Oligarchs

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http://www.diacritica.com/sobaka/200...noligarch.html


FOR MORE THAN A decade, they were above the law, rigging auctions and using the media and even the police as extensions of vast corporate empires. The 1990s were the glory days for this small but highly publicized clique of Russian businessmen - popularly known as "Oligarchs" - who bought, stole, or simply took over Russia's national wealth for pennies on the dollar.

But as a wonderfully colourful Japanese proverb has it, even the mighty shall be brought down low, "like an evening dream in springtime." One by one the Oligarchs have been shaken from their slumbers and dragged before the courts for their misdeeds. Boris Berezovsky and Vladimir Gusinsky, subjected to corruption probes by Russian state prosecutors since 1999, fled rather than stand trial. The target of a similar probe, Mikhail Khodorkovsky, was arrested on October 25, 2003 and is currently cooling his heels in a Russian prison.

From all indications, the Russian public has reacted with jubilation to the downfall of the Oligarchs. It wouldn't be a stretch to suggest that the three sordid businessmen targeted by the Putin government for corruption are three of the most hated men in the country.

Having lost the battle for the hearts and minds of their fellow Russians, the three disgraced tycoons are now bankrolling an army of well-connected lobbyists, marketers, former diplomats and State Department officials in the heart of America. First among the three, with the most vast and extensively funded publicity machine, is the grandest Oligarch of them all: Mikhail Khodorkovsky.




FRIENDS IN HIGH PLACES

To say that Khodorkovsky has powerful friends in finance, business and the sphere where the two worlds overlap is an understatement of nearly cosmic proportions.

In fact, listing the prominent individuals with paper connections to Khodorkovsky plots a diagram that only a conspiracy theorist could love. Henry Kissinger and Lord Jacob Rothschild - of the Rothschild banking family - make up two of the five board members of Khodorkovsky's "Open Russia Foundation," formed several years ago in imitation of the "philanthropic" endeavors of another good friend, Hungarian-American financier George Soros. In the aftermath of Khodorkovsky's arrest, Rothschild - by a "previously unknown agreement," according to a release by the Open Russia Foundation - attempted to take control of Khodorkovsky's voting shares in his oil company, Yukos. And a German board member of one of Khodorkovsky's companies even boasts of his past position on the Trilateral Commission.

But it is his connection with a powerhouse Washington PR firm which has been crucial in polishing up Khodorkovsky's tarnished image and transforming an individual accused of rigging auctions and swindling shareholders into a champion of (in the company's oft-repeated language) "transparency" and "good corporate governance."

Khodorkovsky's alliance with APCO Worldwide, one of the Beltway's leading "spin factories," goes back several years. According to sources in APCO, the American firm was hired by Khodorkovsky more than three years ago in anticipation of selling the company to Wall Street and transforming a dodgy Russian conglomerate into an attractive partner for an American corporation.

Before 2002, Yukos's immense assets and the names and holdings of Yukos officers were closely-guarded secrets. Khodorkovsky himself was frequently lampooned by financial analysts in Europe and the United States as an archetypal specimen of Russia's robber-baron capitalism. APCO was brought on board to change that perception. And they largely succeeded.

APCO's job description changed when Khodorkovsky and other Yukos officers became targets of a probe by the Russian state prosecutor's office for rigging a privatization auction more than ten years ago. Today, the firm is engaged exclusively in selling Khodorkovsky the Oligarch to American powerbrokers and the public as a modern day Solzhenitsyn, unjustly persecuted by a Russian state creeping toward totalitarianism.




A HANDS-ON APPROACH

As a result of their long association, APCO and Khodorkovsky's enterprises have developed a nearly symbiotic relationship. APCO officers, consultants and staff have been appointed to high profile but essentially meaningless positions in several companies and institutions controlled by Khodorkovsky as part of a campaign to improve the Oligarch's image. When Khodorkovsky speaks, it is APCO's voice that's heard. Among the ventriloquists are former ambassadors, policymakers and State Department officials now working as lobbyists in Washington.

