UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ______) CURTIS V. REINAN, Individually and On Behalf ) of All Others Similarly Situated, ) CIVIL ACTION NO. ) Plaintiff, ) ) vs. ) CLASS ACTION COMPLAINT ) YUKOS OIL COMPANY, GROUP MENATEP ) LIMITED, YUKOS UNIVERSAL LIMITED, ) PRICEWATERHOUSE COOPERS LLP, ) JURY TRIAL DEMANDED MIKHAIL KHODORKOVSKY, PLATON ) LEBEDEV, BRUCE MISAMORE, VASILY ) SHAKNOVOSKY, SCOTT A. ZIEGLER AND ) CURTIS & CO., ) ) Defendants. ) ) ______

Plaintiff, Curtis V. Reinan (“Plaintiff”), individually and on behalf of all other persons similarly

situated, by her undersigned attorneys, for her complaint against defendants, alleges the following based upon personal knowledge as to herself and her own acts, and information and belief as to all other matters, based upon, inter alia, the investigation conducted by and through her attorneys, which included, among other things, a review of the defendants’ public documents, conference calls and announcements made by defendants, United States Securities and Exchange Commission (“SEC”) filings, wire and press releases published by and regarding Yukos Oil Company (“Yukos” or the

“Company”) reports and advisories about the Company, and information readily obtainable on the

Internet. Plaintiff believes that substantial evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery.

1 NATURE OF THE ACTION

1. This is a federal class action on behalf of all purchasers of Yukos securities (including its common stock traded on the Russian or other European Exchanges and its American Depository

Shares traded on the “Over-the-Counter Market Exchange “OTC”) between February 13, 2003 and

October 25, 2003, inclusive (the “Class Period”), seeking to pursue remedies under the Securities

Exchange Act of 1934 (the “Exchange Act”).

JURISDICTION AND VENUE

2. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the

Exchange Act, (15 U.S.C. §§ 78j(b) and 78t(a)), and Rule 10b-5 promulgated thereunder (17 C.F.R.

§ 240.10b-5).

3. This Court has jurisdiction over the subject matter of this action pursuant to §27 of

the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331.

4. Venue is proper in this Judicial District pursuant to § 27 of the Exchange Act, 15

U.S.C. § 78aa and 28 U.S.C. § 1391(b). Yukos is a leading Russian vertically integrated oil

company. Pursuant to 28 U.S.C. § 1391(d), as an alien corporation, Yukos may properly be sued in any District in the United States, including the Southern District of New York. Moreover, Yukos trades American Depository Receipts (“ADRs”) on the “OTC” which is located in the Southern

District of New York. Thus, venue is proper in this District. Additionally Yukos has consented to jurisdiction in this venue.

5. In connection with the acts, conduct and other wrongs alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,

2 including but not limited to, the United States mails, interstate telephone communications and the

facilities of the national securities exchange.

PARTIES

6. Plaintiff, Curtis V. Reinan, as set forth in the accompanying certification, incorporated

by reference herein, purchased Yukos securities at artificially inflated prices during the Class Period

and has been damaged thereby.

7. Defendant Yukos is a joint stock company organized under the laws of the Russian

Federation. Yukos is a leading Russian vertically-integrated oil company.

8. Defendant Yukos Universal Limited (“Yukos Universal”) is a holding company

organized under the laws of the Isle of Man. During the Class Period, Yukos Universal owned and/or

controlled at least 61% of the outstanding shares of the Company. Yukos Universal is owned and/or

controlled by defendant Khodorkovsky as a result of his ownership and/or control over Menatep.

9. Defendant Group Menatep Limited (“Menatep”) is a limited liability company organized under the laws of Gibraltar. During the Class Period, Menatep owned and/or controlled

100% of Yukos Universal, which in turn was owned and/or controlled by defendant Khodorkovsky.

10. Defendant PricewaterhouseCoopers International Limited, headquartered in New

York City, New York, is a professional services organization with member firms around the world,

including members in the United States and New York. Defendants PricewaterhouseCoopers LLP

(U.K.) (“PwC UK”), PricewaterhouseCoopers LLP (U.S.A.) (“PwC U.S.A.”) and

PricewaterhouseCoopers Russia (“PwC Russia”) are part of PricewaterhouseCoopers International

Limited ( “PWC”). Prior to and throughout the Class Period defendant PWC served as the

Company’s independent, outside auditors.

3 11. Defendant Mikhail B. Khodorkovsky (“Khodorkovsky”) was during the Class Period

the President and Chief Executive Officer of the Company, as well as, Chairman of the Executive

Committee of the Board of Directors and Chairman of the Management Committee of the Board of

Directors of the Company.

12. Defendant Platon Lebedev (“Lebedev”) was during the Class Period a direct and/or

beneficial owner of 7% of Menatep.

13. Defendant Bruce K. Misamore (“Misamore”) was during the Class Period Chief

Financial Officer and Principal Accounting Officer for the Company.

14. Defendant Vasily Shaknovosky (“Shaknovosky”) was during the Class Period, a direct

and/or beneficial owner of 7% of Menatep.

15. Defendant Scott A. Ziegler (“Ziegler”) was during the relevant period, listed by the

Company as its Authorized Representative in the United States. Defendant Ziegler is, therefore, sued

in his representative capacity.

16. Defendant Curtis & Co. (“Curtis Co.”) is a company organized under the laws of the

United Kingdom. Beginning in the 1990s, Curtis Co., through its owner, Stephen Curtis, organized a myriad of offshore structures used by Menatep and its beneficial owners which were used as part of the Company’s tax scheme.

