this outspoken premier around for his second term, but the president’s patience seemed to run out early: in February 2004, a month before the election, he fired his cabinet.
After firing Kasyanov, Putin planned to keep him on in a less public position. He made him three job offers, each more insistent than the last: there was the option of heading the security council or running a new state- affiliated bank venture, an offer Putin made twice. When Kasyanov finally said no, his former employer’s tone turned from seductive to menacing. “I was already at the door when he said, ‘Mikhail Mikhailovich, if you ever have a problem with the tax police, you may ask for help, but make sure you come to me personally.” Kasyanov interpreted Putin’s parting words as both a threat and an offer to keep a door open. Tax trouble duly began: Kasyanov’s consulting company, which he formed right after losing his job, was audited. Kasyanov chose not to seek help, which meant not only that the tax audit dragged on for two years (the two sides finally managed to settle on an extremely minor violation, improperly entering in the books a box of writing paper), but also that Kasyanov became persona non grata in Russian politics. In the years following his firing, he tried to run for office and register a political party—reportedly even managing to collect the absurdly high number of signatures required—but his papers were consistently turned away by the registration authorities. With no access to television or large newspapers, Kasyanov went from mainstream to marginal as fast as any politician ever had.
The Khodorkovsky case came to trial in mid-2004 and dragged on for ten months, despite the fact that nearly all motions by the defense were denied, drastically cutting the number of witnesses and cross-examinations at Moscow’s Basmanny Court. As the verdict neared, Igor Shuvalov, a lawyer and a newly prominent assistant to Putin, said, “The Yukos case was a show trial intended as an example for other companies using various schemes for minimizing their tax burden. If it hadn’t been Yukos, it would have been another company.” Even the Moscow press corps, used to writing about some of the most cynical politicians on the planet, were shocked by the open use of Stalin-era language to mean more or less exactly what Stalin had meant: that the courts existed to do the bidding of the head of state and dole out punishment as he saw fit to those he saw fit to punish.
In fact, only two of the seven charges against Khodorkovsky concerned alleged tax evasion, and what happened in the Moscow court was more show than trial. The defense called few of its witnesses—not only because the court turned down so many of its motions but also because the prosecution’s case seemed so flimsy it hardly warranted a full-force defense, especially since testifying for the defense seemed to incur considerable risk. Ten Yukos affiliates, including two lawyers—both of them women—had already been arrested, and nine more evaded arrest by fleeing the country; soon these numbers would seem quite small, as dozens of people would be in prison and hundreds on the run.
Finding itself in the middle of a Kafkaesque trial, the defense adopted a pointedly understated style. In his final arguments, Genrikh Padva, Khodorkovsky’s lead attorney and possibly the country’s most famous defense lawyer, sounded more like a schoolteacher than the passionate participant in a judicial contest. Over the course of three days of hearings, Padva read his arguments, methodically listing all of the prosecution’s errors, aiming to show that the prosecutors failed to supply any documents even proving that the defendants were in any way involved with some of the companies listed in the charges, much less actually guilty of the crimes. “And I won’t even mention the fact that the charges are filed in accordance with laws that went into effect years after these supposed deeds took place,” was a typical Padva aside. His tone conveyed that he entertained no illusions about his ability to convince the judges of anything, but in the interests of history and future appeals to international judicial bodies, he needed to get all his arguments on record. The judges, three overweight women around forty, each sporting a shiny helmet of combed-back hair, sat still, their lips pursed in identical demonstrations of displeasure. Their demeanor seemed meant to say: The decision has long been made, and your insistence on procedure and proper discussion is an offensive waste of everyone’s time.
Khodorkovsky and Lebedev were each sentenced to nine years in a prison colony; three months later, an appeals court cut a year off the sentences. The men were shipped off to different colonies, each as faraway and difficult to get to as a colony could be. To visit their client, Khodorkovsky’s lawyers had to travel nine hours by plane and another fifteen hours by train. Russian law mandated placing convicts in prisons within easy travel distance of their homes—so the law had to be changed, retroactively, to accommodate the Khodorkovsky case.