Arthur Hartman, a former US Ambassador to Moscow, sits on the five-member board of Khodorkovsky's Open Russian Foundation with Kissinger, Rothschild, Khodorkovsky and a director of the Hermitage museum. Hartman is well known in both foreign policy and business circles in Europe and the former Soviet Union. The websites of both APCO and the Open Russia Foundation list Hartman as an APCO consultant.

In April 2003, Khodorkovsky's MENATEP company, which functions as Yukos's parent, created an "international advisory board" made up of four non-Russian members. The birth of the advisory board was trumpeted in a company press release in language that could have - and probably did - originate in an APCO focus group. The board would help MENATEP adhere "to the highest levels of corporate social responsibility" and was "one more example of the leadership demonstrated by Group MENATEP and its subsidiary companies in the movement towards transparency and good corporate governance."

Of the four members of the advisory board, two - former State Department deputy Stuart Eizenstat and Margery Kraus - are also employed by APCO. Kraus is APCO's chief executive officer.

Following Khodorkovsky's arrest, the Washington Post reported that the imprisoned magnate had retained the services of Eizenstat - a former deputy Treasury secretary, undersecretary of State, undersecretary of Commerce and US Ambassador to the European Union, all during the Clinton Administration - to lobby in Washington. Responding to the Post's inquiry, Eizenstat stated that he was hired to buoy American "support for the rule of law in Russia, specifically in connection taken by Russian authorities against principals of Group MENATEP and Yukos." To say he has more at stake is obvious, as his employment as a strategist by APCO and his position on MENATEP's international advisory board illustrate.




ASTROTURFING AN OLIGARCH

APCO is also behind a stealth campaign designed to portray Khodorkovsky to Americans - more specifically, to American lawmakers - as a persecuted dissident, jailed for his support of opposition political parties rather than for grand larceny. The firm has unleashed a distinctly American lobbying campaign, employing professional marketers to fabricate a seemingly spontaneous outreach and advocacy effort by the American public. Public relations specialists refer to this as "astroturf" lobbying, as it seeks to emulate - and lead the unwary to believe it really is - a genuine "grassroots" movement of Americans.

One of the ads, which recently appeared on the Washington Post website, looks like a poll which asks readers to choose which of a number of issues is of most concern for the future of Russia. Grouped together with answers such as the lack of the rule of law and the strained economy, one of the options readers can choose refers to the danger to democracy caused by the arrest of Mikhail Khodorkovsky. Upon closer inspection, it seems the poll is not a poll at all, but a sophisticated (and deceptive) advertisement paid for by a website called "supportmbk.com."

Clicking on any of the options brings one to the aforementioned supportmbk.com, which presents Mikhail Khodorkovsky - who once "personif[ied] the predatory Russian oligarch," in the words of a New York Times reporter - as a persecuted dissident languishing in a Russian prison for being in favour of "good corporate governance" and democracy. Here the diehard American Khodorkovsky Booster can catch up on the latest news of the heroic businessman and his court case and read comments on his plight from prominent politicians, businessmen and lawyers.

Of course, no one in Peoria is dying for information about Khodorkovsky. That's less important than conveying the impression that there is. The site has no Russian version, and is presented in no language other than English.

Supportmbk.com, along with supportkhodorkovsky.com and probably other websites with similar titles, was created and maintained by a marketing professional named Deborah Aker. Aker is employed by APCO Worldwide. The correlation between the website and APCO is made clear only in the site's registration data - and only because Ms. Aker used her company email address. The website's public contact information lists only the address and phone number of Khodorkovsky's main lawyer, Robert Amsterdam.

APCO has also purchased the keyword "khodorkovsky" using Google's AdWords advertising program, which includes a link to supportmbk.com whenever his name is entered in Google's search engine.




KHODORKOVSKY: THE TRUE LEFORTOVO STORY

APCO's work on behalf of Khodorkovsky, MENATEP, and Yukos - and their past work with Vladimir Gusinsky, another Russian Oligarch-spun-"freedom fighter" - wouldn't bear such scrutiny were it not for their clients' checkered histories.

APCO's shills and Khodorkovsky's powerful friends have hammered hard on the notion that the Oligarch championed "transparency" and "good corporate governance," and is being punished solely for his support for opposition political parties in Russia. The problem is, it's not true.