17. Defendants Khodorkovsky, Lebedev, and Misamore are collectively referred to hereinafter as the “Individual Defendants.” During the Class Period, each of the Individual

Defendants, as senior executive officers and/or directors of Yukos were privy to non-public information concerning its business, finances, products, markets and present and future business prospects via access to internal corporate documents, conversations and connections with other

4 corporate officers and employees, attendance at management and Board of Directors meetings and committees thereof and via reports and other information provided to them in connection therewith.

Because of their possession of such information, the Individual Defendants knew or recklessly disregarded the fact that adverse facts specified herein had not been disclosed to, and were being concealed from, the investing public.

18. Because of the Individual Defendants’ positions with the Company, they had access to the adverse undisclosed information about the Company’s business, operations, operational trends,

financial statements, markets and present and future business prospects via access to internal corporate documents (including the Company’s operating plans, budgets and forecasts and reports of actual operations compared thereto), conversations and connections with other corporate officers and employees, attendance at management and Board of Directors meetings and committees thereof and via reports and other information provided to them in connection therewith.

19. It is appropriate to treat the Individual Defendants as a group for pleading purposes and to presume that the false, misleading and incomplete information conveyed in the Company’s public filings, press releases and other publications as alleged herein are the collective actions of the narrowly defined group of defendants identified above. Each of the above officers of Yukos, by virtue of their high-level positions with the Company, directly participated in the management of the

Company, was directly involved in the day-to-day operations of the Company at the highest levels

and was privy to confidential proprietary information concerning the Company and its business,

operations, growth, financial statements, and financial condition, as alleged herein. Said defendants

were involved in drafting, producing, reviewing and/or disseminating the false and misleading

statements and information alleged herein, were aware, or recklessly disregarded, that the false and

5 misleading statements were being issued regarding the Company, and approved or ratified these state- ments, in violation of the federal securities laws.

20. As officers and controlling persons of a publicly-held company whose securities were,

and are, registered with the SEC pursuant to the Exchange Act, and was traded on the OTC and governed by the provisions of the federal securities laws, the Individual Defendants each had a duty to disseminate promptly, accurate and truthful information with respect to the Company’s financial condition and performance, growth, operations, financial statements, business, markets, management, earnings and present and future business prospects, and to correct any previously-issued statements that had become materially misleading or untrue, so that the market price of the Company’s publicly- traded securities would be based upon truthful and accurate information. The Individual Defendants’ misrepresentations and omissions during the Class Period violated these specific requirements and obligations.

21. The Individual Defendants participated in the drafting, preparation, and/or approval of the various public and shareholder and investor reports and other communications complained of

herein and were aware of, or recklessly disregarded, the misstatements contained therein and

omissions therefrom, and were aware of their materially false and misleading nature. Because of their

Board membership and/or executive and managerial positions with Yukos, each of the Individual

Defendants had access to the adverse undisclosed information about Yukos financial condition and

performance as particularized herein and knew (or recklessly disregarded) that these adverse facts

rendered the positive representations made by or about Yukos and its business issued or adopted by

the Company materially false and misleading.

6 22. The Individual Defendants, because of their positions of control and authority as

officers and/or directors of the Company, were able to and did control the content of the various SEC

filings, press releases and other public statements pertaining to the Company during the Class Period.

Each Individual Defendant was provided with copies of the documents alleged herein to be misleading

prior to or shortly after their issuance and/or had the ability and/or opportunity to prevent their

issuance or cause them to be corrected. Accordingly, each of the Individual Defendants is responsible for the accuracy of the public reports and releases detailed herein and is therefore primarily liable for

the representations contained therein.

23. Each of the defendants is liable as a participant in a fraudulent scheme and course of

business that operated as a fraud or deceit on purchasers of Yukos securities by disseminating

materially false and misleading statements and/or concealing material adverse facts. The scheme: (I)

deceived the investing public regarding Yukos business, operations, management and the intrinsic

value of Yukos securities; and (ii) caused Plaintiff and other members of the Class to purchase Yukos securities at artificially inflated prices.

PLAINTIFF’S CLASS ACTION ALLEGATIONS

24. Plaintiff brings this action as a class action pursuant to Federal Rule of Civil Procedure

23(a) and (b)(3) on behalf of a Class, consisting of all those who purchased or otherwise acquired the

securities of Yukos between February 13, 2003 and October 25, 2003, inclusive (the “Class Period”)

and who were damaged thereby. Excluded from the Class are defendants, the officers and directors

of the Company, at all relevant times, members of their immediate families and their legal repre-

sentatives, heirs, successors or assigns and any entity in which defendants have or had a controlling

interest.

7 25. The members of the Class are so numerous that joinder of all members is imprac-

ticable. Throughout the Class Period, Yukos’ securities were actively traded on the OTC. While the

exact number of Class members is unknown to Plaintiff at this time and can only be ascertained

through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in

the proposed Class. Record owners and other members of the Class may be identified from records

maintained by Yukos or its transfer agent and may be notified of the pendency of this action by mail,

using the form of notice similar to that customarily used in securities class actions.

26. Plaintiff’s claims are typical of the claims of the members of the Class as all members

of the Class are similarly affected by defendants’ wrongful conduct in violation of federal law that is

complained of herein.

27. Plaintiff will fairly and adequately protect the interests of the members of the Class and

has retained counsel competent and experienced in class and securities litigation.

28. Common questions of law and fact exist as to all members of the Class and

predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are:

(a) whether the federal securities laws were violated by defendants’ acts as alleged

herein;

(b) whether statements made by defendants to the investing public during the Class

Period misrepresented material facts about the business, operations and management of

Yukos; and

(c) to what extent the members of the Class have sustained damages and the proper

measure of damages.

