to Moscow. Several hours later, Khodorkovsky was indicted on six charges, including fraud and tax evasion.
EIGHTEEN MONTHS LATER, Khodorkovsky would be found guilty not on six but on seven counts and sentenced to nine years in a prison colony. Long before that sentence was up, he would be indicted on a new set of charges and then sentenced again, this time to fourteen years behind bars. Lebedev, the former chairman of his board, would stand trial alongside Khodorkovsky both times. Other Yukos affiliates, including the former head of security, lawyers, and a variety of managers not only at Yukos but at several subsidiaries, would face other charges and similarly harsh sentences; dozens of others would flee the country. Eventually, even Amnesty International, openly reluctant at first to take on the case of a billionaire, would declare Khodorkovsky and Lebedev prisoners of conscience. No one—not even his jailers, it seemed—would doubt, after a certain point, that he was unfairly imprisoned, but even eight years after his arrest no one would be quite certain what exactly Khodorkovsky had done that had cost him his freedom and his fortune.
Khodorkovsky himself and many of his staff believed that he was being punished for speaking out about corruption. In February 2003, Putin had gathered Russia’s wealthiest businessmen for a rare discussion that was open to the media. Khodorkovsky arrived with a PowerPoint presentation that consisted of eight simple slides containing facts that all of those present certainly knew and just as certainly tried to pretend they did not know. Slide six was titled “Corruption Costs the Russian Economy over $30 Billion a Year” and cited four different studies that had arrived at more or less the same figure. Slide eight was titled “The Shaping of a New Generation” and contained a chart comparing three different institutions of higher learning: one that graduated oil-industry managers, one that trained tax inspectors, and one that prepared civil servants. Competition to get into the last college reached almost eleven persons per spot, aspiring tax inspectors had to beat out as many as four competitors, while future oil-industry managers had to fight fewer than two other people—even though official starting salaries in the oil industry were two to three times those in the government sector. These, Khodorkovsky indicated, were just the official figures; high school students were making their career plans counting on income from corruption.
When he was speaking, Khodorkovsky also mentioned the recent merger of the state-owned oil giant Rosneft with a smaller, privately held oil company. “Everyone thinks the deal had, shall we say, a second layer,” said Khodorkovsky, alluding to the glaringly high price Rosneft had paid. “The president of Rosneft is here—perhaps he’d like to comment.” The president of Rosneft did not care to comment, and this looked very much like an embarrassing and public admission of guilt.
The person who responded to Khodorkovsky was Putin himself. He got the same smirk on his face with which, at the press conference a few months earlier, he had suggested that the French journalist be castrated—the facial expression that indicated he was having difficulty containing his anger. “Some companies, including Yukos, have extraordinary reserves. The question is: How did the company get them?” he asked, shifting in his chair to raise his right shoulder in a gesture that made him seem bigger and smiling a thuggish smile that made it plain this was a threat, not a question. “And your company had its own issues with taxes. To give the Yukos leadership its due, it found a way to settle everything and take care of all its problems with the state. But maybe this is the reason there is such competition to get into the tax academy?” In other words, Putin accused Khodorkovsky of having bribed tax inspectors and threatened a takeover of his company.
Then there was the school of thought that the reason for Khodorkovsky’s trouble was politics: he meddled too much. He made donations to political parties, including the Communists. Immediately following Lebedev’s arrest in July, Khodorkovsky asked Prime Minister Kasyanov, with whom he had a distant but genial relationship, to find out what had happened. “It took three or four attempts,” Kasyanov told me. “Putin kept saying that the prosecutor’s office knew what it was doing. But finally he told me that Yukos had been financing political parties, not just the [small liberal parties], which Putin had given him permission to finance, but also the Communists, which he did not allow him to fund.” Eight years later, Nevzlin—the Yukos partner who left the country—maintained that the company’s donations to the Communist Party had “of course” been cleared by the Kremlin. Some people in Khodorkovsky’s circle took to calling the party-financing situation “the double-cross cross,” believing Khodorkovsky had been set up by someone close enough to Putin to tell Khodorkovsky—falsely—that his funding the Communists had been cleared. All these discussions were taking place in the lead-up to the December 2003 parliamentary election—the one after which
A third group of observers had the simplest of all explanations for Khodorkovsky’s fate. “He did not go to prison for tax evasion or stealing oil, for God’s sake,” Illarionov said to me seven and a half years after the arrest. “He went to prison because he was—and remains—an independent human being. Because he refused to bend. Because he remained a free man. This state punishes people for being independent.”
