Case 4:12-cv-00003 Document 1 Filed in TXSD on 01/03/12 Page 1 of 8

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION

BAKER BOTTS L.L.P. § § Plaintiff, § § v. § § Case No. 4:12-cv-3 UNITED STATES SECURITIES AND § EXCHANGE COMMISSION § § Defendant. §

ORIGINAL COMPLAINT

I. NATURE OF THE ACTION

1. Plaintiff Baker Botts L.L.P. (“Baker Botts”) brings this action under the

Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, for injunctive and other appropriate relief, seeking release of documents in the Defendant’s possession that the Defendant has improperly withheld.

II. PARTIES

2. Plaintiff, Baker Botts, is an international law firm with 725 lawyers and a

network of 13 offices around the world. Baker Botts’s principal office and headquarters is

located at One Shell Plaza, 910 Louisiana Street, Houston, Texas 77002.

3. Defendant, the United States Securities and Exchange Commission

(“SEC”), is a department of the executive branch of the United States Government, and is an agency within the meaning of 5 U.S.C. § 552(f).

Case 4:12-cv-00003 Document 1 Filed in TXSD on 01/03/12 Page 2 of 8

III. JURISDICTION AND VENUE

4. This Court has subject matter jurisdiction over this action and personal

jurisdiction over the parties pursuant to 5 U.S.C. § 552(a)(4)(B). This court also has jurisdiction over this action pursuant to 28 U.S.C. § 1331.

5. Venue is proper in the Southern District of Texas pursuant to 5 U.S.C.

§ 552(a)(4)(B) because this is the judicial district in which the Plaintiff has its principal place of business and from which Plaintiff’s FOIA request was issued. Venue is also proper pursuant to

28 U.S.C. §1391(e) because the Defendant is an agency of the United States, the Plaintiff resides

in this district, and no real property is involved in this action.

IV. FACTS

6. Prior to its bankruptcy and ultimate dissolution in November 2007, OAO

NK Yukos (“Yukos”) considered listing its shares on the New York Stock Exchange. See Ex. 1 at 5 (Record of Interview by Counsel of Bruce Misamore (certified July 7, 2009), available at

http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/Bruce%20Misamore%

20Deposition.pdf). As part of its decision making process, Yukos met with representatives of

the Securities and Exchange Commission sometime between May 2002 and March 2003 to

discuss the requirements for its shares to be listed on a U.S. exchange and to be registered with

the SEC. Also present at the meeting(s) were Yukos’s auditors, Pricewaterhouse Coopers and its

legal counsel, Akin Gump Strauss Hauer & Feld LLP. On information and belief, the topics of

discussion were: disclosure and reporting requirements, including the appropriate assessment of

reserves, the disclosure of potential issues related to the Yukos privatization, the affiliate status

of several related entities, and taxation and transfer pricing issues facing Yukos.

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7. The SEC has confirmed the existence of responsive records. On information and belief, these include: (1) SEC-created documents such as attendance lists, meeting minutes and notes, visitor logs, and similar documents; (2) communications between

Yukos and the SEC that included information that Yukos provided; and (3) documents prepared by Yukos for SEC review, such as a “draft” F-1 that Yukos submitted to the SEC in March 2003 as well as drafts of other disclosure documentation submitted for “preliminary review.”

8. In testimony disclosed publicly, Mr. Bruce Misamore, former Yukos CFO and board member, stated that these documents disclosed Yukos’s “accounting, finance and governance practices, and its internal controls.” Ex. 1 at 5. Ms. Sarah Carey, a former Yukos board member testified similarly that this documentation, including the “draft” F-1, “had been submitted to the SEC for preliminary review.” See Ex. 2 at 12 (Record of Interview by Counsel of Sarah Carey (certified Mar. 16, 2009) available at http://www.khodorkovskycenter

.com/sites/khodorkovskycenter.com/files/Sarah%20Carey%20Deposition.pdf). On information and belief, the preliminary submission was made and accepted despite the SEC’s policy not to accept or pre-clear any registration statements or other disclosures in advance of their public filing. Ultimately, Yukos never registered its shares or obtained a listing on any U.S. exchange, and, as noted, ceased to exist in 2007.

9. On February 18, 2011, Baker Botts submitted a FOIA request to the SEC pursuant to 5 U.S.C. § 552, requesting any and all documents relating to the meeting(s) and agreeing to pay for reasonable costs incurred. Ex. 3. On March 7, 2011, the SEC’s Office of

FOIA Services returned a perfunctory boilerplate response asserting that the request was “not a proper FOIA request” because it did not “reasonably describe” the records sought. Ex. 4.

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10. On April 11, 2011, Baker Botts responded citing appropriate legal

authority and explaining why the request was proper. Ex. 5.

11. Three days later, on April 14, 2011, the research specialist in charge of the

request responded that he “was premature in [his] initial consideration of [the] FOIA request”

and added: “My bad.” Ex. 6. Because of this premature rejection, request No. 11-04000-FOIA

already had been closed. As a result, on April 14, 2011, the SEC opened a new request, No. 11-

05724-FOIA. Id.

12. On July 7, 2011, the SEC finally responded with its findings. Ex. 7. The

SEC had found responsive documents, but refused to release them. It invoked FOIA Exemption

4, asserting primarily that the release of the responsive information would “cause substantial

competitive harm to the submitter.” Id. As a secondary justification, the SEC asserted that

releasing the documents would adversely affect “governmental interests, such as compliance and

program effectiveness.” Id.

13. By response letter dated July 21, 2011, Baker Botts explained that

Exemption 4 did not apply to these documents, Ex. 8, because the criteria for withholding under

Exemption 4 could not be met. 5 U.S.C. §552(b)(4); 17 C.F.R. § 200.80(b)(4). In short,

Exemption 4 is inapplicable to agency-created documents because those documents were not

“obtained from a person.” Moreover, the documents that the SEC obtained from Yukos or its

agents are neither privileged nor confidential. Yukos ceased to exist in 2007,1 and therefore

cannot sustain competitive harm. Finally, because the SEC can compel this information from any potential registrant, the SEC’s interests in compliance and program effectiveness are not

affected by the release of the documents.

1 See, e.g., Dennis Zawacki II, Yukos legally ceases to exist after Moscow court action, JURIST LEGAL NEWS & RESEARCH (Nov. 22, 2007), http://jurist.org/paperchase/2007/11/yukos-legally-ceases-to-exist-after.php; Yukos oil firm formally ceases to exist, RIA NOVOSTI (Nov. 22, 2007), http://en.rian.ru/business/20071122/89069523.html.

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14. On July 28, 2011, the SEC FOIA staff responded to Baker Botts’s July 21 letter, refusing to reconsider its decision to withhold the documents, and instead inviting Baker

Botts to “avail yourself of the appeal rights presented in our letter of July 7, 2011.” Ex. 9.

15. On August 23, 2011, Baker Botts availed itself of those rights pursuant to

5 U.S.C. § 552(a)(6) and 17 C.F.R. § 200.80 (d)(5) and (6) by submitting a request for administrative review to the general counsel of the SEC. Ex. 10. Section 552(a)(6) allows the agency twenty days, excepting Saturdays, Sundays and legal public holidays, to respond to a request for administrative review.

16. The general counsel’s office received the request for administrative review on August 29, 2011. Ex. 10. The SEC’s twenty day clock for administrative review expired on

September 29, 2011.

17. Despite reasonable efforts to cooperate with the SEC, Baker Botts has had no success in obtaining the review to which it is entitled, or the documents that are being improperly withheld. During October 2011, Baker Botts followed up on three separate occasions by telephone with the office of the general counsel. Each time, Baker Botts was told that its request was in the queue. On October 24, 2011 Baker Botts was told that its review request would be moved “to the top of the stack.” On December 14, 2011, Baker Botts made a final attempt, via telephone, to obtain some movement on its request, only to be told that its request was still pending.

18. The SEC has exceeded the time allowed for responding to the request for review, and is in violation of 5 U.S.C. § 552(a)(6)(ii). Therefore, pursuant to 5 U.S.C.

§ 552(a)(6)(C)(i), Baker Botts has exhausted its administrative remedies.

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IV. CAUSES OF ACTION

CLAIM ONE: VIOLATION OF THE FREEDOM OF INFORMATION ACT

19. Plaintiffs restate every preceding allegation of this Complaint and

incorporate each by reference as though set forth fully herein.

20. The SEC wrongfully withheld the records that it identified as responsive

to Baker Botts’s FOIA request under Exemption 4. First, records created by the agency, or

received from another government entity, do not fall within the exemption and must be disclosed. Therefore, records such as minutes, meeting memoranda, attendance logs or similar documents created by the SEC should not be withheld in any event. Ex. 10 at 3.

21. Second, the SEC simply cannot meet its burden to show that the documents are confidential under Exemption 4. Documents are “confidential” and may be withheld under Exemption 4 only if disclosure of the documents would cause the submitter substantial competitive harm, or would adversely affect the agency’s ability to collect such information in the future. Ex. 10.

22. Yukos, the submitter of the documents, cannot sustain any competitive injury, let alone “substantial competitive injury.” Yukos no longer exists. Furthermore, the draft registration statement and other records that Yukos provided to the SEC for “preliminary review” and approval (see Exs. 1 and 2) comprised information that Yukos itself anticipated disclosing to the public. Disclosure of records containing information that a company itself planned to disclose cannot cause the company substantial competitive harm. Ex. 10 at 3-5.

23. The SEC’s “program effectiveness” is similarly unaffected by the release of the documents. The applicable regulations mandate that companies disclose the type of information that Yukos provided the SEC. Therefore, no danger exists to the SEC’s ability to

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obtain this information from future registrants. Consequently, the SEC cannot meet its burden and the information cannot be withheld on the basis of this aspect of confidentiality under

Exemption 4. Ex. 10 at 5.

24. The SEC therefore improperly invoked Exemption 4. Additionally, the general counsel’s continued failure to respond to Baker Botts’s request for administrative review constitutes an ongoing violation of FOIA.

CLAIM TWO: RECOVERY OF ATTORNEY FEES

25. Plaintiffs restate every preceding allegation of this Complaint and incorporate each by reference as though set forth fully herein.

26. The SEC’s failure to timely respond to Baker Botts’s request has forced

Baker Botts to bring this immediate action incurring costs and fees. Accordingly, pursuant to 5

U.S.C. § 552(a)(4)(E), Baker Botts is entitled to recover its costs and reasonable attorney fees.

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PRAYER

WHEREFORE Baker Botts respectfully requests that this court enter an order:

1. Requiring the SEC to produce the documents in full within 10 business days of the Court’s order;

2. Award Baker Botts its costs and reasonable attorneys’ fees incurred in this action pursuant to 5 U.S.C. § 552(a)(4)(E); and

3. Grant Baker Botts all other relief that is just and proper.

Respectfully submitted,

BAKER BOTTS L.L.P.

By: /s/ Benjamin A. Geslison Benjamin A. Geslison ATTORNEY IN CHARGE FOR PLAINTIFF State Bar No. 24074269 S.D. Tex. Bar No. 1128953 BAKER BOTTS L.L.P. One Shell Plaza 910 Louisiana Street Houston, Texas 77002-4995 Telephone: 713.229.1234 Facsimile: 713.229.2841 [email protected]

OF COUNSEL: Michael P. Lennon, Jr. State Bar No. 00787895 S.D. Tex. Bar No. 19866 BAKER BOTTS L.L.P. One Shell Plaza 910 Louisiana Street Houston, Texas 77002-4995 Telephone: 713.229.1234 Facsimile: 713.229.2734 [email protected]

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%IS 44 (Rev. 11/04) CIVIL COVER SHEET

the service other as as The JS 44 civil cover sheet and the information contained herein neither replace nor supplement filing and ofpleadings or papers required by law, except provided for the of the Clerk ofCourt for the of by local rules of court. This form, approved by the Judicial Conference ofthe United States in September 1974, is required use purpose initiating the civil docket sheet. (SEE INSTRUCTIONS ON THE REVERSE OF THE FORM.) I. (a) PLAINTIFFS DEFENDANTS Baker Botts L.L.P. United States Securities & Exchange Commission

(b) County of Residence of First Listed Plaintiff Harris County County of Residence of First Listed Defendant (EXCEPT IN U.S. PLAINTIFF CASES) (IN U.S. PLAINTIFF CASES ONLY) NOTE: IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE LAND INVOLVED.

(c) Attorney's (Firm Name, Address, and Telephone Number) Attorneys (If Known) Baker Botts L.L.P., 910 Louisiana St. Houston, TX 77002 713-229-1234

II. BASIS OF JURISDICTION (Place an "X" in One Box Only) III. CITIZENSHIP OF PRINCIPAL PARTIES(Place an "X" in One Box for Plaintiff (For Diversity Cases Only) and One Box for Defendant) CI 1 U.S. Government 0 3 Federal Question PTF DEF PTF DEF or (11 0 Plaintiff (U.S. Government Not a Party) Citizen ofThis State 0 1 GI I Incorporated Principal Place 4 4 of Business In This State

0 CI 0 5 0 5 LIB 2 U.S. Government n 4 Diversity Citizen of Another State 2 2 Incorporated and Principal Place Defendant of Business In Another State (Indicate Citizenship of Parties in Item III) 0 0 Citizen or Subject of a 0 3 0 3 Foreign Nation 6 6 Foreign Country

IV. NATURE OF SUIT (Place an in One Box Only) CONTRACT TORTS FORFEITURE/PENALTY I BANKRUPTCY OTHER STATUTES o GI 110 Insurance PERSONAL INJURY PERSONAL INJURY 0 610 Agriculture 0 422 Appeal 28 USC 158 400 State Reapportionment GI GI Antitrust CI 120 Marine 0 310 Airplane 0 362 Personal Injury 0 620 Other Food & Drug 423 Withdrawal 410 0 GI 130 Miller Act GI 315 Airplane Product Med. Malpractice GI 625 Drug Related Seizure 28 USC 157 430 Banks and Banking 0 O 140 Negotiable Instrument Liability 0 365 Personal Injury of Property 21 USC 881 450 Commerce 0 O 150 Recovery of Overpayment 0 320 Assault, Libel & Product Liability CI 630 Liquor Laws I PROPERTY RIGHTS 460 Deportation CI 0 Influenced and & Enforcement ofJudgment Slander o 368 Asbestos Personal GI 640 R.R. & Truck 820 Copyrights 470 Racketeer O 151 Medicare Act 0 330 Federal Employers' Injury Product 0 650 Airline Regs. GI 830 Patent Corrupt Organizations GI Trademark 0 Credit O 152 Recovery of Defaulted Liability Liability GI 660 Occupational 840 480 Consumer GI Student Loans 0 340 Marine PERSONAL PROPERTY Safety/Health 490 Cable/Sat TV 0 Selective (Excl. Veterans) 0 345 Marine Product o 370 Other Fraud 0 690 Other 810 Service SECURITY 0 850 Securities/Commodities/ GI 153 Recovery of Overpayment Liability 0 371 Truth in Lending I LABOR SOCIAL of Veteran's Benefits 0 350 Motor Vehicle CI 380 Other Personal Li 710 Fair Labor Standards 0 861 HIA (1395ff) Exchange 0 O 160 Stockholders' Suits 0 355 Motor Vehicle Property Damage Act 10 862 Black Lung (923) 875 Customer Challenge 0 190 Other Contract Product Liability 0 385 Property Damage 0 720 Labor/Mgmt. Relations 0 863 DIWC/DIWW (405(g)) 12 USC 3410 GI Title 0 890 Other Actions O 195 Contract Product Liability GI 360 Other Personal Product Liability 0 730 Labor/Mgml.Reporting 864 SSID XVI Statutory 0 Acts CI 196 Franchise Injury & Disclosure Act o 865 RSI (405(g)) 891 Agricultural GI Economic Stabilization Act REAL PROPERTY CIVIL RIGHTS PRISONER PETITIONS CI 740 Railway Labor Act FEDERAL TAX SUITS 892 0 CI 893 Environmental Matters CI 210 Land Condemnation 0 441 Voting 0 510 Motions to Vacate 0 790 Other Labor Litigation 870 Taxes (U.S. Plaintiff 0 Allocation Act 0 220 Foreclosure 0 442 Employment Sentence 0 791 Ernpl. Ret. Inc. or Defendant) 894 Energy 0 IRS—Third 895 Freedom ofInformation 0 230 Rent Lease & Ejectment CI 443 Housing/ Habeas Corpus: Security Act 871 Party K Act GI 240 Torts to Land Accommodations CI 530 General 26 USC 7609 GI of Fee Determination GI 245 Tort Product Liability GI 444 Welfare 0 535 Death Penalty 900Appeal Under Access 0 290 All Other Real Property 0 445 Amer. w/Disabilities GI 540 Mandamus & Other Equal Employment CI 550 Civil Rights to Justice O 446 Amer. w/Disabilities 0 555 Prison Condition GI 950 Constitutionality of Other State Statutes O 440 Other Civil Rights

Appeal to District V. ORIGIN (Place an "X" in One Box Only) Transferred from ri -7 Judge from 63 I C--I 2 0 3 [711 4 0 district Multidistrict 0 Original Removed fKrom Remanded from Reinstated or another Magistrate Proceeding State Court Appellate Court Reopened (specify) Litigation Judgment Cite_the U.S„ Gil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity): VI. CAUSE OF ACTION Brief description of cause: Suit seeking documents under FOIA, 5 U.S.C. 552, that the SEC has improperly withheld if demanded in VII. REQUESTED IN 171 CHECK IF THIS IS A CLASS ACTION DEMAND CHECK YES only complaint: COMPLAINT: UNDER F.R.C.P. 23 JURY DEMAND: El Yes gNo VIII. RELATED CASE(S) (See instructions): IF ANY JUDGE DOCKET NUMBER

DATE SIGNATURE OF ATTORNEY OF RECORD _....-1-•-• ...4 January 3, 2012 FOR OFFICE USE ONLY

RECEIPT 4 AMOUNT APPLYING IFP JUDGE MAG. JUDGE Case 4:12-cv-00003 Document 1-2 Filed in TXSD on 01/03/12 Page 1 of 55

EXHIBIT 1 Case 4:12-cv-00003 Document 1-2 Filed in TXSD on 01/03/12 Page 2 of 55

(Convention de La Haye du 5 Gctobre 19(1)

1. District ofColumbia United States ofAmerica GAYNELL FAY GUNN 2. This public document has been signed by ... . _ NOTARY PUBLIC IN AND FOR THE DISTRICT OF COLUMBIA 3. acting in the capacity of

---_.--_.._---_._,,----.._--._----- GAYNELL FAY GUNN, NOTARY PUBLIC IN AND FOR THE 4. bears the seal/stamp of ----.----.-,,----... ----.--".---,,--.--..------. DISTRICT OF COLUMBIA

CERTIFIED

5. at Washington, D.C.

6. the _ 17 day of JULY

7. by Secretary ofthe District of C""o""lt"""I""n"'b.z""·a'---- __ 8. No. 214a19

10. Signature

Stephanie D. Scott Case 4:12-cv-00003 Document 1-2 Filed in TXSD on 01/03/12 Page 3 of 55

Record of Interview by Counsel

Washiugton, DC (USA) 9 March 2009.

Interview started at 09 hours 00 minutes, and ended at 18 hours 45 minutes.

Counsel Yelena Leonidovna Levina, registration No.77/3956 with the Register of Counsel of Moscow city, ID No. 6170, issued on 06/05/2003 by the Central Administration of the Ministry ofJustice of The Russian Federation for Moscow city, on the premises of 2101 L Street NW, Suite 1000, Washington, DC 20037 interviewed with his/her consent a person who may have information regarding a case in which the counsel is providing legal assistance to Mr. Mikhail Khodorkovsky.

Interviewee:

1. Full Name: Bruce K. Misamore 2. Date ofBirth: 20 June 1950 3. Place ofBirth: Findlay, Ohio, United States ofAmerica 4. Place ofResidence and/or Registration: 13402 Pinnacle Place, Houston, Texas 77069-3247, United States of America Phone No: 281-537-2446 5. Nationality: United States ofAmerica 6. Occupation (employment or studies): Retire ---~", Phone No: 281- 7-24 )

My above personal information is true and correct~_~....3.~~~~~~~~~...... ~~---

The participating person has been advised about the use ofrecording equipment: Counsel used a computer and a printer to compile this record. Case 4:12-cv-00003 Document 1-2 Filed in TXSD on 01/03/12 Page 4 of 55

Before the interview I have been made aware of the following norms of applicable Russian Federation laws: Article 6, Part 3, Item 2 of the Federal Law on "The legal profession in the Russian Federation": "counsel is allowed to interview subject to their consent any persons who may have information regarding a case in which the counsel is providing legal assistance." . Article 51, Part 1 ofthe RF Constitution: "No one shall be required to give iucriminating evidence against themselves, their spouses or close relatives." Article 56, Part 4 of the RF CPC: A witness shall have the right: 1) to refuse to testify against himself, his (her) spouse and other close relatives, defined by Item 4 of Article 5 ofthe present Code. Upon my consent to offer information I have been advised that my testimony may be used as evidence in criminal proceedings, also ifI retract my testimony hereafter.

nti,c

Interviewer~~~. (signed) . ./"~ Other participating persons:~/ ~~

Interpreter: Kirill Savinskiy

Counsel representing the Interviewee: The interviewee appears without counsel.

I can provide the following substantive statement in response to the questions presented:

A. Personal background

I was born in Findlay, Ohio and attended Bowling Green State University in Bowling Green, Ohio in the United States. In June 1972, I earned a Bachelors degree from Bowling Green with a major in finance, banking and credit management. In June 1973, I earned a Masters ofBusiness Administration from Bowling Green.

Upon graduation, I was an Instructor of Finance at Bowling Green State University for one year, then after spending two years as an assistant investment officer for the Toledo Trust Company, Toledo, Ohio, I began my career in the oil industry.

From May 1976 tln'ough July 1993, I served in various financial functions for Marathon Oil Company (now Marathon Oil Corporation), including after that company was acquired in 1983 by United States Steel Corporation, later named USX Corporation.

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Marathon was, and is, a large international oil company historically based in Findlay, Ohio, but headquartered in Houston, Texas since 1990. I also worked for Marathon in Houston, Texas and London, England and for USX Corporation in Pittsburgh, Pennsylvania. By way of perspective, as a stand alone company, Marathon was ranked 36th on the 2008 Fortune 500 list. It is listed on the New York Stock Exchange. My responsibilities for Marathon included virtually all of Marathon's corporate finance activities for a 10-year period from 1983 to 1993. I also served as Treasurer for all of Marathon's international companies and virtually all of Marathon's domestic subsidiaries, and served as Marathon's financial representative for virtually all of its industry joint venture activities. While in London, I was also the Treasurer for Marathon's international oil and gas development and production organization, which was based there.

From 1993 through 1998, I worked for another large, multinational, publicly-traded oil industry company, Pennzoil Company in Houston, Texas. This included serving as Vice President and Treasurer of Pennzoil from June 1996 through December 1998 and as Assistant Treasurer from July 1993 through May 1996. In these capacities, I was responsible for most of Pennzoil's finance activities, including mergers and acquisitions, and designed and implemented Pennzoil's corporate-wide strategic planning process. In addition to that and other responsibilities, I managed the financial aspects of Pennzoil's spinoff of its downstream operations in 1998 and the successful merger of those operations with Quaker State Corporation.

From December 1998 through October 1999, I served as Senior Vice President ­ Finance and Treasurer for PennzEnergy Company (the fOlmer Pennzoil Company), in Houston, Texas. In that capacity, I managed the financial aspects ofthe creation of a new, large, public oil and gas company, which subsequently accepted a friendly merger offer from Devon Energy Corporation.

In Febmary 2001, I joined Yukos Oil Company ("Ynkos") in Moscow. From April 2001 through December 2005, I was the Chief Financial Officer ("CFO") of Yukos and also was a Member ofand Deputy Chainnan ofthe Managing Board ofYukos. Beginning in 2005, I was also a Member ofthe Executive Committee ofthe Board ofDirectors ofYukos. During most of this time I lived and worked in Moscow. At Yukos, as further described below, I was responsible for all aspects of financial management ofthe company, as well as having corporate executive responsibilities in my capacity as a member of the Management Board.

Until April 2006, I was a Director of the U,S,-Russia Business Council in Washington, D,C, I was also previously a Director of the International Institute for Management Development (IMD) Foundation in Lausanne, Switzerland, Until May 2006, I was also a Supervisory Board Member of Mazeikiu Nafta in Lithuania, I am also a life member of Financial Executives International, a member of and on the Board of its Houston chapter and a member ofits Globalization Oversight Conunittee.

Over the course of my career, I have developed expertise and knowledge at the most sophisticated levels in the areas of executive management, corporate govemance,

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corporate fmance, financial management and financial reporting practices in the United States and internationally. That expertise and knowledge has, in particular, been focused on the manner in which the principles that govern these general areas of cOlporate operations are applied in the oil and gas businesses both upstream (exploration and production) and downstream (refining and marketing).

B. My mandate at Yukos

As noted above, I took over my responsibilities as CFO at Yukos in April 2001. The Board of Directors of Yukos ( the "Board") technically formally appointed me to that position in October 2001. I also served on the Boards and/or as an officer of various subsidiaries of the company, such as Yukos CIS Investments, Yukos Hydrocarbon Ltd., Brittany Assets Limited, and Yukos UK. In addition, beginning in 2005, I served on the Board's Executive Committee. As CFO, I had overall responsibility for all accounting, corporate finance, tax, investor relations, risk management and treasury functions for Yukos and its various subsidiary companies. I also had significant input into corporate governance functions for both the company and its subsidiaries and had primary responsibility for all financial aspects ofYukos' management interface with the Board.

My mandate as CFO at Yukos was not limited to insuring that Yukos was in compliance with financial and corporate governance standards in the Russian Federation and other jurisdictions where the company operated. Rather, I was directed by the Board and the CEO, Mr. Khodorkovsky, to insure that Yukos met "best practices" standards recognized internationally with regard to all aspects of Yukos' financial management, but particularly as it related to accounting, finance, investor relations and corporate governance. During my time as CFO, we regularly focused on achieving these goals at Yukos. Specific examples of our successful efforts to insure that Yukos was, by prevailing international standards, a leading company, are described below. By 2002/2003, Yukos was regarded as the model for financial reporting, corporate governance and investor relations in Russia.

