THE OLIGARCHS AS MODERN GROTESQUES

To what extent is it possible for us to see what lurks behind the faces of Russia’s power elite?

Among the exhibits of the drawings of Leonardo da Vinci on display at the Louvre since May, there is a selection of four grotesques by the master.

It is said that Leonardo’s keen ability to see unusual faces led him to arrange parties for villagers. He would ply them with alcohol, food and entertainment, and, as they enjoyed themselves and grew less inhibited, he would sit down to make his sketches. Although Leonardo denied any intention of exhibiting these faces for derision, the subjects would hardly have felt complimented. There they are, with bulbous lips over toothless gums, protruding jaws, rotting teeth, deformed noses, humped backs, misshapen breasts, cauliflower ears, unkempt hair and leathery skin. (more…)

HOW THE EGGS MAY SAVE VEKSELBERG’S GOOSE

MOSCOW (Mineweb.com) – Victor Vekselberg has taken so much value out of the Siberian region of Tyumen, it’s understandable that he says he is thinking of putting something back.

According to Vekseiberg’s spokesman, Tyumen – the oil-rich region that has been home to one of Vekseiberg’s properties, the Tyumen Oil Company (TNK) – is being considered for a showing of a collection of Faberge eggs. Dozens of these jeweled ornaments were fabricated for the family of Nicholas II, the last Russian tsar, and eventually ended up in New York, the property of the Forbes family, publishers of a business magazine. Early price year, the 194-piece collection was bought by Vekselberg, after he paid a price he will not confirm, except to say that it was at the upper limit of the Sotheby auction house estimate. Ahead of the sale, the estimate was between $90 and $120 million.

Until July 25, Vekselberg is showing the eggs at the Kremlin in Moscow. After that, they will move to displays in Yekaterinburg and St. Petersburg. Then Vekselberg is considering despatching them for a showing in England Afterwards, he is planning to tour them to regional cities in Russia. Tyumen and Irkutsk lead the list, according to Vekselberg’s spokesman.

Not that Vekselberg is thinking of giving away his eggs to Tyumen, although returning $120 million to the region would be a minuscule fraction of the profit he has extracted. Nor is a temporary glimpse of his property quite the compensation Vekselberg means to offer for what others have openly called his theft of their property from Tyumen,

Take, for example, the affair of who owned the right to lift crude oil from the Kalchinskoye oil fields in Tyumen in 1998. Estimated to contain reserves of 20 million tonnes – worth $5.3 billion at today’s oil price – Kalchinskoye was licensed to joint-venture companies that in 1997 were part-owned by Ivanhoe Energy of Calgary, Canada. In 1998, Vekselberg’s TNK went to the regional court in Tyumen to revoke the Canadian rights, and take them entirely for itself. The Canadians accused TNK of violating its contracts, and stealing the oil. TNK disputed the claim, but after lawsuits were filed, the Canadian government applied pressure, and police arrived at TNK, Vekselberg and his partners offered about $30 million – the sum was kept secret, like the price of the eggs -so that Ivanhoe would drop its claims, pack up, and go home. In August 2000, if did. That might have been the end of the Kalchinskoye affair, except that the civil settlement did not eliminate TNK’s liability to criminal charges that the statute of limitations may yet allow time to file against those involved.

In the same month that Ivanhoe accepted TNK’s offer, Yugraneft, the Russian affiliate of another Canadian company, Norex Petroleum, refused to accept 30 percent of 172,000 tons of oil (now worth $46 million) which Norex had pumped to a TNK storage for safe. In January 2001 TNK gave Yugraneft and Norex an ultimatum – either take the 30-percenf offer, or risk losing, not only the oil already pumped, but the oilfields which had produced them. Six months later, using local court orders, TNK took everything. In papers filed subsequently by Norex in a US federal district court in New York, the Canadian company has accused Vekselberg, his partners, and subordinates, of fraud, bribery, extortion, use of armed force, racketeering, money laundering, and other crimes, in order to steal the oil, $40 million in cash and securities, oil production facilities, and oilfields; the total losses were estimated at more than $500 million. In a first ruling, a New York judge has rejected jurisdiction over the case, and a New York appellate court will shortly rule on whether jurisdiction should be accepted or refused. The charges in the case, including the criminal charges, have yet to be tested in court, and for Vekselberg – identified in the US court documents as holding permanent residency in the US – there remains the risk of prosecution. The trail of cash, identified by Norex in court filings, extends through dozens of international havens, remains open to prosecution for money laundering offences, and casts a shadow over the objects which that money has been spent to acquire.

Other court or government claims have been filed in New York and Washington against Vekselberg and his TNK men. In one, pursued by an investment company acting for Harvard University’s Endowment Fund, they were accused of “one of the most bizarre and brazen acts of corporate theft in recent memory.” in another case, pursued by British Petroleum, similar accusations were lodged, again relating to the theft of oilfields. In these two cases, involving the bankruptcies of Kondpetroleum and Chernogorneft court documents claim that the corruption of local government and court officials in the Tyumen region were instrumental in achieving TNK’s enrichment. Ultimately, BP settled its differences with TNK out of court, and a year ago, bought out Vekselberg and his partners for a multi-year payment of cash and shares, worth a total of $6.4 billion.

It is on account of this history that Vekselberg’s eggs require careful handling. They are controlled by him, his spokesman confirms. But legal title is vested in the “non-profit cultural historical fund Time Connexion. When the eggs move, they do so on customs documents that keep them out of the grasp of the Russian tax authorities, prosecutors, or other potential litigants. According to Vekselberg’s spokesman, this is no fly by night operation. He blames the existing Russian customs legislation, which imposes tax penalties and other restrictions on the movement of such cultural artifacts, for the precautions Vekselberg has had to take. He also says that Vekselberg has no intention of presenting the eggs to a Russian museum, although he is discussing a project for establishing a brand-new museum of private collections in Moscow, where she eggs might be shown. There is also the thought of presenting some of the lesser pieces in the collection, the non-eggs, the non-imperial items, to “regional museums which do not yet have Faberge work”

And that brings us back to the Tyumen region, where the goose got his start. Ignoring Ivanhoe and British Petroleum, which have buried the hatchet for approximately $6,380,000,000 in consideration, there is still the Norex claim for compensatory damages of $500 million, and punitive damages of $1,5 billion. They are the really golden eggs in this story. Vekselberg may succeed in driving his pursuers out of the US courts, but it is from Tyumen that the money originated. And it is in Russia, especially in Tyumen, where we shall find the goose, who lays the oil, that made the money, that Vekselberg took to pay Malcolm Forbes, who acquired the tsar’s treasure, which was also produced from wealth originating, among other places, in Tyumen. In the fantasy which Vekselberg’s Time Connexion foundation is proposing, Tyumen will be allowed a brief glimpse of the golden eggs; and the time cycle will be disconnected at the moment when the last hand on the eggs is Vekselberg’s.