8 29. A class action is superior to all other available methods for the fair and efficient

adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the

damages suffered by individual Class members may be relatively small, the expense and burden of

individual litigation make it impossible for members of the Class to individually redress the wrongs

done to them. There will be no difficulty in the management of this action as a class action.

SUBSTANTIVE ALLEGATIONS

Background

30. Yukos is a fully-integrated oil-and-gas company headquartered in Moscow, Russia.

The Company is one of the world’s largest non-state oil companies by reserves and market

capitalization. Yukos employs a team of approximately 100,000 dedicated professionals. Shares of

the Company are publicly traded on the Russian Trading System (“RTS”) and Moscow Interbank

Currency Exchange (“MICEX”), Level 1 ADRs traded OTC in the USA and on the following international platforms: Frankfurt, Munich, Stuttgart, and Berlin Stock Exchanges, London Stock

Exchange International Order Book.

Materially False And Misleading Statements Issued During The Class Period

31. The Class Period commences on February 13, 2003. At that time, Yukos reported

its consolidated financial results for the third quarter and the first nine months of 2002. According

to the Company, the financial statements were prepared in accordance with US Generally Accepted

Accounting Principles (“GAAP”). Sales and other operating revenues reached USD 3.378 billion for

the third quarter of 2002, a 30.1% increase compared to the same period of 2001, and a 31.9%

increase compared to the second quarter of 2002, driven by higher sales volumes and improved

9 market prices. Net income of USD 850 million in the third quarter of 2002 was 6.6% higher than in

the same period of 2001 (excluding a one-time non-cash deferred income tax credit in the third

quarter of 2001) and 12.1% higher than the second quarter of 2002. Additionally, in the third quarter of 2001, the Company recorded a deferred tax credit of USD 525 million as a result of changes in tax rates in the Russian Federation. This credit was reflected in net income for the three months and nine months ended September 30, 2001. Commenting on these results, defendant Khodorkovsky stated: “the Company’s consistent implementation of its strategy to become the Russian market leader has led to good financial results in the third quarter of 2002.”

32. On April 22, 2003, Yukos announced that Yukos and Sibneft core shareholders had agreed in principle to combine the two businesses in the largest-ever industrial transaction in Russia.

The combined oil & gas group would be the largest in Russia and would have also ranked as world’s fourth largest private oil producer. Describing the proposed merger, the Company, Yukos, stated:

The combined group (including Slavneft reserves) would have total reserves of around 19.4 billion barrels of oil and gas equivalent, based upon year-end 2001 reserves calculated in accordance with SPE methodology. Daily crude oil production is approximately 2.3 million barrels including Sibneft’s share of Slavneft.

The combined entity will be named YukosSibneft Oil Company. It is expected that YUKOS’ Mikhail Khodorkovsky will be responsible for the executive management of the new group, while Sibneft’s Eugene Shvidler will be proposed as chairman of the board of directors. The core shareholders intend that independent directors will constitute a majority of the board.

Mikhail Khodorkovsky of YUKOS said: “By combining with Sibneft, we’ll maximize our competitive advantages thanks to the synergy gained by uniting excellent management teams, highly professional labor forces and the profitable industrial assets of the two companies. The new industrial giant with its huge industrial and financial potential

10 will reach even higher business efficiencies moving closer to our strategic goal of becoming a leader of the global energy market”.

Eugene Shvidler of Sibneft described the Yukos-Sibneft link-up as “a superb alliance of progressive and like minded companies with complementary strategic and management strengths which effectively creates a new super-major that will enhance value to its shareholders and better serve its millions of customers”.

The core shareholders of Sibneft will sell a 20% shareholding in Sibneft for US$ 3 billion in cash and subsequently exchange their remaining shareholding in Sibneft at a ratio of 0.36125% of YukosSibneft for each 1% shareholding in Sibneft. YukosSibneft will make a fair offer to the minority shareholders of Sibneft after receiving a fairness opinion from an internationally recognized investment bank.

Prior to completing the transaction, YUKOS intends to increase its leverage and is considering, among other things, cash distributions to its shareholders in the form of dividends and share buybacks. It is expected that after such capital restructuring and the completion of the transaction, YukosSibneft will have a moderate level of leverage and a strong working capital position.

33. On May 19, 2003, Yukos reported its consolidated financial results for the fourth quarter and full year of 2002. The annual financial statements were prepared in accordance with US

GAAP and had been audited PwC. Sales and other operating revenues reached USD 11,373 million for the full year 2002, a 20.2% increase compared to 2001 primarily due to higher production and sales volumes. Including the effects of deferred tax credits in both years, net income for the full year was USD 3,058 million versus USD 3,156 million in 2001 as margins were affected by weak prices in the first quarter, increases in production taxes, distribution expenses and other costs. Excluding the effects of deferred tax credits, net income was up 2.2% from 2001.

34. Commenting on these results, defendant Khodarkovsky stated:

“Decreasing production costs and the operational growth achieved by the Company in recent years which is unprecedented in the Russian oil

11 industry, allowed YUKOS to show good financial results in 2002 despite weak prices in the first quarter of the year.”

35. On July 7, 2003, Yukos reported its consolidated financial results for the first quarter of 2003 prepared in accordance with US GAAP and reviewed by PwC. Sales and other operating revenues reached USD 3.898 billion for the first quarter of 2003, a 94.0% increase compared to the same period of 2002 as a result of higher production volumes and higher domestic and international realized prices, which were exceptionally strong due to the effects of the situation in Iraq and disruptions in Venezuelan and Nigerian supplies. Net income for the first quarter of 2003 was USD

1.267 billion versus USD 462 million in the same period of 2002 as margins improved in the first quarter 2003 due to continued cost control efforts and higher realized prices.