For six months following his arrest, Khodorkovsky tried to run his company from jail. Finally realizing this was untenable, he signed his shares over to Nevzlin, the partner who had moved to Israel. But the company, bombarded with tax liens and lawsuits, its assets inside Russia long since seized by the state, was cracking. Within a year of Khodorkovsky’s arrest, Russia’s largest and most successful oil company, which had once paid 5 percent of all the taxes collected by the federal government, was facing bankruptcy proceedings. Its most attractive asset, a company called Yuganskneftegaz, owner of some of Europe’s largest oil reserves, was up for auction. The state gas monopoly, now run by Putin’s former deputy in St. Petersburg, looked poised to win the auction. To prevent the deal, Yukos’s lawyers filed for bankruptcy in a Texas court and then sought a staying order on the sale of the company there; Gazprom, the Russian company, certainly was not going to listen to an American court on this matter, but it so happened it planned to buy Yuganskneftegaz with funds borrowed from American and West European banks. The financing was pulled and it looked, briefly, like the takeover might be temporarily averted— when a newly registered company called Baikalfinansgrup appeared out of nowhere to register for the auction. Journalists immediately descended on its registration address in Tver, a godforsaken town about three hours outside Moscow; it turned out to be a small building that was used as a legal address by 150 companies, none of which appeared to have any physical assets.
Nor did Baikalfinansgrup have financial assets. According to its registration documents, filed two weeks before the auction, its capitalization was ten thousand rubles, or roughly $300. But somehow the state-owned oil company Rosneft—the one whose president had declined to respond to Khodorkovsky’s questions about perceived corruption a year earlier—lent the unheard-of company more than $9 billion to buy Yuganskneftegaz; this was less than half the company’s estimated worth at the time. The auction, held on December 19, 2004, lasted all of two minutes.
Speaking in Germany two days after the auction, Putin bristled at the suggestion that Yukos assets had been bought by an unknown entity. “I know the stockholders of the company, and they are individuals,” he said. “They are individuals who have been working in the energy sector for a long time.” Another two days later, Rosneft, the state oil company, bought Baikalfinansgrup, taking control of the Yukos assets—but also ensuring that it could never be sued for having purchased it in the course of a rigged auction.
It had been just over a year since Khodorkovsky’s arrest, and it was now clear Russia had passed two milestones. With the country’s former richest man behind bars indefinitely, no one, not even the rich and powerful, could afford free agency. And with the assets of the country’s largest private company hijacked in broad daylight, Putin had claimed his place as the godfather of a mafia clan ruling the country. Like all mafia bosses, he barely distinguished between his personal property, the property of his clan, and the property of those beholden to his clan. Like all mafia bosses, he amassed wealth by outright robberies, as with Yukos, by collecting so-called dues and by placing his cronies wherever there was money or assets to be siphoned off. By the end of 2007, at least one Russian political expert—someone believed to have access to the Kremlin—estimated Putin’s personal net worth at $40 billion.
THE $40 BILLION FIGURE can be neither confirmed nor disproved, but there was one story I was able to report in detail. It shed light not only on the scale of Putin’s personal fortune but also on the mechanics of amassing it. It took my good reportorial luck and one very brave man to tell it.
In the early 1990s, Sergei Kolesnikov had been one of hundreds of Soviet scientists turned Russian entrepreneurs. A Ph.D. in biophysics, he started out manufacturing medical equipment and then began importing it. During the Sobchak administration, he formed a joint venture with the city and created a successful business outfitting St. Petersburg’s clinics and hospitals. After Sobchak was voted out of office, he bought out the city’s share and took the company private, staying in the same line of business.
As soon as Putin was elected president, Kolesnikov was contacted by an old business associate from his St. Petersburg days. He outlined a scheme: some of Russia’s wealthiest men would donate significant sums of money earmarked toward purchasing medical equipment for Russian facilities. Kolesnikov would use his expertise to procure the equipment at significant volume discounts. The difference between the list price of equipment, which would be reported to the donor, and actual money spent had to be no less than 35 percent; if Kolesnikov obtained an even greater discount, he could keep the difference as profit. The 35 percent had to be deposited in a bank account set up in Western Europe and would later be used to invest in the Russian economy.
Kolesnikov had no qualms about agreeing to the scheme. Like Browder, he thought he was living well while