Further to the end of insuring that Yukos operated pursuant to international "best practices," the company retained the best and brightest outside professionals to audit its books and to provide legal and other business advice. This included the retention of PriceWaterhouseCoopers ("PWC") to provide international tax, accounting and infornlation technology advice. Domestically, Yukos utilized top domestic tax advisers and other consultants in Russia. Yukos also had an internal staff of well-trained professional accountants and lawyers to advise it and implement control systems. Yukos used many prominent international and Russian law firms, and Akin, Gump, Strauss, Hauer and Feld, L.L.P. ("Akin Gump"), a large international law firm, was retained and used extensively as Yukos' primary external corporate counsel. As a further check, Yukos retained PWC and other competent independent external auditors as well as internal auditors to audit company and subsidiary finances and accounting.

Throughout the cour'se of my work as Chief Financial Officer of Yukos, I regularly communicated and worked with PWC representatives, including George Gramatke, Don

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Kingsley and Doug Miller. In mid-2002, Mr. Kingsley became the lead partner for PWC's audit work for Yukos.

As evidence of the extent to which Yukos successfully operated consistent with international accounting, finance and corporate governance standards, in 2002-03, documentation was prepared in preparation for a planned listing ofYukos on the New York Stock Exchange ("NYSE") and also in anticipation ofa Eurobond issue. Yukos retained Akin Gump, and PWC, for this purpose. Professionals from these firms, as well as potential underwriters, including UBS, Morgan Stanley, and others and their counsel, conducted extensive due diligence, investigating the historical and then-current accounting, finance and governance practices of Yukos and its subsidiaries. While Yukos ultimately did not submit its application to the NYSE or issue the Eurobonds, Akin Gump, PWC, and the others did complete their review of the company's practices and also completed exhaustive documentation oftheir findings. Yukos' accounting, finance and governance practices, and its internal controls in these regards, were effectively in a position to satisfy the standards that would have been necessary for either an NYSE listing or issuance of the Eurobonds, subj ect primarily only to the further implementation of controls, to comply with the then­ new Sarbanes-Oxley (SOX) requirements.

Mr. Khodorkovsky and I had discussed the disclosure requirements that would come with the company's listing on the NYSE and while he, as well as most chief executives, was concerned about the pervasiveness of SOX, he knew that Yukos would have to comply to secure its NYSE listing and knew the challenges that listing would entail. His commitment to persist was consistent with his commitment to Yukos becoming a transpar·ent company. Furthermore, it is entirely inaccurate to conclude that Yukos did not go forward with the Level II or III ADR listing on the NYSE because of any issue revealed by PWC or Akin Gump as part of their respective due diligence. The project was put on hold because of the decision in the beginning of 2003 to acquire Sibneft and the need for further extensive due diligence on Sibneft to ensure complete transparency and financial statement accuracy before a NYSE listing. As an interim measure while the comprehensive due diligence of Sibneft was undertaken, Mr. Khodorkovsky and I also discussed the possibility of a full listing on the London stock exchange and/or the Frankfurt stock exchange. Mr. Khodorkovsky's plan for Yukos to be listed on the NYSE was suspended, not by any concern about disclosure or problems raised by its professional advisors, but rather by the attack against him and the company launched by the Russian authorities.

During my time as Chief Finarlcial Officer of Yukos, I am confident that our internal controls would have detected, and that the company would have preventcd, any substantial diversion of company assets, including the assets of the numerous subsidiary structures within the Yukos consolidation perimeter, and in p81ticular the entity known as Fargoil.

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C. The Charges Against Messrs. Khodorkovsky and Lebedev

My understanding of the charges against Messrs. Khodorkovsky and Lebedev is based upon my reading of various summaries ofthe Preliminary Indictment published in the press and posted on the Procurator General's website and discussions with lawyers representing them and other individuals connected to the Khodorkovsky/Yukos situation. I have also reviewed the charges issued on February 7, 2007 and modified in June, 2008. As I understand them, the Procuracy General Office of the Russian Federation ("RF"), and now the Investigative Committee of the Procuracy General Office ofthe RF, alleges that Messrs. Khodorkovsky and Lebedev embezzled all of the oil produced by OAO Yuganskneftegaz ("Yuganskneftegaz"), OAO Sarnaraneftegaz (<

Thc prosecution is completely wrong in its ridiculous allegations. The prosecution is attempting to characterize as criminal the sound business practices adopted by Yukos which allowed it to make the transition from being an unprofitable state-owned company to a company competing on the international markets, to survive the turmoil of thc late 1990s when oil prices and the Russian economy collapsed, and to become the best managed and governed company in Russia. In reality, the alleged embezzlement and money laundering reflect the ordinary-monetary transfers and redistribution of revenues and capital within a vertically-integrated company, which is the very essence of a profitable and efficient commercial enterprise. There was to the best of my knowledge and belief never at any time during my tenure at Yukos any diversion ofYukos funds for the personal benefit of any Yukos shareholders, including particularly Mr. Khodorkovsky and Mr. Lebedev. The significance of the business practices introduced by Messrs. Khodorkovsky and Lebedev, can only be approached by examining the company's evolution, most ofwhich is reflected in publicly available sources, which information the prosecution conveniently ignores.

The Corporate Development ofYukos

As noted above, I joined Yukos with a mandate to further its devclopment and implementation of "best practices". In doing so, I was continuing a process that Yukos management had started a few years before as a result of thc vision and commitment demonstrated by Mikhail Khodorkovsky. In connection with my recruitment to Yukos and during my employment, I learned about the history of the company from historical

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company documents and financial statements, publications, discussions ofbusiness issues with other company management, members of the Board of Directors, third-parties, and with Mikhail Khodorkovsky and Michel Soublin, the prior CFO, in particular. I needed to understand what Mikhail Khodorkovsky and Yukos management had managed to accomplish and company issues and history before I joined the company in order to satisfy my mandate and to continue to build Yukos into a model vertically integrated international oil and gas company.

At the time that Yukos was privatized in 1996, it was not a well managed efficient and profitable company. Rather, by 1996, Yukos was on the verge of bankruptcy and approximately 3 billion US dollars in debt, the majority ofwhich was back taxes owed to the government and back pay owed to the employees ofthe company. It was inefficiently managed and suffered from a lack of financial controls at the operating company level. For example, management of the exploration and production companies was not driven by principles commonly utilized by commercial enterprises aimed at generating profits. Rather the objective was fulfilling state-mandated social goals. They spent funds without the benefit of a budget or without any thought for the potential return on investment. Bonuses were paid on the basis of meeting goals for the number of meters drilled regardless of whether or not oil was found or whether oil was produccd in economic quantities.

While it was considered appropriate under the Soviet system to use businesses to create jobs regardless of actual need or economics, these practices were counterproductive to a company trying to operate in a market driven system. If Yukos had not changed and adopted modcrn business practices resulting in its operating companies being more cost-effective and focused on long-term productivity and profitability, it probably would have collapsed long before I was hired.

I next address certain corporate changes made and practices adopted prior to my arrival at Yukos which were essential to the company's development between privatization in 1996 and my becoming the Chief Financial Officer in April 2001.

Introduction of New Ideas and Personnel

After Mr. Khodorkovsky assumed a leadership position with Yukos, he quickly identified the need to convert the company from the bureaucratic style of management and operations to more modem international standards and technology. In order to best identify and implement his vision for Yukos, Mr. Khodorkovsky recognized the need to hire experienced foreign personnel, professional consultants and service providers to work for and advise Yukos, both to generate ideas on how to improve the company and to secure immediate world class experience in implementing these ideas. For example, he hired Schlumberger Limited one of the world's leading oil field services and equipment providers, to provide advice on how to more cost effectively manage the oil and gas operations, and significantly increase production at a much lower cost. He also hired McKinsey & Co., a major international consulting firm to advise him not only on

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how to create a modem competitive company, but also how to organizationally structure the company.

Yukos began an aggressive recruiting campaign for experienced foreign oil and gas industry executives. This recruiting was a significant step for Yukos and represented a major philosophical shift from the traditional Russian corporate culture in which foreigners were not provided access to management or proprietary records of Russia's largest companies. At that time, it was standard practice for large Russian companies to be highly secretive, autocratic, and not transparent.

In 1998/1999 Yukos launched a search for a foreign CPO, a position ultimately filled by Michel Soublin who was seconded to Yukos from Schlumberger. Mr. Soublin was responsible for initiating the development and implementation of many ofthe Yukos financial reporting and accounting, corporate governance and audit controls described below. Mr. Khodorkovsky hired Jean Gerin, the then country manager in Russia for Elf Acquitaine, to help him develop corporate standards of governance and help structure the principles ofand candidates for an independent Board ofDirectors.

Similarly, Yukos hired Joe Mach in 1998 as Senior Vice President of Production to manage its day-to-day exploration and production activities. Mr. Mach was instrumental in improving Yukos operations and increasing production while simultaneously reducing production and lifting costs. Mr. Mach stressed that the exploration and production subsidiaries should "drill less and drill better." In addition, Yukos hired other foreign professionals who contributed to the reformation of the company in human resources, accounting, and other critical areas. Mr. Khodorkovsky knew that comprehensive training of all employees was extremely important if the company was going to make the transition to a top quality, highly competitive international company, and Schlumberger also seconded several of its human resources and training personnel to Yukos to implement a comprehensive employee training program.

Centralization of Management of the Operating Companies: Creation of Yukos-EP, Yukos-RM, and Yukos-Moscow

Yukos, in 1996, was a holding company that owned a majority interest in many operating subsidiaries including Yuganskneftegaz and Samaraneftegaz. In 1997, it acquired a majority interest in Vostochnaya Neftyanaya Kompaniya ("VNK") and an indirect majority interest in VNK's subsidiaries including the exploration and production company Tomskneft. In 1998, Yukos created a management company named Yukos-EP in order to establish more wliform, value focused, efficient and cost-effective operations for the production companies. It is well known within the oil and gas industry that exploration and production companies are very capital intcnsive and require a relatively predictable cash flow to function properly and grow. Since they are so capital intensive, they also have a higher risk ofwaste and abuse. The centralization ofmanagement under Yukos-EP was essential in transitioning Yukos' exploration and production operations to operate like other major vertically integrated international oil and gas companies around the world and was also consistent with the consolidations and streamlining that occurred within the industry worldwide and in North America in the 1980s/1990s.

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Over time, Yukos-EP ultimately had approximately 20 departments performing numerous functions including: oilfield serviccs, ficld development, research and design activities, geology and field preparation, environmental safety, gas preparation and disposal, industrial and labor safety, pipeline operations, Priobskoye field management, Zapadno-Balykskoye field management, central dispatch services, production technology and field operations, gas sales business, materials management and procurement, borehole technology, East Siberian Oil Company management, capital expenditure analysis and budgeting (included planning and budgeting activities, oilfield construction technology, design and estimate documentation), new projects (included foreign projects and new Russian projects), financial and environmental activities, HR policies, and secmity.

Through Yukos-EP, the production subsidiaries began to exercise economic discipline. Operating and maintenance expenses were controlled and, for example, the drilling of new wells was limited to operating need and existing wells were reworked with inefficient wells being shut in or permanently abandoned. FUlthermore, capital expenditures were directed to well designed and prioritized projects. As a result, the production subsidiaries achieved higher oil production on a per well and aggregate basis as well as lower operating costs and capital costs for drilling than any other Russian company and one of the best results in the world. On a whole, Yukos operated fewer wells but greatly increased production while significantly reducing operating costs per barrel ofproduction. For example, the lifting costs were redueed from $3.89 per barrel in 1997 to $1.73 per barrel in 2002. Similarly, the total operating costs as a percentage of revenues were reduced from 78.3% in 1998 to 41.9% in 2003; and thus, Yukos nearly doubled the efficiency ofits operations.

Similarly, in 1998, Yukos centralized the management for the refining and marketing segment and created a management company named Yukos-RM that provided all ofthe serviees needed for the refineries and the eompanies responsible for distribution and marketing of refined products. Yukos-RM ultimately had approximately 24 such functional departments, providing services including: oil exports, gas and gas condensate sales, transportation infrastructure, AK "Transneft" interactions, oil products exports and bunkering, customs, jet fuel trading, retail network management, related produets, construction, inter-regional logistics, oil products transport logisties, oil tank farms, motor oil and additives production and sales, gas processing and petrochemical technology, petrochemical produets sales, procurement and materials management, personnel management, and environmental safety.

Thus, Yukos management restructured the company from a geographically managed business with a large nUlllber of disjointed entities, to a segmented company consisting of Yukos EP, Yukos RM, managing the two major segments' day to day operations, and Yukos-Moscow, the management group responsible for strategy, finance, allocation ofeapital, administration of shared services, and the company-wide accounting and control functions. These changes gave Yukos a significant economic advantage because each company in the structure did not hire duplicate staff or incur duplicate . , expenses. In doing so, Yukos took advantage of economies of scale and eliminated

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duplicate functions, and thereby, greatly reduced operating and management costs. By implementing these changes, management converted Yukos to a modem competitive vertically integrated oil and gas company.

By 2001, we began to see other Russian companies attempt to replicate the Yukos model. The terms "Yukosizing" and "Yukosization" became a positive way too describe how Russian companies were re-organizing to become more transparent and more desirable to foreign investors. For example, companies such as Lukoil and TNK adopted the Yukos strategy of consolidated operations and utilization of shared services. Furthermore, between 2001 and 2004, PWC marketed its services within Russia by referencing its role in the development of the Yukos-style structure and financial reporting practices. The DeVelopment and Implementation of the Budgeting Process

In connection with the restructuring of Yukos and through the efforts of new personnel recruited to management ofthe company, in partieular Michel Soublin, Yukos began to implement comprehensive procedures of budgeting and financial control. Prior to this time, the "concept" of budgeting was to spend whatever funds were available without any prior long-term development strategy or analysis of rate of retum on the expenditure. This was the case at every level ofthe company and for the Yukos group as a whole. For example, as previously mentioned, wells were drilled without a long-term drilling plan addressing maximum recovery and people were paid based on the number of meters drilled rather than on the production value of the well. By the time I joined the Company, Yukos had replaced these practices with progressive, modern approaches and efficient economic principles. During my years with the Company, these principles received considerable furthcr development.

The concept of an efficient holding company is redistribution of capital at a point where it will maximize the rate of return. The object is to benefit the entire group of companies consolidated under the umbrella of a holding company. Accordingly, each was treated as a separate cost or profit center, but also as part ofa larger entity and capital was allocated between entities in a manner so that cash flows were optimized and allocated between the companies ofthe Yukos group to achieve the best overall result. In order to do so in Yukos, management assessed the potential returns and investment requirements and allocated cash where required or desireable to try to achieve the best return for the company as a whole. For example, Yukos allocated the funds from the R&M segment to the E&P segment because projects in E&P were expected to be more attractive economically than those in R&M were expected to be.

By 2001, Yukos management had implemented a process for following the basic business principle ofbalancing the rate ofreturn on investment with the cost ofcapital so that Yukos generally only pursued projects where the rate of return on investment exceeded the cost of capital it takes to invest. Adherence to this principle was a major element of the economic discipline Mr. Khodorkovsky brought to Yukos. There were clearly some projects which could not be managed in this manner, such as development

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of technology infrastructures, some environmental expenditures and safety expenditures, but all such expenditures were scrutinized for need and effectiveness in the budget process.

Thus, the objective for Yukos-EP and Yukos-RM managers was to examine and recommend for the approval by upper management and directors the kind ofprojects that would give Yukos the greatest rate of return. Accordingly, by 2001 Joe Mach, Don Wolcott, Chief Reservoir Engineer, Yuri Beilin, President of Yukos-EP and their teams, would make decisions or recommendations to upper management on capital investment, including amounts and allocation by sector or project. Additionally, they developed various approaches to making oil-field operations more efficient, such as identifYing and closing inefficient wells while acquiring technology so that the same or addition volumes could be recovered from fewer wells. They also examined and proposed projects that utilized more efficient routes for oil transpOlt and expansion of the existing pipeline capacities. See, for example, exhibit 1, Email dated 5.30.01 from A. Shavokshin to Bruce Misamore Regarding a proposed E&P investment project. Similar decision making occurred in order to greatly improve the R&M operations.

Capital budgets were intensively scrutinized in a formalized process which involved screening at multiple levels before budgets were ever presented to upper management. Following review, effective capital allocation and approval by upper management, the recommended capital budget was presented to the Finance Committee of the Board of Directors and, ultimately the Board of Directors would review and approve the overall capital budget. Mr. Khodorkovsky would never make unilateral decisions to approve a major exploration Or production project until after all due consideration and approval by the Board ofDirectors or the appropriate Committee ofthe Board, or review authority in accordance with established procedures, and he would give very meticulous attention to each proposal. See, e.g., exhibit 2, Email dated 8.9.2001Jrom Mikhail Khodorkovsky to Bruce Misamore, Yuri Beilin, Hugo Erikssen, and Ray Leonard regarding the need for additional management input and Board review ofa business plan.

As a result, all of the expenses of the Company, as well as of its subsidiaries and affiliate companies were comprehensively budgeted. Moreover, one of the basic assumptions always considered in budgeting for production and expenses was the price of oil at both the domestic markets and export prices, including the forecasts based on the market conditions at that time, such as OPEC policies. See exhibit 3, Copies of email communications concerning Yukos budgets including explanatory notes, spreadsheets, and approvals; exhibit 4, copy of email dated 12.5.2001 from Marc Polonsky to Bruce Misamore with a copy of "A New Western Focus on Russia, 'Where The Oil Is'," Sabrina Tavernise, New York Times, December 5,2001.

We vigorously adhered to the approved budgets and made sure that the expenses did not exceed the budgeted levels without required internal approvals. For example, in 2002, capital expenditures were budgeted for up to 1.2 billion USD including VAT, and based on the consolidated cash flow statements for 2002, CAPEX was 1.2 billion USD.

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Mr. Khodorkovsky took an active role in the budget approval process. See exhibit 5, Copy of email dated 12.3.2001 from Tony Groag to Mikhail Khodorkovsky, Bruce Misamore, Mikhail Trushin, Yuri Beilin, Vasiliy Shakhnovskiy, Nikolay Bychkov regarding the final 2002 budget. On the other hand, I never took direction from Mr. Lebedev while I was CFO and did not interact with him in connection with my work with the Finance Committee of the Board of Directors. Furthermore, I never saw any indication that he had any input, let alone control, over thc company's finances.

Yukos absolutely did not siphon cash flow out of the production subsidiaries. To the contrary, Yukos was constantly re-investing into the production companies Yuganskneftegaz, Samaraneftegaz, and Tomskneft and others. In fact, Yukos constantly provided funding well in excess of the cash flow from YNG, SNG and TNK and other production subsidiaries because production projects were generally the most profitable projects in the company and capital directed to these companies and their projects was highly desirable. As I understand the prior years, and I know with certainty from 2001 forward, all decisions regarding distribution of capital, operations, and management of the production subsidiaries were aimed at growing these subsidiaries disproportionately as part of the vertically-integrated holding company structure. They were the most attractive investment opportunities and received much more capital than their share of revenues. For example, in the first quarter of 2003, YUKOS invested approximately 118 million USD in Priobskoye field. Furthermore, in 2003 Yukos invested 2.8 billion Rubles into a number of oil producing installations, which included the projects at Priobskoye oilfield in Tyumen Region, Khanty-Mansiysky Autonomous Area, Khanty-Mansiysky District; at Ma1aninskoye, Krasnoarmeiskoye, Ezhovskoye, Burolatovskoye, Anyutinskoye, Kbrebtovoye and Letovskoye oilfields in Samara region; and the' purchases of rail tank cars necessary for the production subsidiaries. See exhibit 6, copy of 2003 Yukos Loan Facility excerpt and Yukos Oil Company Annual Report and Accounting Statements for 2003.

Based on my interaction with the controllers and the internal audit department and my regular discussions with PWC and with counsel in connection with the Level II JIll ADR project, the Sibneft merger and multiple due diligence of the company for many purposes, I never saw evidence of any leakage of funds away from the production subsidiaries and to the majority shareholders and no one ever brought any such allegations to my attention.

I understand the prosecution alleges that Messrs. Khodorkovsky and Lebedev harmed the production subsidiaries by the manner in which the oil was taken from them without appropriate compensation and that the prosecution quantifies this harm as being in the amount of 892 billion Rubles or 25.3 billion USD using an exchange rate of 35.3. Both the concept and the figme are contrary to the facts and logic. In fact, the prosecution's allegations reflect a complete vacuum of understanding, probably deliberate, of the workings of the Russian domestic oil markets and inte11lational accounting practices. I rely upon Yukos' auditing and reporting safeguards and on my personal knowledge as CFO about how the company used the revenues it generated, which for 1998-2003 amounted approximately $55.165 billion as a basis for rejecting

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completely the possibility of embezzlement by the majority shareholders as alleged by the prosecution. The auditing and reporting safeguards are described in detail below. Regarding expenditures, Yukos paid for operating expenses, research and development, made capital expenditures, paid taxes, made acquisitions, repaid debt and distributed shareholder dividends, and it did so without incurring any new debt until the acquisition of Sibneft. All of these cash outlays are reflected in the company's consolidated US GAAP financial statements. It is impossible that Yukos could have funded all of its required expenditures if massive amounts of money had been embezzled from its operations. It is really simple math. For example, in 2001 Yukos generated $9.461 billion in revenues and paid among other things, the government $ 2.777 billion in taxes; paid $3.7 billion in expenses, expended $2.9 billion for investment activities, which included capital improvements and acquisitions, and distributed $468 million of the net profit as dividends to all Yukos shareholders, while retaining $1.4 billion in cash and cash equivalents at the end of the year. Thus, contrary to the charges, it would have been impossible for the majority shareholders to have embezzled these funds. Nor is there any basis to believe that any ofthese expenditures is fictitious because Yukos could not have achieved its tremendous success if the money was being embezzled rather than pumped back into the company for the benefit ofall the shareholders. A summary of how YUkos, at all levels of the vertically-integrated company consumed its revenues and the actual amounts, is presented below.

Yukos use ofCash - Expenses and Taxes

Just like any oil and gas company, Yukos incurred major operational expenses such as the cost of oil production, distribution, refining and marketing and operational improvements. For example, it paid the salaries of thousands of employees and purchased a wide variety ofequipment, which in turn had to be maintained. Plus, Yukos paid taxes in connection with its operations. In addition, Yukos incurred expenses in connection with the various consolidated management or shared services for all subsidiaries ofYukos which were provided by administrative entities such as Yukos-FBC and Yukos-Moscow. Also, Yukos incurred costs in operating the off~shore structures which held the company's international assets and export sales revenues. For example, combined for 1998-2003, Yukos' operating costs without taxes and excluding depreciation, amortization and goodwill, were $21.878 billion, which is nearly half of total·Yukos revenues for 1998-2003.

The other major expense was taxes, which for the period of 1998-2003 amounted to $17 billion. Yukos was, in fact, the second largest taxpayer in Russia behind only Gazprom, despite all of the completely legal and legitimate tax-minimization strategies which were employed.

Yukos Use of Cash - Capital Expenditures:

A capital expenditure is incurred when a business spends money either to buy fixed assets or to add to the value ofan existing fixed asset with a useful life that extends

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beyond the taxable year. Since Yukos was operating essentially debt free until the Sibneft merger in 2003, our desire to make capital expenditures required the sound management ofour cash. As a CFO, I often had to do a balancing act during the proccss of approving proposed capital expenditures, that is to insure that the operating entities, in particular the exploration and production companies, did not try to use capital funds to cover overruns in operating expenses. See exhibit 7, copy ofemail dated 6.24.2002 from Andrei Bobrovsky to Bruce Misamore regarding capital budgeting policy with attachments. Based on my review of the Cash Flow statements, between 1998-2003, Yukos made capital expenditures in excess of$5 billion.

Yukos Use ofCash - dividends

Even before I joined the company, Yukos had unconditionally complied with the requirements ofthe law and had established Board of Directors policies to insure that all ofthe shareholders shared proportionately to their shareholdings in the ultimate profits of Yukos. In October 2000, the Board of Directors proposed a policy to shareholders whereby. the company would commit to progressively raise the yield and the ratio of the dividend paid over the net income (payout ratio) to levels approaching those of large international oil companies, and for the dividend to be paid semi-annually. The pace of the increase in the dividend would take into account the need to modemize the equipment ofthe company as well as to develop production, refining and marketing; the volatility of the oil prices; the uncertainties of the ability to obtain financing for a Russian based oil company; the respective tax effect ofdividend payments and capital gains.

The shareholders adopted the proposal and Yukos began distributing the profits to the shareholders in consistently increasing amounts. This new policy was unprecedented in Russia as it bound the company to pass the benefits of better operating policies and efficiencies through to the shareholders. Furthermore, the company's financial transparency made it easy for the shareholders to hold management to its obligation. Yukos declared dividends to shareholders in the anl0unts of about $300 million for the year 2000, $500 million for the year 2001, and $700 million for the ycar 2002. In 2003, in accordance with requirements arising from the Sibneft transaction, Yukos paid a nine­ month dividend in the amount of $1.7 billion - a record dividend for any Russian company at that time. These dividends were paid to all of Yukos' more than 55,000 shareholders, most of which were Russian shareholders, in precise accordanee with their shareholdings in Yukos Oil Company.

The distribution of dividends to shareholders was an important issue to Mr. Khodorkovsky and the Board as it represented validation for the management and corporate govemancc policies that he and the Board had brought to the company. In connection with the fiscal year 2000 dividends, Mr. Khodorkovsky stated, "The increased interim dividcnd this year reflects the Company's sound financial performance. Dividend growth demonstratcs the Company's responsibility to its shareholders and is consistent with the dividend policy adopted last year by Yukos' Board of Directors." In connection with the 2003 distribution for fiscal year 2002, he stated, "The significant progress in . , improving the efficiency of operations and boosting production in the current year has

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had a positive effect on the financial performance of the Company. These accomplishments and the recently enacted amendments to the Law on Corporations permit the Company to continue its practice of interim dividends in accordance with the Company's established dividend policy."

I also witnessed the correlation between management's hard work to enhance performance and the company's ability to distribute dividends to thc shareholders. After an extraordinary shareholder meeting on December 3I, 2002, where Yukos shareholders approved the Board's recommendation for an interim dividend, I stated: "The increased interim dividend reflects the solid operating and financial performance ofthe Company in 2002 and is in line with the dividend policy previously adopted by the Company's Board ofDirectors."

As satisfying as it was to propose increasingly large dividend payments. management continually acted responsibly and did not strip the company of cash needcd for capital improvements or acquisitions and to protect it against any decreascs in oil prices. Procedurally, I made the initial determination of the amount of rccommended dividend payments and discussed each such proposal with Mr. Khodorkovsky. Once he and I had agreed on a proposed dividend amount based upon our knowledge of the company's cash flows, profitability and cash needs, I took the recommendation to the Finance Committee of the Board of Directors. Their recommendation on dividends was then presented to the full Board of Directors for approval, and ultimately to the armual shareholders meeting for approval. We did not borrow to make dividend payments. We were determined to best position Yukos to continue to grow while giving shareholders a cash retum on their investment. We wanted sustainable growth in order to insure long­ term increasing dividend payments. Mr. Khodorkovsky was intent on rewarding those shareholders who put their faith in him and the Company.