36. Commenting on these results, defendant Khodorkovsky stated:

“Strict maintenance of cost control, increased sales volumes and a favorable price environment in the first quarter of 2003 allowed YUKOS to report strong net income growth compared to the same period of 2002"

37. On October 20, 2003, Yukos reported its consolidated financial results for the second quarter and the first half of 2003 prepared in accordance with US GAAP and reviewed by PwC.

Sales and other operating revenues reached USD 3.825 billion for the second quarter of 2003, a

49.3% increase compared to the same period of 2002 as a result of higher production volumes and generally higher realized prices. Sales and other operating revenues reached USD 7.723 billion for the first half of 2003, a 69.0% increase compared to the same period of 2002. Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) were USD 1.238 billion in the second quarter of 2003, compared to USD 1.008 billion in the same period of 2002 and USD 2.902 billion in the first half of 2003 compared to USD 1.686 billion in the first half of 2002. Net income for the

12 second quarter of 2003 was USD 955 million versus USD 758 million in the same period of 2002.

Net income for the first half of 2003 was USD 2.222 billion versus USD 1.220 billion in the same period of 2002.

38. Commenting on these results, defendant Khodorkovsky stated:

“The first half of 2003 financial results reflect YUKOS’ effective operations and strict cost control. Despite continuous tariff growth and transport infrastructure limitations, we maintain our leadership position in the Russian oil industry.”

39. The statements contained in ¶¶ 31-38 were materially false and misleading when made because failed to disclose or indicate the following: (1) that the Company, in order to hide a building and significant tax burden, reported financial statements that were materially and artificially inflated throughout the Class Period by failing to report approximately USD 3.4 billion in taxes; (2) that the

Company’s building and significant tax burden totaled approximately USD 3.4 billion, this was accomplished through such deceptive practices, as selling oil at discount rates to the Company’s own shell companies abroad or in tax-exempt zones, which then resold the oil at market rates thereby effectively lowering the tax payments by transferring profits to low-tax or no-tax zone; (3) that the

Company and its Individual Defendants knew and/or recklessly disregarded the fact that the approximately USD 3.4 billion tax burden would materially deflate the Company’s overtly

“positive”financial results and therefore all statements about future prospects were lacking in any reasonable basis when made: and (4) that as a result of the above, the Company’s reported financial results were in violation of US GAAP.

The Truth Begins to Emerge

13 40. On October 26, 2003, THE WASHINGTON POST published an article entitled “Russian

Tycoon And Putin Critic Arrested in Raid; Move Is Widely Denounced as Political,” which, in relevant part, read:

Armed Russian security agents stormed aboard oil tycoon Mikhail Khodorkovsky’s private plane during a pre-dawn Siberian refueling stop and arrested him yesterday on allegations of massive tax evasion and fraud. The arrest marked a dramatic escalation of an election-year battle between the Kremlin and Russia’s richest man.

Khodorkovsky, chief executive of Yukos, Russia’s largest oil company, was charged with seven counts of personal and corporate tax evasion, fraud, forgery and embezzlement. Prosecutors alleged that he and his partners at Yukos had defrauded the country of more than $1 billion. The prosecutor’s office called the case “unprecedented both for the size of the funds that have been stolen and taxes that haven’t been paid.” Specifics of the charges were not released, but prosecutors claimed their indictment ran to more than 50 pages.

Khodorkovsky was seized after his plane touched down about 5 a.m. local time in the Siberian city of Novosibirsk during a business trip. A phalanx of masked, black-uniformed agents from the Federal Security Service (FSB), the domestic agency that succeeded the KGB, rushed aboard brandishing guns, kicking down doors, ordering the passengers to the floor and shouting, “Don’t try to defend yourselves or we’ll shoot,” according to the account provided by Yukos.

Khodorkovsky was then flown to Moscow and taken to a criminal court, which sanctioned his arrest. He was taken to Matrosskaya Tishina prison last night, Russian news agencies reported, and his lawyer said in a statement that he would be held until Dec. 30.

“I’m not sorry about anything I’ve done, nor am I sorry about what’s happened today,” Khodorkovsky told his lawyer in the statement.

*** Under Khodorkovsky, Yukos has grown to become Russia’s largest oil company and, since this month’s merger with Russian oil firm Sibneft, the fourth-largest private oil producer in the world. Major American oil companies, including ExxonMobil and ChevronTexaco, have recently expressed interest in buying a significant stake in the

14 merged company. Russia’s recovery from the 1998 devaluation of the ruble has been fueled by high oil prices. The stock market recently reached an all-time high.

Khodorkovsky, 40, acquired Yukos in a mid-1990s privatization auction for what many analysts considered a fire-sale price but in recent years has embraced Western-style corporate transparency. The value of the company’s shares skyrocketed, and Khodorkovsky’s holdings are estimated to exceed $8 billion, making him Russia’s wealthiest tycoon. He and his partners also reaped billions of dollars in cash in recent years as oil prices surged.

Khodorkovsky had become a leading private philanthropist and a potent force behind the political opposition to Putin, contributing to the Union of Right Forces and another reformist party, Yabloko, which are competing for seats in the December parliamentary elections.

41. This news shocked the market. Shares of Yukos fell $2.42 per share or 16.78 percent

to close, on October 27, 2003, the next trading day, at $12.00 per share.