This little fairy tale would be of next to no interest to South Africans, were it not that Vekselberg has been promising eggs of a different sort – nest-eggs, you might say – to black entrepreneurs willing to back Vekselberg’s plan to swap his Russian assets into South African ones. This is the scheme which Vekselberg has also proposed paying a fortune to Brian Gilbertson, the Mother Goose of fantastic mining mergers, to promote.

YUKOS WOES A WARNING TO RUSSIA’S OLIGARCHS

MOSCOW – It used to be said about a fraudster in Australia that he was too crooked to lie straight in bed. Until now, however crooked the Russian oligarchs – the handful of men who seized control of Russia’s oil and mineral wealth a decade ago – may have seemed, the lure of their money has overwhelmed the inhibitions of investors, bankers, non-executive directors and managers from jumping into the same bed. Until now, they had reason to believe that they could get in and out swiftly, and make a clean getaway.

A class-action lawsuit, filed last week in a federal court in New York, changes these calculations.

According to a 26-page statement of claim by lawyers for Rothwell Holdings Ltd, a Caribbean-registered investor fund, for nine months of last year, the controlling shareholders of oil company Yukos; the company’s chief financial officer; Yukos’ authorized representatives in the United Kingdom and the US; and the company auditor, PricewaterhouseCoopers (PwC), connived to lie, cheat and swindle investors who purchased Yukos’ Russian shares, or its American Depositary Shares (ADS), each of which represents four units of the common stock. Among others named individually in the lawsuit are shareholders Mikhail Khodorkovsky, Platon Lebedev and Valery Shakhnovsky, and chief financial officer Bruce Misamore.

At the heart of the US claim against them is the massive tax evasion for which Yukos has already been held liable in a Moscow court, and which Yukos has conceded in a letter to Prime Minister Mikhail Fradkov. The jurisdiction of the New York court was granted by Yukos when it registered its ADS issue for market purchase, and submitted thereby to US securities regulations. It was not safe to commit fiscal crimes in its homeland if by so doing, and by subsequent concealment and misreporting, Yukos took investors’ cash on the territory of the United States, violating their rights under US law.

“In order to overstate its earnings and to understate its tax liability for the period,” the US complaint alleges that “Yukos engaged in an illegal tax evasion scheme by creating fake organizations in the oil and after-product movement chain and further by registering these fake organizations in territories with preferential tax treatment. Defendants’ scheme was designed to avoid payment of the following types of taxes: profit tax, value-added tax, motorway user tax, tax on the sales of petroleum, and oils and lubricants and housing stock and social amenities maintenance tax on the amount of receipts from oil and after-product sales.”

The shareholders and managers, aided and abetted by auditors at PwC, then “materially misled the investing public, thereby inflating the price of Yukos securities by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants’ statements, as set forth herein, not false and misleading. Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the company, its business and operations, as alleged herein.”

Since the arrests in Moscow last July and October of Lebedev and Khodorkovsky, the details of the crimes alleged against them have been well known. That Shakhnovsky has already pleaded guilty to the charges against him in Moscow is also documented. But the international financial newspapers, which have touted for the oligarchs and benefited from their largesse, have editorialized against the charges against the Yukos group, calling them a politically motivated frameup, and intimating their wrongdoing was minor compared to the human rights violations alleged against Russian President Vladimir Putin and his prosecutors.

More woes for Yukos
Yukos’ troubles were compounded at the end of last week when international creditors declared it in default on a US$1 billion loan. The firm confirmed this on Monday, but the lenders have not demanded payment yet so technically it has not defaulted.

The move on the part of the lenders is presumably aimed at protecting their interests as the Russian government is forcing the giant oil firm to begin paying the first half of nearly $7 billion in back taxes.

Yukos accounts for a fifth of foreign petroleum sales by Russia, the world’s second-largest oil exporter. Yukos produces about 1.7 million barrels a day, ahead of all other Russian oil companies. With its bank accounts frozen by the government, the company has warned that it may have to start shutting down production soon. On Monday, it said it would be able to continue production until the end of the month.

The loan default notice was sent on Friday by a group of banks led by Societe Generale just days after a Moscow court upheld the first of the two tax bills to be paid. The notice asserted the lenders’ right to call the loan immediately, but the banks did not demand instant payment and said they wanted to help Yukos find a way to avoid bankruptcy.

The Yukos crisis has contributed to a rise in world oil prices, which broke above $39 on Tuesday morning. Other contributing factors were Iraqi crude exports being halved by sabotage and threats of disruptions to Nigerian supplies by union action.

The latest attacks in Iraq came a little over a week after that country’s exports recovered from earlier sabotage strikes, which halted shipments for about 10 days in the middle of June. Iraqi exports were running at 984,000 barrels per day (bpd) on Monday, down from close to 2 million bpd before attackers bombed a feeder pipeline running to two southern oil terminals and another pipeline linking oilfields in the north and south. Officials said repairs would take up to four days before exports would recover.

Yukos has tried to calm markets by saying that it planned no export cuts this month and had prepaid pumping deals with pipeline monopoly Transneft until the end of July.

On the trail of the oligarchs
What is more than novel about the new lawsuit filed against Yukos in the United States is that it threatens to put an end to all attempts by the Russian oligarchs to cash out their vulnerable Russian assets into UK- or US-registered securities, and launder the proceeds of their Russian deeds into ostensibly clean Western bank accounts, real estate, and other forms of wealth. The massive tax evasion that was practiced at Yukos is suspected to have been the standard operating procedure for the building of all the Russian oil, mineral, metal and mining fortunes that have been amassed by the likes of Roman Abramovich, Oleg Deripaska, Vladimir Potanin, Victor Vekselberg, and Mikhail Fridman, head of the Alfa banking group.

Thus, if the Yukos investors win their claim in a US federal court, lenders, investors and even employees and contractors of the other oligarchs risk facing parallel claims for fraud, based on what they have concealed (or had a duty to disclose) about the real operations of their companies. Indeed, Rothwell Holdings and US investors in Yukos do not even have to win a court ruling to detonate a bomb of due diligence and liability under the plans of the other oligarchs, whether or not they are prosecuted in Moscow, pay tax reparations, or negotiate an amnesty with the Kremlin.