Yukos Use of Cash - Acquisitions:

In addition to operating and maintammg the assets Yukos had when it was privatized, Mr. Khodorkovsky expanded the company through a series of acquisitions designed to help build Yukos into a major vertically integrated oil and gas company. And while the 1997 acquisition of the initial majority interest in VNK was done with bon-owed funds, thereafter Yukos took a more conservative approach. During my time at Yukos, all of the acquisitions, except for Sibneft, were made with Yukos' own cash. The only need for borrowing for the Sibneft acquisition was related to an agreement with the Sibneft principal shareho1dcrs to increase the amount of debt in the combined company. The most significant acquisitions during the 2001-2003 period beside Sibneft included: OAO Arcticgaz ($274.3 million), the 36% remaining stake in VNK ($256 million), AB Mazeikiu Nafta ($164 million), AO Rospan International (133 million), John Brown Hydrocarbons Limited and Davy Process Technology Limited (100 million), Transpetrol Pipeline ($74 million) and many others.

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Part ofthe acquisition strategy was the use of treasury stock, the most significant of which, $3.69 billion took place in 2003 in connection with the acquisition of Sibneft. See infra pages 36-38.

Yukos Use of Cash - Investment Policies, Purchases and trading of Securities: bonds and promissory notes.

I had managerial responsibility for the Yukos Treasury department and the Yukos cash investment strategy and its implementation. Our priority for distribution offree cash flow was always the financing of Yukos budgetary needs and safe investment of the Company's cash in income-generating marketable investments. See exhibit 8, copy of comprehensive 2002 Yukos budget and copies of select documents reflecting the 2001 budgets for Yukos depaltments or operating segments. Beginning about mid-1999 the Yukos Treasury department began investing free cash in various financial instruments. The premise was to protect the cash assets and generate additional revenues to help fund operations. Typically, cash balances would be deposited in bank accounts or invested in short-term securities which would pay interest, including short-term (less than 14 days) cash accounts. The company needed to maintain cash on the company accounts in order to pay current obligations. In 2000 monthly average expenses of the company ran slightly above $500 million. Accordingly, in 2000 the monthly average amount of cash deposited into the interest-bearing short-term accounts was about $400 million.

Yukos also used its free cash to buy back or retire Yukos debt, purchase federallsubfederal bonds and debt of regional governments (in the area of the company's operations) or debt instruments reputable Russian companies according to credit risk limits I approved. The portfolio for each year beginning with 2000 included investments into Eurobonds, dollar-denominated T-bills, Gazprom promissory notes, and ruble­ denominated T-bills. See exhibit 9, copy ofthe 2001 Yukos Investment Strategy.

The purpose for these investments was to meet future cash flow and investment needs of the Company and to ensure flexibility so that we could respond to market opportunities. Therefore the Yukos investment portfolio was diversified to encompass several parameters, including a) meeting the Company's commitments under loan or similar debt arrangements and current cash needs; b) offsetting tax and currency risks (for example, Gazprom notes or ruble-denominated T-bills), c) a cash reserve set aside to finance the Company should economic conditions worsen, such as when oil prices drop, and d) a cash pool to finance acquisitions.

In preparing the investment plan for the upcoming year and future periods, we prepared budgets based on forecasts for the price of the oil and other variables and market changes that would affect budgetary risks such as currency risks or OPEC's policies (market risks).

We regularly sought the advice of outside consultants on policies for effective cash management,. Mr. Khodorkovsky and I encouraged Yukos personnel to contact the most reputable financial advisors available to us. See exhibit 10, copy of an email dated

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8.16.2001 from Mark S. Stockley, JP Morgan Fleming, to Bruce Misamore and Andrey Leonovich regarding liquidity management with attachment.

My area had a number of responsibilities and simultaneously worked on various projects during 2001-2003 such as planning & budgeting, improving accounting systems, obtaining credit ratings for Yukos, conversion to US dollar reporting, investor relations, consolidation of financial statements, tax planning and structuring, acquisitions, consolidations of subsidiaries, etc.. See, e.g., exhibit 11, a representative copy of a Yukos Finance Department proj ect list.

To the extent that the prosecution alleges that Yukos trading companies used the funds accumulated on their accounts to buy promissory notes as a means to launder the proceeds from the trade of oil, they again mischaractcrize as criminal a sound and reasonable business practice. The purchases of promissory notes and bonds with excess cash is a standard and customary practice of not only oil trading companies, both in Russia and abroad but all major commercial enterprises in Russia and elsewhere. This tool is particularly attractive to and useful for trading companies because they retain the proceeds from oil sales and are well positioned to turn cash into short-term cash equivalents, or to invest longer-term. Within the Yukos structurc during 2001-2003 Fargoil, Ratibor, and Energotrade, for example, purchased Gazprom bonds and promissory notes ofother Russian companies.

The holding, and subsequent sale, of the promissory notes or bonds was disclosed to the external auditors, including PWC, and reflected separately in the statutory financial statements of the trading companies and collectively on the Yukos consolidated balance sheet. For example, the notes to the Fargoil 2002 Russian financial reports disclosed that 21.29 billion Rubles on its balance sheet were investments in corporate and govcrnmental bonds, as well as promissory notes, including the promissory notes of issuers not traded on the stock exchange. These statutory reports were provided to the tax authorities which for years conducted detailed audits and approved the trading company tax reports without material comments, so despite their refusal to acknowledge disclosures in the consolidated financials of Yukos, the Russian government in the face of the prosecution cannot claim its was unaware ofthe trading companies investing in promissory notes and bonds until 2003 or 2004.

Yukos' Use of trading companies to buy all output from the production subsidiaries, - Yukos Tax Structuring and Yukos R&M

I understand that the prosecution alleges that thcproduction subsidiaries could have traded oil at world market prices and were deprived of such an opportunity by Messrs. Khodorkovsky and Lebedev, presumably resulting in a lower realized net price to the production subsidiaries. This is absolutely incorrect. Even ifthe production subsidiaries had sold oil directly to world markcts on their own, they would have needed to pay transportation costs to get the oil to the border and export duties on the export sales. Many studies have shown that the difference between the domestic price for oil in Russia and the world market price is almost exactly the cost of transportation to the border and

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export duties. Therefore, whether the production subsidiaries sold the oil themselves or through an agent which paid the transportation and export duty costs (which is exactly what happened at Yukos), the net price actually realized by the production subsidiary would have becn virtually the same. The commercial logic for the consolidation of oil trading activities in a central location was that it provided significant economies of scale and was accomplished far more efficiently with far fewer personnel and costs than ifeach ofthe production subsidiaries had marketed their own oil.

As the CFO, one of my direct responsibilities was to coordinate the finance functions of Yukos-EP and Yukos-RM and to ensure that opportunities presented to the Company were utilized. To implement the then legally existing opportunities to receive a benefit oftrading oil through regional companies in order to minimize the Company's tax payments through the widely accepted use of trading companies established in Russian tax havens was prudent and, in the best interests of all shareholders. Not to take advantage of such tax opportwlities available legally and being used by many other Russian companies would have been a significant competitive detriment to Yukos, and put Yukos at a competitive disadvantage versus all the other oil companies which were virtually all utilizing such tax havens.

In Russia, where tax rates and policies at times would result in tax burdens exceeding total profits, it would have been imprudent for management not to utilize a regulatory framework such as that provided by the domestic tax havens. This objective was shared by both Yukos management and the Board of Directors. Yukos-EP Finance and Yukos-RM Finance were directly responsible for developing and implementing an efficient framework for the trade of oil produced by production subsidiaries and the oil products manufactured at refineries.

All Yukos subsidiary, affiliated and associated companies and their activities and assets were managed and reported within the Yukos corporate group, specifically for purposes ofUS GAAP consolidated financial reporting. In this regard, unlike in Western countries, Russian law did not, and still does not, require creation of eonsolidated group financial statements. Consolidated financial statements equivalent to those recoguized under US GAAP are not provided for Wlder Russian Accounting Standards (RAS). Instead, for each separate Russian legal entity within the Yukos group, Russian law required, and Yukos prepared, an individual accoWlting statement and tax filing. Thus, associated company operating structures, such as the trading companies Fargoil, Ratibor, Yu-Mordovia, Energotrade and Evoil, prepared their own accounting statements and tax filings, which were reported to Russian authorities separately, but were consolidated into Yukos' US GAAP consolidated financial statements. See infra pages 24-28, discussion about the principles of Yukos consolidated financial reporting.

In 2003, Fargoil became wholly owned by Yukos and then Yukos' StatutOlY accounting statements under RAS captured Fargoil, which was already being reported in the US GAAP consolidated financial statements openly published by the company. During the entire period that the operating companies were employed as tax-minimization vehicles by Yukos, internal contTols, including internal audit department and its internal

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investigative unit (KRU), as well as restrictions on approvals ofexpenditures, were in place that would have identified any material accounting irregularities or funds divelted from such companies out ofthe group structure. In addition, PWC's auditors were in position to identify any such irregularities. No such material irregularities were ever identified. To the best of my knowledge and belief, no material accounting irregularities existed and no funds were diverted from the group structure even though Yukos did not report the results of all of its companies directly to the Russian authorities as Yukos results. At the same time, all Yukos-related companies were controlled by Yukos and made all required statutory filings separately, while Yukos captured those companies reporting on its US GAAP consolidated statements.

Prior to Yu-Mordovia, Fargoil, and some other operating entities becoming included in the accounting statements of Yukos under RAS, i.e. becoming wholly-owned by Yukos, they regularly filed their own tax returns and were not, accordingly, included in Yukos' tax retUl11s. Similarly, during the same period oftime, other Russian vertically integrated companies in various industries also employed entities registered in ZATOs, and they presumably filed their own tax returns and financial reports, too. PWC audited the operational entities' tax returns as part ofPWC's regular auditing process ofYukos-related companies. Additionally, corporate tax returns were audited annually by the corresponding Inspectorate of the Federal Tax Service of Russian Ministry of Finance. This is different from, for example, the U.S., where tax audits are conducted randomly. In the tax years 2001 through 2003, the auditors from the tax authorities had complete access to all operating companies books and records for all companies which were included within the Yukos US GAAP consolidated financial statements and which were Russian taxpaying companies. However, though they completed their tax audits, they never indicated to Yukos or any ofits entities that there was any issue, much less a problem, with their tax returns.

Furthermore, in November 2003, after the atTest ofMr. Khodorkovsky, Yukos wrote to the tax authorities asking whether the authorities had any knowledge of any outstanding tax liabilities from previously-filed tax returns of any Yukos-group entity. With minor exceptions that did not include Fargoil, which certainly was a major vehicle of tax minimization for Yukos, the tax authorities identified no irregularities. See exhibit 12, copy of Ministry of Taxes and Charges of Russia Certificate of Absence of Tax Arrears or Other Mandatory Payments and of Compliance with Tax Legislation, dated September 19,2003, October 23,2003, and November 17, 2003.

I am certainly aware that subsequent to Yukos' November 2003 conespondence with the Russian Ministry of Tax, the Russian authorities did bring tax and other charges against the company and various individuals related to purported tax violations and alleged embezzlement from Yukos' production subsidiaries. As stated above, I am generally familiar with the substance ofthose charges.

Concerning the tax charges related to both Yukos Oil Company and its operating companies, it is my opinion that they constituted a blatant retroactive reinterpretation of provisions in the Russian tax code prosecuted selectively against Yukos and related persons ·and entities for the sole purpose of expropriation of the company. Based upon

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reliable information provided to me by expelts in Russian tax law, the charges were inconsistent with Russian tax law, as written and as applied within Russia, during the relevant time periods. This is now a matter which is being adjudicated in the European Court of Human Rights (ECHR), and at the end of January, 2009, the ECHR admitted Yukos Oil Company's case against the Russian Federation for these very reasons. Oil Pricing Policies and Compliance with Arm's Length Principles.

I understand that the prosecution charges that Messrs. Khodorkovsky and Lebedev forced the production subsidiaries to sell oil to Yukos without adequate (or due) compensation and thus disadvantaged them. There is no rational basis for this contention and it disregards two fundamentals for oil sales: a) the economics of the Russian domestic market and b) the economies ofoil prices as oil moves from production downstream to the export market. Regarding the first point, Yukos did not expOlt all of its oil, but rather sold approximately half ofits production on the domestic market, either as oil (minor amounts) or primarily as refined products. In addition to being the largest crude oil production entity in Russia, the company was also the largest refiner/oil products marketing company in Russia. The Russian government is well aware ofthis allocation, because it was the result, in significant part, of limitations on pipeline capacity and export quotas, both factors controlled by the government. Prior to 2002, Yukos exported only approximately one third ofits output; Yukos exports sales increased to approximately 51 % after 2002. Throughout the period of 1998 to 2003, domestic oil and refined products prices in Russia were far below the prices of export markets and no Russian oil producer could secure export prices for domestic sales. No Russian refiner could have paid world market prices for its crude oil supply and then sold the refined products at the prices which then prevailed in Russia. If the expOlt price is the benchmark, then such faulty logic would have to conclude that all Russian vcrtically integrated oil companies and independent oil and refined products traders were embezzling oil and refined products from the producers.

Regarding the second point, export prices such as the Urals price is a delivered price, which includes the cost of delivery to the seaport, freight, export taxes and duties, cost of financing, insurance, banking and legal services and other expenses. These costs were always absorbed by Yukos, e.g. either directly by Yukos or by its operational (trading) companies. Therefore, Urals oil at Rotterdam, for example, can be sold at a higher price than the same oil at the well-head or points in between. Thus, no Russian oil producer ever could secure an expOlt market price for crude sold at the well-head. In arriving at the offering prices paid to the production subsidiaries for their oil, Yukos naturally did not include in the price paid to the production subsidiaries all these costs to be incurred before the oil was sold to the end-purchaser. All other veltieally integrated Russian oil companies functioned the same way and inter-corporately priced the sale of oil accordingly without their management being charged with embezzlement. This is also standard procedure and the basis for pricing economics around the world for oil purchased at the wellhead.

Since the pricing structure was also a factor in Yukos' tax minimization plans, Yukos utilized outside consultants and oW' internal tax and auditing personnel to insW'e that we fully complied with Russian law. The prices at local markets in the respective regions where the production subsidiaries were located, served as benchmarks for setting the prices.

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There was no conunon price for local markets because of the large number of regions in Russia and the number ofproducers which varied tremendously from region to region. Thc prices would differ greatly from region to region based on, among other things, the costs involved in lifting and bringing the oil up to the necessary quality grade, as well as local socio-economic factors and transportation costs for delivery to a particular buyer. Russian domestic prices were also significantly affected by logistical costs to get oil to domestic refineries and the quantity of oil production which could be refined by Russian domestic refiners in a particular region.

As CFO, I regularly consulted with the Tax Department, the Controllers Division and the Internal Audit Department of Yukos to make sure that agreements for the sale of oil between the production subsidiaries and the Yukos trading companies satisfied the compliance guidelines we had established with the advice and assistance of our tax consultant, PWC, amongst others. For example, all agreements were supposed to contain required pricing information and be available for review by the external auditors and tax authorities.

During my time in Yukos, we mandated that the Tax and Internal Audit Depmtments, as well as the employees of Yukos-EP and Yukos-RM, monitor the local prices on a regular basis and adjust the prices for the production subsidiaries' sales agreements, if required to reflect actual market conditions, accordingly. We worked diligently to insure that the prices for the sale ofoil never deviated more than the +/- 20% from the prices in effect on local markets in Tomsk, Samara, and Khanty-Mansiysk regions, as mandated by tax provisions related to transfer pricing. The tax authorities also monitored this pricing to make sure that Yukos was in compliance.

PWC was well aware ofthe prices at which Yukos trading companies purchased oil from the production subsidiaries and PWC's domestic tax consultants were aware that prices could not deviate more than the permissible +/- 20% from the prices on local domestic markets. By 2002 - 2003, this system was well in place and PWC audited our systems of internal control to ensure they were functioning properly and we were always in compliance with Russian law.

Yukos management relied on the professional advice of its internal and external audit and tax specialists, both at PWC and from others and had no reason to second-guess them. It is my understanding that, prior to my arrival at Yukos, PWC and others advised Yukos management on price procedures and established the system of holding auctions on a monthly basis to sell its production subsidiaries' oil, which permitted Yukos to closely monitor that the transactions always remain arm's length, i.e. based on the market prices, accepted in the analogous vertically integrated oil companies (VIOK). Alexey Smimov, Yukos Domestic Tax Manager, worked closely with the PWC domestic tax consultants on setting up the initial process. Moreover, at the request of the regional government authorities, auctions were hcld, which did not impact the pricing, since other real contenders would not show up and would not take part in them.

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The Russian government was well aware of the prices at which Yukos trading companies were buying oil from the production subsidiaries. Pursuant to Russian law, we documented and filed regular documentation with the tax authorities. The tax authorities conducted their review and audit and issued an opinion on April 28, 2003 stating that Yukos had only a small additional tax liability based on 2000 and 2001 tax audit. The tax authorities never notified Yukos that there was ever a material question concerning the pricing of the oil or the quality of the documentation. Yukos also won transfer pricing eases in November 2002 in the Russian Supreme Court, which reviewed Yukos' transfer pricing strategies, and in September 2003 in the Federal Arbitration Court in the Western Siberian District.

The allegations of embezzlement and money laundering advanced by the prosecution run completely counter to the facts because Yukos had numerous safeguards in place that would prevent this kind ofcriminal activity: Internal Audit and other internal control systems, see pages 22-24; Audit Commission; External audit by one of most reputable audit companies; policies of transparency which included reporting the financials under US GAAP, regular submission of the consolidated financial statements to the SEC and the statutory reports to the FCSM of the Rl'; Independent Board of Directors and its Committees, including the Audit Committee, and outside legal counsel.

Internal Audit of books and operations; other Internal control systems

The primary purpose of the Internal Audit department was to ensure that the Company complied with Russian law, corporate policies and procedures, and guidelines of government regulatory authorities. One of the basic functions of the Internal Audit department was to perform regular and comprehensive appraisals of the adequacy and efficiency of our internal controls, as well as report to the Company's management independent and objective information about the Company's operations. An express provision in the Company's Internal Audit Guidelines states that the Audit Opinion may not contain any conclusions or assumptions that are not supported by hard evidence or audit results. See Exhibit 13, copy of2002 Internal Audit Guidelines.

One issue we regularly faced was that field-level managers attempted to manipulate the budgeting process and management at the corporate level and increase expenditures despite the amounts provided for in pre-set budgets. If we cut their capital budget, they could increase their operating budget. Frank Rieger, the Financial Controller, and I worked hard to eliminate such conduct by the field managers. As he explained to me, this issue was worse when Michel Soublin became CFO and it was patt ofthe impetus for the efforts to centralize and control the accounting systems.

The Internal Audit department of Yukos was essential to these efforts. Its personnel conducted regular audits of the books and operations and repOlt weaknesses or abuses. Yukos internal audit at first consisted of 110 employees, headed by Ms. Antonova and by her deputy, Ms. Britkova. In September 2003, it was restructured and we created an internal investigative unit, KRU, which was tasked with closely monitoring the operations and the books at the locations ofthe production and refining subsidiaries.

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They were provided with broad access to the information and docwnents needed to perform their function. I was never made aware of an instance where they were denied access to something they believed material to an audit, nor were any allegations ever brought to me regarding any material diversions offunds from the Yukos group.

In addition to the internal audit department and the work ofthe Audit Committee of the Board of Directors; the Company had an Auditing Commission with oversight authority for the financial and business activities of the company. Ms. Britkova was elected chairwoman by the shareholders several times during my time with Yukos. Specifically, the Audit Commission, annually, at its discretion, or by resolution of a General Meeting of Shareholders or at the request of the Board of Directors, President, Financial Director or shareholders holding an aggregate of at least 10% of the voting shares in the Company, audited the financial and business activities of the Company. Upon completion of such a review, it was required to report its findings to the Board of Directors or other party authorized to request the internal review. The results also were disclosed at the General Meeting of Yukos Shareholders. Similar to the intemal audit department, the Auditing Commission had complete access to any information required to complete its audits.

The work ofthe Audit Committee ofthe Board ofDirectors, (see the description of all committees below, infra pages 42-43, also was aimed at strengthening the internal controls at Yukos.

The involvement of our extemal auditor and consultant, PWC, cannot be underestimated in terms of helping the Audit Committee and Yukos management in improving its internal control mechanisms. I worked closely with PWC's partners, specifically George Gramatke, Don Kingley and Doug Miller, and the Audit Committee Chair, Jacques Kosciusko-Morizet to build a comprehensive audit and control function for the Board Audit Committee; what its objectives were, and how they envisioned that Yukos management would implement PWC's and the Committee's recommendations.

In addition, PWC partners held regular private sessions without management in attendance with the Audit Committee before each regular meeting of the Board of Directors. Such meetings were standard best international corporate governance practice. As a direct result of Mr. Khodorkovsky's insistence on corporate governance, we told PWC we wanted to have a world class system for intemal audit and contl'ol in place and sought constructive criticism. PWC was responsive. For example, in October 200 I, during a Audit Committee meeting, George Grarnatke from PWC informed the Committee members that "although it was necessary to reengineer the accounting reporting systems, thc progress made by Yukos so far is encouraging". See exhibit 14, copy of 10.18.01 Audit Committee Meeting Minutes and copy of email dated 10.17.01 from George Gramatke to Bruce Misarnore and Doug Miller regarding Audit Committee comments.

Furthermore, PWC regularly sent me recommendations for improvement in our management systems and internal control, resulting from its audit of the financial

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statements. Although I did not need further authorization to implement a PWC recommendation, I often discussed them with Mr. Khodorkovsky and his response was always the same; move forward on the recommendations.

Consolidated Financial Reporting under US GAAP, Transparency and Disclosure, and external audit conclusions

It appears that the prosecution also alleges that Messrs. Khodorkovsky and Lebedev exploited PWC to cover up their illegal activity with the use of consolidated financial statements audited by PWC. As I understand the charges, the prosecution contends Messrs. Khodorkovsky and Lebedev, as well as Yukos management illegally obtained PWC audit opinions by knowingly presenting false or incomplete infonnation to PWC about the consolidated, or omitted, Yukos associated entities, the substance of transactions between Yukos associated companies and Yukos treasury group companies: After obtaining unqualified audit conclusions from PWC, Mr. Khodorkovsky and the "organized group" allegedly laundered the proceeds from the sale of embezzled oil by transferring them to the offshore accounts. These allegations are baseless, lack any rational basis and run counter to the facts and logic.

Key evidence contradicting the prosecution's allegations at both a macro and micro level is the Yukos financial reporting system and its issuance of consolidated US GAAP compliant financial statements. As part of Yukos' campaign to elevate its corporate governance to Western, and not just Russian standards, and also at my direction, Yukos' accountants also prepared annual consolidated financial statements in compliance with US GAAP, or generally accepted accounting principles. The transition to reporting under US GAAP began prior to my arrival at Yukos. I understand from Yukos and PWC personnel that PWC played such an integral role in developing Yukos' reporting system that, rather than saying PWC advised Yukos on its system, it is most accurately described as a "PWC system." In essence, PWC audited its own system when it audited the Yukos reporting system. PWC's role in developing systems diminished after the initial setup of the systems, and after Yukos hired its own experts, but PWC always had an intimate knowledge of all of the systems and controls. Yukos became the first Russian oil company to issue quarterly US GAAP statements and we were the first to publish an annual consolidated US GAAP statements and disclose the related auditors notes and supporting documentation.

After PWC consultants and the Yukos financial consolidation department prepared the financial statements, the PWC auditors then audited the financial statements. Ultimately, the consolidated financial statements along with the audit conclusions were posted on the Yukos website and made available to the Yukos shareholders. Yukos' consolidated US GAAP financial statements always captured all of the assets, liabilities, income, expenditures and other financial information of all of the Yukos' subsidiary, affiliated and associated operating companies. I made statements to the financial community that Yukos prided itself on using the "anti-Enron approach" to its financial reporting. Whereas Enron tried to manipulate its financial statements to not disclose many of its operations, Yukos' policy under me was to always include everything

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associated with the company's operations in its comprehensive financial disclosures under US GAAP. I felt this was a principal corporate governance responsibility of the CFO, and I took it very seriously. Yukos' approach to financial disclosure was very definitely consistent with the "best practices" in the world.

The principles ofconsolidation were never a secret and were always one ofthe first key items disclosed to the public in our financial reports. There should be no question that the Russian authorities were aware of them and their content. I am told they are part of the case materials in this matter. Thus, for example, they know the 2002 US GAAP Consolidated Financial Statements as of December 31, 2002, Note 3, page 3, provides "The consolidated financial statements include the operations of all entities in which the Company directly or indirectly controls more than 50 percent of the voting stock....Significant joint ventures and investments in which the Company has voting ownership interests between 20 and 50 percent or otherwise exercises significant influence are accounted for using the equity method and adjusted for estimated impairment. Long-term investments in other unquoted companies are accounted for at cost and adjusted for estimated impairment." In conference calls I held regularly after each quarterly US GAAP earnings release, I emphasized to the financial professionals on the calls that they should not rely on the Russian accounting standards statements, not because they were not cOlTect, but because they did not and could not, because of the deficiencies of Russian accounting standards, properly reflect the comprehensive results of the company. All of Yukos' US GAAP financial statements were widely available in hard copy or on the Yukos websites, and reflected significant differences from the Russian accounting standards statements. The RF financial and tax authorities, as well as every Yukos shareholder, were certainly easily able to readily access all of these statements whenever they so desired.

A consolidated financial statement combines the activities of a business and its subsidiaries. So for Yukos, the consolidated financial statements represent a compilation or synthesis of financial results of each separate subsidiary which comprised the Yukos family of companies. While each entity prepared statements pursuant to Russian law and RAS accounting standards or the applicable laws and accounting principles applicable to the off-shore jurisdictions, each entity's financials also would become Palt of the consolidated US GAAP financial reporting for Yukos. In essence, it represented management's desire to provide a complete and accurate picture of the entire company's financial performance in one document. In doing so, it was easier to identify and stop ally improper use or diversion of funds and represented an example of a change implemented to put Yukos corporate governatlce on the same page with the other major vertically integrated oil companies in the world. I also continued the practice initiated by Michel Soublin and insisted, although there was absolutely no legal requirement, that all financial statements of every entity consolidated in Yukos' financial statements had its financials audited by an independent extemal auditor, whenever possible. This provided a high level of comfOlt that multiple independent extemal authorities were reviewing everything which went into the consolidated US GAAP audited financial statements. It was our practice also that the extemal audits of all sizeable subsidiaries, affiliates and

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associated companies were performed by the principal external auditor, in Yukos' case, PWC.