Khodorkovsky acquired his unsavory reputation as first among scoundrels because it is, quite simply, deserved. Press accounts always allude to Khodorkovsky's fantastic wealth, but often neglect to mention the murky circumstances in which he acquired it, defended it, and made it grow. Laying bare the details of mergers, stock swindles and rigged auctions may have the effect of Dramamine on the average reader, but they deserve closer scrutiny if one is to establish why Khodorkovsky is where he is, and why he's paying so much to make Americans think otherwise.

Khodorkovsky rose to prominence as the owner of the Menatep Bank, described in the memorable words of two scholars as "the most parasitic of Russia's parasitic banks." Menatep was placed in charge of the sale of the state-owned Yukos petroleum company. The Soviet Union's third-largest stockpile of oil came along with the title and deed to the company, and Yukos was generally regarded as one of the crown jewels of the Russian economy.

To no one's surprise, Menatep's owner - Mikhail Khodorkovsky - came out the winner in the Yukos derby, with a bid of approximately $300 million. The value of Yukos, on the other hand, was estimated at several billion - a magnificent increase in value before its new owner left the building. None of this came from hard work or expertise - and certainly not "good corporate governance," unless your standard is Enron. Khodorkovsky, representing the seller, sold Yukos to himself.

Menatep Bank, which was heavily involved in the Bank of New York money laundering scandal, itself collapsed in 1998, causing millions of dollars in losses to depositors as well as creditors. The bank's failure also resulted in three foreign financial institutions eating the majority of $266 million dollars in loans to Menatep. The loans had been backed by shares in Yukos. When the banks moved forward to claim their shares, Khodorkovsky initiated a stock dilution scheme that would have made the banks' stake in Yukos worthless. The banks knuckled under and dumped their shares. Khodorkovsky, on the other hand, appeared to come out of the bank crisis completely unscathed. In the next four years his assets would quadruple in size.

Just one year after the dismal end of Menatep Bank, Khodorkovsky pulled a fast one on Yukos shareholders by switching the location of a shareholder conference so its members couldn't veto Khodorkovsky's plan to strip the company of some assets and move them abroad. Khodorkovsky also masterminded another stock dilution scheme at Yukos which defrauded a controversial American investor, Kenneth Dart, out of millions of dollars.

Khodorkovsky isn't being charged for the Yukos auction swindle, the Menatep Bank collapse, or his pushing around of Yukos shareholders, though - not yet, anyway. Most of the charges pending against Khodorkovsky stem from still another dubious privatization. Russian prosecutors claim to have evidence that all four bids for a stake in Apatit, a fertilizer company auctioned in 1994, came from Khodorkovsky himself. Required by law to invest some $280 million dollars in Apatit, Khodorkovsky then sold Apatit assets to his own shell companies at rock bottom prices. The shell companies then re-sold the assets at full-price, dodging taxes in the process.

APCO and Khodorkovsky's other retainers wonder aloud why this (relatively speaking) tiny privatization has incurred the wrath and indignation of prosecutors. They may also wonder aloud why Al Capone was jailed not for racketeering or pimping or murder, but for failure to pay his income taxes. It would seem to be a rather plebeian task to prove the state prosecutor wrong: simply redirect some of the millions Khodorkovsky is spending on foreign PR flacks to locating just one other legitimate bidders for Apatit. That these mysterious bidders haven't been produced suggests they probably don't exist.

These are the deals which made Khodorkovsky his billions. That same money is now lining the pockets of former American ambassadors and cabinet deputies to persuade lawmakers of his innocence. Even Henry Kissinger has seen fit to distance himself from his apparent protИgИ's seedy wheeling and dealing. In a brief statement to the New York Times shortly after Khodorkovsky's arrest, Kissinger said that his membership on the five-man Open Russian Foundation board was "in no sense an endorsement of Mr. Khodorkovsky's business practices." He claimed that he was on the board because Lord Rothschild had invited him, and had only met Khodorkovsky twice in his life.