For now, the threat of this litigation casts an immediate shadow over every transaction by Abramovich in spending cash derived from his oil company Sibneft and other Russian companies that are subject already to, or may soon be facing, charges of tax evasion. Tax investigations of Sibneft have already begun. They include a scheme of tax preferences issued by Abramovich in his capacity as governor of the Chukotka region to companies in which he had a financial interest. More than once, Abramovich has declared himself innocent of the charges against him, and Russian prosecutors have been hesitant to lay the type of indictment against him and Sibneft, which has been prosecuted against the Yukos group. Nonetheless, if Abramovich obtains funds from investors or lenders on the basis of artificially inflating the value of his Russian assets, and of illegally shielding his cashflow from legitimate Russian taxation, then the potential legal liabilities of doing business with him become serious.

A similar shadow also falls over the year-long negotiations by Oleg Deripaska’s Russian Aluminum (Rusal) to borrow $800 million from a syndicate of international banks; over Vladimir Potanin’s attempt to acquire shares in the South African mining company Gold Fields Ltd through borrowings from Citibank; and over Victor Vekselberg’s plan to float his SUAL International corporation under the leadership of Brian Gilbertson, and trade its shares with those of another Johannesburg or London-listed company. The most heavily indebted of the oligarch companies – Deripaska’s Rusal is estimated to owe at least $2.5 billion at the moment – are the most vulnerable to the new standard of disclosure and liability set by the New York court claim. The declared ambitions of these companies to retire their bank debt with unsecured Eurobonds, or issue initial public offerings in London or New York, face protracted delays.

Non-Russians who have been engaged to manage these companies, sit on their boards of directors, direct their legal and accounting departments, negotiate their borrowings, plan their mergers and acquisitions, or persuade investors to buy their shares and bonds, should no longer feel financially secure. What Western executive would risk his reputation and personal fortune in taking a position in these enterprises that would expose them to the type of liability claim now filed against Yukos’ Misamore? What insurance company would write a policy to protect them, in the event of a comparable lawsuit in the future?

According to the New York court documents, Misamore is alleged to be one of several defendants who “participated in the drafting, preparation, and/or approval of the various public and shareholder and investor reports and other communications complained of herein and were aware of, or recklessly disregarded, the misstatements contained therein and omissions therefrom, and were aware of their materially false and misleading nature. Because of their board membership and/or executive and managerial positions with Yukos, each of the individual defendants had access to the adverse undisclosed information about Yukos’ business prospects and financial condition and performance as particularized herein and knew (or recklessly disregarded) that these adverse facts rendered the positive representations made by or about Yukos and its business issued or adopted by the company materially false and misleading.”

Misamore will have his day in court to explain what he knew, what he didn’t know, and what he could have been expected to know about the flow of Yukos funds. For the time being, Yukos is officially not commenting on the allegations. Misamore is on the list of defendants, say lawyers involved in the case, because he provides a means of compelling discovery, according to the US rules of evidence (and perjury); and because his insurance coverage provides a means of recovery, in the event that Yukos itself goes into bankruptcy.

The naming of PwC, and the charges against the audit company for its role in misrepresenting the true state of Yukos’ accounts, mark the first time an international auditor has been charged with liability in a case of Russian corporate malfeasance. They have not been able to make a clean getaway in the best-known cases of US corporate fraud, but they have not been charged by Russian prosecutors to date. For as long as it takes to resolve Rothwell’s claim against PwC, this case opens up the possibility of litigation against accountancy firms, as well as law firms, by investors or lenders in many other cases.

“PwC’s responsibility as Yukos’ independent auditor,” assert the New York plaintiffs, included determining “sufficient competent evidential matter… to afford a reasonable basis for an opinion regarding the financial statements under audit” as to “the fairness with which they present, in all material respects, financial position, results of operations, and its cash flows in conformity with generally accepted accounting principles”.

By attacking PwC for failing this duty, the US claimants have punched a hole in the bubble of corporate transparency that has protected and promoted the oligarchs since the Russian financial crisis of 1998. For as long as the corporate assets of the oligarchs cannot be valued without taking into account their hidden and uncertain tax liabilities, and auditors such as PwC cannot warrant their balance sheets as a fair and accurate presentation of their financial position, it will be impossible for the oligarchs to cash out their assets on the international market. And without that cash as their lifeline, the oligarchs are likely to wither away.

THE LAWSUIT THAT ENDS THE OLIGARCHS’ RUN FOR CASH

MOSCOW – It used to be said about a fraudster in Australia that he was too crooked to lie straight in bed. Until now, however crooked the Russian oligarchs – the handful of men who seized control of Russia’s oil and mineral wealth a decade ago – may have seemed, the lure of their money has overwhelmed the inhibitions of investors, bankers, non¬-executive directors, and managers from jumping into the same bed. Until now, they had reason to believe they could get in and out swiftly, and make a clean getaway.

A class-action lawsuit, filed last week in a federal court in New York, changes these calculations.

According to a 26-page statement of claim by lawyers for Rothwell Holdings Ltd., a Caribbean-registered investor fund, for nine months of last year, the controlling shareholders of oil company Yukos; the company’s chief financial officer; Yukos’s authorized representatives in the UK and US; and the company auditor, Price WaterhoiseCoopers (PwC), connived to lie, cheat, and swindle investors who purchased Yukos’s Russian shares, or its American Depositary Shares, each of which represents 4 units of the common stock. Among others named individually in the lawsuit are shareholders Mikhail Khodorkovsky, Platon Lebedev, and Valery Sjhakhnovsky, and CFO Bruce Misamore.

At the heart of the US claim against them is the massive tax evasion for which Yukos has already been held liable in a Moscow court, and which Yukos has conceded in a letter to Prime Minister Mikhail Fradkov. The jurisdiction of the New (York court was granted by Yukos, when it registered its ADS issue for market purchase, and submitted thereby to US securities regulations. It was not safe to commit fiscal crimes in its homeland if by so doing, and by subsequent concealment and misreporting, Yukos took investors’ cash on the territory of the US, violating their rights under US law.

“In order to overstate its earnings and to understate its tax liability for the period,” the US complaint alleges that “Yukos engaged in an illegal tax evasion scheme by creating fake organizations in the oil and after-product movement chain and further by registering these fake organizations in territories with preferential tax treatment. Defendants’ scheme was designed to avoid (payment of the following types of taxes: profit tax, value-added tax, motorway user tax, tax on the sales of petroleum, and oils and lubricants and housing stock and social amenities maintenance tax on the amount of receipts from oil and after-product sales.”:

The shareholders and managers, aided and abetted by auditors at PriceWaterhouseCoopers (PwC), then “materially misled the investing public, thereby inflating the price of Yukos Securities by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants’ statements, as set forth herein, not false and misleading! Said statements and omissions were materially false and misleading in that they failed to disclose material adverse information and misrepresented the truth about the Company, its business and operations, as alleged herein.”