The same principles of consolidation were and are utilized by other Russian oil and gas companies. See exhibit 15, copies ofexcerpts from annual reports ofTNK-BP (2004), audited by PWC; Lukoil (2006), audited by KPMG, Rosneft (2007), audited by Ernst&Young.

It is a basic principle of financial reporting that the profits accumulated on the accounts of subsidiaries and dependent or affiliated entities, such as trading companies, arc reflected in the company's consolidated financial statements and cannot be "removed" as the prosecution alleges, or not reflected in the statements. Intercompany transactions between entities in the consolidated group are removed as a part of the accounting consolidation process so that double counting of results does not occur. This process does not occur in Russian accounting statements because of the lack of a consolidation accounting process. Once a company's earnings are reported as part of Yukos consolidated reports, however, it is not possible "to remove" these earnings or the associated cash or assets without corresponding entries in the financial statements. The simple fact is that these reversals never occurred. The prosecution's allegations reflect a complete vacuum of knowledge about international financial reporting principles and practices and, in particular, a complete lack of understanding of the principles of consolidation accounting.

Yukos-Moscow had a Planning and Consolidation Departmcnt, headed by Senior Manager Peter Zolotarev, which insured that Yukos complied with all of the financial reporting requirements under US GAAP and that all of PWC's recommendations were taken into account when financial statements were being prepared. As prove of PwC's involvement in preparing financial statements, see exhibit 16, copy of email dated 3.28.01 from Tony Groag to Bruce Misamore forwarding Doug Miller memorandum regarding the audit of Yukos US GAAP financial statements; Exhibit 17, copies ofPWC memorandums to Yukos management regarding preparation and audit ofthe consolidated statements with attachments.

Both Frank Rieger, the Financial Controller, and I were directly involved in monitoring the preparation ofYukos' US GAAP consolidated financial statements, which prior to being audited was the task ofthe Yukos Consolidation Department. This process included line-by-line analysis of every expenditure by, and every payment to, every group company included in the consolidation umbrella, including all production and refining subsidiaries, all domestic and foreign trading subsidiaries, all entities part of the Yukos treasury group, and transactions with other related entities.

The team responsible for preparing the consolidated statements, which included PWC consultants, would have, for example, accounted for every sale between a production facility, like Yuganskneftegaz, and the trading/operating companies such as Yu-Mordovia or Fargoi\. Concurrently, it would have accounted for any dividend paid by Fargoil to another group company, like Nassaubridge Management Limited and any

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intra-Company loans. Once the Yukos Consolidation Department, which had as many as two dozen employees, completed its "first-level" review of all transactions involving Yukos group companies, as just described, additional adjustments would be made to the financial statements to account for potential legal, environmental or tax liabilities. Then, after those two levels of review by internal auditors, the entire consolidated financial statement was audited again by PWC.

In addition, PWC drafted the Yukos management representation letters, as well as the Management Discussions and Analysis ("MD&A") that would become part of the Annual Report, and which was also available to the shareholders of the Company. See exhibit I8, copies of emails from PWC regarding edited draft Yukos management representation letters and MD&As.

I recall the issues that arose in early 200 I in connection with the work on consolidated financial statements for the year 2000, when Yukos was still transitioning away from nominee owned companies and establishing control over its domestic and foreign operating companies and treasury group companies using the mechanisms established in conjunction with PWC such as a "golden share" or a call option. Specifically, PWC had difficulty consolidating all of the entities that Yukos wanted to consolidate without Yukos establishing direct control over these entities, while Yukos management and legal counsel were concerned with asset protection. See infra pages 29­ 33, discussing the rationale behind the offshore structure. Hence, contrary to the prosecution's contention, and subsequently, the contentions of some employees of PWC, that Yukos management withheld information necessary for the complete reflection of the consolidation perimeter, Yukos presented PWC with information on all Yukos entities that had to be and that we wanted to be consolidated. Rather, it was PWC consultants that had difficulty balancing the inclusion with the requirements under US GAAP. These issues were always ultimately resolved as we followed PWC's advice.

As a Russian company, we paid close attention to the reporting requirements under RAS and submissions to FCSM as required by Russian law. We went beyond Russian law requirements and took the added step of having all Yukos associated company financials independently audited, whenever possible. Furthermore, when Russian law changed in 2002 to require tax accounting, as opposed to the financial accounting, for businesses, Yukos quickly responded and created a special task force to trarlsition the company to tax accounting in the most effective and efficient manner possible. See as Exhibit 19, copy ofa Draft Internal Decree about setting up a task force.

As stated, PWC was involved at all stages of preparation of the consolidated statements md their audit. Any information that PWC ever requested, be it in a capacity ofa consultant or an auditor, to my knowledge, was provided to them. During preparation of the Form F-I for submission to SEC in connection with Yukos being listed on the NYSE, PWC and Akin Gump jointly and separately raised many issues with Group Menatep Limited ("Group Menatep"), which was ultimately the majority shareholder of Yukos. PWC representatives requested all the information it in its sole discretion determined it needed from Group Menatep at numerous meetings it held with Group

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Menatep and its representatives. In all of those instances, PWC representatives told me either they had sufficient information to proceed to make its assessment of an issue or they had determined an issue was immaterial. See infra pages 47 - 49.

PWC also provided auditing services related to the production subsidiaries. For example, PWC worked closely with the internal audit department (KRU) to assist it in conducting its review of the performance of the production subsidiaries. PWC also helped internal audit prepare executive summaries for submission to Yukos management. See exhibit 20, copy ofan emails dated April 6, 2001 and May II, 2001 from Kristin Lie of PWC to LA. Moskalets regarding 2001 internal audit of Yuganskneftegaz and Tomskneft, with attachment. PWC's offices outside Russia regularly audited the financial statements of virtually all of the offshore companies, such as Routhenhold Trading Limited and Pronet Limited, and the entities of Yukos treasury group, while PWC Moscow assisted Yukos as a consultant on how to set up the offshore structure so that the entities could be consolidated on Yukos financial statements. IfPWC was not the auditor for an offshore company, which was a very limited number of situations, then PWC was provided with and reviewed the audit results Yukos received from the different auditor.

The Yukos US GAAP consolidated financial statements clearly demonstrate Mr. Khodorkovsky and Yukos management's commitment to corporate governance and financial transparency and provided management and the shareholders protection against the type of conduct alleged by the prosecution. By issuing US GAAP consolidated statements, Yukos madc it easier to effectively control and repOlt the movement of funds throughout the company; they were designed to show money and financial data on the company books comprehensively. The US GAAP consolidated statements also should defuse concerns about some ofthe Yukos off-shore structures which are described below. Regardless of how numerous the company's subsidiaries, affiliates and associated companies, the US GAAP consolidated financials permitted oversight ofthe results of all of the companies in one document. In this regard Yukos and its management acted in a manner completely different from Enron. In the Enron case, Enron management used separate entities to move affiliated and associated company debts and expected losses off the consolidated financial statements so that shareholders did not get an accurate picture ofthe company's performance. Yukos made sure that all ofits subsidiaries, affiliates and associated companies were included in the financial reporting and results. The reliance on Russian accounting requirements only, without separate financial repOlting compliant with US GAAP, could have helped hide the type of conduct that the prosecution now levies against Messrs. Khodorkovsky and Lebedev, but this did not occur at Yukos. The issuance of Yukos US GAAP consolidated financial statements enhanced the auditors', the shareholders' and the government's ability to prevent and identify any such conduct. The prosecution's understanding of the importanee of these statements as the doeumentation that excludes any basis for the proseeution's charges probably explains the attacks on PWC in 2007 and the prosecution's efforts to diseredit by such means the US GAAP consolidated statements of Yukos because the US GAAP consolidated financial statements totally discredit the prosecution's case.

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The rationale for the use ofthe offshore structures; Consolidation ofYukos treasury group entities and the external audit ofall offshore structures

The prosecution contends that Yukos' use of complex offshore structures was a means to conceal money laundering. There is no merit whatsoever to this contention. The origin of the structure was in part a reflection of some of the uncertainties facing Yukos during the 1990s, and the need to engagc in protection of its assets. Yukos was forced to move SOme of its assets offshore in order to reduce the risks associated with internal corporate corruption during the initial stages after the company's privatization, government instability, attempts at greenmail and unscrupulous creditors, such as East Petroleum and Birkenholz. Eventually, management's concerns about these issues lessened and the use of off-shore entities foeused on the need to have entities in speeifie locations to best perform in the market, e.g., Petroval located in Geneva as an international oil trading center, to perform foreign investments, or to avail ourselves to preferred tax treatment or investment protections, e.g., Yukos Finance, B.V. in the Netherlands. To the best of my knowledge and belief, Yukos management never established or used any of the companies included within the Yukos US GAAP consolidated US GAAP financial statements to illegally evade taxes or to launder money.

Even by 2001, many Russian business people did not understand the fundamental concepts justifying the advantages of a holding or a vertically integrated company. Clearly in 2009, the prosecution willfully ignores and, in particular, fails to grasp the benefits of building a vertically integrated company and characterizes vertical integrated companies as means of committing crimes. A company such as Yukos becomes a more attractive investment if the risk associated with its business is not concentrated in one entity or one aspect of a particular industry. For example, the acquisitions of the Mazeikiu Nafta refinery and the Transpetrol pipeline provided Yukos with revenues not exclusively dependent on the price ofoil, but strategically important for the disposition of oil. Furthermore, it was a sound business practice to acquire foreign investments through the use ofoffshore companies.

Yukos management in the mid to late 1990s had to develop ways to protect the Company assets. There were lawsuits filed against Yukos and its associated companies at that time, and despite the claims being baseless, they posed a threat to the company's stability. In response, the company sought the advice of outside counsel and consultants and identified the means to place assets in offshore companies so that creditors could not use baseless judgmcnts as a means to attach company assets. An example of these types ofissues were the claims brought by Eastern Petrolewn and Bierkenholtz in the aftermath of Yukos' acquisition of a majority interest in VNK. Each attempted to seize Yukos assets in the late 1990s, but it was not until 2002 or 2003 that Yukos finally established in international arbitrations that their claims were based on corrupt deals and baseless. Other examples of the threat of attachment ofthe assets due to a judicial action were the Dardana Limited and Dart Management Group litigations.

Therefore, the legal department of Yukos, based upon the advice of legal counsel and consultants such as PWC established various off-shore companies in order to allocate

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its resources, mostly export sales revenues, amongst them as a means of asset protection and risk avoidance. In certain instances, Yukos established Trusts which held the shares in some of the Yukos associated companies. Management always understood that the trusts were structured in such a way as to enable Yukos to insulate assets for purposes of judicial attaclunent, but allow Yukos to include the assets on a US GAAP compliant consolidated financial statement. Yukos always made all relevant and necessary disclosures about the structures and the earnings of foreign entities. Thus, while the use ofthe offshore structures might at first appear opaque, Yukos remained transparent about its financial transactions and assets at all times.

The reason for having so many offshore companies as a part of the Yukos treasury group was primarily financial and tax risk management. Instcad of concentrating the assets, such as the funds accumulating from export trade of oil and/or dividends, in one entity and running a risk of a legal action or some unforeseen financial event, it was and is a prudent risk minimization technique to spread the assets out among various legal entities. Certain offshore entities were created for a specific purpose of, for example, serving as a depository ofthe funds to be used for an acquisition ofa foreign company, or to invest into securities traded on international stock markets, or to invest in securities and debentures on the Russian or international financial markets. For example, one of the British Virgin Islands entities was established in November 2001 to assist Yukos with acquisition of the Fedorovskoye Exploration Block in Kazakhstan from First International Oil Company, a Houston, TX company. All of the international treasury management companies were also structured to minimize the tax burden associated with maintaining the funds offshore and for the tax effects of their eventual repatriation to Russia or longer-term investment outside Russia.

Furthermore, Yukos established international trading companies such as Routhenhold Holdings Limited and Pronet Holdings Limited to purchase oil and oil products from Yukos trading companies in Russia, such as Fargoil and Ratibor, and then Yukos-associated company Petroval served as the commissionaire for sales to final consumers. The presence and extensive use of international trading companies was standard practice for every Russian oil exporter of which I have knowledge while I was affiliated with Yukos, and is also standard practice for all major international oil companies of which I have knowledge. Along with the other business reasons described in the preceding paragraph, the international trading companies were also a response to Russian regulations concerning the requirement that export revenues received in foreign cUlTencies be converted into Rubles within 90 days of receipt. These requirements imposed a burden on major exporters, including Yukos, considering the instability of local cUlTency. Furthermore, until the change in these regulations in 2002, Russian exporters could sell the foreign CUlTency only through the Moscow Interbank Cunency Exchange, which charged high fees and offered low exchange rates. By selling crude and oil products to Yukos trading companies in Cyprus, Yukos could thus fully legally maintain this portion of the export revenues in U.S. dollars in foreign bank accounts and have ready access to them for international transactions, while the funds remained continuously under the complete control of the Yukos consolidated group of companies and were accounted for in Yukos' consolidated US GAAP financial statements.

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As described above, when I alTived at Yukos, PWC was already working closely with Yukos management and Michel Soublin, in particular, on streamlining the offshore structure. I continued Soublin's policy that the US GAAP consolidated financial statements also should capture each company in which Yukos had less than 50% of the shares but which Yukos controlled by some other means, e.g., through management agreements or joint venture agreements, "golden shares" or call options. This position was part of the commitment to financial transparency and disclosure of the consolidated earnings of the entire Yukos structure. See supra pages 24-28 (on principles of consolidation).

Yukos' lawyers and external legal advisors had a preference for holding zero percent ownership in some companies, mostly in the offshore companies, because they wanted to protect the Company's assets from outside legal risks. However, Mr. Soublin and I insisted on financially consolidating and fully disclosing the entities. It was PWC's advice to utilize "golden shares" or call options to permit us to satisfy both goals.

Yukos made the requisite disclosures in its consolidated financial statements. We 'also explained how these entities were consolidated in Form F-I:

"We hold our principal finance and oil trading companies through a holding company which has share capital that is divided between 10% common stock and 90% prefelTed stock. We are the holder of the 10% common stock interest. The holder of the 90% preferred stock interest is an unrelated party. We have structured our ownership interest in this holding company so that we retain substantially all of the economic benefit of our finance and oil trading companies and consolidate these companies in our U.S. GAAP consolidated financial statements, which are contained elsewhere in this prospectus." See Exhibit 21, copy of excerpt from FOlm F-I, draft dated March IS, 2003.

All ofthe cash accumulated in offshore accounts came from the following sources: I) the export of oil and refined products through the offshore trading companies; 2) income from the operations of the foreign production and refining subsidiaries - in later years when we began investing in acquisitions outside of Russia, and 3) income from investing primarily in short-term, highly liquid securities. Naturally, we would keep income from domestic operations and investments in domestic accounts, and from foreign operations and investments - in foreign accounts.

PWC and the Yukos controller continually monitored all creations and dissolutions of offshore entities; as a result, PWC would prepare reports on the transactions and accounting balances of all companies within the Yukos treasury group, such as, for

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example, project "Victor", as I understand, is now part of the Investigative Committee's case. This audit report represents the depth of the review by PWC, as well as demonstrates the perimeter of consolidation and the purposes which each of the offshore companies served.

In addition, PWC actively advised Yukos management regarding the establishment ofoffshore companies to accommodate tax minimization as well as asset protection. For example, Doug Miller and Steven Wilson of PWC assisted in developing a stock option plan for Yukos. They advised the treasury, tax, legal and the Yukos personnel department on establishing a Cypriot subsidiary as part of the Yukos group, and advised the consolidation department on US GAAP reporting and disclosures necessary in relation to the stock option plan. See exhibit 22, copy of an email dated 2.27.2001 from Michel Soublin to BlUce Misamore regarding Yukos stock option plan with attachment; exhibit 23, copy of email dated 3.20.2001 from Doug Miller to Bruce Misamore and Vasiliy Aleksanyan regarding Yukos stock option plan with attachments.

Beginning in 2003, I became more aggressive on minimizing the number of offshore entities to the extent it was possible and prudent to do so, while maintaining the same level of risk minimization, tax minimization and profitability. I did so for a very practical reason - it is costly to maintain companies. Every company had its own set of financial records requiring accounting expenses for bookkeeping, and every company had an external auditor, tax consultants, tax filings, and associated legal fees in addition to any operating costs.

In keeping with the policy initiated by Michel Soublin, I required, in coordination with the Board's Audit Committee, that all of the offshore companies be audited by an external auditor, whenever possible. If Yukos had a minority position, then it would exercise its votes to demand an audit, although it could not prevail in every circumstance. The audits were costly, but since we did not want to cut back on our reporting controls, I took action to reduce the number of the offshore entities by eliminating entities where possible. By this time, obviously incorrectly, we believed certain risks were behind us, including the rampant internal corlUption, the baseless litigation and the potential for instability in government regulation. We could focus our use of offshore entities on more conventional concerns such as investment protection, tax minimization or deferral, cUITency fluctuation and inflation.

In addition to full compliance with US GAAP requirements for consolidation and the Company's policy of the external audit for all of the entities within the perimeter of consolidation, all of the offshore entities were subject to internal audit to insure compliance with local law and disclosure of their operations on the financial and audit reports filed in their respective jurisdictions. This internal audit system was also a significant expense and was another reason to eliminate unnecessary offshore entities.

As an example of how determinations were made with respect to the creation, dissolution or cost-effective use of international companies, Yukos had established Yukos UK Ltd. in the late 1990s with the full knowledge and pelTnission of the Russian Central Bank for the primary purpose ofengaging in oil trading out ofLondon, one ofthe

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centers of international oil trading. However, in 200 I, Yukos UK became unnecessary due to the consolidation ofall international oil and refined products trading activities with Petroval in Geneva and it was no longer cost efficient to maintain its operations. Because the permission of the Russian Central Bank and the Company's atticles allowed it to engage in a fairly broad scope of activities, Steven Wilson, at the time the Yukos International Tax Manager, recommended making it dormant in the UK and re­ domiciling it in Cyprus to eventually act as a holding company for international operating assets. See exhibit 24, copy of an email dated 3.20.2002 from Sergey Ketcha to Bruce Misamore with attached Acknowledgement ofMigration.

Steven Wilson was a PWC international tax consultant and pm of PWC's tax consulting team, working on intemational tax structuring matters for Yukos, amongst other companies when I becatne CFO. In 2002, in order to attract him to work for Yukos, I created an International Tax Manager position in the Finance Department of Yukos­ Moscow, reporting to me, and hired him away from PWC.

The Domestic Tax and International Tax depmtments were responsible for evaluating tax structures on a regular basis since many countries, including Russia, regularly change their tax regimes. In addition, their responsibility was to improve tax efficiency in light of new projects and investments. Stevc Wilson had the authority to engage outside consultants, in addition to PWC, as he did during the restructuring of the "Yukos Finance BV group" of companies in 2002 by engaging consultants from Ernst&Young and seeking advice from ALM Feldmans on the applicable tax rates in the targeted jurisdictions. See exhibit 25, copy of email dated 10.11.2002 from Steven Wilson to Bruce Misamore regarding Yukos Finance BV. Steve Wilson was also responsible for all of the tax filings and tax compliance of all of the international companies.

Thus, the rationale behind establishing the offshore structure was well-based, and such structures, although probably not as sophisticated as that of Yukos, are commonly employed by all Russian oil and gas companies. Such international structures are also commonly employcd by virtually all companies operating in international commerce, and I was quite familiar with such structures from my international financial management positions at both Marathon and Pennzoil. I found the international structures being used by Yukos when I arrived or developed while I was there to be nothing unusual for large international companies, but clearly I strived to make sure that the international structures at Yukos evolved to be the most economically favorable and risk-free possible while it was a part of my responsibilities. By consolidating all of the international operational and treasury group entities we reached the goal of Mr. Kbodorkovsky and Yukos management for complete transparency, while at the Satne time our efforts resulted in an increased asset base and cash flows as reported in the consolidated financial statements under US GAAP, and consequently, in an increased capitalization of Yukos; and thus, in a better performance of the Company's stock price. Nothing was hidden by Mr. Kbodorkovsky or Mr. Lebedev or Yukos management from the public or its shareholders, or the Russian government, or from the PWC teams, or any other external auditors of Yukos. All of the international operations and their results were fully disclosed in the Yukos US GAAP financial statements.

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Repatriation of Funds from the offshore accounts to benefit Yukos and its production subsidiaries.

The prosecution appears to allege that none of the funds accumulated on the offshore accounts were ever repatriated to Yukos in Russia. Such a contention is totally flawed and the prosecution contradicts itself by including allegations of money laundering based on the loans by Yukos Capital S.a.r.l., a Luxemburg subsidiary of Yukos, to Yuganskneftegaz, Samaraneftegaz, and Tomksneft in 2003-2004. These loans were precisely one means ofhow the funds were repatriated to Yukos in Russia from the offshore companies.

The only reason why the funds were repatriated to Yukos in Russia through the use of intra-company loans is simple: tax minimization and cash management flexibility strategy, which was and continues to be today a common practice not only for Russian companies, but by virtually all companies involved in international commerce. Using the mechanism of loans is a tax-efficient vehicle available to multi-national companies for moving money amongst operations, and results in saving money by reduced income tax on profits transferred from offshore subsidiaries, and paying either no withholding tax altogether or the withholding tax is greatly minimized by doing so. Repayments against the loans from Russian subsidiaries could then either be re-loaned back into Russia or invested in international projects or eventually repatriated through dividends if needed pelmanently in Russia.

Specifically, if a foreign subsidiary of a multi-national corporation repatriates its funds in the offshore accounts to a parent in Russia permanently, such as through a dividend payment, the company must pay withholding tax in the jurisdiction where the company is incorporated and/or domiciled. If, on the other hand, the foreign entity loans the funds to either a holding company or its subsidiary in Russia, then the transfer qualifies for either 0% or a minimal, depending on a local tax rcgime, withholding tax. In addition, the parent company in Russia has to pay a profit tax on the dividend received, I.e. on the permanently repatriated funds.

For accounting and reporting purposes, the transaction is treated as ifthe money is destined to come back to Yukos one day, one way or the other, even if numerous loans back and forth take place in the meantime. What this means is that under the US GAAP reporting requirements, specifically SFAS 109, the income from the transfer of funds which are not repatriated permanently but only as a loan, is still recognized on the financial statements and Yukos had to record deferred tax expense and liabilities from unremitted earnings from equity affiliates and foreign subsidiaries. Unless the funds were used for what is commonly referred to a "permanent investment", deferred taxes had to be recognized because eventually, either upon a permanent repatriation orland after the expiration of a deferment period since it was (and always is) expected that the subsidiaries or affiliates under the consolidation umbrella ofa parent company would pay taxes resulting from dividending up their free cash and thus result in the parent company's gain and in the subsidiary company's withholding tax

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Until the funds are permanently repatriated to Yukos, and because they are only loaned for a limited period, the payment oftaxes is deferred, and accordingly, a deferred tax liability and deferred tax expense are recognized on the financial statements. Such deferred liabilities and expenses were always recorded even though pursuant to its tax minimization strategy, Yukos management planned on repatriating the funds only through intra-company loans. The strategies that Yukos employed for repatriating the funds from the offshore accounts were disclosed in the US GAAP financial statement and we never "hid" the amount offunds accumulated on the foreign accounts. See exhibit 26, Note 3 ("Summary of Significant Accounting Policies, Deferred Income Tax") and Note 14 ("Taxes") to the 2002 US GAAP consolidated financial statements, regarding disclosure of strategy with respect to unremitted earnings of subsidiaries and equity affiliates and disclosure ofreduction in deferred tax liabilities due to expected remittance.

Again, this was and is a standard practice for large oil and gas companies in Russia and for all international companies. For example, TNK-BP in its 2006 Annual Report presents a disclosure on pages 53 and 56 (Note 14) on deferred tax liabilities, resulting from unremitted earnings. So does Lukoil in its 2006 Annual Report, Note 13, "Taxes". See exhibit 27, excerpts from 2006 TNK-BP Holding Annual Report and 2006 Lukoil Annual Report. However, what separates Yukos and TNK-BP from Lukoil, in my opinion, is the fact that Lukoil treats all of its unremitted earnings from the foreign subsidiaries as permanent investments: "As of Dec 31, 2006, retained earnings of the foreign subsidiaries included $12,130 million for which deferred taxation has not been provided because remittance of the earnings has been indefinitely postponed through reinvestment and such amounts are considered permanently invested.. ,.amount of deferred taxation is not practicable to calculate,"

In effect, Lukoil is engaging in the practice for which Yukos and Mr. Khodorkovsky are alleged to be criminals. Lukoil is investing money offshore and disavowing any foreseeable intent to repatriate the funds and thereby is legally saving millions ofdollars by not paying withholding taxes offshore and avoiding the profit taxes of the Russian Federation on 12 billion USD. However, at the same time these funds are unavailable for capital improvements of operations in Russia or distribution to its shareholders as dividends.

To the extent Yukos used this practice to minimize its taxes, it did so in strict compliance with Russian law and in conformity with US GAAP and RAS requirements. I realize that in Russia quoting a US judge will receive little deference, but Judge Learned Hand in the US expressed a universal truth many years ago when he said: you are not under obligation to pay maximum taxes. That was Yukos' goal to eliminate the payment ofexcessive taxes based on the axiom -- Tax avoidance is not tax evasion!

Moreover, acting in accordance with tax minimization strategies, Palt of which was formulating tax-efficient dividend repatriation strategies and optimizing Yukos' US GAAP deferred tax position, - all that was a prudent conduct, required of any company management and directors. See exhibit 28, copy of email dated 6.4.2003 from Steven Wilson to Bruce Misamore regarding Yukos international tax optimization.

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International tax strategy was developed by PWC and other reputable international outside consultants together with Yukos management. See exhibit 29, copy ofemail dated 10.16.2002 from Steve Wilson to Bruce Misanlore regarding Armenian Structure with attached memorandum by PWC partners. It was never a secret to any of the Yukos shareholders, and of course, it was never a secret to neither the Russian tax authorities nor the SEC in the United States, since Yukos was required to file certain reports and disclosures with SEC. See exhibit 26. In fact, the Armenian company and structure referenced in the Exhibit 29 is specifically authorized under the rules of the Russian Central Bank.