POST CLASS PERIOD STATEMENTS AND EVENTS

42. On November 29, 2003, THE WASHINGTON POST published an article entitled “Merger

Unravels Between Russian Oil Companies; Market Falls Again As Deal Is Put Off, “ which, in relevant part, read:

Two of Russia’s biggest oil companies, Yukos and Sibneft, abruptly suspended their landmark merger Friday, unraveling the creation of one of the world’s largest private oil producers in another blow to imprisoned tycoon Mikhail Khodorkovsky.

Sibneft announced the move in a one-line statement that caught even top Yukos executives by surprise. It also accelerated a plunge in the Russian stock market that was touched off by the Oct. 25 arrest of Khodorkovsky, then chief executive of Yukos.

The suspension came on the day shareholders had planned to complete the formalities of the merger and stoked suspicion in business circles

15 of a power play by Roman Abramovich, Sibneft’s principal owner going into the merger, to take over the unified company.

Abramovich, considered Russia’s second-richest man behind Khodorkovsky, secretly flew to Israel last week to meet with Yukos’s second-largest shareholder, Leonid Nevzlin, who has fled Russia and currently controls the voting rights of Khodorkovsky’s shares.

In a telephone interview from Israel Friday, Nevzlin confirmed he had met with Abramovich but said he was given no warning of Sibneft’s announcement suspending the merger.

“I supposed a new situation like this could arise, but before today’s [shareholders] meeting I didn’t have a concrete sense of what they would do,” Nevzlin said. “It’s hard to say what will happen next.”

The merger of Yukos and Sibneft was to be Khodorkovsky’s prize achievement, creating Russia’s first truly international oil giant that could compete with Western companies such as ExxonMobil and BP. A merged YukosSibneft would be the world’s fourth-largest private oil producer and had attracted interest from ExxonMobil in a possible purchase of part of the Russian company.

Khodorkovsky and other Yukos investors seemed to seal the Sibneft deal by buying Abramovich’s shares in the company last month, just weeks before Khodorkovsky was arrested on charges of fraud and tax evasion. Since then, the Russian government’s campaign against Khodorkovsky has severely damaged Yukos: About 40 percent of its stock has been frozen by prosecutors, its oil field licenses are under investigation, and it has lost more than a quarter of its market value.

In the past, Abramovich has been widely seen as politically favored by the Kremlin. He began divesting his Russian assets this year, and analysts said Friday that he is either trying to pull out of the merger for fear of being tainted by Khodorkovsky’s troubles or is exploiting the situation for better position. Some said Abramovich could be doing the Kremlin’s bidding by trying to further damage or even take over Yukos outright.

43. On this news shares of Yukos plummeted further. Shares fell an additional 64 cents per share or 5.33 percent to close at $11.36 per share.

16 44. On December 3, 2003, THE WASHINGTON POST published an article, entitled “Russia

Alleges Yukos Has Tax Debt; Embattled Oil Giant Owes $5 Billion, Ministry Letter Says,” which, in relevant part, read:

The Russian government declared Tuesday that the embattled Yukos oil company and its affiliates owed $5 billion in unpaid taxes, a new escalation of the politically charged campaign against the firm five days before parliamentary elections.

The latest allegations were contained in a letter sent by the Tax Ministry to Russian prosecutors alleging that Yukos avoided taxes through a variety of methods from 1998 through this year, according to the Interfax news agency.

Among other things, the letter alleged that Yukos dodged taxes by selling oil at discount rates to its own shell companies abroad or in tax-exempt zones, which then resold the oil at market rates. Such transactions have the effect of lowering tax payments by transferring profits to low-tax or no-tax zones.

Yukos’ shares have plummeted since its main shareholder, Mikhail Khodorkovsky, was arrested Oct. 25 on fraud and tax evasion charges. Khodorkovsky has described those allegations as a Kremlin-inspired attack on a political rival.

The latest blow to Yukos comes as its long-planned multibillion-dollar merger with the smaller Sibneft oil company may be unraveling. Roman Abramovich, Sibneft’s chief owner, suspended the merger Friday after the Yukos team rejected his demand to run the merged YukosSibneft.

Since the summer, the government has been assaulting Khodorkovsky’s empire, detaining the billionaire in prison, freezing his Yukos stock, charging two of his partners with financial crimes and investigating the company’s oil field licenses. But it had not directly alleged major wrongdoing by the company and President Vladimir Putin had always suggested the dispute dealt solely with the firm’s big shareholders.

Yukos officials and some analysts saw Tuesday’s tax allegations as retaliation by the government for rejecting what they see as a

17 Kremlin-sponsored takeover by Abramovich. “This is Russian hardball tactics,” said a source close to Yukos. “This is part of the psychological weapon. . . . It’s building up pressure.”

Mikhail Delyagin, an economist at Moscow’s Institute for Globalization Studies and a former adviser to Prime Minister Mikhail Kasyanov, said the timing made it clear that the Kremlin was threatening Yukos for rejecting Abramovich’s management team. “Such a coincidence is not by chance,” he said in an interview. “When Yukos refused, all of a sudden the state is making complaints against Yukos again.”

Among the complaints that the Tax Ministry made about Yukos is that it registered subsidiaries in the region of Mordovia, where businesses get partial tax exemptions.

After similar complaints were raised against Sibneft recently, Finance Minister Alexei Kudrin and the state audit chamber called such a maneuver legal, though morally offensive. “Unless they decide there is one law for Sibneft and one law for Yukos,” prosecutors will have a hard time arguing that Yukos violated the law, said Stephen O’Sullivan, an analyst at United Financial Group, a Moscow investment bank.

The ministry’s letter Tuesday was not a tax bill, but a summation of conclusions from past inspections requested by prosecutors, according to Interfax.

