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.

RED HAS TURNED YELLOW – THE GREEK AND CYPRIOT COMMUNISTS ARE FLYING A DIFFERENT FLAG IN THE UKRAINE WAR



By John Helmer, Moscow
  @bears_with

The Ukraine war is splitting the communist parties of Europe between those taking the US side, and those on the Russian side.

In an unusual public criticism of the Greek Communist Party (KKE) and of smaller communist parties in Europe which have endorsed the Greek criticism of Russia for waging an “imperialist” war against the Ukraine, the Russian Communist Party (KPRF) has responded this week with a 3,300-word declaration:  “The military conflict in Ukraine,” the party said, “cannot be described as an imperialist war, as our comrades would argue. It is essentially a national liberation war of the people of Donbass. From Russia’s point of view it is a struggle against an external threat to national security and against Fascism.”

By contrast, the Russian communists have not bothered to send advice, or air public criticism of the Cypriot communists and their party, the Progressive Party of Working People (AKEL). On March 2, AKEL issued a communiqué “condemn[ing] Russia’s invasion of Ukraine and calls for an immediate ceasefire and the withdrawal of the Russian troops from Ukrainian territories….[and] stresses that the Russian Federation’s action in recognising the Donetsk and Luhansk regions constitutes a violation of the principle of the territorial integrity of states.”

 To the KPRF in Moscow the Cypriots are below contempt; the Greeks are a fraction above it.

A Greek-Cypriot veteran of Cypriot politics and unaffiliated academic explains: “The Cypriot communists do not allow themselves to suffer for what they profess to believe. Actually, they are a misnomer. They are the American party of the left in Cyprus, just as [President Nikos] Anastasiades is the American party of the right.” As for the Greek left, Alexis Tsipras of Syriza – with 85 seats of the Greek parliament’s 300, the leading party of the opposition – the KKE (with 15 seats), and Yanis Varoufakis of MeRA25 (9 seats), the source adds: “The communists are irrelevant in Europe and in the US, except in the very narrow context of Greek party politics.”

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IF IT SMELLS ALLURING, IT’S RUSSIAN – IN WARTIME L’ORÉAL (FRANCE) AND ESTÉE LAUDER (US) MAKE A BAD SMELL



By John Helmer, Moscow
  @bears_with

The war plan of the US and the European allies is destroying the Russian market for traditional French perfumes, the profits of the French and American conglomerates which own the best-known brands, the bonuses of their managers, and the dividends of their shareholders. The odour  of these losses is too strong for artificial fresheners.

Givaudan, the Swiss-based world leader in production and supply of fragrances, oils and other beauty product ingredients, has long regarded the Russian market as potentially its largest in Europe; it is one of the fastest growing contributors to Givaudan’s profit worldwide. In the recovery from the pandemic of Givaudan’s Fragrance and Beauty division – it accounts for almost half the company’s total sales — the group reported “excellent double-digit growth in 2021, demonstrating strong consumer demand for these product categories.”    Until this year, Givaudan reveals in its latest financial report, the growth rate for Russian demand was double-digit – much faster than the  6.3% sales growth in Europe overall; faster growth than in Germany, Belgium and Spain.    

Between February 2014, when the coup in Kiev started the US war against Russia, and last December, when the Russian non-aggression treaties with the US and NATO were rejected,   Givaudan’s share price jumped three and a half times – from 1,380 Swiss francs to 4,792 francs; from a company with a market capitalisation of 12.7 billion francs ($12.7 billion) to a value of 44.2 billion francs ($44.2 billion). Since the fighting began in eastern Ukraine this year until now, Givaudan has lost 24% of that value – that’s $10 billion.  

The largest of Givaudan’s shareholders is Bill Gates. With his 14%, plus the 10% controlled by Black Rock of New York and MFS of Boston, the US has effective control over the company.

Now, according to the US war sanctions, trade with Russia and the required payment systems have been closed down, alongside the bans on the importation of the leading European perfumes. So in place of the French perfumers, instead of Givaudan, the Russian industry is reorganizing for its future growth with its own perfume brands manufactured from raw materials produced in Crimea and other regions, or supplied by India and China. Givaudan, L’Oréal (Lancome, Yves Saint Laurent), Kering (Balenciaga, Gucci), LVMH (Dior, Guerlain, Givenchy), Chanel, Estée Lauder, Clarins – they have all cut off their noses to spite the Russian face.

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THE WAR AGAINST FOOD – WHO IS TO BLAME



By Nikolai Storozhenko, introduced and translated by John Helmer, Moscow
  @bears_with

This week President Joseph Biden stopped at an Illinois farm to say he’s going to help the  Ukraine ship 20 million tonnes of wheat and corn out of storage into export, thereby relieving  grain shortages in the international markets and lowering bread prices around the world.  Biden was trying to play a hand in which his cards have already been clipped. By Biden.  