Contrary to the prosecution's allegations, it was impossible to divert the funds from the offshore accounts except for repatriating them to Yukos, and when we did, it was done openly and was reported on the financial statements. Moreover, Yukos statutory quarterly and annual financial statements under RAS reflected a 36.3 billion Rubles loan from Yukos Capital S.a.r.l. See exhibit 30, excerpt from 2003 Yukos Annual Statutory Accounting Report, Note 3.5 "Long-Term Credits and Loans. It is striking that at the time ofthe submission of these reports, the Russian government did not view these loans as a means of money laundering but are only now advancing their charges against Messrs. Khodorkovsky and Lebedev.

To the extent the prosecution contends that the decision in December of 2003 to repatriate the funds to support the operations of Yuganskneftegaz, Samaraneftegaz, and Tomskneft harmed these production subsidiaries, it is wrong, even if the loans were not interest-free. Rather, the loans were to benefit the three main domestic production subsidiaries through maintaining capital and operating programs, and being able to compensate the work forces. The only reason for funding these production subsidiaries by way of Yukos Capital S.a.r.l. loans was to repatriate the funds to Russia and avoid paying the withholding tax, as well as the profit tax, and because Yukos Capital S.a.r.l. fully intended to be repaid by the production subsidiaries.

Moreover, it was absolutely imperative for Yukos Capital S.a.r.l. to charge the subsidiaries interest because both Russian law and Luxembourg law required that the intra-company loans in such situations be bonafide arm's length transactions; hence, in any event, the related party-creditor must, for example, charge the debtor interest, and we did. If the loans had not borne interest, then taxing authorities in both countries, and perhaps also other countries, would classify the loans as deemed dividends and charge the full amount ofthe taxation that the loans were intended to avoid.

The repatriation of fnnds to Yukos in Russia: The Fargoil dividend and Yukos' acquisition of Sibneft

The prosecution has also mischaracterized a dividend which was paid by Fargoil in 2002 and 2003 as money laundering. There was absolutely nothing about this dividend that could possibly constitute money laundering.

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In early 2003, Fargoil declared and paid a dividend to Nassaubridge Management Limited ("Nassaubridge"), a Cypriot entity which was a part of the Yukos group which owned 100% of Fargoil stock. Pursuant to a Russia-Cyprus double-tax treaty, 5% of the dividend, or 4 billion Rubles, was withheld and paid to the budget ofRussian Federation. I made the decision myself to incur the withholding tax and pay it to the Russian Federation. Nassaubridge then declared and paid a dividend to Moonstone Service Limited, a British Virgin Islands corporation, also a part of the Yukos group of companies, which owned 100% ofNassaubridge.

Moonstone then paid a dividend to Brill Management Limited, another Yukos group corporation registered in BVI, which in turn was 10% owned by Brittany Assets Limited (BVI), ("Brittany Assets"), another Yukos group company, and 90% owned by Steven Trust, formed under the laws of Gibraltar. Even though Steven Tmst had 90% voting control over Brill's shares, the distribution of Brill's dividends was such that its preferred shares, held by Abacus (Nominees) Limited for the benefit of Steven Trust, received only an annual payment ofdividends amounting to five perccnt oftheir nominal value or an aggregate of $2,250.00, and the rest of the funds in Brill, was contractually transferred as a dividend on the common shares to Brittany Assets, therefore staying completely within the Yukos group.

From Brittany Assets, which was 100% owned by Yukos Hydrocarbons Investments (BVI), which was in turn 100% owned by Yukos CIS Invest (Armenia), and which in turn was 100% owned by Yukos Oil Company, the funds could be repatriated to Yukos either through a dividend, but then result in a withholding tax in Armenia and the profit tax in Russia, or could be loaned from Brittany Assets back to Yukos Oil Company. It was decided to minimize taxes by having Brittany loan the funds to Yukos Oil Company through Yukos Capital S.a.r.l., which in turn, loaned the funds to Yukos, just like it did with loaning the funds to Yukos' production subsidiaries in 2003-2004.

In addition, Fargoil paid 32.8 billion mbles as a dividend to Nassaubridge in September 2002. The payment of the taxes on this dividend was reviewed and acknowledged by the Tax Ministry of Russian Federation. See exhibit 31, a copy of a letter from the Tax Ministry to Nassaubridge Management. Similar to the above­ described application of the Fargoil dividends Ratibor paid a dividend of 27 billion rubles in January 2003 to Dunsley Limited, another company in the Yukos group. These dividends reached Brittany Assets as a result ofthese transfers and were intended to fund intemational acquisitions Yukos had under consideration at the time. See supra pages 15­ 16.

The biggest use of funds from offshore, such as the Fargoil and Ratibor dividends described above, was to fund cash needs associated with the Sibneft acquisition. In addition to the $3 billion cash payment to Sibneft shareholders, Yukos also bought back billions of dollars worth of its own stock to meet the share exchangc part of the transaction and also paid a very large dividend in 2003 to its shareholders. See exhibit 32, copies of Notes to Yukos US GAAP financial statements, "Subsequent Events." In addition to borrowing $2.6 billion to fund these transactions, a sizeable amount was loaned to Yukos Oil Company from the cash reserves of the offshore companies. In

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addition, the Fargoil and Ratibor dividend payments, as well as those by Yukos' Cypriot companies also were deposited in Brittany Assets accounts, and eventually were loaned back to Yukos Oil Company or other Yukos group companies in Russia for their cash needs. During 2003 and 2004, billions of dollars were loaned to Yukos operating companies in Russia to keep them operating after the Russian govenunent began taking all the cash from Yukos Oil Company's bank accounts as a part ofthe expropriation plan. Never did one bit of money from any of these offshore companies go anywhere else but for use within the Yukos group.

Internal Control over the movement of funds.

The prosecution alleges that various standard business practices were the means to facilitate money laundering. Specifically, it refers to "transferring of funds using a "bank-client" electronic system. In fact, this was the very system that was in place to manage and control cash flows and monitor transfers of funds between the Yukos subsidiaries in Russia and within the offshore companies of Yukos treasury group, and is used by virtually all sophisticated cash management companies around the world. The Yukos Treasury Department, headed by Andrei Leonovich, oversaw management of the funds transferred into or out of the trading companies' accounts, as well as out of the offshore companies within the treasury group.

The core function of the Yukos Treasury Department was to manage, control, and safeguard the cash of Yukos group companies. For example, the Treasury Department accomplished this by negotiating with the banks favorable terms for placement of cash of the group companies on a consolidated basis. For domestic Russian trading companies like Fargoil, Yu-Mordovia, Ratibor and Energotrade, the Treasury Department used electronic keys to transfer money from group company accounts. The keys were kept in a secure place within the Treasury Department. A computerized payment authorization system eontrolled all payments. The payment of any dividends, or other transfers, could not have oeeurred without Treasury Department knowledge or without appropriate authorizations. All bank transfer information involving Yukos group companies was tracked by the Treasury Department. For domestie Russian trading companies, this information was passed along directly to Yukos-FBC. There is absolutely nothing suspieious about secret keys for money transfers; it is for seeurity and used by all companies and banks for money transfers.

The Treasury Department also managed all "free cash" for foreign companies within the Yukos group. Any request for payments from the accounts of international Yukos group companies required the signature of both the head of the requesting department, as well as the head ofthe overall Yukos Budgeting Department. Beginning sometime in 2003, I decided to personally review and approve every payment in exccss of $1 million to a party outside the Yukos group from any international company, providing even more financial control. This frequently caused problems in making timely payments to payees from the international companies, but I wanted to personally ensure that all payments made were completely proper and received proper internal approval. Even then, Yukos employees, including me, did not have authority to directly release funds from any group company account overseas because the signatory control

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over those accounts rested with third party professional service providers. For example, the Abacus accounting firm in Cyprus performed this function in Cyprus. These professional service providers independently reviewed all requests for payment, including supporting documentation for the requests. If the provider had any question about the provenance of any request, it would direct an inquiry back to the central company.

At the end of each day, for both domestic and international Yukos group companies, the Treasury Department completed a daily reconciliation of all money held in all centrally managed accounts of Yukos group companies to assure that it had accounted for all money belonging to Yukos. Another set of duties and regular activities ofthe Yukos Treasury Department was reviewing the books and records ofboth domestic and foreign trading companies and the companies within the treasury group and insuring that they accurately reflect all monies transferred in or out ofthe company.

It is true that all of the banking accounts of all of the domestic trading companies were managed by the central Yukos Treasury Department, while the International department of Yukos Treasury managed the accounts of foreign trading and treasury companies; hence, Yukos Treasury could and always did track all transactions involving Yukos trading companies and the Yukos treasury group companies.

Corporate Governance; Board of Directors ofYukos and the Board's Committees:

All of the described safeguards and systems that were in place at Yukos. were instituted and complied with because of the company's adherence to strong corporate govemance and transparency principles and they made impossible the embezzlement and money laundering alleged by the prosecution. Mr. Khodorkovsky decided Yukos should adopt and implement many of these principles before any relevant legislation on corporate governance requirements had been enacted in Russia. For example, while Russian law at the time did not include prohibitions on insider trading by company shareholders, Yukos nonetheless voluntarily imposed such prohibitions on its employees and directors. The existence of these policies and the clear commitment to them that ultimately caused me to accept the CFO position at Yukos.

It also was Mr. Khodorkovsky who made significant changes in the company such as institution of an independent Board ofDirectors, creation ofthe Board's committees, and hiring higWy-skilled foreign management. Based on my knowledge ofthe work ofthe Board of Directors and the Committees, as well as my work as Yukos' former Chief Financial Officer, I know that Yukos had sufficient internal controls in place that we would have easily identified and prevented such massive alleged theft contemporaneously, if it could have ever occurrcd, which it did not. Moreover, cven ifany massive irregularity was missed by company internal controls, I believe that PWC or the Russian tax authorities would have contemporaneously discovered them during their audits. They did not.

The Board of Directors was vested with the authority to institute and monitor all systems of internal control to assure that no abuse occun-ed at either a corporate level or managerially in the field operations. The Board had the following responsibilities, tasks,

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and spheres of power, which were outlined in the Board of Directors' Summary of the Board Review and Information process: Strategy, Plan and Budget: The Board outlined priority business fields for the Company; reviewed and approved Annual Budgets, and reviewed and approved 5-year plans for the Company;

Investments and Financing: The Board reviewed and considered all issues pertaining to exploration licenses and reserves acquisitions both in Russia and abroad. The Board reviewed and approved operational investments in fixed assets in Russia (both Upstream and Downstream) and outside of Russia; reviewed and approved acquisition ofcompanies and other assets; reviewed appraisal reports of the market value of propelty; evaluated and approved loans from banks or any other lenders with interest or equivalent, and guarantees to third parties. The Board also discussed and approved actions for the Company to participate in commercial organizations, as well as Company's participation in holding companies, financial and industrial groups and other associations of commercial organizations.

Reserve Fund and Other Funds of the Company: the Board had to either determine or review and approve the purposes, amounts, sources and terms of formation ofthe Funds, as well as the procedures of application for the use ofthe Funds.

Transactions: The Board approved all large transactions, the subject of which included property; all very large transactions (other than transactions with property) such as ones in the ordinary course of business, including trading, etc., and ones that were not in the ordinary course of business such as electricity, gas, transport, etc. The Board also reviewed and approved all transactions in the conclusion ofwhich there was an interest, or interested-party transactions.

Reporting: The Board regularly reviewed current activity and financial reports, including quarterly consolidated accounts. The Board reviewed and preliminarily approved to be submitted to the following Annual General Shareholders meetings the Annual Group Report (including US GAAP consolidated accounts), and Annual report ofYukos.

Authorized Capital, Shares and Dividends: The Board made relevant decisions on the issues of allottcd shares and bonds purchase and redemption; subdivision and consolidation of any shares; and allocation of results. The Board determined dividend amounts to be paid for the shares and the procedures of such payments, for annual and interim payments. The Board considered proposals and approved the issuing and allotment of bonds and other securities by the Company. The issues for consideration in this respect would include analysis of the Authorized Capital increase, be it due to the increase in the nominal value of shares or the allotment of additional shares within the amount of declared shares. The Board considered and made preliminarily approvals of proposed amendments to the Yukos Charter related to increases in the authorized capital by the amount of 40 Case 4:12-cv-00003 Document 1-2 Filed in TXSD on 01/03/12 Page 43 of 55

actually allotted declared shares. The Board reviewed the results of securities issuances, and considered issues ofnon-application ofthe preferential right of any shareholder to acquire the Company's shares or other conveliible into shares securities.

Top Management: The Board reviewed and approved appropriate actions with respect to the appointment of the Company President and the Financial Director; termination of the contracts concluded with them before expiration; reviewed, revised, and approved management organization charts, outlining the job functions; approved the principles of total annual compensation for senior managers after it was reviewed by the Compensation Committee.

Company StlUcture: The Board worked on tasks and made applicable decisions on reorganization of the Company, creation of the separate subdivisions of the Company, and relevant regulations. It reviewed and proposed amendments to be made to Yukos charter in connection with opening or closing separate subdivisions. The Board also determined the terms of the management contract with the Managing Organization.

Shareholders Meetings: The Board was involved in preparing and convening the General Meetings of Shareholders. The Board called the extraordinary Shareholders meetings; determined the form of notification ofthe shareholders by mass media for publication ofthe notices for convocation of the General Meeting of Shareholders, Annual Reports, balance sheets, accounts of profits and losses and other information. The Board authorized its representative to contact media for announcing the Shareholders meeting.

Lastly, the duties of the Board included drafting and approval of internal documents and regulations concerning the committees of the Board of Directors, as well as working regulations of the Company administrative bodies. The duties ofthe Board also included the creation of any committees, commissions and other permanent or provisional working bodies of thc Board of Directors. The Board determined and approved the amounts of remuneration and compensation to be paid to the members of the Auditing Commission, and the amount to be paid for the services ofthe Auditor.

Shortly after I joined Yukos, we engaged the law finn ofAkin Gump Strauss j·jauer & Feld LLP to assist the Yukos Legal Depariment in preparing the Board Members Agreement. It took nearly six months to finalize the document, and it received the approval of all of the directors on the Board at that time (Golubev Y.A, Carey S.C., Gupta R.K., Loze B., Kagalovsky K.G, Nevzlin L.B., Kazakov V.A, Pokholkov Y.P., Karasev V.I., Soublin, M., Kontorovich AE., Temerko AV., Kosciusko-Morizet J., Khodorkovsky M.B.). Some of the issues that had to be taken into consideration and provided for in the Agreement were Conflict of Interests, Liability of Directors, Transactions with Company securities, Indemnification and Confidentiality. See exhibit 33, copy of Sample Agreement with a member of a Board ofDirectors ofthe "Yukos Oil Company" Joint Stock Company".

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All of the Board Committees served a particular and vital purpose. Each was responsible for specific issues and was created to maximize the benefit to Yukos of having an independent Board of Directors. In 2002-2003, there were Five Committees. Below is a description ofsome oftheir functions:

a) Finance Committee. Chairman - Michel Soublin. The competence of the Committee members was to rcview and make recommendations to the Board pertaining to financial items included in the Board Review and Information Process adopted by the Board, including particularly financial items pertaining to investments and financing; Reserve Fund and other funds of the Company; transactions; and authorized capital, shares and dividends. The Committee members also reviewed and made recommendations to the Board pertaining to financial policies and procedures, which the management of the company proposed for Board approval.

b) Audit Committee. Chairman - Jacques Kosciusko-Morizct. The Committee members evaluated and presented to the Company Board of Directors recommendations on internal accounting, internal and external control and audit of the business activity of the Company. The competence of the Committee included particularly, but was not limited to:

The activity of the Company Auditing Commission, elaboration of the Auditing Commission Regulations;

The activity of the Auditor of the Company, including fees for the Auditor's services, initiating audit ofthe Company;

The participation in selection and approval by the Board of Directors of, and elaboration ofterms ofthe contract with, auditors ofthe Company.

The Committee would primarily interact with the management of the Company, including the CEO and CFO and depending upon circumstances other relevant managers.

c) Corporate Governance and Nominating Committee. ChaiIman - Sarah Carey. The Committee evaluated and presented to the Board of Directors recommendations on issues regarding Corporate Governance matters and practices including effectiveness of the Board of Directors, its committees and individual directors, and the organization and coordination of Company subdivisions, subsidiaries and affiliates activities. The Committee's members were responsible for, but not limited to:

the accountability by the Company management and relevant Company subdivisions of the Corporate Governance Charter adopted by the Board of Directors;

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the consideration ofthe key stakeholders constituencies: the shareholders, the government, communities in which YUKOS operated, the employees, the retirees, the suppliers, the customers and creditors;

the information of the Board of Directors as regards to the Rules and regulations issued by competent independent organizations such as OECD or WEF;

the review and the reporting to the Board of Directors of the performances made by the Company in corporate governance matters and the recommendations of improvement or corrective actions whenever necessary, by considering amongst other the views of independent observers.

The Committee also had to review and recommend the size and composition of the Board of Directors and its Committees in light of the operating requirements of the Company; advise the Board of Directors as to the creation of any additional, or the elimination ofany existing committee ofthe Board ofDirectors; review the qualification of possible candidates for Board membership and maintain a list of persons who may be potential Directors, as required to provide an appropriate knowledge to the Board of Directors; give its opinion to the Boar'd of Directors on the candidates to the Board; and recommend to the Board of Directors the membership of each committee established by the Board of Directors, including the necessity ofchanges in such membership.

d) Compensation Committee. Chairman - Raj Gupta. The Committee provided advice and recommendations to the Company Board of Directors regarding compensation policy, the amount and compensation payment practice, performance premiums (bonuses) and any relevant incentives to the Company top executives; the Committee would also receive survey data on compensation markets. While carrying out their duties the Committee members directly addressed to relevant Company subdivisions including Finance, Human Resources Departments and any other subdivisions (as maybe necessary); as well as independent specialized Consulting Firms (consultants).

e) Executive Committee. Chairman - Mikhail Khodorkovsky. The committee was vested with authority to determine and submit recommendations to the board of directors regarding priorities of the company's activities, the company's strategy and development.

Mr. Khodorkovsky instructed the Board ofDirectors instead ofpaying his director's fee to him to have it donated to a charity on his behalf.

Between 2001 arld 2003 the Board became a more independent and active. Mr. Khodorkovsky encouraged the members of the Board of directors to express their own ideas and celtainly did not force his opinions on them. For example, Mr. Khodorkovsky strongly suppOlted the Level lI/IlIlisting in the United States while certain directors were hesitant and thought a filing on the London stock exchange was a preferable next step 43 Case 4:12-cv-00003 Document 1-2 Filed in TXSD on 01/03/12 Page 46 of 55

into the international equities markets. He knew that I too favored the US filing, but made it a point to discuss the Board members concerns with me.

In 2001-2002, I served as Deputy Chairman ofthe Yukos Management Corrunittee, and I was always invited to attend the meetings of all corrunittees ofthe Board. From the beginning of my work at Yukos, I maintained particularly close interaction with the Board's Audit, Finance, Compensation and Corporate Governance committees, respectively. At times, I participated in three or four Board corrunittee meetings on one day. The corrunittees' chairpersons with whom I had extensive communication and interaction were Jacques Koscuisko-Morizet (Audit), Michel Soublin (Finance), Sarah Carey (Corporate Governance) and Raj Gupta (Compensation). Other members of the Board of Directors in 2002-2003 were, Yuri Golubev, Mikhail Khodorkovsky, Alexei Kontorovich, Bernard Loze, Yuri Pokholkov, Alexander Temerko, and Sergei Muravlenko who was a Chairman ofthe Board ofDirectors.

Yuko's progressive Corporate Governance policies were evinced by our strict compliance with requirements for transparency, including the ones under US GAAP, our focus on independence as a criteria for an increasing number of the Board members during the nomination of the candidates, and the specific formation of the Board of directors' corrunittees. We also, had hired a corporate secretary with SEC experience and we had begun re-writing our internal stock trading policy and drafting a code of ethics and a revised corporate governance code that was compliant with both local and NYSE rules.

During the Sibncft merger project, Yukos engaged another, highly reputable international, law firm, LeBoeuf, Lamb, Green &MacRae to serve as counsel on the project. Among other tasks, this firm prepared an agreement between the shareholders of Yukos and shareholders of Sibneft, which included detailed provisions for Corporate Governance. See Exhibit 34, copy of a Summary of Corporate Governance Provisions of Shareholder Agreement, prepared by LeBoeuf, Lamb, Green &MacRae, June 17,2003.

During 2001-2004, the Russian government FCSM began to evolve into a government body promulgating Corporate Governance Principles. Yukos played a very active role in coordinating with the FCSM in the formation of its recommendations. It enacted a Corporate Governance Code and continued to revise and amend it through the years. Every time a proposed revision was released, the Yukos Legal department immediately addressed the impact of the proposed changes on the present Ynkos charter and principles of corporate governance in place at Yukos at that time. And to the extent that the changes had to be implemented once a Code or the amendments were enacted, Yukos would make the necessary changes to its Charter and Articles of incorporation, and inform its shareholders accordingly.

Moreover, as a member on the U.S.-Russia Business Council (USRBC) and a prominent member of Russia's best governed company, I was invited by the FCSM to comment on the draft Corporate Governance Code ("CGC") and submit recommendations directly to FCSM. See exhibit 35, copy ofcmail dated 10.24.2001 from USRBC to Bruce Misamore regarding draft CGC, attachments omitted.

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During my years at Yukos, the Company's performance, corporate structure, and governance principles were publicized, promoted, and specifically disclosed to existing and prospective investors through various reports prepared by the Investor relations department and publications on the website. Messrs. Khodorkovsky, myself, and other Yukos executives spoke frequently to various investor forums and assemblies. Yukos hired Tailor Rafferty, one ofthe most respected firms in the business to assist Yukos with Investor relations. See exhibit 36, copies of various emails from and attached presentations by Taylor Rafferty regarding Yukos Investor Relations. Yukos became widely recognized as the leader in corporate govemance , investor relations and financial transparency.

To insure that Yukos maximized its financial performance and effectively responded to the current changes in markets, inflation, fluctuations in oil prices, and others business risks, Yukos worked together with many top analytical firms to conduct various research and analysis of the business practices in place at Yukos and to compare them to those used by our counterparts in Russia and abroad, the financial performance of the Company and to assist Yukos management with its strategic outlook for the future development of the company. See exhibit 37, copies of reports prepared by Renaissance Capital, Brunswick DBS Warburg, Aton Capital Group, Credit Suisse First Boston, Dresdner Kleinwort Wasserstein, ABN AMRO, and Lehman Brothers.

Relations with minority shareholders, known conflicts, consolidation of the Yukos snbsidiaries

The consolidation ofthe exploration and production subsidiaries was, for all intents and purposes completed before I became CFO. The final consolidation of Tomskneft was the only major consolidation action that occulTed while I was CFO and we retained the investment bank Renaissance Capital to assist on this project. I understand that years before, Yukos arranged for VNK, Tomskneft's parent, to enter into agreements with three Cypriot companies to swap its shares in its subsidiaries, including Tomskneft, for Yukos shares and the prosecution now contends that these swaps constituted embezzlement. These allegations are contrary to fact and logic.

After becoming CFO, I received information about the aforementioned VNK swap transactions. The explanation for them was straightforward, the agreements were executed to protect the shares from attachment as a result of bogus lawsuit, and that the shares were held temporarily by offshore companies. The swap agreements contained a mandatory provision for buy-back at the call of VNK. The "unwinding" of the swap transactions occurred while I was CFO. Pursuant to a mandatory buy-back provision in the share swap agreements, VNK demanded the Cypriot companies holding the shares of Tomskneft and the other five subsidiaries of VNK to swap the shares back for the Yukos shares. The company Renaissance Capital was engaged to calculate the necessary arms' length amount of shares need for the swap-back transactions, particularly because the

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value of Yukos stock had appreciated much quicker, than the stock price of Tomskneft, and due to the inevitable tax consequences ofthe transactions.

Most importantly, at all times the said shares of the VNK subsidiaries all the way until the buy-back (the reverse swap) continued to be treated on the Yukos US GAAP consolidated financial statements as held by VNK and our auditor, PWC, agreed with such a treatment. Clearly, given the principles ofconsolidation outlined above this would not be possible ifVNK did not retain the actual right to demand the buy-back of shares of Tomskneft, Achinsky Refinery and other four subsidiaries. Due to this treatment and the disclosure ofthis information, as well as the fact that absolutely all shares were swapped back in late 200 I, the allegations of embezzlement run counter to what had actually occurred.

We at Yukos were so confident that the transactions had been in the legitimate interest of the shareholders that we prepared a press release offering to compensate any shareholder who thought they were harmed. None ever came fOlward and made a claim. See exhibit 38, copy ofdraft press release.

Finally, Yukos acquired the Russian Property Fund's remaining shares in VNK, that belonged to the RF and the shares ofother minority shareholders, in 2002. IfMessrs. Khodorkovsky and Lebedev had embezzled VNK's shares in the subsidiaries, it strikes me as unlikely the Russian government would have sold us the remaining shares in the company.

I). Withdrawal by PWC of its Audit Reports of Yukos Financial Statements in June of 2007.

On June 15, 2007, PWC publicly announced that it had withdrawn all of its audit reports for Yukos Oil Company financial statements in two letters sent to Yukos bankruptcy receiver, Eduard Rebgun. One letter was signed by Doug Miller and the other was signed by Michael Kubena. I have reviewed both documents wherein PWC asserts that the Procuracy's disclosure of information concerning four items raised such doubt as to the truthfulness of what management had been telling them that they had to issue the withdrawal:

• information that shareholders of Group Menatep Limited ("Group Menatep") "controlled" Behles Petroleum, Baltic Petroleum and South Petroleum ("collectively, BBS"), companies to which Yukos had exported "substantial volumes ofcrude oil and petroleum products."

• information" demonstrating that Yukos management controlled "key issues ofbusiness operation" ofaffiliated legal entities.

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• Yukos had made "significant payments" to companies owned and controlled by Group Menatep before the bankruptey of AKB Menatep Bank.

• Group Menatep shareholders eommitted to make payments to certain individuals who led the company when it privatized.

I also have reviewed the eopies of the records of intelTogations of Doug Miller and Mikhail Klubnichkin conducted by the Russian procuracy in May-June of 2007. The common theme found in both the PWC letters and the interrogations of PWC representatives is that Yukos withheld material infolTilation from PWC during their audits ofthe company financial records.

As a general matter, Mr. Miller and PWC are absolutely wrong to the extent they state or otherwise infer, either directly or indirectly, that they did not know or have access to the material facts concerning the issues set forth as a basis for withdrawal of the audits. I had numerous conversations with both Mr. Miller and other PWC representatives regarding three of the four items set forth in the withdrawal letters and I had tangential communications regarding the Yukos assumption ofcertain Bank Menatep debt. Based upon these conversations, it was absolutely clear that, contrary to their CUlTent allegations, Yukos provided PWC with access to any and all infolTilation PWC requested. PWC made its own detelTUination prior to the pressure it received from Russian authorities that for at least two of the four issues any impact on Yukos financial statements as a result of any incomplete information in this respect was immaterial for financial statement purposes. I know of no new infolTilation that PWC could have received that should have changed that detelTilination.