Christopher Weafer, chief strategist at Moscow-based Alfa Bank, said if Yukos were ultimately forced to pay the money it would be “a heavy blow” that could derail not only the Sibneft merger but the company’s chances of forming a partnership with a major Western oil company. “It would certainly destroy their growth strategy, cripple their ability to pay dividends at least for the next two years, and would leave them extremely financially vulnerable,” he said.

The timing of the tax statement may have been intended to bolster Putin’s party, United Russia, as it heads into Sunday’s elections for the lower house of parliament, some analysts said. The campaign against Yukos has proved popular with the electorate; a recent poll found that 43 percent of Russians supported keeping Khodorkovsky in jail, compared to 18 percent who opposed it.

18 “It could well be this is an issue raised for short-term political reasons,” said Weafer.

“Right now there is the perception that the government is going to raise $5 billion, which could get them a few votes,” said Weafer, “even if next week shows there’s no basis for collecting it.”

45. Following the announcement shares of Yukos continued to plummet. By December

10, 2003, shares of Yukos were worth $9.51 per share.

YUKOS’ VIOLATION OF GAAP RULES

46. The Company announced financial results that were in violation of GAAP, the

Company’s own announced revenue recognition policies, and the following principles:

(a) The principle that “interim financial reporting should be based upon the same

accounting principles and practices used to prepare annual financial statements” was violated

(APB No. 28, ¶ 10);

(b) The principle that “financial reporting should provide information that is useful

to present to potential investors and creditors and other users in making rational investment,

credit, and similar decisions” was violated (FASB Statement of Concepts No. 1, ¶ 34);

(c) The principle that “financial reporting should provide information about the

economic resources of an enterprise, the claims to those resources, and effects of transactions,

events, and circumstances that change resources and claims to those resources” was violated

(FASB Statement of Concepts No. 1, ¶ 40);

(d) The principle that “financial reporting should provide information about an

enterprise’s financial performance during a period” was violated (FASB Statement of

Concepts No. 1, ¶ 42);

19 (e) The principle that “completeness, meaning that nothing is left out of the

information that may be necessary to insure that it validly represents underlying events and

conditions” was violated (FASB Statement of Concepts No. 2, ¶ 79);

(f) The principle that “financial reporting should be reliable in that it represents

what it purports to represent” was violated (FASB Statement of Concepts No. 2, ¶¶ 58-59);

and

(g) The principle that “conservatism be used as a prudent reaction to uncertainty

to try to ensure that uncertainties and risks inherent in business situations are adequately

considered” was violated. (FASB Statement of Concepts No. 2, ¶ 95).

47. The adverse information concealed by defendants during the Class Period and detailed above was in violation of Item 303 of Regulation S-K under the federal securities law (17 C.F.R.

229.303).

PWC DEFENDANT’S LIABILITY

48. During the Class Period and as stated above, PwC issued false clean audit reports on the Company’s financial statements.

49. As a result of false clean audit reports, the PwC violated the following Generally

Accepted Auditing Standards (“GAAS”) with respect to their certification of the Company’s financial reports during the Class Period:

(A) GAAS (AU Section 411) which requires that the auditors opinion that

financial statements present fairly an entity’s financial position, results of operations, and cash

flows in conformity with GAAP should be based on judgement as to whether:

(1) the accounting principles are selected and applied have general acceptance;

20 (2) the accounting principles are appropriate in the circumstances;

(3) the financial statements, including the related notes, are informative of matters that may affect their use, understanding, and interpretation;

(4) the information presented in the financial statements is classified and

summarized in a reasonable manner, that is, neither too detailed nor too condensed; and

(5) the financial statements reflect the underlying events and transactions in

a manner that presents the financial position, results of operations, and cash flows

stated within a range of acceptable limits, that is, limits that are reasonable and

practicable to attain in financial statements.

(B) GAAS (AU 150)

(1) General Standard No 1 was violated, which requires that the audit is

to be performed by a person or persons having adequate technical training and

proficiency as an auditor.

(2) General Standard No. 2 was violated, which requires that in all matters

relating to the assignment, an independence in mental attitude is to be maintained by

the auditor or auditors.

(3) General Standard No. 3 was violated, which requires that due

professional care is to be exercised in the performance of the audit and in the

preparation of the report.

(4) Standard of Field Work No. 1 was violated, which requires that the

work is to be adequately planned and assistants, if any, are to be properly supervised.

21 (5) Standard of Field Work No. 2 was violated, which requires that a

sufficient understanding of internal controls is to be obtained to plan the audit and to

determine the nature, timing, and extent of tests to be performed.

(6) Standard of Field Work No. 3 was violated, which requires that

sufficient competent evidential matter is to be obtained through inspection,

observation, inquiries, and confirmations to afford a reasonable basis for an opinion

regarding the financial statements under examination.

(7) Standard of Reporting No. 1 was violated, which requires that the

report shall state whether the financial statements are presented in accordance with

GAAP.

(8) Standard of Reporting No. 3 was violated, which requires that the

informative disclosures in the financial statements are to be regarded as reasonably

adequate unless otherwise stated.

UNDISCLOSED ADVERSE INFORMATION

50. The market for Yukos’ securities was open, well-developed and efficient at all relevant times. As a result of these materially false and misleading statements and failures to disclose, Yukos’ securities traded at artificially inflated prices during the Class Period. Plaintiff and other members of the Class purchased or otherwise acquired Yukos securities relying upon the integrity of the market price of Yukos’ securities and market information relating to Yukos, and have been damaged thereby.

