Russian prosecutors move to allay investor fears over Yukos arrest

The Russian prosecutor general's office yesterday defended the controversial arrest of the oil billionaire, Mikhail Khodorkovsky, in the strongest possible terms, denying reports that he had been apprehended at gunpoint or refused access to a lawyer.

In a clear effort to allay the fears of foreign and Russian investors, a senior judiciary official insisted the charges against Mr Khodorkovsky were "unprecedented" in their scale and significance and the law was being followed to the letter.

In a highly unusual meeting with a small group of Western journalists the deputy head of the prosecutor general's information directorate, Natalya Vishnyakova, detailed some of the tax evasion and embezzlement charges levelled against Mr Khodorkovsky and accused Yukos of "spinning" its accounts of his arrest and subsequent detention.

Mr Khodorkovsky, she said, was accused of extremely serious tax evasion and embezzlement, which had inflicted total losses on the Russian state of at least $1bn. She said the charges - seven in all, with more likely to follow - related to Mr Khodorkovsky personally and in his capacity as head of Yukos, Russia's biggest oil conglomerate. Some date back to 1994-95, others to alleged tax offences from 1997 to 2002.

Mr Khodorkovsky's arrest at the weekend prompted sharp falls in Russian share values and the first fall in the value of the rouble for four years. It also caused ructions among foreign investors, who feared the detention of Russia's richest and best-known "oligarch" might set a precedent that would call into question the security of their own property and other interests in Russia.

Russian stocks fell again yesterday on fears of another high-profile arrest at Yukos after prosecutors asked a court to annul the election to parliament of a major Yukos shareholder, Vasily Shakhnovsky - the position would have given him immunity from tax evasion charges. Yukos shares closed 2.58 per cents down on the day.

Referring repeatedly to the Russian criminal code, Ms Vishnyakova produced a 47-page document which she said was the formal indictment, containing seven "extremely serious criminal charges" against Mr Khodorkovsky and his company. The document has been posted on the prosecutor general's website in its entirety, and two pages were reproduced in yesterday's issue of the newspaper, Kommersant.

Ms Visnyakova expressly denied that he had been refused access to a lawyer, saying the lawyer had been present when the indictment was handed over. She attributed any delay to the normal functioning of the law, but said that the first telephone call Mr Khodorkovsky made was to his lawyer, who had subsequently visited him in the Moscow prison, Matrosskaya Tishina, where he is being held.

Ms Vishynakova said the investigation into Mr Khodorkovsky and Yukos began earlier this year after investigations revealed that a fertiliser company, a subsidiary of Yukos, was exploiting a monopoly position it enjoyed apparently as a result of illegalities in the way it had been privatised.

The initial investigation led to searches of Yukos offices in Moscow, and - last week - to the search of offices of a public relations company that worked both for Yukos and for the centrist political party, Yabloko, to which Yukos was a contributor. According to Ms Vishnyakova, those searches led to the confiscation of five computer servers, the data on two of which had "self-destructed" when police tried to access the information. Others, she said, yielded unauthorised tax documents revealing mechanisms for massive tax evasion. The search had also turned up $700,000 in cash, in bank wrappings which showed it to have come from a bank in Atlanta. The Russian judicial authorities were now in discussion with US authorities about identifying the bank and tracing the origin of the money. It was that search that appears to have precipitated Mr Khodorkovsky's arrest.

Ms Vishnyakova insisted there had been nothing questionable in the judicial authorities' action and certainly no political aspect or intervention. Whether or not there is a directly political aspect to the case, the investigations into Yukos over the summer, which culminated in Khodorkovsky's arrest, have highlighted deep divisions inside President Putin's administration about how to handle the country's billionaire "oligarchs".