Leonid Nevzlin.01.05.13 01.05.13

Leonid Nevzlin 01.05.13

by

Howard Adelman

Leonid Nevzlin is from Moscow. As I shall explain, he is probably no longer the billionaire listed in Forbes in 2003, but he is included in this series because of the explanation. Nevzlin graduated from the Gubkin Institute of Oil and Gas in Moscow as a software engineer and worked as a computer programmer for the Foreign Trade Association (ZarubezhGeologia) in the Soviet Ministry of Geology. In 1987, he partnered with Mikhail Khordorkovsky and became Deputy Director of the Youth Centre for Scientific and Engineering Creativity just when Mikhail Gorbachev began his restructuring of the Soviet economy. He also headed the Center of Interdisciplinary Scientific–Technological programs (MNTP) that morphed into the Joint Company Menatep-Invest out of which the two partners established the Menatep Bank in 1990. Nevzlin became President. Menatep was used to found Yukos, where Nevzlin assumed the position of Vice-President. Yukos became the world’s largest non-state oil company in only five years.

The foundation of their wealth began with currency trading in the early nineties based on algorithms Nevzlin devised, and then buying up for cash the vouchers issued in the process of privatization, initially in state enterprises, and then in property at deeply discounted prices. The new Russian oligarchs, mostly Jewish, lent the money to the state Yeltsin ran, and the loans were secured by state assets. When the government defaulted on loan payments, the oligarchs seized the assets. Through buying vouchers and foreclosing on state loans, by the mid-nineties, Khodorkovsky and Nevzlin were very rich.

Nevzlin and Khodorkovsky bankrolled Yeltin’s re-election in 1996 for which Nevzlin was awarded the Russian Order of Friendship. In September 1997, Nevzlin became Deputy Director of the Russian news agency, ITAR-TASS, for a year. Nevzlin developed a plan to gradually transform ITAR-TASS into a joint-stock company. In 1999, Bank Menatep went belly-up in the Russian financial crisis of 1998-1999. Yukos was also in trouble, spending US$12 to pump oil with its outdated equipment that was only selling for $US8 per barrel. Nevzlin and Khodorkovsky not only saved the company by modernizing it, transforming the financial reporting to western methods to assure transparency and accountability, but mainly through the god’s of fortune as oil prices began their spectacular rise.

The two partners began to devote more time to the development of civil society and the two founded the Open Russian Federation to fund civil society projects. The two also funded a school for public administration. From March to December 2001, Nevzlin was president of the Russian Jewish Congress and he personally funded a number of Jewish historical and heritage research projects, including the establishment of the Moscow Jewish Cultural Center and the International Center for Russian and Eastern European Jewish Studies in Moscow. From November 2001 to March 2003, Nevzlin became a senator in the Federation Council of Russia representing Mordovia and became the first rector of a university without a PhD for the Russian State University for the Humanities. The two partners became the biggest supporters of civil society organizations providing at least 50% of the income of all of them while Khodorkovsky also donated a hundred million $US to the Russian State Humanities University.

In 2003, the political winds that had been changing over the previous four years became a whirlwind. Putin had assumed the presidency of Russia in 2000 after rising under Yeltsin as Acting President in 1999. By 2003 he was consolidating his power in preparation for running for president again in 2004. Though the economy had stabilized and had experienced enormous growth under his regime, fueled in good part by increases in the value of Russia’s oil and gas, Russia began also to regress in democratic terms. Part of that regression meant eliminating any economic centres of power that threatened Putin’s political power. You were either in bed with Putin or sentenced to the scrap heap of history. Putin targeted Vladimir Gusinsky, another Jewish oligarch, who owned a media company and two television stations. Gusinsky was charged and agreed to sign over his companies to the state and fled to Israel.

Khodorkovsky, in 2003 then the richest man in Russia, had as big an ego as Putin and challenged him in the political arena by funding civil society human rights and opposition groups. As an ex-KGB agent, Putin was wedded to doublespeak, doubletalk and double think while Khodorkovsky was a believer in saying what he thought without inhibitions. In February 2003, he refused in a direct meeting with Putin to buckle under. In fact, he directly challenged Putin at the meeting with a slide show arguing that political corruption was costing the Russian economy US$30 billion per year. Khodorkovsky and Nevzlin were true believers in the free market – he and Nevzlin had published a manifesto, The Man with the Ruble, extolling the virtues of capitalism. They wrote: “Our guiding light is Profit, acquired in a strictly legal way. Our Lord is His Majesty, Money, for it is only He who can lead us to wealth as the norm in life.” They had also become believers in free speech and human rights, transparency and accountability. However, Nevzlin, a more prudent man, was not willing to uphold his beliefs at the risk of his life.

