Russian Tycoon Khodorkovsky got Oil Giant Yukos with a Bribe & Robbed Western Shareholders

Corruption is Everywhere - And Most Definitely in Russia

FILE PHOTO: Mikhail Khodorkovsky. ©  Reuters / Axel Schmidt

A TV report, citing an ongoing probe, claims Russian oligarch-turned-opposition figure Mikhail Khodorkovsky took control over the oil giant Yukos by bribing its managers and then siphoned off billions of dollars from shareholders.

Having spent a decade in prison in Russia after being found guilty of tax evasion and embezzlement, Khodorkovsky, once Russia’s richest man, may now face more charges. A new probe into his activities, launched by the Russian Prosecutor General’s Office, has revealed that the businessman laid his hands on the now-defunct oil giant as a result of a shady deal, the report by the Russia’s NTV Channel says.

It reveals that, in the mid-1990s, Khodorkovsky managed to win the right for his companies to buy almost 80 percent of Yukos’s shares by bribing the company’s management. The businessman allegedly promised the then-Yukos director Sergey Muravlenko and three more top managers to pay them an equivalent of 15 percent of the oil giant’s shares – or some $2 billion – Salavat Karimov, an adviser to Russia’s Prosecutor General, told NTV.

“He indeed transferred hundreds of millions [of dollars] to the offshore accounts opened in the names of these four Yukos top managers,” Karimov said.

While he did not name the exact sum of the bribe money, NTV reported that it amounted to $250 million. The top managers then lobbied for Yukos shares to be mostly handed over to the “effective investor” Khodorkovsky, which his company eventually purchased for a giveaway price of just $9 million. It also obtained a right to buy additional 45 percent of shares as a result of a “special clause.”

While Khodorkovsky has already faced charges of tax evasion and embezzlement, a major revelation seems to be that he fooled Yukos’s minor shareholders big-time, with a whopping $51 billion siphoned off to offshore accounts, according to the probe. 

The businessman employed “dozens” of criminal schemes to rob his business partners, which reportedly included JP Morgan, Barclays, Raiffeisen Bank, UBS, Merrill Lynch and Credit Suisse. In particular, he bought oil from Yukos affiliates at dumping prices, presenting it as “borehole liquid,” and then sold it on at full price.

The money went to offshore accounts in the British territories – the Cayman Islands, Gibraltar and the Guernsey islands. They were then laundered through a specially created company Quadrum, which purchased real estate in the UK and the US. According to Karimov, some $10 billion was also transferred to the Netherlands.

Khodorkovsky, who is currently based in London and enjoys the limelight of accorded to a top Vladimir Putin critic in the west, has dismissed the information published by NTV, saying he “could not care less” about what he called a “sham investigation.”

The former oil tycoon was sentenced to nine years in prison in 2005 following a lengthy legal battle, which was increased to 11 years after the second trial ended in late 2010. He was pardoned by President Putin in 2013 and left Russia for Germany, Switzerland and then the UK.

In 2015, Russian prosecutors accused Khodorkovsky of ordering the murder of the mayor of Siberian city Nefteyugansk, Vladimir Petukhov, and an attempted assassination of businessman Evgeny Rybin. He was then placed on an international wanted list.

Ex-Credit Suisse Bankers Arrested on US Charges Over $2bn Fraud Scheme

Corruption is Everywhere - but in a Swiss Bank? Say it ain't so!

The Credit Suisse logo in Geneva © Reuters / Denis Balibouse

Three former bankers of the second-largest bank in Switzerland, Credit Suisse Group AG, were arrested in London over an alleged connection to a $2bn Mozambique fraud scheme, according to US justice authorities cited by media.

The three suspects – former managing directors Andrew Pears and Surjan Singh, as well as the vice president in the global financing unit, Detelina Subeva – were charged with conspiring to violate US anti-bribery law, money laundering, and securities fraud in an indictment issued in a federal court in Brooklyn, New York, Reuters reported.

The three men were released on bail after their arrest in the British capital on Thursday but may face extradition to the US.

The bank itself was spared of the charges and says it was kept in the dark by its own staff.