Since the arrests in Moscow last July and October of Lebedev and Khodorkovsky, the details of the crimes alleged against them have been well-known. That Shakhnovsky has already pleaded guilty to the charges against him in Moscow is also documented. But the international financial newspapers, which have touted for the oligarchs and benefited from their largesse, have editorialized against the charges against the Yukos group), calling them a politically motivated frameup, and intimating their wrongdoing was minor compared to the human rights violations alleged against Russia’s President Vladimir Putin and his prosecutors. It is thus not surprising that the Financial Times of London buried the details of the new US court claim in a single sentence

What is more than novel about the new lawsuit is that it threatens to put an end to all attempts by the Russian; oligarchs to cash out of their vulnerable Russian assets into UK oil US-registered securities, and launder the proceeds of their; Russian crimes into ostensibly clean western bank accounts, real estate, and other forms of wealth. For as everyone knows, thel massive tax evasion that was practiced at Yukos has been the standard operating procedure for the building of all the Russian oil, mineral, metal and mining fortunes that have been amassed bylthe likes of Roman Abramovich, Oleg Deripaska, Vladimir Potanin, Victor Vekselberg, and Mikhail Fridman.

Thus, if the Yukos investors win their claim in US federal court, lenders, investors, and even employees and; contractors of the other oligarchs risk facing parallel claims for fraud, based on what they have concealed (or had a duty to disclose) about the real operations of their companies. Indeed, Rothwell Holdings and US investors in Yukos do not even have to win ja court ruling, in order to detonate a bomb of due diligence and liability under the plans of the other oligarchs, whether or not they are) prosecuted in Moscow, pay tax reparations, or negotiate an amnesty with the Kremlin.

For now, the threat of this litigation casts an immediate shadow over every transaction by Abramovich in spending cash derived from his oil company Sibneft and other Russian companies that are subject already to, or may soon be facing, charges of tax evasion. Tax investigations of Sibneft have already gotten under way. They include a scheme of tax preferences issued joy Abramovich in his capacity as Governor of the Chukotka region to companies in which he had a financial interest. More than once, Abramovich has declared himself innocent of the charges against him, and Russian prosecutors have been hesitant to lay the type of indictment against him and Sibneft, which has been prosecuted against the Yukos group. Nonetheless, if Abramovich obtains funds from investors or lenders on the basis of artificially inflating the value of his Russian assets, and of illegally shielding: his cashflow from legitimate Russian taxation, then the potential legal liabilities of doing business with him become serious.

A similar shadow also falls over the year-long negotiations by Oleg Deripaska’s Russian Aluminium (Rusal) to borrow $800 million from a syndicate of international banks; over Vladimir Potanin’s attempt to acquire shares in the South African mining company Gold Fields Ltd. through borrowings from Citibank; and; over Victor Vekselberg’s plan to float his SUAL International corporation under the leadership of Brian Gilbertson, and trade its shares with those of another Johannesburg or London-listed company. The most heavily indebted of the oligarch companies — Deripaska’s Rusal is estimated to owe at least $2.5 billion at the; moment – are the most vulnerable to the new standard of disclosure and liability set by the New York court claim. The declared ambitions of these companies to retire their bank debt with unsecured Eurobonds, or issue IPOs in London or New York, face protracted delays.

Non-Russians who have been engaged to manage these companies, sit on their boards of directors, direct their legal and accounting departments, negotiate their borrowings, plan their mergers and acquisitions, or persuade investors to buy their shares and bonds, should no longer feel financially secure. What western executive would risk his reputation and personal fortune in taking a position in these enterprises that would expose them to the type of liability claim now filed against Yukos CFO Misamore? What insurance company would write a policy to protect them, in the event of a comparable lawsuit in future?

According to the New York court documents, Misamore is alleged to be one of several defendants who “participated in the drafting, preparation, and/or approval of the various; public and shareholder and investor reports and other communications complained of herein and were aware of, or recklessly disregarded, the misstatements contained therein and omissions therefrom, and were aware of their materially false and misleading nature. Because of their Board membership and/or executive and managerial positions with Yukos, each of the Individual Defendants had access to the adverse undisclosed information about Yukos’ business prospects and financial condition .und performance as particularized herein and knew (or recklessly disregarded) that these adverse facts rendered the positive representations made by or about Yukos and its business issued or adopted by the Company materially false and misleading.”

Misamore will have his day in court to explain what he knew, what he didn’t know, and what he could have been expected to know about the flow of Yukos funds. For the time: being, Yukos is officially not commenting on the allegation:’.. Misamore is on the list of defendants, say lawyers involved in the case, because he provides a means of compelling discovery, according to the US rules of evidence (and perjury); and because his insurance cover provides a means of recovery, in the event that Yukos itself goes into bankruptcy.

The naming of PwC, and the charges against the audit company for its role in misrepresenting the true state of Yukos’s accounts, are the first time an international auditor has been charged with liability in a case of Russian corporate malfeasance. They have not been able to make a clean getaway in the best known cases of American corporate fraud, but they have nt)t been charged by Russian prosecutors to date. For as long as it takes to resolve Rothwell’s claim against PwC, this case opens up the possibility of litigation against accountancy firms, as well as law firms, by investors or lenders in many other cases.

“PWC’s responsibility as Yukos’ independent auditor,” asserts the New York plaintiffs, included determining “sufficient competent evidential matter … to afford a reasonable basis for an opinion regarding the financial statements under audit” as to “the fairness with which they present, in all material respects, financial position, results of operations, and its cash flows in conformity with generally accepted accounting principles.”

By attacking PwC for failing this duty, the US claimants have punched a hole in the bubble of corporate transparency that has protected and promoted the oligarchs since: the Russian financial crisis of 1998. For as long as the corporate assets of the oligarchs cannot be valued without taking into account their hidden and uncertain tax liabilities, and auditors like PwC cannot warrant their balance-sheets as a fair and accurate presentation of their financial position, it will be impossible for the oligarchs to cash out of their assets on the international market. And without that cash as their lifeline, the oligarchs are likely to wither away.

WILL THE VICTOR GO WITH THE SPOILS?

MOSCOW (Mineweb.com) – At the turn of the last century, when Americans were the conspicuously new oligarchs of the western world F.Scott Fitzgerald was their story-teller.

In his novel about a rich young man of upper-class New York, called The Beautiful and Damned, Fitzgerald stuck a warning of his fate as an epigram at the front of the book – ” the victor belongs to the spoils”. There’s no escape from the corruption of too much money, Fitzgerald seemed to be saying in 1922.