(i). Compensation Agreement with Four Managers:

In connection with preparation of the F-l registration statement related to the issuance of Level II/III ADRs, an issue arose as to a Group Menatep obligation to pay four individuals who had been Yukos managers prior to the time Group Menatep acquired its shares in Yukos. Messrs. Khodorkovsky, Lebedev and other shareholders wanted to compensate these individuals for their efforts in transitioning Yukos to a profit oriented, effective and successful company and, tlu'ough Group Menatep, had a verbal agreement to pay them cash for their performance at some undetermined point in the future.

To my knowledge, Messrs. Khodorkovsky and Lebedev always believed it was a Group Menatep issue and did not understand how Group Menatep's obligation to these four men had an impact on Yukos' financial reporting. I agreed with that assessment and did not understand how an obligation undertaken by Group Menatep, but not Yukos could impact Yukos financials. However, PWC stated that Yukos in its financial statements would have to recognize a retroactive adjustment to equity in the amount of approximately $2 billion. Even though PWC had some general knowledge of the

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compensation arrangements, palticularly because it had been disclosed by Group Menatep when it identified its shareholder group, no one at PWC Moscow or at Yukos ever thought that a Group Menatep agreement could impact Yukos financials until the issue was raised by PWC New York in its review of Yukos financials for the NYSE listings.

Mr. Kingsley, Mr. Miller and othcr employees of PWC Moscow understood the accounting principles involved but generally disagreed with PWC's accounting policy department in New York that such a large accounting (non-cash) charge was appropriate other than as a technical accounting matter and Miller took it upon himself, perhaps with my urging, to find a way to avoid Yukos restating its prior financial statements. In doing so, he approached Messrs. Khodorkovsky and Lebedev and offered to write or re-write the agreements with the four managers.

After discussions I had with Mr. Khodorkovsky, we were not concerned about the possible restatement of the financials because analysts probably would not have been troubled by a non-cash charge against equity which was unrelated to performance and would have no impact on the future operations of the Company. Although it would have been inconvenient to the extent it impacted ratios relevant to credit ratings, Mr. Khodorkovsky and I were prepared to accept the restatement of the financial statements, if necessary, should the prior managers' compensation agreement not be rcsolved othcrwise.

There was nothing improper about the agreements with the prior managers. At that time, Messrs. Khodorkovsky and Lebedev made an arrangement with them that 'they would be compensated in connection with the future sale of Group Menatep's shares in Yukos based upon their value at that time. In any event, and contrary to Mr. Miller's assertion in his interrogation, Mr. Miller did know that these four prior managers did in the past work for Yukos Oil Company.

I am certain that Miller knew the historical details and the rationale supporting the approach because we spoke often of his efforts to reconcile the issue raised by PWC in New York with the strong desire of Messrs. Khodorkovsky and Lebedev to honor their commitment to these managers. Since PWC New York insisted that there was a potential problem for Yukos, Miller directed the drafting of the compensation agreements reflecting a deal with Group Menatep in such a way as to avoid Yukos taking a significant non-cash reduction in its equity.

Ultimately, Mr. Miller advised us that the issue had been resolved with the agreement of PWC New Yark and through his efforts in re-drafting the agreement. Thus, the restatement ofthe financial statements was no longer necessary. Moreover, according to Miller, there was no need to amend any of the previous years financial statements nor include any relevant disclosures in the 2002 financial statements that were being prepared at that time.

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(ii). Downstream Trading Structures Behles, Baltic and South or "BBS"

PWC's assertion that it did not know or have access to material information regarding these structures as to constitute a basis to doubt management and withdraw the audits, contradicts PWC's actual conduct in resolution of these issues during the F-I preparation in 2002-2003. When PWC was working on the F-I and the disclosures ofthe related-party transactions it focused on BBS, as well as other non-consolidated companies to determine whether or not any previously excluded companies should have been consolidated in the Yukos financials, and what the impact on historical financials might be.

I personally specifically spoke with George Gramatke and Doug Miller of PWC on many occasions about the BBS issue. PWC was at that time conducting due diligence with the law firm of Akin Gump. PWC directly communicated with Mr. Lebedev, Mr. Khodorkovsky and the lawyers of Group Menatep regarding the ownership of BBS. I understood PWC representatives experienced some frustration with the information being provided by Group Menatep; however, they ultimately completed their inquiries and stated to me that when the funds were run through the companies, the accumulated amounts were immaterial in the context of Yukos financial statements. Some of PWC's frustration probably was attributable to answers being provided from the standpoint of Russian law. In other words, part ofthe issue was the form ofthe responses to questions, and not the substance ofthe problem.

I personally investigated the Yukos relationship with BBS by inquiring with various people, including Mikhail Brudno, a Group Menatep shareholder and Yukos executive, Michel Soublin, the prior Yukos Chief Financial Officer and member of the Board, as well as Messrs. Khodorkovsky and Lebedev. PWC determined that the maximum amount of accumulated funds or margin as a result of transactions between Behles, Baltic, and South was probably at most $25 million, and this amount of funds was de minimus as it related to Yukos' financials. Therefore, PWC decided not to pursue this issue on the grounds that whether Behles Baltic and South were related entries was immaterial for financial reporting purposes. It was speculated at the time that the funds which may have accumulated in BBS may have been used as payments to governmental agencies to acquire additional export pipeline capacity.

Moreover, PWC acknowledged that, in 2000, Yukos management made all relevant disclosures to PWC concerning the sales transactions with Behles and Baltic, including the use of the margin resulting from export sales at higher prices to third parties to acquire pipeline capacity. Proof ofPWC's knowledge is reflected in the PWC Matters for Partner Attention based on 2000 audits, where, at the same time, PWC stated that it concurred with the management's treatment.

As a practical matter, PWC could have caused Yukos to identify BBS as a related parties but it would have had no effect on the financial statements because of immateriality. Specifically, in the Matters for PatineI' Attention based on 2000 audits, PWC stated that Behles and Baltic werc related parties to Yukos Oil Company. However, PWC advised the management that Yukos not need disclose this information on its

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financial statements because "the nature of the transactions and their relative materiality to the financial statements, taken as a whole." Again, as proof of PWC's knowledge and advice. Based upon my own investigations, I do not believe that any portion ofthe $25 million, assuming it was that much, ever went to the personal benefit of the core shareholders.

(iii). Yukos Assumption ofBank Menatep debt

Yukos did assume some of Bank Menatep's debts after the Bank collapsed. This issue was consummated by the time I began working at Yukos in 2001. In connection with transitioning into the CFO position, I asked questions about the history of the assumption of this debt. It was explained to me that Mr. Khodorkovsky wanted the creditors to be paid and that a way had been identified for Yukos to facilitate such payments, while securing fair market value transaction for Yukos' shareholders for assuming the debts.

Mr. Miller was fully informed about the transaction; however, Miller conveniently forgets and he ignored it at his interrogation, that he and others at PWC had all required infOlmation regarding these transactions because it clearly and visibly appeared on the liability side ofthe Yukos balance sheet. The presence ofor nature ofthis debt was never raised by PWC in any letter to management.

To my knowledge, the assumption of Yukos' debt that had to be repaid to bank Menatep was "unwound" by some time in 2002. Those claims were offset by mutual netting, whereby the remainder of the claims against the bank were bought out by shareholders using Yukos shares. The debt was only in the amount of $200 to $300 million. Based on what I was aware of, the deals had bottom line economic value to Yukos and nothing was done to the detriment ofthe Yukos shareholders.

(iv). The Domestic Operating Companies and Yukos' use of entities in tax advantaged zones in order to minimize taxation

The fourth reason for the withdrawal of audit reports is entirely inconsistent with the PWC's position previously taken, even when the attack on Yukos ensued at the end of 2003 and the tax claims were brought against the Company by the Russian Tax authorities in 2004. PWC consistently avowed that the Company's practices of tax minimization were in compliance with Russian law, as well as the accounting rules for including companies in a consolidated financial statements prepared pursuant to US GAAP. It is my position that the consultants from PWC, clearly knew and understood the nature of all trading of the Company's trading companies in tax havens. In fact, PWC helped Yukos develop and implement this tax strategy.

When I came to Yukos in February 2001, it was connnon practice in Russia for domestic corporations to minimize taxation by employing operating vehicle entities set up in geographic regions, called "ZATOs", in which the local governments sought to minimize taxation in order to encourage development. There were minimal operational

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requirements for these entities. For example, while ZATO entities were widely used in a variety of industries, in the oil business there was no requirement that a ZATO entity actually take physical possession of crude oil. It was sufficient for the vehicle entity to have a physical presence in ZATO and meet the other statutory requisites. It was my understanding that when thc economic development zone concept was created in the 1990s, the Ministry of Tax supported the concept and even conducted seminars to teach Russian business people about the advantages of using these vehicle entities as a tax minimization dcvice. Yukos took steps to assure that its ZATO entities adhered to all legal requirements.

In the first half of2001, I became aware of an effort to consolidate Yukos' ZATO entities into a smaller number of vehicle entities. The purpose of this consolidation was, as with many Yukos initiatives of the time, to reduce the costs associated with a greater number of entities by consolidating such activities into fewer entities and concentrating Yukos' relationships with such entities in areas which provided the most competitive tax incentives. One such consolidated entity was known as Fargoil, which was incorporated in the Russian state of Mordovia.

I conducted my own due diligence to satisfy myself that the reviscd structure met all legal requirements with regard to such vehicle entities. This would have included consulting legal counsel to satisfy myself that the Fargoil structure, for example, and other domestic operating companies were consistent with Russian tax and other law. I have also consulted with the lead PWC partner working with Yukos and with the auditors at PWC to insure that the operation and structure of Fargoil and other domestic operating companies was appropriate for accounting purposes. In other words, I would have obtained from PWC assurance that the domestic operating companies would properly remain within the Yukos corporate family and could be consolidated, including its revenues and expenditures, in the Yukos consolidated financial statements. This would be true despite the fact that, at certain times, Yukos' ownership of the domestic operating companies was beneficial and contingent, rather than direct.

PWC annually audited the financial statements ofFargoil and the vast majority ofother Yukos group entities, including for proper accounting of relevant tax requirements. PWC's .- audits never identified any material tax or accounting irregularities with regard to Fargoil (or other Yukos subsidiaries). Moreover, for 10 years of work with Yukos, PWC, as its auditor, has stood by its audits and has never suggested that the audits were in en-or or any violations in the reporting could have existed, because in fact, none ofsuch were ever detected.

PWC never said anything to me or, as far as I know, anyone else at Yukos, to my knowledge, about a lack of information or the refusal to provide information, other than the instance concerning the ownership interests in BBS. If PWC had asked me to intervene - and I did intervene with the BBS inquiry - I would have gone to Group Menatep shareholders or their lawyers, and would have urged the release ofthe requested information.

It is my belief that the withdrawal of audits by PWC was motivated by the continuing attack by the government on Yukos and persons associated with the

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Company, including the employees of PWC, and more likely, Mr. Miller, as well as the pressure by the government on the PWC itself and the real threat to PWC's operations in Russia associated with all that.

PWC cannot justifiably deny knowledge about the Yukos financial reporting in all of its material aspects because PWC own personnel developed the Yukos US GAAP statements and the accounting systems used to generate them. Given the extent of the work PWC did at Yukos, its people probably had more information about the company than r did. See supra pages 24-33.

PWC and personally Mr. Miller were intimately aware that Yukos companied had funds in various offshore accounts. To my knowledge, this practice was discussed extensively during Michel Soublin's tenure as a CFO and was firmly in place by the time I took over his position. PWC was involved in both the audit and the tax consulting of Yukos during both periods. For example, PWC advised Yukos on the Annenian structme which in essence was a means to defer taxes and have capital available for reinvestment into the company. See supra page 36.

Furthermore, PWC knew about the use of nominal shareholders or trusts, etc. PWC advised Yukos to consolidate entities and helped develop the new structures. PWC may not have favored all of them because some were unusual, but they developed them as the means to pull all ofthe companies into the consolidated US GAAP financials.

It is my position that if the auditors from PWC thought something was illegal or improper, they had an affirmative duty to tell management, but they did not. Each year, PWC prepared a post-audit letter to management wherein PWC addressed any company practices or record keeping methods that could expose the company to litigation Or civil liability later on. These letters were delivered to Mr. Khodorkovsky and myself. PWC Moscow never took exception to any actions taken during the inspection or audit, the standards for which were developed and approved in the PWC London office.

r would like to appear and testify at the trial ofMessrs Khodorkovsky and Lebedev; however, the Russian Procuracy has branded me a possible suspect in a criminal case in retaliation for my efforts to resist the government's expropriation of Yukos. I have no illusions about the Russian legal system and to use the words of President Medvedev the "legal nihilism" that has gripped the country for years. A second criminal trial for these gentlemen is the definitive indication that nothing has changed and, as much as it would be an honor and a privilege to stand up for Messrs. Mikhail Khodorkovsky and Platon Lebedev in Russia, I cannot justify the risk to my personal safety and freedom to do so. I have publically stated on several occasions that I shall be glad to meet with the appropriate members of the Russian Procuracy in either the US or the UK to answer any oftheir questions about Yukos, and I shall be quite happy to meet with and testify before the judges in this case in either the US or the UK if it would assist in their understanding ofthe case facts.

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Before, during or after the interview the participating persons did not offer any comments.

Natur~Ofc~nOlll~~~ -) Intervlewe~~.....~.....~~~~§~~~;~~::::::~-_ (signed) .

g persons: cnh~~ /7~ p_artJ_·c_ip_a_ti,nc- _

The record was read -(:J; Av /l;-v (by counselor by the interviewee) Record Notes-!.1!'F'~~I--__='":::-"====~~------Interviewe~~~.~~~~~~~~~====:: (signed) - . / _ ~ Other participating persons: ~ A"';? r ~ Counsel:

Di"trict of Columbia: SS Subscribed and Swom 10 before me

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53 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 1 of 19

EXHIBIT 2 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 2 of 19 alioOdle (Convention de La Haye du 5 Octobre 1961)

1. Country: United States of America

This public document

2. has been signed by Norman Goodman

3. acting in the capacity of County Clerk

4. bears the seal/stamp of the county of New York

0 Certifteb

5. At New York, New York 6. the 16th day of March 2009

7. by Special Deputy Secretary of State, State of New York

8. No. NYC-106'61676A

9. Se- •1 p 10. Signature

James Bizzarri (I 1 of State t Special Deputy Secretary

S!

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7 ill

04135595.RSL.( REV: 2)6/96) Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 3 of 19

Record of Interview by Counsel

March 2009 New York, NY (USA) 10

Interview started at 13 hours 00 minutes, and ended at 17 hours 40 minutes.

Counsel Levina Y.L., registration No. 77/3956 with the Register of Counsel of Moscow Administration of the of city, ID No. 6170, issued on May 6, 2003 by the Central Ministry Justice of The Russian Federation for Moscow city, on the premises of 50 Park Avenue South, have information New York, New York 10019, interviewed with her consent a person who may assistance to Mr. M.B.. regarding a case in which the counsel is providing legal Khodorkovsky

Interviewee:

1. Full Name: Sarah Carey

2. Date of Birth: August 12, 1938

3. Place of Birth: United States of America

4. Place of Residence and/or Registration: 1201 Pennsylvania Avenue, NW Washington, DC 20044

Phone No: (202) 626-6605

5. Nationality: United States of America LLP 6. Occupation (employment or studies): Partner, Squire Sanders & DeMpsey Phone No: (202) 626-6605

My above personal information is true and correct X.LeLL 3Z--4.12r. the use of Counsel used a The participating person has been advised about recording equipment: computer and a printer to compile this record.

Russian Before the interview I have been made aware of the following norms of applicable Federation laws: 2-(ni-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 4 of 19

Article 6, Part 3 Item 2 of the Federal Law on "The legal profession in the Russian Federation": 'counsel is alio'wed to interview subject to their consent any persons who may have information regarding a case in which the counsel is providing legal assistance." Article 51, Part I of the RF Constitution: "No one shall be required to give incriminating evidence against themselves, their spouses or close relatives." Article 56, Part 4 of the RF CPC: A witness shall have the right: 1) to refuse to testify against 4 of Article 5 of the himself, his (her) spouse and other close relatives, defined by Item present Code.

be used as Upon my consent to offer information I have been advised that my testimony may evidence in criminal proceedings, also if I retract my testimony hereafter.

be The aforementioned norms of the law are clear and have been explained to me; I shall offering testimony of my own free will.

Interviewee (signed)

Interviewer (signed) 1.1"F' .4P.4/Otherparticipating persons: Interpreter: Kirill Savinskiy

Counsel representing the Interviewee: The interviewee appears without counsel.

I can provide the following substantive statement in response to the questions presented:

LLP and chair the I am a partner in the international law firm Squire Sanders & Dempsey firm's Commonwealth of Independent States (CIS) Practice Group. I work out of the firm's Washington, DC and Moscow offices. I received my Juris Doctorate from Georgetown in University Law Center in 1965 and my Bachelor of Arts Degree from Harvard University Columbia. 1960, magna cum laude. I am a member of the Bar of the District of

I have extensive experience in practicing law in Russia and the CIS and have played a now available in the role in the implementation of many of the business forms and procedures CIS including joint ventures, joint stock companies, holding companies, production sharing arrangements, limited liability partnerships and others. I have served as the chair of the Legal Committee of the United States/Russia Business Council.

2 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 5 of 19

President Clinton appointed me to the first board of directors of the Russian-American Enterprise Fund, and the U.S. Secretary of Defense appointed me to the board of the Defense Enterprise Fund. I also chair the Board of the Eurasia Foundation, created by the U.S. government to support economic and social reform throughout the former Soviet Union.

My Mandate at Yukos

In 2000, I was contacted by representatives of OAO NK Yukos ("Yukos") and asked whether I would be interested in serving on the Board of Directors. At the time I was familiar with Yukos and had met Mikhail Khodorkovsky. I was aware of the stories of mistreatment of minority shareholders in the production companies years before. I also had heard that Mr. Khodorkovsky was a talented businessman who was building a successful company.

I met with Mr. Khodorkovsky and we discussed his plan for Yukos. He explained that he wanted to build Yukos into a model international vertically integyated oil company. Part of his goal was to achieve sustainable growth and return on equity for the Company shareholders. He stressed the importance ofhiring knowledgeable foreigners, both as managers and consultants, to the Company's development and the ongoing commitment to recruiting similar individuals to serve as directors.

Mr. Khodorkovsky stated that Yukos was seeking to create an independent Board of Directors which included non-Russians with business experience. The Board would work with management to help it enhance transparency- and improve corporate governance. Mr. Khodorkovsky encouraged the independent board members to introduce the Company to well established western business concepts that were not yet common in Russia in light of the short period of time companies like Yukos had operated in international markets. As I was well aware, only a decade before, the state had controlled and operated the energy sector and private companies like Yukos did not exist. I also met or talked with other independent directors and international managers who were serving the Company to verify that the:Board members acted independently. They also were committed to moving the Company forward.

At the time, one of the most impressive elements of Yukos's development was its financial management systems including financial reporting. These systems were considered to be more detailed and more transparent than those of comparable Russian companies. The strides made in this area were solid evidence of senior management's commitment to moving the Company forward for the benefit of all the shareholders as well as the employees and the communities in which Yukos operated.

I was intrigued by the opportunity to influence and be part of a significant Russian Company that was expanding both in Russia and overseas and was committed to meeting international governance standards. Therefore, I agreed to stand for a seat and was elected to the Yukos Board of Directors in June 2001. I remained on the Board until December 2004 at which time I and four other independent directors announced our resignation because the Russian 3 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 6 of 19

government's takeover of the Company made it impossible for the Board to properly perform its duties.

As noted below, throughout my tenure on the Board, the Company continued to improve its financial management and reporting, as well as operations management and corporate governance.

The Yukos Commitment to Strong Corporate Governance:

Throughout my service as a Board member, Yukos management supported the adoption of best governance practices as a key aspect of making Yukos a leading international energy company. Yukos' financial reporting and shareholder relations were generally transparent and responsive to shareholders' needs.

In 2000, the Yukos Board had adopted a resolution "On Good Corporate Governance" which provided for such items as internal Board committees, disclosure of management structures, publication of the audited financial statements, and the disclosure of transactions with related parties. Also in 2000, Yukos adopted a new Company charter which protected shareholders from dilution by requiring a 75% vote to issue new shares, and in the same year it adopted and implemented policies for distributing dividends.

Yukos adopted a Corporate Governance Charter in 2000, ahead of the Russian government. In August of 2001 President Putin signed into law a comprehensive set of amendments to the Joint-Stock Company Law designed to prevent many of the abuses experienced in the 1990s. It was not until September 2001 that the Russian sovernment began to unveil the first draft of a new "Code of Corporate Conduct". foi

When I joined the Board of Yukos, it consisted of 14 directori; at that time 4 of its members, or 29%, were independent. In 2002, Yukos reduced the number of Board members to 11, giving the independent directors more influence. Here Yukos was ahead of international standards, as it was not until November 2003 that the U.S. Securities and Exchange Commission ("SEC") approved new rules proposed and adopted by the New York Stock Exchange that required the majority of members on listed companies' boards to be independent.

As part of the commitment to enhance corporate governance, in 2000, the Yukos Directors had created the following Board committees: Corporate Governance, Nominating, Compensation, Audit, Finance, and Executive. The first three committees were chaired by non- executive directors. The creation of such committees is a standard western best practice and is required by the Securities laws in the United States for publicly traded companies. It is generally accepted that a functioning committee structure enhances board performance. Shortly after I joined the Board, I became Chair of the Nominating Committee and a member of the

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Corporate Governance Committee. In 2002, these Committees were merged, and I served as fiqLiie Corporate Governance and Nominating Committee.

Through the Committees, the Board members focused on particular areas of management all of which related to the strategic growth and development of Yukos. In particular, the Corporate Governance and Nominating Committee, and its respective members, were responsible for, but not limited to:

The review of and the reporting to the Board of Directors regarding the Board's performance in corporate governance matters and the recommendations for improvement or corrective actions whenever necessary; and

Review of candidates for senior management positions as well as candidates for Board memberships.

It was in the context of Board committee work and oversight that the independent directors had their closest contact with senior company management besides Mr. Khodorkovsky. Mr. Khodorkovsky encouraged communication between the Directors and the Company's executives. This level of communication helped the Board to better understand the Company's operations and to be more effective in executing its oversight responsibilities.

In 2003, the Board adopted a "Corporate Governance Charter" taking into consideration the effects of corporate governance in regard to all of Yukos' constituents. In its preamble, the Charter states:

YUKOS is committed to international principles of good corporatq governance. The company will strive to continuously be a leader in impkmenting and promoting the highest standards of corporate governance in all, aspects of its business both in Russia and in all other areas where the company conducts its operations. YUKOS recognizes that good corporate governance is essential to the continued development of the company and for the creation of long-term, stable value for its shareholders and other stakeholders. Specifically, the company is committed to: implementing and maintaining good corporate governance principles and practices on the basis of generally recognized best international practices (to the extent that such practices do not conflict with the laws governing YUKOSoperations);

complying with all laws and regulations applicable to the company and its governing bodies;

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striving to create long-term increased shareholder value of the company through the application of good corporate governance practices;

treating all of its shareholders equally, including providing timely, accurate and easy access to all material information about the company and its operations;

conducting all transactions with related parties on an arm's length basis and disclosing such transactions when applicable;

adhering to the highest standards of financial reporting in accordance with established international accounting principles and practices;

adopting and maintaining a formal dividend policy;

maintaining a board of directors and committees of the board comprised primarily of members who are independent from the management of the company and have independent directors as chairs of the Corporate Governance & Nominating, Audit, Finance and Compensation committees.

Yukos was also, in a sense, ahead of many large corporations in the west, including publicly traded companies, by adopting restrictions, and in some instances prohibitions against insiders, including Board members, trading Yukos stock.

In addition to his advocacy within Yukos, Mr Khodorkovsky was an active leader in corporate governance in the broader business community. For example, he was a member of the Entrepreneurship Council which was an advisory body created to provide a means for communication between the government and Russian business leaders.

Yukos also took steps to ensure that all levels of Company management understood the importance of corporate governance. Just before I joined the board, on May 26, 2001, Yukos conducted an intensive all day corporate governance program for more than 200 Company officers. It included lectures and panel discussions on topics such as fmancial disclosure, insider trading and the effect of corporate governance on market capitalization.

According to Troika Dialog, Yukos was the first Russian company to communicate its corporate governance policy down the power vertical to its employees. Troika Dialog regularly rated Russian companies for their compliance with international corporate governance standards. By 2002, Yukos had achieved the highest ratings possible in all categories on the Troika 6 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 9 of 19

Governance Risk to Brunswick UBS Warburg's Corporate Dia scale. Similarly, according oil and logue Yukos had become the top ranked gas xankings of Russian oil and gas companies, company by 2001. Internal Controls and External Audit: Disclosure and Transparency; was the commitment to enhanced corporate governance A component of the Yukos financial key financial policies and strong and of tsansparent reporting adoption implementation of PriceWaterhouseCoopers (PWC) accounting and consulting firm controls. The international time on the Board, it Yukos achieve these goals. During my a role helping played critical all aspects of the accounting that PWC was broadly knowledgeable regarding appeared to me and business structures. To my as well as of its operations and financial activity of the Company Yukosconsolidated financial was involved as a consultant regarding understanding, PWC of Yukos. It was my as the long-time auditor and tax strategies, as well as serving and reporting many of these structures had been intimately involved in designing that PWC is evidenced by the impression PWC's extensive involvement on its tax strategies. advised Yukos and $7 million annually during Yukos, which ranged between $4 significant fees it received from on the board. the years that I served

of the the of the audit committee that PWC regularly attended meetings I understand Yukos's financial reporting an overall positive opinion regarding Board and generally presented PWC informed the audit and other means of internal controls. reportedly and its internal audit with its annual audit, made to management in connection committee of various recommendations the of the concern or reservation about integrity and I understand that PWC never expressed Company's financial records. Growtiv Directors and its Role in the Company's The Work of the Board of

a integrated company, the Board, Yukos was essentially vertically At the time I joined the refineries and all the way downstreaffi to the and production segment from exploration the 100% shareholder in OAO For example, Yukos was processing companies. OAO Vostochnaya Neftyannaya 0A0 Samaraneftegaz ("SNG"), ("YNG"), was also Yuganskneftegaz Tomskneft VNK (TN VNK"). The Company Kompaniya ("VNK"), and OAO networks. expanding its retail and distribution increased revenues and Yukos Board, the Company achieved my time on the Board and During shareholders. Simultaneously, the voted record dividends to the profits and program both ensured that Yukos engaged in a strong expansion/investment management on in 2002 and 2003, Yukos spent $1.3 and $1.7 billion capex domestically and internationally. focus was on billion in 2004. Although the primary and had to spend $1.9 respectively planned investments in Eastern Europe as additional oil assets, and power as well Russia, including gas latter Yukos acquired a major For regarding the two, and China were also pursued. example, 7 .ase 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 10 of 19 s

interest in Mazeikiu Nafta in Lithuania and the Transpetrol pipeline in Slovakia and investigated zonstruction of pipelines to Murmansk and China. Furthermore, Yukos invested in the development and implementation of state-of-the-art technology such as the Production and Monitoring System which was on the company intranet and could be accessed by engineers others on a need to know basis. It entered into a partnership with Schlumberger, a leading and international oil field services company, to enhance exploration and production operations the conditions for its workers. built a training centre in Tomsk. Yukos also improved living and other While on the Board, I visited YNG and saw the new housing, conununity centre, revenue its facilities. This investment program enabled Yukos to expand its base and maximize profitability.