51. During the Class Period, defendants materially misled the investing public, thereby inflating the price of Yukos’ securities, by publicly issuing false and misleading statements and omitting to disclose material facts necessary to make defendants’ statements, as set forth herein, not

22 false and misleading. Said statements and omissions were materially false and misleading in that they

failed to disclose material adverse information and misrepresented the truth about the Company, its

business and operations, as alleged herein.

52. At all relevant times, the material misrepresentations and omissions particularized in

this Complaint directly or proximately caused or were a substantial contributing cause of the damages

sustained by plaintiff and other members of the Class. As described herein, during the Class Period,

defendants made or caused to be made a series of materially false or misleading statements about

Yukos’ business, prospects and operations. These material misstatements and omissions had the

cause and effect of creating in the market an unrealistically positive assessment of Yukos and its

business, prospects and operations, thus causing the Company’s securities to be overvalued and

artificially inflated at all relevant times. Defendants’ materially false and misleading statements during

the Class Period resulted in plaintiff and other members of the Class purchasing the Company’s

securities at artificially inflated prices, thus causing the damages complained of herein.

ADDITIONAL SCIENTER ALLEGATIONS

53. As alleged herein, defendants acted with scienter in that defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially

false and misleading; knew that such statements or documents would be issued or disseminated to the

investing public; and knowingly and substantially participated or acquiesced in the issuance or dissemination of such statements or documents as primary violations of the federal securities laws.

As set forth elsewhere herein in detail, defendants, by virtue of their receipt of information reflecting the true facts regarding Yukos, their control over, and/or receipt and/or modification of Yukos’

23 allegedly materially misleading misstatements and/or their associations with the Company which made

them privy to confidential proprietary information concerning Yukos, participated in the fraudulent

scheme alleged herein.

54. Additionally, the Individual Defendants engaged in such a scheme to inflate the price

of the Company’s securities in order to enhance the value of the their personal holdings and to protect

and enhance their executive positions.

Applicability Of Presumption Of Reliance: Fraud-On-The-Market Doctrine

55. At all relevant times, the market for Yukos’ securities was an efficient market for the following reasons, among others:

(a) Yukos stock met the requirements for listing, and was listed and actively

traded on the OTC, a highly efficient and automated market;

(b) As a regulated issuer, YUKOS filed periodic public reports with the SEC;

(c) Yukos regularly communicated with public investors via established market

communication mechanisms, including through regular disseminations of press releases on the

national circuits of major newswire services and through other wide-ranging public

disclosures, such as communications with the financial press and other similar reporting

services; and

(d) Yukos was followed by several securities analysts employed by major

brokerage firms who wrote reports which were distributed to the sales force and certain

customers of their respective brokerage firms. Each of these reports was publicly available

and entered the public marketplace.

24 56. As a result of the foregoing, the market for Yukos’ securities promptly digested

current information regarding Yukos from all publicly available sources and reflected such

information in Yukos’ stock price. Under these circumstances, all purchasers Yukos’ securities

during the Class Period suffered similar injury through their purchase of Yukos’ securities at

artificially inflated prices and a presumption of reliance applies.

NO SAFE HARBOR

57. The statutory safe harbor provided for forward-looking statements under certain circumstances does not apply to any of the allegedly false statements pleaded in this complaint. Many of the specific statements pleaded herein were not identified as “forward-looking statements” when made. To the extent there were any forward-looking statements, there were no meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those in the purportedly forward-looking statements. Alternatively, to the extent that the statutory safe harbor does apply to any forward-looking statements pleaded herein, defendants are

liable for those false forward-looking statements because at the time each of those forward-looking

statements was made, the particular speaker knew that the particular forward-looking statement was false, and/or the forward-looking statement was authorized and/or approved by an executive officer of Yukos who knew that those statements were false when made.

FIRST CLAIM Violation Of Section 10(b) Of The Exchange Act Against And Rule 10b-5 Promulgated Thereunder Against All Defendants

58. Plaintiff repeats and realleges each and every allegation contained above as if fully set

forth herein.

25 59. During the Class Period, defendants carried out a plan, scheme and course of conduct which was intended to and, throughout the Class Period, did: (1) deceive the investing public, including plaintiff and other Class members, as alleged herein; and (2) cause plaintiff and other members of the Class to purchase Yukos’ securities at artificially inflated prices. In furtherance of this unlawful scheme, plan and course of conduct, defendants, and each of them, took the actions set forth herein.

60. Defendants (1) employed devices, schemes, and artifices to defraud; (2) made untrue statements of material fact and/or omitted to state material facts necessary to make the statements not misleading; and (3) engaged in acts, practices, and a course of business which operated as a fraud and deceit upon the purchasers of the Company’s securities in an effort to maintain artificially high market prices for Yukos’ securities in violation of Section 10(b) of the Exchange Act and Rule 10b-5.

All defendants are sued either as primary participants in the wrongful and illegal conduct charged herein or as controlling persons as alleged below.

61. Defendants, individually and in concert, directly and indirectly, by the use, means or instrumentalities of interstate commerce and/or of the mails, engaged and participated in a continuous course of conduct to conceal adverse material information about the business, operations and future prospects of Yukos as specified herein.

62. These defendants employed devices, schemes and artifices to defraud, while in possession of material adverse non-public information and engaged in acts, practices, and a course of conduct as alleged herein in an effort to assure investors of Yukos’ value and performance and continued substantial growth, which included the making of, or the participation in the making of, untrue statements of material facts and omitting to state material facts necessary in order to make the

26 statements made about Yukos and its business operations and future prospects in the light of the

circumstances under which they were made, not misleading, as set forth more particularly herein, and engaged in transactions, practices and a course of business which operated as a fraud and deceit upon the purchasers of Yukos securities during the Class Period.