“The indictment alleges that the former employees worked to defeat the bank’s internal controls, acted out of a motive of personal profit, and sought to hide these activities from the bank,” Credit Suisse said in a statement.

The arrests of the three former Credit Suisse employees came less than a week after the former finance minister of Mozambique was arrested in South Africa as part of the same case. Manuel Chang is now fighting extradition to the US. A fifth suspect was also arrested earlier this week.

Between 2013 and 2016, Credit Suisse and other banks arranged $2 billion loans for Mozambique state-owned companies. The loans were initially aimed at maritime projects and coastline protection in one of the poorest countries in the world, but instead were plundered, with at least $200 million diverted for bribes and kickbacks. The companies created to operate planned maritime projects were a cover for the suspects to enrich themselves.

The loans were partly concealed from international donors and creditors, including the International Monetary Fund. After they were disclosed in 2016, international aid was withdrawn, sending the nation into crisis. The state-owned companies missed more than $700 million in loan payments after defaulting in 2016 and 2017, according to the indictment.

A similar case has recently been brought against Wall Street giant Goldman Sachs. In December, Malaysia filed criminal charges against the US bank and two of its key bankers over its role in the multi-billion dollar scandal with 1MDB state fund. Kuala Lumpur wants $7.5 billion in reparations from Goldman Sachs, which it claims covered up the looting of the fund.

Super Rich Hide $21 Trillion Offshore, Study Says

Frederick E. Allen, Leadership Editor of Forbes.

Grand Cayman (left)
It's isn't beaches like this that draw the extremely wealthy to the Cayman Islands. (Photo credit: toddwickersty)

A new report finds that around the world the extremely wealthy have accumulated at least $21 trillion in secretive offshore accounts. That’s a sum equal to the gross domestic products of the United States and Japan added together. 

The number may sound unbelievable, but the study was conducted by James Henry, former chief economist at the consultancy McKinsey, an expert on tax havens and offshoring. It was commissioned by Tax Justice Network, a British activist group.

According to an early report on the study in The Guardian, Henry’s research shows that at least £13tn [$21 trillion] – perhaps up to £20tn [$31 trillion] – has leaked out of scores of countries into secretive jurisdictions such as Switzerland and the Cayman Islands with the help of private banks, which vie to attract the assets of so-called high net-worth individuals. Their wealth is, as Henry puts it, “protected by a highly paid, industrious bevy of professional enablers in the private banking, legal, accounting and investment industries taking advantage of the increasingly borderless, frictionless global economy“. According to Henry’s research, the top 10 private banks, which include UBS and Credit Suisse in Switzerland, as well as the US investment bank Goldman Sachs, managed more than £4tn [$6.2 trillion] in 2010, a sharp rise from £1.5tn five years earlier.

The report’s analysis, based on data from many sources including the Bank of International Settlements and the International Monetary Fund, indicates that enough money has left some developing countries since the 1970s to pay off all their debts to the rest of the world. “The problem here is that the assets of these countries are held by a small number of wealthy individuals while the debts are shouldered by the ordinary people of these countries through their governments,” the report says. Money has especially flowed out of oil producing states. Some $700 billion has left Russia since the 1990s: $305 billion has flowed out of Saudi Arabia since the 1970s, and about the same amount from Nigeria.

Henry calculates that some 92,000 people, a thousandth of a percent of the world’s population, control $9.8 trillion, and that if all the $21 trillion that has been off-shored earned 3% a year and were taxed at 30%, it would raise $188 billion in revenues, more than rich countries spend on aid to the developing world every year.

The rich in the USA pay on average about 15% taxes, much less than middle-class workers. That 15%, however, is based on reported income which does not include money filtered to off-shore tax havens. Consequently, many of the rich are actually paying less than a 15% tax rate, and perhaps much less.

These are the same people who wine and cry at the thought of paying their fair share of taxes - which can never happen as long as they are hiding money off-shore. But they don't even want to pay their share of taxes on income that they actually report. All the while they begrudge the poor a few crumbs from the table, calling them all sorts of names. 

Maybe Berni Madoff was right - he's just an ordinary businessman.