Once that painfully snobbish tale gets under way, it’s a question which Anthony Patch, the doomed playboy, puts to his friend, a novelist like; Fitzgerald himself, swollen with the early financial success of his first book. Then the warning is expressed as a question, as if Fitzgerald thought it might be possible to avoid the corruption of riches, if only it can be recognized in time Three years later, when Fitzgerald’s life was coming apart under the strain of spending more than he could earn, he wrote wistfully about the very rich: “They are different from you and me…soft where we are hard, and cynical where we are trustful.” Much later, when Fitzgerald was a decade beyond his best work and almost broke, his sometime pal Ernest Hemingway rewrote the answer to the question of how the rich were different. “Yes, they have more money,” Hemingway’s character said simply. Fitzgerald told Hemingway he had insulted him.

For the time being, the only person in Russia who claims to have given Yukos oil company owner Mikhail Khodorkovsky the Fitzgerald warning in advance of his arrest last October is his mother. She says she phrased it more like the ancient Greek warning that pride goes before a fall, that too much hubris brings on nemesis, destruction by the jealous gods. None of the super-rich young men, the Russian oligarchs who made their fortunes alongside Khodorkovsky, apparently thinks the same. In fact, they are so far from heeding Fitzgerald’s warning, they are now trying to reverse it in their own favour . If Khodorkovsky’s assets are up for grabs, they have begun to tell their friends in government, let the spoils be auctioned off to those rich enough to afford them; in other words, a new round of rigged asset disposals by the government, for the benefit of the surviving oligarchs.

By way of announcing his readiness, Oleg Deripaska a, the controlling shareholder of Russian Aluminium (Rusal) and the holding company Basic Element, recently arranged for the Moscow press to be told that he is thinking of going into the oil business.

Mikhail Fridman, head of the Alfa banking group and one of the beneficiaries of last year’s sale of Tyumen Oil Company to British Petroleum, has gone further. He is reported by some in the Kremlin to have proffered a bid of $10 billion for the assets of Yukos, once the state has taken around $3 billion in tax payments, and Khodorkovsky and his allied shareholders hive been assigned, and cleared their penalties. At the time Fridman tabled his bid, the Yukos share price was tumbling towards a market capitalization of $12 billion. It has since risen to around $16 billion.

Roman Abramovich, the controlling shareholder of Sibneft, has gone much further. In proposals to both the Kremlin and Yukos, Abramovich has indicated his plan for unfreezing the court orders that have locked up the Yukos acquisition of Sibneft from last year, along with other Yukos assets, and cash. Abramovich proposes to allow Yukos to clear its debts to the state by selling its Sibneft stake back to Abramovich. Just how big a shareholding that is remains for the courts to settle. But Abramovich isn’t intending to part with any of his own money. According to his plan, he will only buy back from Yukos in value what Khodorkovsky will need to pay the authorities and then only on two conditions – that Yukos will indemnify him from lawsuits seeking enforcement of last year’s Sibneft sale contract, or restitution for the damage he may have conspired to inflict; and that the Kremlin will give him advance approval for reselling the stake he buys from Khodorkovsky at double, or triple, the price to a foreign oil company.

Inside the Kremlin, each of these proposals has its low and mid-level advocates. But for President Vladimir Putin, the problem of how to settle Yukos’s debts and resolve Khodorkovsky’s fate is far too weighty to be left to his aides, or to the courts, to decide. For every division of the spoils, and for each self-promoting victor, there is now a Kremlin faction busily promoting its line to the President; drafting its interests into his speeches and one-liners; and interpreting him to suit their own ends. They are eager to recruit ministers like Alexander Zhukov and Alexei Kudrin to their cause. They, in turn, are trying to gauge which way Putin is leaning, in order to avoid damaging themselves in his eyes, and to share in the eventual spoils, if they can. This appears to be so confusing, the President and his men now find they are in as much need of time, and courtroom delaying tactics, as the defendants at the bar.

But Putin may be undecided; he isn’t confused. He understands that if he proceeds to dismantle Yukos at Khodorkovsky’s expense,and then redistributes his shares and assets to Deripaska, Fridman, or Abramovich, he will be confirming the central charge which Khodorkovsky’s supporters, the US and English governments, and the oligarch in exile, Boris Berezovsky, have repeatedly leveled at him. He will be demonstrating favouritism for one oligarch over another, and inviting the interpretation that his motives are either political – that Khodorkovsky backed political opponents and media critics – or corrupt.

At the same time, Putin realizes that his power to pursue the other oligarchs for similar crimes as Khodorkovsky committed is limited. To prevent a legion of mid-level officials reopening files for the sole purpose of being paid to close them again, Putin has too few personnel, who are both loyal and honest, never mind competent. In this respect, despite the massive election mandate he won since he started the campaign against Yukos almost a year ago, and notwithstanding his reorganization of the government Putin is hardly better served today than he was then. He is obliged, therefore, to proceed slowly, agreeing to tax claims against one company, to threats of other consequences against others, and to delays on delivering the decisions everyone, including the oligarchs, are seeking.

The timing to redistribute the wealth, Putin is told by economic advisors, is as good as it is ever likely to be, with oil and commodity prices at their peak. But how to resolve the conflicting priorities that land on his desk each day, urging him to pursue Deripaska for one reason; Fridman for another; or Abramovich for yet another? And what of Abramovich’s demand that Putin reverse last year’s veto of sales of Russian oil company assets to American, French, or British companies? Is the weight of their lobbying so heavy, that for the sheer relief, he is ready to give an assent, which contradicts every statement he has made on national resource policy? Are the spoils of the anti-oligarch campaign to belong to Putin the victor, or will the victor belong to the spoils?

If Putin were to take a leaf out of Fitzgerald’s tales of rich Americans, he would discover that asking the right question repeatedly doesn’t produce an answer that is either convincing or enduring.

AFTERSHOCK OF NORD STREAM EXPLOSIONS RUMBLES WARSAW — POLISH POLITICIANS GO “NUTTERS”

By John Helmer, Moscow
  @bears_with

The Polish government in Warsaw, facing re-election in less than a year, wants all the credit from Washington for their joint operation to sabotage the Nord Stream gas pipelines on the Baltic seabed.

It also wants to intimidate the German chancellor in Berlin, and deter both American and German officials from plotting a takeover by the Polish opposition party, Civic Platform, next year.

Blaming the Russians for the attack is their cover story. Attacking anyone who doesn’t believe it, including Poles and Germans, Warsaw officials and their supporting media claim they are dupes or agents of Russian disinformation.

Their rivals, Civic Platform (PO) politicians trailing the PiS in the polls by seven percentage points,   want Polish voters to think that no credit for the Nord Stream attack should be earned by the ruling Law and Justice (PiS) party. They also want to divert  the Russian counter-attack from Warsaw to Washington.

“Thank you USA” was the first Polish political declaration tweeted hours after the blasts by Radoslaw Sikorski (lead image, left), the PO’s former defence and foreign minister, now a European Parliament deputy. In support and justification,  his old friend and PO ministerial colleague, Roman Giertych, warned Sikorski’s critics: “Would you nutters prefer that the Russians find us guilty?”

