Wall Street Journal - January 28, 2008
Gregory L. White, greg.white@wsj.com

Prosecutors have filed new allegations against Mikhail Khodorkovsky, Yukos's former CEO 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 jailed on related charges. One of them, Vasily Alexanian, said in court last week that prosecutors had refused him treatment for his advanced AIDS unless he provided evidence against Mr. Khodorkovsky. A spokesman for the Prosecutor General declined to comment.

Though 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 much as 22 years in prison. A trial could begin later this year.

PWC, one of the most successful foreign auditors in Russia, became caught up in the Yukos case in 2006. PWC was found guilty of tax evasion, and then its offices were searched by police and prosecutors looking into possible criminal charges in that case. Tax authorities also sued to strike down PWC's audits of Yukos, which the oil giant had been pointing to as evidence of its financial rectitude. PWC lost that case in a lower court, but appealed.

After months of standing by its financial reports on the company, PWC last June withdrew all 10 years of its audits, saying new information had become available that cast doubt on them. Yukos officials accused PWC of caving in to Kremlin pressure, allegations the auditor denied. For a few weeks, the legal pressure on PWC seemed to abate.

But the respite was short-lived. In October, an appeals court upheld the tax-evasion case against PWC. Monday, the Ninth Arbitration Appellate Court abruptly ended consideration of PWC's appeal in the audit case. That decision means the ruling that PWC was a participant in the alleged tax evasion by Yukos takes legal effect, potentially threatening PWC's ability to operate in Russia.

A PWC spokeswoman said the decision was "strange and incomprehensible," adding the PWC's lawyers are now considering possible implications and paths for further appeal.

Defense lawyers for Mr. Alexanian say he is now blind and near death after contracting tuberculosis in prison, and they have appealed to the European Court of Human Rights for remedy. Monday, prison officials declined to comment on his condition, saying that Mr. Alexanian is being offered "all the necessary medical help." They also said he had signed documents refusing some AIDS treatments, an allegation his lawyers denied.

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Alan Cullison contributed to this article.

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