KHODORKOVSKY AS A STICK

There are two related parts to APCO's lobbying campaign in the United States. The first is to re-brand the most odious Oligarch into a political prisoner, a champion of democracy and free market enterprise. This has, in large part, succeeded. The Wall Street Journal howled over his arrest, calling Khodorkovsky "Russia's richest oligarch who was cleaning up his act." The International Herald Tribune read directly from the APCO script, stating that Yukos "stood out among Russian businesses in its striving toward Western ideals of financial transparency." And good corporate governance.

Together with business media, a number of American politicians have lined up to condemn Khodorkovsky's arrest and - this is the second part of the campaign - demand swift retribution against the totalitarian Russian state which has jailed him. Tom Lantos, John McCain, Conrad Burns and a number of other Washington heavyweights have introduced measures in Congress calling for Khodorkovsky's release and retaliation against Russia.

This, too, is probably an APCO operation. How do we know? Because APCO carried out an identical campaign just three years ago on behalf of Khodorkovsky's fellow Oligarch, Vladimir Gusinsky.

Back in 2001, after Gusinsky's brief imprisonment and then exile, Lantos introduced a measure in Congress which would call for Russia to be expelled from Group of Eight (G-8) summit of industrial nations. APCO's role in the affair was revealed by Moscow investigative reporter Aleksandr Budberg.

This time, it's McCain and Khodorkovsky's fellow financier George Soros who are leading the charge. McCain duly released a lengthy statement which, while admitting that Khodorkovsky had some warts, stated that his arrest by the Russian authorities was so dastardly that "Russia should have no place at the next G-8 summit." Soros, in the meantime, told a Harvard symposium on the Russian economy last November, after Khodorkovsky's arrest, that "The G-8 is supposed to be a democratic organization, but it is becoming questionable whether Russia qualifies for it." Per the St. Petersburg Times' account of the event, Soros was clearly on-message, calling Khodorkovsky "the most enlightened" Oligarch, and "praising him for building a transparent company with good corporate governance practices."




APCO'S GAMBIT

Clearly, American public opinion - and, more importantly, the opinions of decision makers - are being deliberately manipulated by a public relations campaign carried out at the behest of a foreign citizen with pockets as deep as a sinkhole and a reputation that belongs there. Khodorkovsky and APCO have targeted representatives in practically every field who might be called upon - by Congress, by the media, or by the president - to comment on the Khodorkovsky Affair.

But to what end? The congressional resolutions introduced thus far have been non-binding, and the Bush Administration - or any administration - is not likely to hurl bilateral relations into the breach over Yukos, no more than they did on behalf of the American that Khodorkovsky ripped off, Kenneth Dart.

What Mikhail Khodorkovsky hopes to accomplish, of course, is to the benefit of his number one supporter: Mikhail Khodorkovsky.

Both of Khodorkovsky's fellow fallen Oligarchs, Boris Berezovsky and Vladimir Gusinsky, are presently living in Europe after fleeing the Russian courts. Berezovsky is arguing for political asylum in Britain, and Gusinsky was briefly detained in Spain and Greece before he was released. Though the Russian government remains in pursuit of the two - which is not terribly shocking, considering the way America hounded one of its own before Clinton's pardon of notorious financier Marc Rich - it appears unlikely that either will taste the lash of the Russian penal system again unless they're foolish enough to re-enter the country.

Khodorkovsky vows that he will fight the allegations against him, even as he shamelessly borrows a page from Soviet dissidents by bemoaning the "political show-trial" he faces. However, both supportmbk.com and Khodorkovsky's legal team have been pressing to have him released on bail. No one knows the significance of the assets Khodorkovsky has stashed abroad, but neither Berezovsky (who takes out full-page ads in American papers lambasting the Putin government) nor Gusinsky, who became a significant contributor in the last Israeli election, appear to be hard-up for hard currency.

Thus it stands to reason that if the campaign waged on his behalf is successful, and American pressure succeeds in getting him released pending trial, Khodorkovsky - like APCO's last Oligarch client - will be free and clear to bemoan the fickle hand of fate from an Andalusian villa, meditating on evening dreams that fade amid the springtime blossoms.

He'll have the best and brightest of the American PR machine to thank for it.