But in October 2003, when news of the arrest broke, its darkly absurd nature was far from obvious to everyone. William Browder, for one, applauded the arrest. In an op-ed piece published in the English-language daily
ON NOVEMBER 13, 2005, Browder was returning to Moscow from London. He had been living in Russia for nine years, and though he spoke no Russian, he felt as much at home in Moscow as anyone could. His money guaranteed a level of comfort familiar to the very wealthy in oil-producing countries: he traveled on a luxurious separate track from the moment he landed in Moscow, where he would be whisked through airport formalities and picked up by his driver, a former police officer who retained his badge, which made him king on the lawless roads of Moscow. But this time Browder found himself stuck in the airport’s VIP lounge: his passport was apparently held up at the border. A couple of hours later, he landed in the detention area of the airport, a blank room with cold plastic chairs and several other detainees, each a prisoner of his own uncertain fate. Fifteen hours after arriving, Browder was put on a flight back to London: his Russian visa had been revoked.
Surely this was a massive misunderstanding. Browder called the cabinet ministers and the Kremlin staffers who had liked his PowerPoint presentations so much. They were vague, evasive, noncommittal. After several phone calls, it began to sink in that his visa issues would not be resolved anytime soon. For all his faith in Putin’s best intentions, one thing Browder knew for certain was that no business should be left unattended in Russia. He began moving his operation to London. The analysts moved; the fund divested itself of $4.5 billion worth of stock in Russian companies, without anyone’s seeming to notice. By the end of the summer of 2006, the Hermitage Fund’s Russian companies were empty shells with a small office in Moscow occasionally visited by the company’s secretary.
She was there, along with a staff member visiting from London, when twenty-five tax police officers descended on the office and turned it upside down. Soon the same number of officers, led by the same colonel who had run the first raid, appeared at the offices of the Hermitage Fund’s law firm, apparently looking for stamps, seals, and certificates for three holding companies through which the Hermitage Fund had managed its investments. When a lawyer objected that they lacked the appropriate search warrants, he was taken to a conference room and beaten there.
Four months later, Browder was notified of multimillion-dollar judgments against his companies issued by a court in St. Petersburg. Put on notice by his visa annulment, frightened by the tax police raids, he was now downright terrified by a sequence of events for which there could no be reasonable explanation. Why would the tax police need registration papers, seals, and stamps for empty shell companies? How could there be judgments against these companies if their representatives had not even known of any lawsuits or court hearings? Browder asked his Moscow lawyers to investigate.
It was not a lawyer but a young accountant who, after more than a year of sleuthing, finally reconstructed an absurd, barely believable, but nonetheless logical sequence of events. The three empty shell companies, Sergei Magnitsky discovered, had been re-registered in the names of other people, all of them convicted felons. Then the companies had been sued by other companies, which produced contracts supposedly showing that the stolen companies owed them money. Three different courts in three different Russian cities held speedy hearings and issued judgments against Browder’s former companies totaling a billion dollars, which just happened to be exactly the amount of profit the three companies had reported in the previous tax year. Then the companies’ new owners filed claims with the tax authority, requesting a refund of all the taxes they had paid: they appeared to qualify for it because, on paper, the companies no longer had a profit. The refunds, totaling $230 million, were processed in a