The first Washington-Kiev war plan for eastern Ukraine has already lost about 40% of the Ukrainian wheat fields, 50% of the barley, and all of the grain export ports. Their second war plan to hold the western region defence lines with mobile armour, tanks, and artillery  now risks the loss of the corn and rapeseed crop as well as the export route for trucks to Romania and Moldova. What will be saved in western Ukraine will be unable to grow enough to feed its own people. They will be forced to import US wheat, as well as US guns and the money to pay for both.

Biden told his audience that on the Delaware farms he used to represent in the US Senate “there are more chickens than there are Americans.”  Blaming the Russians is the other card Biden has left.  

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EXILE



By John Helmer, Moscow
  @bears_with

The problem with living in exile is the meaning of the word. If you’re in exile, you mean you are forever looking backwards, in geography as well as in time. You’re not only out of place; you’re out of time — yesterday’s man.

Ovid, the Roman poet who was sent into exile from Rome by Caesar Augustus, for offences neither Augustus nor Ovid revealed, never stopped looking back to Rome. His exile, as Ovid described it, was “a barbarous coast, inured to rapine/stalked ever by bloodshed, murder, war.” In such a place or state, he said, “writing a poem you can read to no one is like dancing in the dark.”

The word itself, exsilium in Roman law, was the sentence of loss of citizenship as an alternative to loss of life, capital punishment. It meant being compelled to live outside Rome at a location decided by the emperor. The penalty took several degrees of isolation and severity. In Ovid’s case, he was ordered by Augustus to be shipped to the northeastern limit of the Roman empire,  the Black Sea town called Tomis; it is now Constanta, Romania. Ovid’s last books, Tristia (“Sorrows”) and Epistulae ex Ponto (“Black Sea Letters”), were written from this exile, which began when he was 50 years old, in 8 AD, and ended when he died in Tomis nine years year later, in 17 AD.  

In my case I’ve been driven into exile more than once. The current one is lasting the longest. This is the one from Moscow, which began with my expulsion by the Foreign Ministry on September 28, 2010.  The official sentence is Article 27(1) of the law No. 114-FZ — “necessary for the purposes of defence capability or security of the state, or public order, or protection of health of the population.” The reason, a foreign ministry official told an immigration service official when they didn’t know they were being overheard, was: “Helmer writes bad things about Russia.”

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IN THE FOG OF WAR THERE’S THE GUTERRES CERTAINTY AND THE CADIEU CERTAINTY – GORILLA RADIO SEES THROUGH THE COVER-UP



By John Helmer, Moscow
  @bears_with

Antonio Guterres is the Secretary-General of the United Nations (UN), who attempted last month  to arrange the escape from Russian capture of Ukrainian soldiers and NATO commanders,  knowing they had committed war crimes. He was asked to explain; he refuses.   

Trevor Cadieu is a Canadian lieutenant-general who was appointed the chief of staff and head of the Canadian Armed Forces last August; was stopped in September; retired from the Army this past April, and went to the Ukraine, where he is in hiding. From whom he is hiding – Canadians or Russians – where he is hiding, and what he will say to explain are questions Cadieu isn’t answering, yet.

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DID UN SECRETARY-GENERAL GUTERRES COMMIT A WAR CRIME AT AZOVSTAL?

By John Helmer, Moscow
  @bears_with

Antonio Guterres, the United Nations Secretary-General, is refusing this week to answer questions on the role he played in the recent attempt by US, British, Canadian and other foreign combatants to escape the bunkers under the Azovstal plant, using the human shield of civilians trying to evacuate.

In Guterres’s meeting with President Vladimir Putin at the Kremlin on April 26 (lead image), Putin warned Guterres he had been “misled” in his efforts. “The simplest thing”, Putin told Guterres in the recorded part of their meeting, “for military personnel or members of the nationalist battalions is to release the civilians. It is a crime to keep civilians, if there are any there, as human shields.”  

This war crime has been recognized since 1977 by the UN in Protocol 1 of the Geneva Convention.  In US law for US soldiers and state officials, planning to employ or actually using human shields is a war crime to be prosecuted under 10 US Code Section 950t.  

Instead, Guterres ignored the Kremlin warning and the war crime law, and authorized UN officials, together with Red Cross officials,  to conceal what Guterres himself knew of the foreign military group trying to escape. Overnight from New York, Guterres has refused to say what he knew of the military escape operation, and what he had done to distinguish, or conceal the differences between the civilians and combatants in the evacuation plan over the weekend of April 30-May 1.May.

