RUSSIAN TYCOON IS FREE, BUT HIS MONEY IS STILL TIED UP

c.2013 New York Times News Service

MOSCOW — Before he went to prison 10 years ago, Mikhail B. Khodorkovsky was Russia’s richest man, worth maybe $15 billion. Set free this month, he could only guess at his vastly depleted, but still formidable, wealth.

“I have no idea about my financial situation,” he told journalists in Berlin, where he was whisked on a private plane straight from a Russian penal colony.

He was not being coy. As Russian prosecutors began dismantling his company, Khodorkovsky’s lawyers set about safeguarding his main asset, shares in the Yukos oil company. His lawyers did such a good job entangling billions of dollars in offshore vehicles outside Russia, mostly in the Netherlands, that it is far from clear when or if Khodorkovsky will ever gain access to what is left of his fortune.

The money is under the control of Dutch foundations, run by boards known by the benign, if Kafkaesque, term of benevolent interveners.

There is little doubt that Khodorkovsky still has tens of millions of dollars in other investments. He is not going to go hungry. In a news conference after his release, he said he had “enough money to make a living.” Striking a philosophical note, he also said he was certainly better off than most of his fellow convicts.

But that is a pittance compared with what could still be his personal stake in what is left of Yukos, once one of the world’s largest oil companies, now bankrupt. There may be as much as $920 million from the sale of the company’s overseas assets, but it is locked up in the Dutch foundations.

Control of these legal entities, called stichtings in Dutch law, is in the hands of independent boards not beholden even to the beneficiaries, possibly including Khodorkovsky. The boards are wholly autonomous, run by lawyers and former oil company executives who have found a second career in the corporate afterlife of Yukos.

The legal insulation of these foundations means that not only will Khodorkovsky have to wait before seeing any proceeds, but he cannot offer assurances to President Vladimir V. Putin of Russia or anyone else about how this legal process will unfold. Looming in the future is the possibility of protracted legal battles with Russia and the Russian state oil company Rosneft.

“This happened a year and a half after Khodorkovsky was arrested, and he didn’t have a hand in it and didn’t even know about it,” said Bruce K. Misamore, former chief financial officer for Yukos. “We’ve been fighting to protect those assets for eventual distribution to shareholders of Yukos.”

He and others emphasized those shareholders also included pension and mutual funds that invested in Yukos. “We will disburse the funds at the first opportunity,” Misamore said, but that could be many years from now because of pending lawsuits.

Without the efforts of the benevolent interveners, all the shareholders including Khodorkovsky would most likely have been wiped out, fully absorbed into Rosneft.

While they have a fiduciary responsibility to move as quickly as possible, the legal process has been slow. A lawsuit to recoup $100 billion from the bankruptcy of Yukos in the European Court of Human Rights dragged on for seven years, ending inconclusively.

A new suit filed in May by the benevolent interveners could last as long. Cases are also pending in Britain and the Netherlands.

The five trustees on each board of the two foundations and their lawyers, deduct “a few million” a year for legal fees and for a “market-based compensation” as directors, Misamore said.

(BEGIN OPTIONAL TRIM.)

After his release, Khodorkovsky told interviewers in Germany that he had offered Putin assurances in a letter that he would not participate in politics and not seek to regain his shares of Yukos, though the details were unclear. Switzerland has granted Khodorkovsky a three-month visa.

What is clear is that the lawyers now controlling Yukos’ legacy assets made no such promise.

Further muddying Khodorkovsky’s potential claim to the remnants of Yukos, and the right to sue over them in court, is his vow to give up all his shares in Yukos’ parent company, Menatep.

He was apparently acting on the advice of consultants who said they believed this would reduce his punishment; it did nothing of the sort. In the end, he was sentenced to eight years, followed by a second sentence of six more years.

At the time of his arrest, Khodorkovsky owned 60 percent of Menatep and thus about 42 percent of Yukos indirectly, equivalent to about $920 million of the $2.2 billion now held in the Dutch foundations.

He said he had given the personal shares of Yukos to a business partner, Leonid B. Nevzlin, who lives in Israel. Nevzlin could not be reached for comment

(END OPTIONAL TRIM.)

By law, the Dutch foundations can disburse no money until the lawsuits are resolved. The benevolent interveners are pursuing cases around the world and defending against claims from Russian state-controlled companies. They recently won $180 million from a subsidiary of the Russian state oil company in a case in federal court in New York.

The strategy can be profitable for years to come, though in this phase of the Yukos saga the legal fees run high, Misamore conceded. “This is the nature of the system,” he said. “The lawyers always win.”

Prison, Khodorkovsky said, had changed his thinking. Once a member of the youth wing of the Communist Party, he made his first fortune in a scheme allowing Soviet enterprises to convert their worthless ruble bank accounts into cash.

Later, he bought privatized oil fields for a pittance, joining the ranks of the world’s richest men on the back of assets built over decades by Communists. Prison, he said, made him think about people and not the “industrial scrap” he fought so fiercely for before.

At the news conference after his release, Khodorkovsky said he intended to focus now on human rights rather than business and said he was still trying to catch up on the details of his finances.

“I won’t sin against the truth if I say I have no idea about my financial situation,” he said. “I met only one of my former partners so far. Not because we stopped being friends, but because we stopped doing business together. I think I will deal with this situation.”