In September of 2001, Yukos issued Level I ADRs which were traded in the United States. In addition to generating capital for the Company, the ADRs, also benefited the minority shareholders by creating enhanced liquidity for the Company stock.

a more effective which had a During my time on the Board of Directors, it became body between Russian and growing impact on the operations of the Company. Over time, the barriers International Board members and the Russian managers and the western Board members were reduced and the free flow of ideas increased. Mr. Khodorkovsky was instrumental in facilitating arrest in October of the level of this progress. Unfortunately, after Mr. Khodorkovsky's 2003, communication between the Russian and International Board members regressed, particularly in the regard to the question of how to respond to the legal actions initiated against the Company by Russian government.

One of the main activities of the Yukos Directors was participation in Board and committee meetings. These were the vehicles by which the directors exercised oversight of the and the processes relating to corporate governance, company performance, budgeting, implementation of internal controls and external audit safeguards. The 1Thard met on a regular basis with meetings being both in person and by telephone.

as well Board members were provided with an agenda for each quarterly Board meeting, financial before each as detailed information, including operational and statistics meeting. Specifically, the agendas for regular Board meetings would typically include the current activity a financial from the report, a report on the Company's international development, report, reports Board's committees (Finance, Audit, Compensation, and Nominations and Corporate Governance), and reports and information about proposed or ongoing acquisitions or joint on 3.6.2002 is attached as Exhibit venture projects. (A copy of the Agenda for the Board meeting 1). The Board received strong support from the Board Secretariat. The Secretariat staff, headed by Jean GerM who joined Yukos from Total, was skilled and insured that responses were distributed prepared to Board member's questions. They also collected relevant materials and draft meeting minutes, thus allowing the Board to be more active.

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We received other information on a regular basis, as well as requests to hold interim meetings on particular issues that arose between the quarterly meetings, such as approval of an urgent project or of an acquisition or a large loan transaction. (A copy of a proposed agenda for a 24.9.2002 unscheduled Board of Directors meeting including the review of a loan transaction whereby Yukos was to provide Samaraneftegaz with financing for participation in the Talakan field auction is attached as Exhibit 2.)

Board members regularly reviewed capital expenditure proposals and acquisition proposals that we were required to approve. Typically, senior management from Yukos EP, such as Yuri Beilin and his team, would submit their proposals first to the relevant Board committee and then the committee would report its recommendations to the full Board. Board members would then review and vote, and afterwards the Management Board, would implement the approved plan.

Board members did not always unanimously agree on a particular issue, either amongst ourselves or with management. For example, I recall one instance where Board members disagreed regarding the acquisition of Rospan International. These instances usually were resolved through the exchange of additional information and discussion between the Board and management. In these instances, even if the Board disagreed with a position he supported, Mr. Khodorkovsky encouraged discussion and the exchange of ideas. He never exerted undue pressure on the Board in general or a member in particular. (A copy of an email dated 2.21.2002 from Jean Gerin to Yuri Beilin about the Rospan project, Gerin's email to Mr. Khodorkovsky and Mr. Khodorkovsky's reply is attached as Exhibit 3. Also attached as exhibit 3 is a copy of the email from Mr. Khodorkovsky to Jean Gerin on 2.20.2002 agreeing to hold a second vote during the next Board meeting regarding the acquisition of Rospan, and an email dated 2.8.2002 from Michel Soublin to M. Sadomskaya, B. Misamore and J. Gerin regarding the voting on Rospan. The proposal had not passed and two directors, Carey and Gupta,, had abstained from voting due to the lack of sufficient information provided at the time.)

Generally, particular proposals regarding acquisitions and other, new investments were first addressed by one of the Board committees, such as the Finance committee, and then the entire Board would discuss and vote on the committee's recommendations. (A copy of a letter dated 22.02.2002 from M. Sadomskaya to the Board regarding the proposed acquisition of OAO Arcticgaz is attached as Exhibit 4.)

As part of its commitment to becoming a diversified international vertically integrated energy company, Yukos engaged in a series of domestic and international acquisitions. Each of these projects was considered and approved by the Board of Directors. For example, while or just before I served as a board member, Yukos acquired:

In Millions In Millions USD RR

9 case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 12 of 19

OCX000 Geoilbent 75 2, 301 Sibneft 6, 690 205, 291 OAO Neftegazgeologia 97 2, 857

Total 6862 210,449 :aBggiOSIEEEISWOM

OAO NNGK Sakhaneftegaz 50 1,589 OAO Arcticgaz 274.3 I 8,718 I ZAO Urengoil 75 2, 384 VNK 256 8, 137 AB Mazeikiu Nafta 164 5, 213 Transpetrol a.s. 74 2, 352 ZAO Rospan International (part of acquisition began in 2001) 133 4, 227

Total 1026.3 32,620

2001

Eastern Siberian Oil and Gas Company 4 121 Kvaerner ASA 37.5 1, 102 John Brown Hydrocarbons Limited and Davy Process Technology Limited 100 2, 939 Yuganskneftegaz 49 1, 531 Samaraneftegaz 11 355 Kuibyshev refinery 3 100 Novokuibyshevsk refinery. 4 108 Syzran refinery i., 4 131 Tomskneft 17 485 Achinsk refinery, 25 717 Angarsk Petrochemical Company 74 2, 018 Treasury stock 1.3 40

Total 329.8 9,647

Total for 2001-2003 8218.1 252,716

The Board worked with management to insure that Yukos reinvested a significant portion of the Company's free cash flow stemming from higher oil prices and improved operations. The Company's increased revenues were spent on acquisitions and on capital expenditures (for example new equipment, training facilities and company infrastructure) or were dividended to the shareholders. 10 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 13 of 19

costs and and to eliminate redundant to enhance efficiencies It was Yukos' goal to enhance efficiency through Yukos efforts The Board supported management's a expenditures. For example, Yukos established and consolidated management. the use of shared services the technologies developed center in Moscow to maximize centralized research and development Similarly, the to develop new technology. various Yukos' entities and or owned by controls. Mr. Khodorkovsky allowed for improved financial consolidation of audit functions supported these efficiencies. with He treated the Board members attended all board meetings. in Mr. Khodorkovsky those that related to trends solicitous of their opinions and ideas, particularly He respect and was markets, and to corporate governance. oil business, to international capital the international to compete with the international would enhance Yukos' ability pushed for innovation that majors. and developed and initiated Board members, were pro-active Similarly, the Independent For example, the and with Mr. KhodorkovskY. of issues with management after he discussion a succession particularly raised with him the need for plan, Board members Mr. Khodorkovsky began to Independent leave the Company in 5 years. announced in 2003 that he would his arrest in October 2003. develop such a plan prior to I discussed with Mr. Khodorkovsky Governance Committee, As chair of the Corporate and consultation of open communication with management the importance of sharing ways to reinforce support, the importance We stressed, with Mr. Khodorkovsky's with the Board. director had an office at Yukos basis with the board. Each information on a timely other board members. relevant with senior management and we communicated freely headquarters, and transparency. This topic moved the Company towards greater The directors a listing of independent concerning whether Yukos ihould pursue relevant to the discussions Board members was particularly on the NYS. Some United States, i.e., to be listed II or III ADRs in the such a listing would Level the administrative burden Yukos could not handle were concerned that first seek a listing on a European whether it would be preferable to and were considering the heightened impose favored the NYSE listing, notwithstanding exchange. Mr. Khodorkovsky regulatory burdens. the on the website of from the summary of the charges posted It is my understanding with the Western defense 2007 and conversations Office in February on Procuracy General's Yukos never completed the listing misinterprets the reasons why he counsel that the prosecution the project in 2003 because asserts that Mr. Khodorkovsky suspended first-hand the NYSE. It wrongly to the SEC. Based on my for making false disclosures was afraid of potential liability this assertion. knowledge, there is no basis for

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with retained professionals acting The facts were as follows: Yukos personnel together for the Listing in late spring of 2002; on behalf of Menatep began preparing Group summer of in as soon as During the 2002, was to complete it practical. management's objective F-1 the United States due phase and preparation of forms, the middle of the extensive diligence and Act. Sarbanes-Oxley created significant new reporting Congress passed the Sarbanes-Oxley in the United States. Compliance with this certification obligations for public companies trading and administrative costs and increased in additional accounting new law would result significant for of the Company, such as Mr. Khodorkovsky, reporting the potential liability to senior officers violations. In June 2002, was aware of these requirements. The Board, including Mr. Khodorkovsky Strauss Hauer & Feld ("Akin Gump") the international law firm of Akin Gump lawyers from the the Sarbanes-Oxley Act and its impact on Company prepared an outline for Yukos regarding of the outline is attached as Exhibit 5. In early August should it register on the NYSE. A copy Mr. board members and from Akin met and advised Khodorkovsky, 2002, lawyers Gump the overall due issues. Akin Gump also conducted management representatives on these Yukos's interests before the US Securities diligence for the new ADR offering and represented and Exchange Commission. ramifications; however, to clearly understand the potential Mr. Khodorkovsky appeared and would, the and maintained that Yukos could, he no reservations about project expressed the Investigative Committee's assertion with the regulatory requirements. Accordingly, comply ADR in order to avoid exposure that Mr. Khodorkovsky abandoned the-Level project regarding illegal activities is inaccurate.

was to abandon the new listing. The listing delayed Mr. Khodorkovsky never sought the the issue of how to measure Yukos' reserves, because of a number of factors including with and Chevron/Texaco Sibneft merger and Group Menatep's negotiations Exxon/MobiV of Yukos' shares. Mr. Khodorkovsky of a percentage the possible purchase significant the regarding of the Sibneft merge1. and depending on to the Listing after completion intended pursue It was the with the two US major oil companies. outcome of the Group Menatep negotiations and Yukos, in the Fall of 2003, that killed Russian government's attack on Mr. Khodorkovsky the enhanced ADR listing project.

were to the Board members and we a draft of the F-1 was circulated Furthermore, of a SEC for review. The submission informed that it had been submitted to the preliminary is inconsistent with the even for review, completely draft F-1 to the SEC, preliminary all of the assertion that Mr. Khodorkovsky was embezzling Investigation Committee's additional in such a scheme would avoid Company's oil production. Someone engaged and financial information. disclosure or review of company operating

The Attack on Yukos:

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to take to circulate that the government was going summer of 2003, rumors began In the In 2003, Mr. because of his political activity. July action against Mr. Khodorkovsky in connection Platon Lebedev was arrested and imprisoned Khodorkovsky's long-time colleague At that time, to the of a fertilizer company, Apatit. with criminal charges related privatization in or of misconduct of an attack on Yukos itself any allegation there was no indication 25th, Mr. Khodorkovsky was arrested on October with Yukos Even after connection operations. conduct at the time of the was on his and Mr. Lebedev's the focus of the allegations The 2003, which were unrelated to Yukos. of Apatit and the export sales of its products privatization was for the 1999 to 2000. tax evasion involving Yukos period one charge of corporate its "revised" audit 2003 when the Tax Inspectorate announced It was not until December attack. realized the Company itself was under for tax 2000 that the Board of Yukos year to the in August to the potential threat Company However, the Board had begun investigate of interviewed PWC representatives regarding the allegations 2003. Among others, the Board We also Akin Gump to conduct an internal investigation. tax violations and retained of Russian tax the advice being provided by the team communicated with management regarding from tax lawyers. The response Sergey Pepeliayev, one of Moscow's leading lawyers, including tax claims against Yukos and Akin Gump was that the government's PWC, the tax lawyers of the tax laws havens constituted a retroactive interpretation regarding the use of internal tax enforced Yukos. which were being selectively against and of the impact of defense of the tax charges, During our investigation management's reservation to knowledge never expressed any cases on the Company, PWC, nly of the tax in internal tax havens to Yukos tax strategy for using operating companies regarding the but not 1 tax was aggressive improper. taxes. PWC did say that Yukos' position minimize had Yukos' overall tax to have reservations since they approved would not have expected them that the Russian corporate practices, I knew structure. Further, from my experience regarding in method to corporate taxes or external, was a common reclyice use of tax havens, internal 44, Russia. for the in the Director of the Russian Institute Economy In in 2007 Yegor Gaidar, fact, which allowed it to reduce the level made use of various schemes observed: "Yukos not Transition, one in Mordovia. This may via internal off-shore companies, including of its tax liabilities the of those the authorities permitted setting-up but a fact is a fact: During years be pleasant, to minimize their and most companies made use of them internal off-shore companies in Russia, Khodorkovsky and Lebeclev have been criminally tax-liabilities. However, only Messers this violation." The selective Yukos has been dismantled for alleged and only the International Tax and prosecuted and Lebedev also was noted by of Messrs. Khodorkovsky Policies In prosecution issued in December 2003: Government Regard Investment Center in a Special Report To Internal Tax Havens In Russia.

and Mr. Lebedev: The New Charges against Mr. Khodorkovsky

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and Mr. I learned about the new charges originally filed against Mr. Khodorkovsky on the Lebedev in February 2007 from the summary of the preliminary indictment posted the website of the Procurator General of Russia, the translation of which was presented to me by that the United States lawyers acting on Mr. Khodorkovsky's behalf. I understand Investigatory and Committee filed updated charges on June 29, 2008. Essentially Messers. Khodorkovsky and TN VNK Lebedev are accused of embezzling all of the oil produced by YNG, SNG, sales ("Production Subsidiaries") for the period 1998 to 2003 and then laundering the proceeds ofvarious offshore and by transferring the revenues from the oil sales to the accounts companies funds for their then transferring the funds between companies in order to appropriate the personal benefit.

the fact that The charges of embezzlement and money laundering seem implausible given the Chief Financial Officer the financial reports published on Yukos' website, discussed by with the SEC in ("CFO") in conferences with shareholders and with the financial press and filed the revenues connection with the possible ADR offering revealed in great detail the allocation of that Yukos generated annually. These allocations were typical for the industry: significant of taxes and other fees, as well expenditures on operating costs, regulatory compliance, payment in new and and the purchase of as an aggressive program of investment equipment technology In the declared sizeable dividends, new assets both domestically and abroad. addition, Company allocations took under the watchful eye which were also fully and publicly reported. These place committee as well as of the outside auditor, PWC, and of the Yukos board, particularly its audit in would have of the relevant Russian authorities. The audit requirements and controls place be6use Yukos" CFO monitored both income revealed any systematic diversion of funds closely would have been and expenditure streams_ Any discrepancy remotely resembling embezzlement identified, investigated and reported to the Board.

with the To the extent the Investigation Committee alleges the embezzlement occurred this is unfounded. purchase of the oil from the production subsidiaries at the well Ilead, auditors and Although the Board did not delve into this level of detail, it relied on the outside the Board that consultants who reviewed the Company's activities and assured management and with tax and other the Company was properly reporting and in compliance applicable same methods of transfer regulations. I know that numerous Russian companies utilized the laws at that time. pricing to minimize taxes, since it did not contravene Russian tax Messrs. In connection with the Board's investigation of the impact of the charges against PWC who worked Khodorkovsky and Lebedev on the Company, I met with two representatives in London. there were no on the Yukos' account on December 10, 2003 Although at the much of what said is embezzlement or money laundering charges pending time, they stated had reviewed the relevant to, and contravenes, the current charges. Each they original of criminal tax evasion charges and asserted that they did not see a basis for the allegations as ZATOs. described PWC's role in through the use of the Russian tax havens known They and various subsidiaries advising Yukos on how to structure the use of these companies foreign taxes and revenues in a consolidated financial so that Yukos could legitimately minimize report 14 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 17 of 19

KV. statement prepared pursuant to GAAP. Furthermore, they stated that they had advised other Russian corporate clients to implement similar tax strategies. Their explanation of the Yukos tax strategies contradicts the allegation that the domestic trading or offshore companies were part of a scheme to launder embezzled property.

The PWC representatives noted how the internal audit controls they helped Yukos design and implement, along with their audits, would have revealed large scale diversion of funds had such occurred. The PWC representatives also described how Yukos' use of transfer pricing between the production companies and the trading companies in the internal tax havens complied with Russian law. (A copy of a diagram Messrs. Miller and Kubina prepared to illustrate this point is attached as Exhibit 6.)

The December 2003 meeting with PWC representatives and other communications to me other reported by Board members or senior management prior to my resignation, make me question PWC's withdrawal of the Yukos audited financial statements they had prepared. As noted the above, comprehensive and in depth nature of Yukos' financial reporting was one of the factors that lead me to join the Board. These audited financials are clearly essential to Messrs. Khodorkovsky and Lebedev's defense to charges of embezzlement and money laundering.

Furthermore, the comprehensive internal investigation conducted by Akin Gump did not reveal any embezzlement or money laundering or any other potentially improper conduct by Mr. Khodorkovsky or any other member of Yukos managernent.

In addition to the above, Messrs. Khodorkovsky and Lebedev and the alleged "organized group” took an additional major step towards making Yukos a model company, and this action, like the others described above is inconsistent with the Investigative Committee's allegations of embezzlement and money laundering. In 2001, Group Menatep, Limited,-placed a percentage of its shares in Yukos, equivalent to 10% of the company's outstanding sirares, into a retirement fund for Yukos oil field workers. This fund was known as the Veterans Petroleum Trust. An independent trustee was retained to manage the Trust. In April 2004, th'e Trust had assets with the appraised market value of approximately 2.6 billion USD. As a result of the attack on Yukos, the Trust was rendered worthless and, despite Messer. Khodorkovsky and Lebedev's best intentions, no Yukos oil field worker ever received any benefits under the plan.

Furthermore, the alleged embezzlement and money laundering scheme is contrary to the corporate governance rankings provided by independent analysts as described on page 6 above. The fiscal discipline and reporting practices, the transparency and utilization of independent auditors, the election of independent directors, and the formation and empowerment of Board Committees, all elements in achieving the exemplary ranking they awarded Yukos are inconsistent with a senior management or majority shareholder intent on embezzling and laundering company assets.

15 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 18 of 19

Before, during or after the interview the participating persons did not offer any comments.

Nature of comments: none.

Interviewee: 3401.44, (signed)

2"."1" Other participating persons: 1414,40111i1S49,

The record was read in4 674,7 (by counsel or by the interviewee) Record Notes (fruj•

Interviewee: 7t.L44... (signed)

Other participating persons: diAsgtodedee#— Lit./Atm, X r r Counsel: rf Ctp,

NtiA, r YOkist... COHA Form t State of New York. 695111 County of New York, 1 5.5..1.. I, NORMAN GOODMAN, County Clerk and Clerk of the Supreme Court of the State ot f' New York, in and for the County of New York, a Court of Record, having by law a seal, to Law of the that P. 1 DO HEREBY CERTIFY pursuant the Exe'cutive State of New York, ChY 1 ah910V-Ve\r whose name is subscribed to the annex d affidavit, deposition, certificate of acknowledgment or proof, was itt the time of taking the same a NOTARY PUBLIC in and for the State of New York duly commissioned, sworn and qualified to act as such; that pursuant to Iaw, a commission or a certificate of his official character, with his autograph signature has been filed in my office; that at the time of taking such proof, acknowledyment or oath, he was duly authorized to take the same; that I am well acquainted with the handwriting of such NOTARY PUBLIC or have compared the signature on the annexed instrument with his autograph signature deposited in my office, and I believe that such signature is genuine. IN WITNESS WHEREOF, I have hereunto set my hand affixed my official seal this. MAR 1 6, 2110-9 FEE PAID $3.00 i...... -'61.,./ZZIA"‘4 aieZ#Irit—, County Clerk und Clark of e Supreme CO/ifi, New York County

16 Case 4:12-cv-00003 Document 1-3 Filed in TXSD on 01/03/12 Page 19 of 19

Before, during or after the interview the participating persons did not offer any comments.

Nature of comments: none.

Interviewee: 3944k (signed) Ceeitezr

Other participating persons:

The record was read in/ ez.,Pi (by counsel or by the interviewee) Record Notes oui

interviewee: rg,Lak, (signed)

Other participating persons: 'ili1=1111il or" Counsel: OLtAiry iIPP" Z4Zt-

--Cto 6, -(--t, 1 viii.10 LL' i7 igg Ate-y.-42 )--00, 1 A,ii„..., o

CH STY SCHAEFFER Notary Pubhc, State of New York ir t No 31-4769958 Q U 8 lifien in New York County Commission Expires August 31; .1

16 Case 4:12-cv-00003 Document 1-4 Filed in TXSD on 01/03/12 Page 1 of 3

EXHIBIT 3 Case 4:12-cv-00003 Document 1-4 Filed in TXSD on 01/03/12 Page 2 of 3 11---og000-r19rov

ONE SHELL PLAZA ABU DHABI 910 LOUISIANA AUSTIN HOUSTON, TEXAS BEIJING LIP BAKER BOTTS /70024995 DALLAS DUBAI ED TEL +1 713.229 1234 HONG KONG Recetv FAX +7131 229 1522 HOUSTON B vvww.bokelbolts.com LONDON VVB MOSCOW NEW YORK February 18, 2011 PALO ALTO RIYADH WASHINGTON BY CERTIFIED MAIL Michael P. Lennon, Jr. TEL +1 713.229.1867 Ms. Celia Winter FAX +1 713.229.7867 [email protected] FOIA Officer Office of FOIA and Records Management Services Securities and Exchange Commission Mail Stop 5100 100 F St, NE Washington, DC 20549-2736

Re: Freedom of Information Act Request

Dear Ms. Winter:

Baker Botts L.L.P. ("Baker Botts") hereby submits a request for records pursuant to the Freedom of Information Act, 5 U.S.C. 552. Baker Botts requests any and all documents or other records related to a meeting that Securities and Exchange Commission staff had,with the managenient; Of OAO Yukos, PricewaterhouseCoopers, and Akin Gump Strauss Hauer & Feld LLP. We donot have:a specificdate for this1 meeting.buthelieve that it occurred sometime between May 2002 and March 2003.

For purposes of determining the applicability of any fees, Baker Botts is seeking the records for commercial use. See 5 U.S.C. 552(a)(4)(A)(ii)(I). Baker Botts is willing to pay a reasonable fee for this request not to exceed $10,000. If the cost of fulfilling this request is expected to exceed this amount, please let me know. Baker Botts may authorize the accrual of additional reasonable and necessary costs.

Please forward all materials responsive to this request, either in paper format or in reasonably usable electronic format on CD-ROM, to me at the following address:

Michael P. Lennon, Jr. Baker Botts L.L.P. One Shell Plaza 910 Louisiana Houston, Texas 77002-4995

We would appreciate your forwarding,of tesponsive materials on a rolling basis, sothat information is provided as quickly as itis located. If you have any questions about this request, .please .do not hesitate to .contactmeby mail at the above address, by e7mail:• at [email protected] or by phone at (713) 2294867: Case 4:12-cv-00003 Document 1-4 Filed in TXSD on 01/03/12 Page 3 of 3

BAKER BOTTS up Freedom of Information Act Officer 2 February 18, 2011

Thank you for your attention to this request.

Very truly yours, Nti Cho& LenoOn Michael P. Lennon, Jr. (oict rifrocr Case 4:12-cv-00003 Document 1-5 Filed in TXSD on 01/03/12 Page 1 of 3

EXHIBIT 4 Case 4:12-cv-00003 Document 1-5 Filed in TXSD on 01/03/12 Page 2 of 3

ao0'1144%, UNITED STATES ss, SECURITIES AND EXCHANGE COMMISSION 1 1. A il, STATION PLACE Q. .4. 100 F STREET, NE *MVO WASHINGTON, DC 20549-2736

Office of FOIA Services

March 07, 2011

Mr. Michael Lennon Baker Botts, LLP One Shell Plaza 10 Louisiana Houston, TX 77002

Re: Freedom of Information Act (FOIA), 5 U.S.C. 552 Request No. 11-04000-FOIA

Dear Mr. Lennon:

This letter is in response to your request dated February 18, 2011, and received in this office on February 28, 2011, for information regarding OAO NK Yukos Price WatterhouseCoopers and Akin Gump Strauss Hauer & Feld LLP meeting records.

After careful review of your request, we have determined that it is not a proper FOIA request. As stated in our online guidance How to Make a Freedom of Information Act (FOIA) or Privacy Act Request (http://www.sec.gov/foia/howfo2.htm), a request must "(3) reasonably describe the records sought (by name, date, and subject matter)

Your request does not "reasonably describe" the records sought as required by 5 U.S.C. 552(a)(3)(A) and the Commission's implementing rule, 17 CFR 200.80(d) (3). This rule requires that "[e]ach request for Commission records or copies thereof shall reasonably describe the records with sufficient specificity with respect to names, dates and subitgt_matter to permit the records to be located among the records maintained by or for the Commission." The description must be sufficiently specific so that an agency may locate records by examining indices to its record-keeping systems or specifically identifiable files. FOIA does not require an agency to review every document or file in its possession to locate potentially responsive records. See Hudgins v. IRS, 620 F. Supp. 19 at 21 (D.D.C. 1985). Case 4:12-cv-00003 Document 1-5 Filed in TXSD on 01/03/12 Page 3 of 3

Mr. Michael Lennon March 7, 2011 Page 2

A request for all documents related to a topic, without any defining parameters or description of the files to be reviewed, is inappropriate. See Massachusetts v. Dep't of HHS, 727 F. Supp. 35, at 36 n.2 (D. Mass. 1989). Agencies are not required under the FOIA to conduct wide-ranging, "unreasonably burdensome" searches for records. See Blackman v. United States Dep't of Justice, No. 00-3004, slip op. at 5 (D.D.C. July 5, 2001).