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THE BORNHOLM BLOW-UP REPEATS THE BORNHOLM BASH — POLAND ATTACKS GERMANY AND BLAMES RUSSIA

By John Helmer, Moscow
  @bears_with

The military operation on Monday night which fired munitions to blow holes in the Nord Stream I and Nord Stream II pipelines on the Baltic Sea floor, near Bornholm Island,  was executed by the Polish Navy and special forces.

It was aided by the Danish and Swedish military; planned and coordinated with US intelligence and technical support; and approved by the Polish Prime Minister Mateusz Morawiecki.

The operation is a repeat of the Bornholm Bash operation of April 2021, which attempted to sabotage Russian vessels laying the gas pipes, but ended in ignominious retreat by the Polish forces. That was a direct attack on Russia. This time the attack is targeting the Germans, especially the business and union lobby and the East German voters, with a scheme to blame Moscow for the troubles they already have — and their troubles to come with winter.

Morawiecki is bluffing. “It is a very strange coincidence,” he has announced, “that on the same day that the Baltic Gas Pipeline  opens, someone is most likely committing an act of sabotage. This shows what means the Russians can resort to in order to destabilize Europe. They are to blame for the very high gas prices”.   The truth bubbling up from the seabed at Bornholm is the opposite of what Morawiecki says.

But the political value to Morawiecki, already running for the Polish election in eleven months’ time, is his government’s claim to have solved all of Poland’s needs for gas and electricity through the winter — when he knows that won’t come true.  

Inaugurating the 21-year old Baltic Pipe project from the Norwegian and Danish gas networks, Morawiecki announced: “This gas pipeline is the end of the era of dependence on Russian gas. It is also a gas pipeline of security, sovereignty and freedom not only for Polish, but in the future, also for others…[Opposition Civic Platform leader Donald] Tusk’s government preferred Russian gas. They wanted to conclude a deal with the Russians even by 2045…thanks to the Baltic Pipe, extraction from Polish deposits,  LNG supply from the USA and Qatar, as well as interconnection with its neighbours, Poland is now secured in terms of gas supplies.”

Civic Platform’s former defence and foreign minister Radek Sikorski also celebrated the Bornholm Blow-up. “As we say in Polish, a small thing, but so much joy”.  “Thank you USA,” Sikorski added,   diverting the credit for the operation, away from domestic rival Morawiecki to President Joseph Biden; he had publicly threatened to sabotage the line in February.  Biden’s ambassador in Warsaw is also backing Sikorski’s Civic Platform party to replace  Morawiecki next year.  

The attack not only escalates the Polish election campaign. It also continues the Morawiecki government’s plan to attack Germany, first by reviving the reparations claim for the invasion and occupation of 1939-45;  and second, by targeting alleged German complicity, corruption,  and appeasement in the Russian scheme to rule Europe at Poland’s expense. .

“The appeasement policy towards Putin”, announced PISM, the official government think tank in Warsaw in June,  “is part of an American attempt to free itself from its obligations of maintaining peace in Europe. The bargain is that Americans will allow Putin to finish building the Nord Stream 2 pipeline in exchange for Putin’s commitment not use it to blackmail Eastern Europe. Sounds convincing? Sounds like something you heard before? It’s not without reason that Winston Churchill commented on the American decision-making process: ‘Americans can always be trusted to do the right thing, once all other possibilities have been exhausted.’ However, by pursuing such a policy now, the Biden administration takes even more responsibility for the security of Europe, including Ukraine, which is the stake for subsequent American mistakes.”

“Where does this place Poland? Almost 18 years ago the Federal Republic of Germany, our European ally, decided to prioritize its own business interests with Putin’s Russia over solidarity and cooperation with allies in Central Europe. It was a wrong decision to make and all Polish governments – regardless of political differences – communicated this clearly and forcefully to Berlin. But since Putin succeeded in corrupting the German elite and already decided to pay the price of infamy, ignoring the Polish objections was the only strategy Germany was left with.”

The explosions at Bornholm are the new Polish strike for war in Europe against Chancellor Olaf Scholz. So far the Chancellery in Berlin is silent, tellingly.

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LEMONS, MIMOSAS, AND STALIN’S SHOVEL

By John Helmer, Moscow
  @bears_with

The only Russian leader in a thousand years who was a genuine gardener and who allowed himself to be recorded with a shovel in his hand was Joseph Stalin (lead image, mid-1930s). Compared to Stalin, the honouring of the new British king Charles III as a gardener pales into imitativeness and pretension.   

Stalin cultivated lemon trees and flowering mimosas at his Gagra dacha  by the Black Sea in Abkhazia.  Growing mimosas (acacias) is tricky. No plantsman serving the monarchs in London or at Versailles has made a go of it in four hundred years. Even in the most favourable climates, mimosas – there are almost six hundred varieties of them — are short-lived. They can revive after bushfires; they can go into sudden death for no apparent reason. Russians know nothing of this – they love them for their blossom and scent, and give bouquets of them to celebrate the arrival of spring.

Stalin didn’t attempt the near-impossible, to grow lemons and other fruit in the Moscow climate. That was the sort of thing which the Kremlin noblemen did to impress the tsar and compete in conspicuous affluence with each other. At Kuskovo, now in the eastern district of Moscow, Count Pyotr Sheremetyev built a heated orangerie between 1761 and 1762, where he protected his lemons, pomegranates, peaches, olives, and almonds, baskets of which he would present in mid-winter to the Empress Catherine the Great and many others. The spade work was done by serfs. Sheremetyev beat the French king Louis XIV to the punch – his first orangerie at Versailles wasn’t built until 1763.

Stalin also had a dacha at Kuskovo But he cultivated his lemons and mimosas seventeen hundred  kilometres to the south where they reminded him of home in Georgia. Doing his own spade work wasn’t Stalin showing off, as Charles III does in his gardens, like Louis XIV before him. Stalin’s spade work was what he had done in his youth. It also illustrated his message – “I’m showing you how to work”, he would tell visitors surprised to see him with the shovel.  As to his mimosas, Stalin’s Abkhazian confidante, Akaki Mgeladze, claimed in his memoirs that Stalin intended them as another lesson. “How Muscovites love mimosas, they stand in queues for them” he reportedly told him.  “Think how to grow more to make the Muscovites happy!”

In the new war with the US and its allies in Europe, Stalin’s lessons of the shovel and the mimosas are being re-learned in conditions which Stalin never knew – how to fight the war for survival and at the same time keep everyone happy with flowers on the dining table.