Putin’s guiding light was power and Russian nationalism. He turned the power of the state apparatus against Yukos. At the meeting in February, Putin took umbrage at Khodorkovsky’s speech and in not very subtle terms issued his threat. “Some companies, including Yukos, have extraordinary reserves. The question is: How did the company get them? Your company had its own issues with taxes. To give the Yukos leadership its due, it found a way to settle everything and take care of all its problems with the state. But maybe this is the reason there is such competition to get into the tax academy?”

Nevzlin, who had mastered public relations, got the message and immediately went to take citizenship in Israel in 2003 and made efforts to move whatever funds he could salvage to safe havens. Khodorkovsky held his ground as other billionaires and millionaires fled Russia to save their lives (several were murdered abroad) and to avoid the wild west lawlessness of Russia where kidnappers and murderers in cahoots with the state ransomed children and killed at will, Khodorkovsky, as stubborn as Putin, refused to flee, even though Nevzlin warned him that the old laws still on the books could be used to prosecute them.

The squeeze began on 2 July 2003 when, their partner, Platon Lebedev, was arrested. Later in July, the head of security for Yukos, Alexi Pichugin, was also arrested and eventually sentenced to 24 years in prison for murder. Khodorkovsky could bend or flee. He not only stood his ground but ran a public campaign against Putin. By the time Khodorkovsky was arrested on 25 October at the Novosibirsk airport in Siberia at 8:00 in the morning as he was preparing to fly back to Moscow, Nevzlin was living in Israel where he fled with two other partners from Yukos, Vladimir Duvdov and Michail Brodno. Nevzlin has said that he had spoken to his friend just earlier and he seemed to know the consequences he faced.

So did Pavel Ivlev, a tax lawyer who never worked for Yukos or Khodorkovsky but was called as an expert witness at the trial even though he was the lawyer representing other Yukos employees who had been charged, a completely illegal move under any jurisdiction. In the pre-trial examination, he was told that he had to tell all – namely how the employees took sacks of cash out of Yukos to deliver to Khodorkovsky personally. Ivlev protested that he had no knowledge of that ever happening. He was told that if he said that, he too would be arrested. The next day, Ivlev fled the country and flew to Kiev and eventually his family joined him and they now live in New Jersey.

Three years after Mikhail Khodorkovsky was convicted of fraud and tax evasion after a ten month farcical trial, he was sentenced to nine years in prison and sent to Khodorkoovsky colony, YaG-14/10, a 9 hours flight and a 15 hour train ride from Moscow. In January 2004, an international warrant was issued for Nevzlin’s arrest, initially for evading US$930,000 in taxes for the 1999-2000 fiscal year, with illegal appropriation of shares in two Eastern Oil Company (VNK) subsidiaries, and, in July, for murder and attempted murder, specifically targeting businessman Sergei Gorin and his wife, and also Yevgeny Rybin, the president of the East Petroleum Company.

Moscow City Court tried Nevzlin in absentia and found him guilty of organizing five murders and sentenced him to life in prison. All efforts to extradite Nevzlin from Israel failed as the Israeli Supreme Court found that none of the evidence the Russian government presented was enough to even charge him let alone secure a conviction. The High Court of Justice in Israel ruled, “These are hearsay testimonies that do not even justify the appeal to extradite Nevzlin.” In the end, 42 Yukos employees were charged and sentenced. Yukos was sold at a bargain basement price to a company, Baikalfinansgrup capitalized at $US300 with no assets at all registered in a small town of Tver three hours drive from Moscow, the purchase financed by a US$9billion loan by the state oil company, Rosneft, to get rid of debt in return for Baikalfinansgrup’s shares as collateral. Ironically, the process that the partners had initially used to acquire the assets was now put in reverse gear.

While in prison, Khodorkovsky and Lebedev were charged in March 2009 with stealing Yukos’ oil between 1998 to 2003. The trial ended in December 2010 and the two were sentenced to a further 14 year prison term. It was clear that Putin had determined that the two would never again be out of prison.

Since leaving Russia, Nevzlin has repeatedly criticized the Putin regime and offered monies to opponents. He set up an institute on Eastern European and Russian Judaism, The Leonid Nevzlin Research Center for Russian and Eastern European Jewry, at the Hebrew University in Jerusalem. Twin institutions were funded in Moscow, Vilnius and Kiev. He has helped create an endowment for Beth Hatefutsoth, the Nahum Goldmann Museum of the Jewish Diaspora next to Tel Aviv University and became chair of its Board, funding the Nevzlin Program for the Study of Jewish Civilization at Tel Aviv University and the International School for Jewish Peoplehood Studies at Beth Hatefutsoth. He also helped saved the newspaper, Haaretz, by buying a 20% interest.

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