of Justice included M.B. Khodorkovsky in the list of physical persons executing functions of a foreign agent.