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AND THEN THERE WERE NONE

By John Helmer, Moscow
  @bears_with

Agatha Christie’s whodunit entitled And Then There Were None – the concluding words of the children’s counting rhyme — is reputed to be the world’s best-selling mystery story.    

There’s no mystery now about the war of Europe and North America against Russia; it is the continuation of Germany’s war of 1939-45 and the war aims of the General Staff in Washington since 1943. Defense Minister Sergei Shoigu (left) and President Vladimir Putin (right) both said it plainly enough this week.

There is also no mystery in the decision-making in Moscow of the President and the Defense Minister, the General Staff, and the others; it is the continuation of the Stavka of 1941-45.  

Just because there is no mystery about this, it doesn’t follow that it should be reported publicly, debated in the State Duma, speculated and advertised by bloggers, podcasters, and twitterers.  In war what should not be said cannot be said. When the war ends, then there will be none.  

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RUSSIANS RAISE THEIR GLASSES – THE TOAST IS TO BEATING THE BLOCKADE OF MOSCOW



By John Helmer, Moscow
  @bears_with

Alas and alack for the Berlin Blockade of 1948-49 (Berliner Luftbrücke): those were the days when the Germans waved their salutes against the unification of Germany demilitarised and denazified; and cheered instead for their alliance with the US and British armies to fight another seventy years of war in order to achieve what they and Adolf Hitler hadn’t managed, but which they now hope to achieve under  Olaf Scholtz — the defeat of the Russian Army and the destruction of Russia.

How little the Germans have changed.

But alas and alack — the Blockade now is the one they and the NATO armies aim to enforce against Russia. “We are drawing up a new National Security Strategy,” according to Foreign Minister Annalena Baerbock. “We are taking even the most severe scenarios seriously.”  By severe Baerbock means nuclear. The new German generation — she has also declared “now these grandparents, mothers, fathers and their children sit at the kitchen table and discuss rearmament.”  

So, for Russia to survive the continuation of this war, the Germans and their army must be fought and defeated again. That’s the toast of Russian people as they salute the intrepid flyers who are beating the Moscow Blockade.  

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THE INTERNATIONAL ATOMIC ENERGY AGENCY GOES TO WAR — GORILLA RADIO GOES NUCLEAR

By John Helmer, Moscow
  @bears_with

Last week the International Atomic Energy Agency’s (IAEA) board of governors voted to go to war with Russia by a vote of 26 member countries against 9.

China, Vietnam, India, Pakistan, Egypt, Senegal and South Africa voted against war with Russia.  

The IAEA Secretary-General Rafael Grossi (lead image, left) has refused to tell the press whether a simple majority of votes (18) or a super-majority of two-thirds (23) was required by the agency charter for the vote; he also wouldn’t say which countries voted for or against. The United Nations Secretary-General Antonio Guterres then covered up for what had happened by telling the press: “I believe that [IAEA’s] independence that exists and must be preserved is essential. The IAEA cannot be the instrument of parties against other parties.” The IAEA vote for war made a liar of Guterres.

In the IAEA’s 65-year history, Resolution Number 58, the war vote of September 15, 2022,  is the first time the agency has taken one side in a war between member countries when nuclear reactors have either been attacked or threatened with attack. It is also the first time the IAEA has attacked one of its member states, Russia, when its military were attempting to protect and secure a nuclear reactor from attack by another member state, the Ukraine, and its war allies, the US, NATO and the European Union states. The vote followed the first-ever IAEA inspection of a nuclear reactor while it was under active artillery fire and troop assault.

There is a first time for everything but this is the end of the IAEA. On to the scrap heap of good intentions and international treaties, the IAEA is following the Organisation for the Prohibition of Chemical Weapons (OPCW), and the UN Secretary-General himself.  Listen to this discussion of the past history when the IAEA responded quite differently following the Iranian and Israeli air-bombing attacks on the Iraqi nuclear reactor known as Osirak, and later, the attacks on Pakistan’s nuclear weapons sites.

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INTERNATIONAL ATOMIC ENERGY AGENCY TAKES UKRAINE SIDE IN WAR IN SEPTEMBER 15 VOTE, MAKING UN SECRETARY-GENERAL GUTERRES EITHER A LIAR OR A FOOL

By John Helmer, Moscow
  @bears_with

The International Atomic Energy Agency (IAEA) decided this week to take the side of Ukraine in the current war; blame Russia for the shelling of the Zaporozhye Nuclear Power Plant (ZNPP); and issue a demand for Russia to surrender the plant to the Kiev regime “to regain full control over all nuclear facilities within Ukraine’s internationally recognized borders, including the Zaporizhzhya Nuclear Power Plant.”      

This is the most dramatic shift by the United Nations (UN) nuclear power regulator in the 65-year history of the organisation based in Vienna.

The terms of the IAEA Resolution Number 58, which were proposed early this week by the Polish and Canadian governors on the agency board, were known in advance by UN Secretary-General Antonio Guterres when he spoke by telephone with President Vladimir Putin in the late afternoon of September 14, before the vote was taken. Guterres did not reveal what he already knew would be the IAEA action the next day.  

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THE RUSSIAN SITUATION COMEDY IS NO LYING MATTER – THE JOKE IS ON THE OFFICE OF FOREIGN ASSETS CONTROL

By John Helmer, Moscow
  @bears_with

Never mind that King Solomon said proverbially three thousand years ago, “a merry heart doeth good like a medicine.”  

With seven hundred wives and three hundred concubines, Solomon realized he was the inventor of the situation comedy. If not for the sitcom as his medicine, the bodily and psychological stress Old Solly had to endure in the bedroom would have killed him long before he made it to his death bed at eighty years of age,  after ruling his kingdom for forty of them.

After the British sitcom died in the 1990s, the subsequent stress has not only killed very large numbers of ordinary people. It has culminated today in a system of rule according to which a comic king in Buckingham Palace must now manage the first prime minister in Westminster  history to be her own joke.

Even the Norwegians, the unfunniest people in Europe, have acknowledged that the only way to attract the British as tourists, was to pay John Cleese of Monty Python and Fawlty Towers to make them laugh at Norway itself.   This has been a bigger success for the locals than for the visitors, boosting the fjord boatman’s life expectancy several years ahead of the British tourist’s.  

In fact, Norwegian scientists studying a sample of 54,000 of their countrymen have proved that spending the state budget on public health and social welfare will only work effectively if the population is laughing all the way to the grave. “The cognitive component of the sense of humour is positively associated with survival from mortality related to CVD [cardio-vascular disease] and infections in women and with infection-related mortality in men” – Norwegian doctors reported in 2016. Never mind the Viking English:  the Norwegian point is the same as Solomon’s that “a sense of humour is a health-protecting cognitive coping resource” – especially if you’ve got cancer.  

