Russian Court Upholds Tax Claim Against Yukos :: Namibia Internet Gateway cc ::

Articles: Russian Court Upholds Tax Claim Against Yukos

Posted by admin on Wednesday, June 30, 2004 - 12:03 AM

A Russian court upheld on Tuesday a claim for $3.4 billion in back taxes against the Russian oil giant Yukos, bringing the company one step closer to the question of how it might pay up without bankrupting itself.
Lawyers for Yukos said on Tuesday that they would recommend an appeal, which would again freeze the government's tax claim. For now, the decision by the Moscow Arbitration Court allows the Russian government to collect at any moment. "This latest ruling crystallized the amount, but not the timing," James Fenkner, head of research at Troika Dialog, a brokerage firm, said on Tuesday. "For minorities still holding the stock, they need to know Yukos will be saddled with tax liabilities, and the new majority owner could be the state." Today, minority investors in Yukos face a stark reality - the Russian government may not want to destroy Yukos, but it certainly seems to want to control it. Russia's president Vladimir V. Putin said earlier this month that he did not want to see Yukos bankrupted by the $3.4 billion tax case. With Yukos barred from selling any assets except oil, giving the government a stake in the company may be one outcome to the tax claim, analysts have said. Yukos is finding its fate inextricably linked with that of its jailed founder, Mikhail B. Khodorkovsky - and minority investors in Yukos say they are suffering because of it. After its transformation from an unwieldy Russian company into one that made an effort to be transparent and manage itself along Western lines, Yukos has had a stunning comedown. Mr. Khodorkovsky, its founder and Russia's wealthiest man, is in prison awaiting trial on fraud and other charges. The company's other core Russian shareholders have fled the country or are also in jail. And Russian and American executives at Yukos are bickering with one another publicly. Foreign investors, particularly United States mutual funds and hedge funds, have sold the stock in droves, pushing the price down from a high last summer of $16 a share to $7.70 on Tuesday. But roughly 30 percent of Yukos is held by minority shareholders - investors other than Mr. Khodorkovsky, the controlling shareholder with 44 percent. The next important date for Yukos is July 12 - the day Mr. Khodorkovsky's criminal trial resumes. And the Yukos tax case and the billionaire oil oligarch's criminal case are closely tied, investors say. "The future of Yukos depends on whether the company can decouple itself from the controlling shareholder," said Boris A. Jordan, an investor and representative hired by United States and European mutual funds holding Yukos shares to lobby for their interests and seek a seat on the Yukos board. So far, Mr. Khodorkovsky has been protected by keeping himself and the company united - but other Yukos shareholders are held hostage, Mr. Jordan said. Many analysts here say the Kremlin will use Tuesday's tax ruling as implicit leverage against Mr. Khodorkovsky in his trial, perhaps to persuade him to cut a deal swapping his stake in Yukos for his freedom - or at least a reduced sentence. Meanwhile, the government has not made any concrete proposals to settle the tax bill, the new chief executive, Steven M. Theede, said in an interview last Friday. In the course of Tuesday's hearings, Yukos revealed that it had sent a proposed out-of-court settlement to the Finance Ministry on June 22. But tax ministry lawyers on Tuesday said they would not settle out of court. "The dispute will be settled only after Yukos pays its taxes," a ministry lawyer, Elena Aleksandrovna, told Prime-Tass news agency on Tuesday. Mr. Theede distanced himself from Mr. Khodorkovsky's legal problems, and said that he was trying to address the welfare of all Yukos shareholders. He said that Yukos's management has sent a letter to Mr. Khodorkovsky's Group Menatep, through which he holds his Yukos shares, asking them to consider a settlement with the government, either through asset sales, a share buyback or a tax payment schedule, but has received no response.

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