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THE LAST DITCH IS POLAND – RUSSIA’S PHASE-3 PLAN FOR WESTERN UKRAINE



By Vlad Shlepchenko, introduced & translated by John Helmer, Moscow
  @bears_with

The more western politicians announce pledges of fresh weapons for the Ukraine, the more Russian military analysts explain what options their official sources are considering to destroy the arms before they reach the eastern front, and to neutralize Poland’s role as the NATO  hub for resupply and reinforcement of the last-ditch holdout of western Ukraine.

“I would like to note,” Defense Minister Sergei Shoigu, repeated yesterday, “that any transport of the North Atlantic Alliance that arrived on the territory of the country with weapons or material means for the needs of the Ukrainian armed forces is considered by us as a legitimate target for destruction”.  He means the Ukraine border is the red line.

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THE MATLIN PLOT, THE BROWDER PLOT AND THE NEW YORK TIMES PLOT



By Lucy Komisar,  New York*
  @bears_with

Here’s a story the New York Times has just missed.

US politicians and media pundits are promoting the targeting of “enablers” of Russian oligarchs who stash their money in offshore accounts. A Times article of March 11   highlighted Michael Matlin, CEO of Concord Management as such an “enabler.” But the newspaper missed serious corruption Matlin was involved in. Maybe that’s because Matlin cheated Russia, and also because the Matlin story exposes the William Browder/Sergei Magnitsky hoax aimed at Russia.

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YELLOW COAL, THE FUEL MADE OUT OF RACE HATRED — MAY DAY MESSAGE FROM SIGIZMUND KRZHIZHANOVSKY, 1939



By John Helmer, Moscow
  @bears_with

In 1939 a little known writer in Moscow named Sigizmund Khrzhizhanovsky published his idea that the Americans, then the Germans would convert human hatred into a new source of energy powering everything which had been dependent until then on coal, gas, and oil.

Called yellow coal, this invention originated with Professor Leker at Harvard University. It was applied, first to running municipal trams, then to army weapons, and finally to cheap electrification of everything from domestic homes and office buildings to factory production lines. In Russian leker means a quack doctor.

The Harvard professor’s idea was to concentrate the neuro-muscular energy people produce when they hate each other.  Generated as bile (yellow), accumulated and concentrated into kinetic spite in machines called myeloabsorberators, Krzhizhanovsky called this globalization process the bilification of society.

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IS CAESARISM THE PROBLEM, THE SOLUTION, A FANCY DRESS COSTUME, OR A PROPAGANDA CARTOON?



By John Helmer, Moscow
  @bears_with

In imperial history there is nothing new in cases of dementia in rulers attracting homicidal psychopaths to replace them.  It’s as natural as honey attracts bees.

When US President Woodrow Wilson was incapacitated by a stroke on October 19, 1919, he was partially paralysed and blinded, and was no longer able to feed himself, sign his name, or speak normally; he was not demented.

While his wife and the Navy officer  who was his personal physician concealed his condition, there is no evidence that either Edith Wilson or Admiral Cary Grayson were themselves clinical cases of disability, delusion,  or derangement. They were simply liars driven by the ambition to hold on to the power of the president’s office and deceive everyone who got in their way.  

The White House is always full of people like that. The 25th Amendment to the US Constitution is meant to put a damper on their homicidal tendencies.

What is unusual, probably exceptional in the current case of President Joseph Biden, not to mention the history of the United States,  is the extent of the president’s personal incapacitation; combined with the clinical evidence of psychopathology in his Secretary of State Antony Blinken;  and the delusional condition of the rivals to replace Biden, including Donald Trump and Hillary Clinton.

Like Rome during the first century AD, Washington is now in the ailing emperor-homicidal legionary phase.  But give it another century or two, and the madness, bloodshed, and lies of the characters of the moment won’t matter quite as much as their images on display in the museums of their successors craving legitimacy, or of successor powers celebrating their superiority.  

Exactly this has happened to the original Caesars, as a new book by Mary Beard, a Cambridge University professor of classics, explains. The biggest point of her book, she says, is “dynastic succession” – not only of the original Romans but of those modern rulers who acquired the Roman portraits in marble and later copies in paint, and the copies of those copies, with the idea of communicating “the idea of the direct transfer of power from ancient Romans to Franks and on to later German rulers.”

In the case she narrates of the most famous English owner of a series of the “Twelve Caesars”, King Charles I — instigator of the civil war of 1642-51 and the loser of both the war and his head – the display of his Caesars was intended to demonstrate the king’s self-serving “missing link” between his one-man rule and the ancient Romans who murdered their way to rule, and then apotheosized into immortal gods in what they hoped would be a natural death on a comfortable bed.

With the American and Russian successions due to take place in Washington and Moscow in two years’ time, Beard’s “Twelve Caesars, Images of Power from the Ancient World to the Modern”,  is just the ticket from now to then.

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