The Russians understand this better than the Norwegians or the British.  Laughter is an antidote to the war propaganda coming from abroad, as Lexus and Vovan have been demonstrating.   The Russian sitcom is also surviving in its classic form to match the best of the British sitcoms, all now dead – Fawlty Towers (d. 1975), Black Adder (d. 1989), You Rang M’Lord? (d. 1988), Jeeves and Wooster (d. 1990), Oh Dr Beeching! (d.1995), and Thin Blue Line (d. 1996).

The Russian situation comedies, alive and well on TV screens and internet streaming devices across the country, are also increasingly profitable business for their production and broadcast companies – not despite the war but because of it. This has transformed the Russian media industry’s calculation of profitability by removing US and European-made films and television series, as well as advertising revenues from Nestlé, PepsiCo, Mars, and Bayer. In their place powerful  Russian video-on-demand (VOD) streaming platform companies like Yandex (KinoPoisk), MTS (Kion),  Mail.ru (VK), and Ivi (Leonid Boguslavsky, ProfMedia, Baring Vostok)  are now intensifying the competition for audience with traditional television channels and film studios for domestic audiences.  The revenue base of the VOD platforms is less vulnerable to advertisers, more dependent on telecommunications subscriptions.

Russian script writers, cameramen, actors, designers, and directors are now in shorter supply than ever before, and earning more money.  “It’s the Russian New Wave,” claims Olga Filipuk, head of media content for Yandex, the powerful leader of the new film production platforms; its  controlling shareholder and chief executive were sanctioned last year.  

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RUSSIAN AVIATION INDUSTRY CORRECTS YELTSIN YAW – BOEING, AIRBUS DITCHED



By Olga Samofalova, translated and introduced by John Helmer, Moscow
  @bears_with

It was the American humourist Mark Twain who didn’t die in 1897 when it was reported that he had. Twain had thirteen more lively years to go.

The death of the Russian aerospace and aviation industry in the present war is proving to be an even greater exaggeration – and the life to come will be much longer. From the Russian point of view, the death which the sanctions have inflicted is that of the US, European and British offensive against the Soviet-era industry which President Boris Yeltsin (lead image, left) and his advisers encouraged from 1991.

Since 2014, when the sanctions war began, the question of what Moscow would do when the supply of original aircraft components was first threatened, then prohibited, has been answered. The answer began at the Federal Aviation Administration (FAA) in 1947 when the first  Supplemental Type Certificate (STC) or Parts Manufacturing Approval (PMA) was issued by Washington officials for aircraft parts or components meeting the airworthiness standards but manufactured by sources which were not the original suppliers.   

China has been quicker to implement this practice; Chinese state and commercial enterprises have been producing PMA components for Boeing and Airbus aircraft in the Chinese airline fleets for many years.  The Russian Transport Ministry has followed suit; in its certification process and airworthiness regulations it has used the abbreviation RMA, Cyrillic for PMA. This process has been accelerating as the sanctions war has escalated.

So has the Russian process of replacing foreign imports entirely.

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FOR WANT OF A NAIL THE KINGDOM WAS LOST – ENGLISH PATHOLOGIST GUY RUTTY FACES CHALLENGE TO THE RELIABILITY OF HIS NOVICHOK EVIDENCE



By John Helmer, Moscow
  @bears_with

The weakest link in the British government’s four-year long story of Russian Novichok assassination operations in the UK – prelude to the current war – is an English medical expert by the name of Guy Rutty (lead image, standing).

A government-appointed pathologist advising the Home Office, police, and county coroners, Rutty is the head of the East Midlands Forensic Pathology Unit in Leicester,  he is the author of a post-mortem report, dated November 29, 2018,  claiming that the only fatality in the history of the Novichok nerve agent (lead image, document), Dawn Sturgess, had died of Novichok poisoning on July 8, 2018. Rutty’s finding was added four months after initial post-mortem results and a coroner’s cremation certificate stopped short of confirming that Novichok had been the cause of her death.

Rutty’s Novichok finding was a state secret for more than two years. It was revealed publicly   by the second government coroner to investigate Sturgess’s death, Dame Heather Hallett, at a public hearing in London on March 30, 2021. In written evidence it was reported that “on 17th July 2018, Professor Guy Rutty MBE, a Home Office Registered Forensic Pathologist conducted an independent post-mortem examination. He was accompanied by Dr Phillip Lumb, also an independent Home Office Registered Forensic Pathologist. Professor Rutty’s Post-Mortem Report of 29th November 2018 records the cause of death as Ia Post cardiac arrest hypoxic brain injury and intracerebral haemorrhage; Ib Novichok toxicity.”  

Hallett, Rutty, Lumb, and others engaged by the government to work on the Novichok case have refused to answer questions about the post-mortem investigations which followed immediately after Sturgess’s death was reported at Salisbury District Hospital; and a cause of death report signed by the Wiltshire Country coroner David Ridley, when Sturgess’s body was released to her family for funeral and cremation on July 30, 2018.  

After another three years, Ridley was replaced as coroner in the case by Hallett in March 2021. Hallett was replaced by Lord Anthony Hughes (lead image, sitting) in March 2022.

The cause-of-death documents remain state secrets. “As you have no formal role in the inquest proceedings,” Hallett’s and Rutty’s spokesman Martin Smith said on May 17, 2021, “it would not be appropriate to provide you with the information that you have requested.” 

Since then official leaks have revealed that Rutty had been despatched by the Home Office in London to take charge of the Sturgess post-mortem, and Lumb ordered not to undertake an autopsy or draw conclusions on the cause of Sturgess’s death until Rutty arrived. Why? The sources are not saying whether the two forensic professors differed in their interpretation of the evidence; and if so, whether the published excerpt of Rutty’s report of Novichok poisoning is the full story.   

New developments in the official investigation of Sturgess’s death, now directed by Hughes, have removed the state secrecy cover for Rutty, Lumb, and other medical specialists who attended the post-mortem on July 17, 2018. The appointment by Hughes of a London lawyer, Adam Chapman, to represent Sergei and Yulia Skripal, opens these post-mortem documents to the Skripals, along with the cremation certificate, and related hospital, ambulance and laboratory records. Chapman’s role is “appropriate” – Smith’s term – for the Skripals to cross-examine Rutty and Lumb and add independent expert evidence.

Hughes’s appointment of another lawyer, Emilie Pottle (lead image, top left), to act on behalf of the three Russian military officers accused of the Novichok attack exposes this evidence to testing at the same forensic standard. According to Hughes,  it is Pottle’s “responsibility for ensuring that the inquiry takes all reasonable steps to test the  evidence connecting those Russian nationals to Ms Sturgess’s death.” Pottle’s responsibility is to  cross-examine Rutty and Lumb.

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