The Wall Street Journal-20080129-Politics - Economics- Pricewaterhouse Loses Appeal in Russia
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Politics & Economics: Pricewaterhouse Loses Appeal in Russia
Full Text (395 words)MOSCOW -- A Russian court upheld a ruling that PricewaterhouseCoopers LLP essentially was a participant in massive tax evasion by former oil giant OAO Yukos.
The ruling increases pressure on the auditor as the Kremlin gears up for more charges in the politically tinged Yukos case.
Yesterday, Russia's Ninth Arbitration Appellate Court abruptly ended consideration of Pricewaterhouse's appeal of a lower-court ruling. The original ruling found that the contract with Yukos should be voided because it involved criminal wrongdoing.
Prosectors and Pricewaterhouse attorneys have said the ruling implies the auditor was a participant in the oil company's tax evasion. Under Russian law, the ruling doesn't take legal force until an appeal is decided.
A Pricewaterhouse spokeswoman said the decision was "strange and incomprehensible," adding that Pricewaterhouse's lawyers are considering possible implications and paths for further appeal. It is unclear what impact the decision will have on Pricewaterhouse's business in Russia, which is undergoing rapid economic growth and offers flush business opportunities for many Western firms.
The rejected appeal follows new allegations by prosecutors against Mikhail Khodorkovsky, Yukos's former chief executive and main shareholder, who is serving an eight-year term in a Siberian jail for fraud and tax evasion. Several lower-level executives also have been imprisoned on related charges. One of them, Vasily Alexanian, said in court last week that prosecutors had refused him treatment for AIDS unless he provided evidence against Mr. Khodorkovsky.
Defense lawyers for Mr. Alexanian say he is blind and near death after contracting tuberculosis in prison, and they have appealed to the European Court of Human Rights for assistance.
A spokesman for the prosecutor general declined to comment. Prison officials declined to comment on Mr. Alexanian's condition, saying he is being offered "all the necessary medical help." They also said he had signed documents refusing some AIDS treatments, an allegation his lawyers denied.
Russian officials defend the Yukos prosecutions and the ensuing takeover of most of Yukos's assets by the state oil company as a purely criminal matter. Western courts and officials have decried it as politically motivated, an effort to scotch Mr. Khodorkovsky's challenge to Kremlin control. The new allegations against Mr. Khodorkovsky describe his former oil company's operations essentially as a criminal enterprise. If convicted, he could face as many as 22 years in prison. A trial could begin later this year.
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Alan Cullison contributed to this article.
