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New Front Opens in Yukos War

Prosecutors on Friday seized documents at the Siberian offices of titanium giant VSMPO-Avisma in what appeared to be a new legal assault on the business empire of imprisoned former Yukos CEO Mikhail Khodorkovsky.

The investigation into the relationship between Avisma and Khodorkovsky's Menatep holding company could reopen one of the most controversial chapters in the oilman's past.

Once the country's richest man, Khodorkovsky is already serving out an eight-year sentence in a remote Siberian prison camp after being convicted of fraud and tax evasion in a highly politicized trial. But prosecutors have indicated that they want to press new charges of money laundering, which could add another 10 years to his sentence.

"The searches are being conducted as part of a large criminal probe into a number of fraudulent activities conducted by senior Yukos executives and into tax evasion," Alexander Vasilyev, a spokesman for the Prosecutor General's Office, said Friday. He refused to comment on who was the subject of the investigation, but said the probe started in 2003, before Khodorkovsky had been arrested. No charges have been filed, Vasilyev said.

The search at the VSMPO-Avisma headquarters in Berezniki, in the Perm region, which started earlier last week, was unrelated to a dispute between the company's current owners, Vasilyev said. Instead, he said, the probe was specifically tied to Yukos executives. Between 1994 and 1998, senior Yukos managers such as Khodorkovsky owned -- via Menatep -- more than 60 percent of Avisma, which was later merged with VSMPO.

Khodorkovsky's lawyer, Anton Drel, said his client had not been questioned with regard to Avisma. "If there is some kind of investigation, they have not informed us of this," he said Friday.

Menatep, the core shareholder of Yukos, has long been the focus of controversy in regards to its Avisma stake, which it won for next to nothing in the early 1990s.

After Menatep in 1998 sold the stake for $80 million to a group of foreign investors, including U.S. styrofoam cup tycoon Kenneth Dart, its titanium trading arrangements with Avisma soon came under scrutiny.

In a series of international lawsuits filed in early 1999, Dart and other foreign investors alleged that Menatep had been diverting tens of millions of dollars from Avisma into its own pockets and continued to do so even after selling the stake.

The investors claimed that Menatep was using transfer-pricing schemes to sell Avisma's titanium at a knockdown price to an Isle of Man-based trading company, TMC Holding, and keeping the money offshore, according to a copy of one of the lawsuits obtained by The Moscow Times.

In one transaction, Menatep-linked directors at TMC transferred nearly $10 million to a Bank Menatep unit in Cyprus several months after the bank went under in the 1998 financial crisis, according to the lawsuit.

Menatep denied any wrongdoing and said the sales arrangement through TMC was designed to avoid U.S. anti-dumping measures. The standoff was eventually settled out of court.

A former Menatep Bank executive familiar with Avisma's operations in the 1990s said the probe could either be aimed at looking into the transfer pricing arrangements, or into the privatization of a 10 percent stake in Avisma won in 1994 by a Menatep-linked company called Mayak.

In 1999, the Moscow arbitration court annulled the privatization on the grounds that Mayak failed to fulfill its investment obligations. The ruling was never enforced.

Menatep has said it was acting in line with the law.

"This was very similar to the privatization of Apatit," the former executive said, referring to the controversial sale of a fertilizer plant that figured into the first set of charges levied against Khodorkovsky.

Vasilyev, the spokesman for the prosecutors' office, declined to elaborate on which aspect of Menatep's dealings was under investigation.

The current head of VSMPO-Avisma's legal department, Artyom Kislichenko, told Interfax that law enforcement officials were looking into Menatep-related matters. "The prosecutors say that they are trying to follow the traces of Menatep, not just among the shareholders, but in the day-to-day activities of the company, including those at the present time," Kislichenko said, Interfax reported.

VSMPO-Avisma today is owned by billionaire Viktor Vekselberg and by former heads of the VSMPO titanium processing plant Vyacheslav Bresht and Vladislav Tetukhin.

Vekselberg's ownership dispute with Bresht and Tetukhin has led the RTS Index to freeze trading in the company's shares. On Friday, the exchange said that starting on Dec. 15, it would cut out VSMPO-Avisma shares altogether.

(The Moscow Times 05.xii.05)

 
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