63. Each of the Individual Defendants’ primary liability, and controlling person liability, arises from the following facts: (1) the Individual Defendants were high-level executives and/or directors at the Company during the Class Period and members of the Company’s management team or had control thereof; (2) each of these defendants, by virtue of his responsibilities and activities as a senior officer and/or director of the Company was privy to and participated in the creation, development and reporting of the Company’s internal budgets, plans, projections and/or reports;

(3) each of these defendants enjoyed significant personal contact and familiarity with the other defendants and was advised of and had access to other members of the Company’s management team,

internal reports and other data and information about the Company’s finances, operations, and sales

at all relevant times; and (4) each of these defendants was aware of the Company’s dissemination of

information to the investing public which they knew or recklessly disregarded was materially false and

misleading.

64. The defendants had actual knowledge of the misrepresentations and omissions of

material facts set forth herein, or acted with reckless disregard for the truth in that they failed to

ascertain and to disclose such facts, even though such facts were available to them. Such defendants’ material misrepresentations and/or omissions were done knowingly or recklessly and for the purpose

and effect of concealing Yukos’ operating condition and future business prospects from the investing public and supporting the artificially inflated price of its securities. As demonstrated by defendants’

27 overstatements and misstatements of the Company’s business, operations and earnings throughout the Class Period, defendants, if they did not have actual knowledge of the misrepresentations and omissions alleged, were reckless in failing to obtain such knowledge by deliberately refraining from

taking those steps necessary to discover whether those statements were false or misleading.

65. As a result of the dissemination of the materially false and misleading information and

failure to disclose material facts, as set forth above, the market price of Yukos’ securities was

artificially inflated during the Class Period. In ignorance of the fact that market prices of Yukos’

publicly-traded securities were artificially inflated, and relying directly or indirectly on the false and

misleading statements made by defendants, or upon the integrity of the market in which the securities

trades, and/or on the absence of material adverse information that was known to or recklessly

disregarded by defendants but not disclosed in public statements by defendants during the Class

Period, plaintiff and the other members of the Class acquired Yukos securities during the Class Period

at artificially high prices and were damaged thereby.

66. At the time of said misrepresentations and omissions, plaintiff and other members of

the Class were ignorant of their falsity, and believed them to be true. Had plaintiff and the other

members of the Class and the marketplace known the truth regarding Yukos’ financial results, which

were not disclosed by defendants, plaintiff and other members of the Class would not have purchased

or otherwise acquired their Yukos securities, or, if they had acquired such securities during the Class

Period, they would not have done so at the artificially inflated prices which they paid. 67.

By virtue of the foregoing, defendants have violated Section 10(b) of the Exchange Act, and

Rule 10b-5 promulgated thereunder.

28 68. As a direct and proximate result of defendants’ wrongful conduct, plaintiff and the other members of the Class suffered damages in connection with their respective purchases and sales of the Company’s securities during the Class Period.

SECOND CLAIM Violation Of Section 20(a) Of The Exchange Act Against the Individual Defendant

69. Plaintiff repeats and realleges each and every allegation contained above as if fully set forth herein.

70. The Individual Defendants acted as controlling persons of Yukos within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their high-level positions, and their ownership and contractual rights, participation in and/or awareness of the Company’s operations and/or intimate knowledge of the false financial statements filed by the Company with the SEC and disseminated to the investing public, the Individual Defendants had the power to influence and control and did influence and control, directly or indirectly, the decision-making of the Company, including the content and dissemination of the various statements which plaintiff contends are false and mis- leading. The Individual Defendants were provided with or had unlimited access to copies of the

Company’s reports, press releases, public filings and other statements alleged by plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause the statements to be corrected.

71. In particular, each of these defendants had direct and supervisory involvement in the day-to-day operations of the Company and, therefore, is presumed to have had the power to control or influence the particular transactions giving rise to the securities violations as alleged herein, and exercised the same.

29 72. As set forth above, Yukos and the Individual Defendants each violated Section 10(b)

and Rule 10b-5 by their acts and omissions as alleged in this Complaint. By virtue of their positions

as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the Exchange

Act. As a direct and proximate result of defendants’ wrongful conduct, plaintiff and other members of the Class suffered damages in connection with their purchases of the Company’s securities during the Class Period.

WHEREFORE, plaintiff prays for relief and judgment, as follows:

(a) Determining that this action is a proper class action, designating plaintiff as Lead

Plaintiff and certifying plaintiff as a class representative under Rule 23 of the Federal Rules of Civil

Procedure and plaintiff’s counsel as Lead Counsel;

(b) Awarding compensatory damages in favor of plaintiff and the other Class members

against all defendants, jointly and severally, for all damages sustained as a result of defendants’

wrongdoing, in an amount to be proven at trial, including interest thereon;

(c) Awarding plaintiff and the Class their reasonable costs and expenses incurred in

this action, including counsel fees and expert fees; and

(d) Such other and further relief as the Court may deem just and proper.

JURY TRIAL DEMANDED

Plaintiff hereby demands a trial by jury.

Dated: August 6, 2004 MURRAY, FRANK & SAILER LLP

By: ______

30 Brian P. Murray (BM-9954) Aaron D. Patton (AP-6334) 275 Madison Avenue Suite 801 New York, New York 10016-1101 (212) 682-1818

GLANCY, BINKOW & GOLDBERG LLP Michael Goldberg 1801 Avenue of the Stars Suite 311 Los Angeles, CA 90067 (310) 201-9150

Attorneys for Plaintiff

31