Moreover, until an agency receives a proper request, i.e., one that reasonably describes the records as FOIA requires, an agency is not obligated to search for responsive records, meet time deadlines, or release any records. See 5 U.S.C. 552(a)(3)(A) and (a)(6)(A).

If you have any questions, please contact me at [email protected] or (202) 551-6376. You may also contact me at [email protected] or (202) 551-7900.

Sincerely, A

Jeff Ovall FOIA Lead Research Specialist Case 4:12-cv-00003 Document 1-6 Filed in TXSD on 01/03/12 Page 1 of 3

EXHIBIT 5 Case 4:12-cv-00003 Document 1-6 Filed in TXSD on 01/03/12 Page 2 of 3 ONE SHELL PLAZA ABU DHABI 910 LOUISIANA AUSTIN HOUSTON, TEXAS BEUING BAKER BOTTS LIP 77002-4995 DALLAS DUBAI TEL +1 713.229.1234 HONG KONG FAX +1 713.229.1522 HOUSTON www.bakerbotts.com LONDON MOSCOW NEW YORK April 11, 2011 PALO ALTO RIYADH WASHINGTON BY EMAIL AND FIRST CLASS MAIL Michael P. Lennon, Jr. TEL +1 713.229.1867 Mr. L. Ovall FAX +1 713.229.7867 Jeffrey [email protected] FOIA Lead Research Specialist Office of FOIA Services Securities and Exchange Commission 100 F St, NE Washington, DC 20549-2736

Re: Freedom of Information Act Request No. 11-04000-FOIA

Dear Mr. Ovall:

Thank you for your letter of March 7, 2011. After carefully considering your letter and all of the references therein, we respectfully disagree with your conclusion that we have not made a proper FOIA request of the Securities and Exchange Commission ("SEC" or the "Commission"). FOIA Request No. 11-04000 satisfies all requirements.

The FOIA statute and the Commission's implementing regulations require the SEC to provide records in response to a request that reasonably describes the records sought with sufficient specificity to permit the records to be located. It is well established that "an agency also has a duty to construe a FOIA request liberally." Nation Magazine, Washington Bureau v. U.S. Customs Service, 71 F.3d 885, 890 (D.C. Cir. 1995). Additionally, an "agency must show that it made a good faith effort to search for the requested records, Blackman v. U.S. Dep't of Justice, No. 00-3004, slip op. at 3 (D.D.C. July 5, 2001), and must "follow through on obvious leads to discover requested documents." Id. at 4. Finally, a request must be evaluated in accordance with the President's instruction to administer the Act "with a clear presumption" for disclosure and to "act promptly and in a spirit of cooperation, recognizing that such agencies are servants of the public." Barack Obama, Freedom of Information Act: Memorandum for the Heads ofExecutive Departments and Agencies, Jan. 21, 2009.

Our February 18 letter (attached) requested records related to a meeting or meetings that Yukos Oil, PricewaterhouseCoopers and Akin Gump had with the SEC, between May 2002 and March 2003. Our March 4 email (attached) provided more detail to assist the search, explaining that the overall subject matter of the meeting was the requirements for listing a foreign company with a U.S. Exchange. The particular topics of discussion likely included disclosure and/or reporting requirements for reserves, corporate formation and structure, accounting methods and risk factors that could affect the company's performance once listed.

Our request reasonably describes the records sought sufficiently specifically with respect to names, dates and subject matter to permit records to be located. We have supplied the Commission with names of the three companies participating in the meeting—Yukos, PWC and Case 4:12-cv-00003 Document 1-6 Filed in TXSD on 01/03/12 Page 3 of 3

BAKER BOTTS LL P Mr. Jeffrely L. Ovall 2 April 11, 2011

Akin Gump—and at least one individual likely to have been present from Yukos—Mr. Bruce Misamore. We have specified the ten-month time period in which the meeting(s) would have taken place—May 2002 to March 2003. Finally, we have provided considerable detail about the subject matter of the meeting(s) and points of discussion. As previously advised, we do not know the name(s) of the individual(s) who attended from the SEC. Based on the timing, nature and the subject matter, we would predict that the SEC's Trading and Markets Division and/or Corporation Finance Division would be a logical starting point for a search. Our request for records relating to limited subject matter addressed in a single or small number of meetings with one or two divisions in a ten-month period compares quite favorably to the SEC's online guidance and sample letter, which asks for "the records of consumer complaints against XYZ Company that the SEC has received since June 1, 1996."

Our records request is not open ended and does not require the SEC to "review every document file in its possession to locate potentially responsive records." Therefore, it bears no resemblance to the request in Hudgins v. IRS, 620 F.Supp. 19, 21 (D.D.C. 1985), which was not one for records at all, but rather, was a set of questions to the IRS regarding the purpose and effects of providing a social security number on tax returns. The request is also unlike that in Massachusetts v. Dep't ofHealth & Human Services, 727 F. Supp. 35, 36 n. 2 (D. Mass. 1989). Our records request does not seek all documents related to a topic, without any defining parameters or description. Rather, it simply seeks those documents in the SEC's possession that directly concern the meeting(s) identified. In this regard, to help clarify and eliminate any dispute, we would be content to receive meeting minutes, notes or memoranda, visitors logs, attendance lists or other similar documents memorializing the meeting(s).

The opinion in Blackman v. U.S. Dep't of Justice, cited in your letter, supports our position. Despite the breadth of the request in that case and the absence of an index to facilitate the search, the Department of Justice nevertheless attempted twice to fulfill it, ultimately finding records from between 60 and 72 cases. The Department only declined to go further when doing so would require a manual search of approximately 37 million pages of documents. It was this type of request that the court found "unduly burdensome." Id. at 4-5. Moreover, the DOJ was still denied summary judgment because the court was "not entirely convinced that [it had] completely satisfied its obligations under FOIA" when it refused a third attempt, after the plaintiff agreed to a somewhat narrower request. Id. at 5.

We therefore respectfully request reconsideration of our request, which provides ample leads to search for and locate the requested documents.

v ery truly y* rs, e +ichael Lennt, Jr. Enclosure L Case 4:12-cv-00003 Document 1-7 Filed in TXSD on 01/03/12 Page 1 of 4

EXHIBIT 6 Page 1 of 3 Case 4:12-cv-00003 Document 1-7 Filed in TXSD on 01/03/12 Page 2 of 4

From: Ovall, Jeffery L. [mailto:[email protected]] Sent: Thursday, April 14, 2011 8:49 AM To: Lennon, Mike Subject: RE: Freedom of Information Act (FOIA) Request No. 11-04000

Here’s what I need to discuss: I spoke with my manager and she agrees that we should have conducted a search based on the information you provided. Therefore, we are going to send your request to the program offices listed in your letter, i.e., Corporate Finance and Trading & Markets. Weo are als going to forward it to our International Affairs office, and any other office that others may direct.

However, before we do that, we need to ask if it would be okay with you for us to assign a new FOIA control number to your case since we had already closed the FOIA case number 11‐04000. Our FOIA system is automated so it would be quicker for us to simply assign a new number to your request than reopening your old case.

If you don’t have any objection to having a new FOIA control number assigned to your request, then we will move forward right away and won’t need to discuss on the phone. But if you have any other concerns, we can still talk when you’re free.

Sorry for the trouble. Apparently, I was premature in my initial consideration of your FOIA request. My bad.

Thanks

Jeff Ovall Lead Research Specialist FOIA/Privacy Act Office Securities and Exchange Commission 100 F Street, NE Room 2702, Station Place 2 Washington, DC 20549 Phone (202) 551-6376 [email protected]

From: [email protected] [mailto:[email protected]] Sent: Thursday, April 14, 2011 9:32 AM To: Ovall, Jeffery L. Subject: RE: Freedom of Information Act (FOIA) Request No. 11-04000

Page 2 of 3 Case 4:12-cv-00003 Document 1-7 Filed in TXSD on 01/03/12 Page 3 of 4

Good morning, Mr. Ovall. I have a couple of appointments this morning but should free up after about 10:30 - 11:00 Central.

Thanks,

Mike

From: Ovall, Jeffery L. [mailto:[email protected]] Sent: Thursday, April 14, 2011 8:29 AM To: Lennon, Mike Subject: RE: Freedom of Information Act (FOIA) Request No. 11-04000

Good morning, Mr. Lennon. I left you a voice‐mail, but I’m e‐mailing in case you get this first. I spoke to my manager about your FOIA case and would like to discuss it with you. When you have a moment, please call me so that we can discuss it. My number: 202.551.6376.

Thanks

Jeff Ovall Lead Research Specialist FOIA/Privacy Act Office Securities and Exchange Commission 100 F Street, NE Room 2702, Station Place 2 Washington, DC 20549 Phone (202) 551-6376 [email protected]

From: [email protected] [mailto:[email protected]] Sent: Monday, April 11, 2011 4:18 PM To: Ovall, Jeffery L. Cc: [email protected] Subject: RE: Freedom of Information Act (FOIA) Request No. 11-04000

Dear Mr. Ovall,

Please see the attached reply to your letter of March 7, 2011. Please do not hesitate to call me (713.229.1867) if you would like to discuss the matter.

Sincerely,

Mike Lennon

From: Ovall, Jeffery L. [mailto:[email protected]] Sent: Monday, March 07, 2011 4:29 PM To: Lennon, Mike Subject: Freedom of Information Act (FOIA) Request No. 11-04000 Page 3 of 3 Case 4:12-cv-00003 Document 1-7 Filed in TXSD on 01/03/12 Page 4 of 4

Good afternoon, Mr. Lennon. Please see the attached response to the FOIA request you submitted to the SEC on February 18, 2011.

Sincerely,

Jeff Ovall Lead Research Specialist FOIA/Privacy Act Office Securities and Exchange Commission 100 F Street, NE Room 2702, Station Place 2 Washington, DC 20549 Phone (202) 551-6376 [email protected]

Confidentiality Notice: The information contained in this email and any attachments is intended only for the recipient[s] listed above and may be privileged and confidential. Any dissemination, copying, or use of or reliance upon such information by or to anyone other than the recipient[s] listed above is prohibited. If you have received this message in error, please notify the sender immediately at the email address above and destroy any and all copies of this message.

Case 4:12-cv-00003 Document 1-8 Filed in TXSD on 01/03/12 Page 1 of 3

EXHIBIT 7 Case 4:12-cv-00003 Document 1-8 Filed in TXSD on 01/03/12 Page 2 of 3

UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATION PLACE 100 F STREET, NE WASHINGTON, DC 20549-2736

Office of FOIA Services

July 07, 2011

Mr. Michael P Lennon Baker Botts, LLP One Shell Plaza 10 Louisiana Houston, TX 77002

RE: Freedom of Information Act (FOIA), 5 U.S.C. § 552 Request No. 11-05724-FOIA

Dear Mr. Lennon:

This is our final response to your request for “records related to a meeting that Securities and Exchange Commission staff had with the management of OAO NK Yukos, PricewaterhouseCoopers, and Akin Gump Strauss Hauer & Feld LLP,” that occurred sometime “between May 2002 and March 2003.”

After consulting with Commission staff, we have determined to withhold any correspondence that may be responsive to your request, under 5 U.S.C. § 552(b)(4), 17 CFR § 200.80(b)(4). Any responsive records would be withheld under Exemption 4 since they contain confidential commercial or financial information, the release of which could cause substantial competitive harm to the submitter. Under Exemption 4, this material would also be withheld to protect other governmental interests, such as compliance and program effectiveness.

You have the right to appeal our decision, to our General Counsel under 5 U.S.C. § 552(a)(6), 17 CFR § 200.80 (d)(5) and (6). Your appeal must be in writing, clearly marked "Freedom of Information Act Appeal," and should identify the records at issue. The appeal may include facts and authorities you consider appropriate.

Case 4:12-cv-00003 Document 1-8 Filed in TXSD on 01/03/12 Page 3 of 3

Mr. Michael Lennon 11-05724-FOIA July 07, 2011 Page 2

Send your appeal to the Office of FOIA Services, Securities and Exchange Commission located at Station Place, 100 F Street NE, Mail Stop 2736, Washington, D.C. 20549, or deliver it to Room 1120 at that address. Also, send a copy to the SEC Office of General Counsel, Mail Stop 9612, or deliver it to Room 1120 at the Station Place address.

If you have any questions, please contact me at [email protected] or (202) 551-6376. You may also contact me at [email protected] or (202) 551-7900.

Sincerely,

Jeff Ovall FOIA Branch Chief

Case 4:12-cv-00003 Document 1-9 Filed in TXSD on 01/03/12 Page 1 of 4

EXHIBIT 8 Case 4:12-cv-00003 Document 1-9 Filed in TXSD on 01/03/12 Page 2 of 4 ONE SHELL PLAZA ABU DHABI 910 LOUISIANA AUSTIN HOUSTON, TEXAS BEUI NG BAKER BOTTS LIP 77002-4995 DALLAS DUBAI TEL +1 713.229.1234 HONG KONG FAX +1 713.229.1522 HOUSTON www.bakerbotis.com LONDON MOSCOW July 21, 2011 NEW YORK PALO ALTO BY EMAIL AND FIRST CLASS MAIL RIYADH WASHINGTON Michael P. Lennon, Jr. Mr. Jeffrey L. Ovall TEL +1 713.229.1867 FAX +1 713.229.7867 FOIA Branch Chief [email protected] Office of FOIA Services Securities and Exchange Commission 100 F St, NE Washington, DC 20549-2736

Re: Freedom of Information Act Request No. 11-05724-FOIA

Dear Mr. Ovall:

Thank you for your letter of July 7, 2011. After carefully considering your letter, as well as 5 U.S.C. §552(b)(4) and 17 C.F.R. §200.80(b)(4), we respectfully request that the SEC staff reconsider application of Exemption 4 to the minutes, notes or memoranda, visitor logs, attendance lists, other similar documents memorializing the meetings and the materials provided to the SEC by Yukos Oil.

Our prior communications may not have made clear that Yukos Oil ceased to exist November 21, 2007.1 Consequently, issues of privilege and confidentiality no longer seem to apply. We would hope that this fact ends the matter and responsive documents will be produced.

If not, we respectfully suggest that Exemption 4 does not apply to the information that we requested. FOIA's statutory exemptions must be narrowly construed, John Doe Agency v. John Doe Corp., 493 U.S. 146, 152 (1989), and information withheld under Exemption 4 must meet three criteria: (1) it is commercial or financial information; (2) obtained from a person; and (3) privileged or confidential. 5 U.S.C. §552(b)(4); Getman v. N.L.R.B., 450 F.2d 670, 673 (D.C. Cir. 1971). We do not know, but have no reason to doubt that the records the SEC has collected contain commercial or financial information. We believe, however, that the second and third criteria are not met.

Information "obtained from a person" requires that the information withheld under the exemption must have been produced outside the agency and provided to the agency. Gulf Western Indus., Inc. v. U.S., 615 F.2d 527 (D.C. Cir. 1979). If the information is created by the agency, it does not fall within the exemption. E.g., Gruman Aircraft Eng'g Corp. v. Renegotiation Bd, 425 F.2d 578 (D.C. Cir. 1970). As previously indicated, we are seeking meeting minutes, notes or memoranda, visitor logs, attendance lists or other similar documents memorializing the meeting(s). Such documents, which we expect were produced by the agency, are not properly withheld under Exemption 4 and should be released.

I See, e.g., Dennis Zawacki II, Yukos legally ceases to exist after Moscow court action, JURIST LEGAL NEWS & RESEARCH (Nov. 22, 2007), http://jurist.org/paperchase/2007/11/yukos-legally-ceases-to-exist-after.php; Yukos oil firmformally ceases to exist, RIA NCWOSTI (Nov. 22, 2007), http://en.riansu/business/20071122/89069523.html. Case 4:12-cv-00003 Document 1-9 Filed in TXSD on 01/03/12 Page 3 of 4

BAKER BOITS LL P Mr. Jeffrey L. Ovall 2 July 21, 2011

Naturally, the SEC's files might contain, and the meeting minutes, notes, memoranda or similar documents might attach or refer to information provided by Yukos Oil. Information that was provided to the agency by an outside source must still meet the third criterion of 5 U.S.C. §552(b)(4), namely that it is privileged or confidential.

As a general rule, a defunct company cannot assert a privilege. See City ofRialto v. US. Dept. ofDef, 492 F. Supp. 2d 1193, 1199-1200 (C.D. Cal. 2007). See also Edgewater Med. Ctr. v. Rogan, Slip Op., 2010 WL 2711448 at *5 (N.D. Ill. July 6, 2010); TAS Distrib. Co., Inc. v. Cummins Inc., 2009 WL 3255297 at *1-2 (C.D. Ill. Oct. 7, 2009); Gilliland v. Geramita, 2006 WL 2642525 at *4 (W.D. Pa. Sep. 14, 2006); Lewis v. US., 2004 WL 3203121 at *5 (W.D. Tenn. Dec. 7, 2004). Indeed, "[n]o real purpose would be served by continuing the privilege after operations cease, as the corporation would no longer have any goodwill or reputation to maintain." Gilliland at *4. It follows, therefore, that the SEC should be reluctant to maintain a nondisclosure determination on the basis of Exemption 4, particularly in view of the strong overall presumption in favor of disclosure. See, e.g., Dept. ofAir Force v. Rose, 425 U.S. 352, 361 (1976); Barack Obama, Freedom of Information Act: Memorandum for the Heads of Executive Departments and Agencies, Jan. 21, 2009 (encouraging agencies to administer the Act "with a clear presumption" for disclosure.).

The information is not confidential under FOIA in any event. Information is confidential only "if disclosure would (1) impair the agency's ability to get [the necessary] information in the future or (2) cause substantial competitive harm to the entity that submitted the information." Judicial Watch, Inc. v. FDA, 449 F3d 141, 148 (D.C. Cir. 2006); Nat'l Parks & Conserv. Ass 'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974). Your letter indicates that "substantial competitive harm to the submitter" is the principal basis for the staff' s nondisclosure determination based on Exemption 4. However, a defunct company has no competitive position and simply cannot suffer competitive harm. It therefore would seem impossible to show, as an agency must, "a likelihood of substantial competitive injury if the information were released." Lion Raisins v. US. Dep't ofAgric., 354 F.3d 1072, 1079 (9th Cir. 2004).

As a secondary rationale, your letter makes reference to the first prong of the confidentiality test, i.e., "other governmental interests, such as compliance and program effectiveness." While this is, in principle a valid reason under existing law, a conclusory statement that such ability will be impaired is insufficient to invoke the Exemption. See Wash. Post Co. v. U S. Dept. ofHealth & Human Servs., 690 F.2d 252, 269 (D.C. Cir. 1982).

We also respectfully disagree that the release of this information can have any effect on "compliance and program effectiveness" or on the SEC's ability to obtain necessary information in the future. This test is intended to foster a spirit of candor and full disclosure between regulated entities and the SEC, allowing the SEC to obtain information from these regulated entities voluntarily, without resorting to mandating additional disclosure. See, e.g., Critical Mass Energy Project v. Nuclear Reg. Com 'n, 975 F.2d 871, 873 (D.C. Cir. 1992). The information we have requested concerning Yukos does not fit this category for at least the following reasons. First, the SEC possessed no oversight over Yukos when Yukos provided the information. Second„ because Yukos ultimately chose not to become subject to SEC regulation, disclosure of Case 4:12-cv-00003 Document 1-9 Filed in TXSD on 01/03/12 Page 4 of 4

BAKER BOTTS LI P Mr. Jeffrey L. Ova11 3 July 21, 2011

the information that it provided the SEC can do nothing to impair compliance and program effectiveness, or the SEC's ability to get information to which it is entitled from entities that are subject to its oversight.

For these reasons, we kindly request reconsideration of the staff s decision to withhold the documents pursuant to Exemption 4.

Very truly yi'ii, lii #iichael Le on,if4 Case 4:12-cv-00003 Document 1-10 Filed in TXSD on 01/03/12 Page 1 of 2

EXHIBIT 9 Case 4:12-cv-00003 Document 1-10 Filed in TXSD on 01/03/12 Page 2 of 2

UNITED STATES SECURITIES AND EXCHANGE COMMISSION STATION PLACE 100 F STREET, NE WASHINGTON, DC 20549-2736

Office of FOIA Services

July 28, 2011

Mr. Michael P Lennon Baker Botts, LLP One Shell Plaza 10 Louisiana Houston, TX 77002

RE: Freedom of Information Act (FOIA), 5 U.S.C. § 552 Request No. 11-05724-FOIA

Dear Mr. Lennon:

This is in response to your letter of July 21, 2011, requesting that we reconsider the final determination expressed in our letter of July 7, 2011.

After some consideration, we have decided to maintain the position stated in our previous response. Please be advised that you may avail yourself of the appeal rights presented in our letter of July 7, 2011.

If you have any questions, please contact me at [email protected] or (202) 551-6376. You may also contact me at [email protected] or (202) 551-7900.

Sincerely,

Jeff Ovall FOIA Branch Chief

Case 4:12-cv-00003 Document 1-11 Filed in TXSD on 01/03/12 Page 1 of 7

EXHIBIT 10 Case 4:12-cv-00003 Document 1-11 Filed in TXSD on 01/03/12 Page 2 of 7

FREEDOM OF INFORMATION ACT APPEAL

Request for administrative review of Freedom of Information Act Request No. 11-05724-FOIA

To the

OFFICE OF FREEDOM OF INFORMATION ACT SERVICES

and

GENERAL COUNSEL, SECURITIES AND EXCHANGE COMMISSION

August 23, 2011 BAKER BOTTS L.L.P. Michael P. Lennon, Jr. Benjamin A. Geslison One Shell Plaza 910 Louisiana Houston, Texas 77002 713.229.1234 Telephone 713.229.1522 Facsimile Case 4:12-cv-00003 Document 1-11 Filed in TXSD on 01/03/12 Page 3 of 7

General Counsel Cahn:

We appeal to you because we do not agree with the staff's recent denial of our FOIA request. Specifically, we cannot appreciate any agency interest in withholding documentation provided to the SEC eight years ago by a company that no longer exists and that would have contained information that the company anticipated disclosing to the public in accordance with registration and listing requirements of the agency. Therefore, we submit this request for administrative review pursuant to 5 U.S.C. 552(a)(6) and 17 C.F.R. 200.80 (d)(5) and (6). We believe that the denial of request No. 11-05724-FOIA (originally request No. 11-04000- FOIA) was improper and should be reversed. The records requested are not exempt from disclosure and should be released.

BACKGROUND

I. Yukos

1 Prior to its bankruptcy and ultimate dissolution in 2007, OAO NK Yukos (Yukos) considered listing its shares in the U.S. under either the 1933 or 1934 Act. As part of its decision making process, Yukos met with the representatives of the Securities and Exchange Commission sometime between May 2002 and March 2003 to discuss the requirements for its shares to be listed on a U.S. exchange and registered with the SEC so that the shares could be sold. Also present at the meeting(s) were Yukos's auditors, Pricewaterhouse Coopers ("PWC") and its legal counsel, Akin Gump Strauss Hauer & Feld LLP ("Akin Gump"). As we have confirmed from 2 further research subsequent to our FOIA request, the topics of discussion were disclosure and reporting requirements, including the appropriate assessment of reserves, the disclosure of potential issues related to the Yukos privatization, the affiliate status of several related entities, and taxation and transfer pricing issues that were facing Yukos.

The SEC has confirmed the existence of responsive records, which we expect include: (1) SEC-created documents such as attendance lists, meeting minutes and notes, visitor logs, and similar documents; (2) communications between Yukos and the SEC that included information that Yukos provided; and (3) documents prepared by Yukos for SEC review, such as a "draft" F- 1 that Yukos submitted to the SEC in March 2003 as well as "drafts" of other disclosure documentation submitted for "preliminary review." In testimony disclosed publicly, Mr. Bruce Misamore, former Yukos CFO and board member stated that these documents disclosed Yukos's "accounting, finance and governance practices, and its internal controls."3 Ms. Sarah Carey, a former Yukos board member testified similarly that this documentation, including the draft F-1, "4 "had been submitted to the SEC for preliminary review, despite what we understand to be the

See, e.g., Dennis Zawacki II, Yukos legally ceases to exist after Moscow court action, JURIST LEGAL NEWS & RESEARCH (Nov. 22, 2007), http://juristorg/paperchase/2007/11/yukos-legally-ceases-to-exist-after.php; Yukos oilfirm formally ceases to exist, RIA NOvOSTI (Nov. 22, 2007), http://en.rian.ru/business/20071122/89069523.html. 2 See, e.g., Record of Interview by Counsel of Bruce Misamore (certified July 7, 2009) at 5, available at http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/Bruce%20Misamore%20Deposition.pdf (attached as Exhibit 8) and Record of Interview by Counsel of Sarah Carey (certified Mar. 16, 2009) at 12, available at http://www.khodorkovskycenter.com/sites/khodorkovskycenter.com/files/Sarah%20Carey%20Deposition.pdf (attached as Exhibit 9). 3 Exhibit 8, at p. 5. 4 Exhibit 9, at p. 12.

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SEC's policy not to accept or pre-clear any registration statements or other disclosures in advance of their public filing. Ultimately, Yukos never registered its shares or obtained a listing on any U.S. exchange, and, as noted, was dissolved in 2007.

II. FOIA Process

On February 18, 2011, Baker Botts, L.L.P. submitted a FOIA request to the SEC pursuant to 5 U.S.C. 552, requesting any and all documents relating to the meeting(s). Ex. 1. On March 7, 2011, the SEC's Office of FOIA Services ("Office") returned a brief response summarily rejecting the request. Ex. 2. Baker Botts responded with clarifying information and with appropriate legal authority explaining why the request was proper, Ex. 3, whereupon the research specialist in charge of the request responded that he "was premature in [his] initial consideration of [the] FOIA request." Ex. 4. Because of this premature rejection, request No. 11-04000-FOIA already had been closed. Consequently, on April 14, 2011, two months after our request originally was submitted, a new request was opened, No. 11-05724-FOIA.

After another three months, the Office finally responded with its findings. Ex. 5. It had found responsive documents, but refused to release them, invoking FOIA Exemption 4. Id. On July 21, 2011, Baker Botts again responded, explaining why Exemption 4 did not apply to these documents, Ex. 6, but the Office refused to reconsider its decision to withhold them. Ex. 7. That refusal prompted this request for administrative review.

ARGUMENT

I. The SEC may not withhold documents under Exemption 4 in this instance

The documents may not be withheld under Exemption 4 for two reasons. First, the exemption does not apply to agency created documents. Second, the documents that the SEC received from Yukos or its agents are neither privileged nor confidential as FOIA is interpreted.

A. Applicable Standards President Obama has instructed agencies to administer the Act "with a clear presumption" for disclosure and to "act promptly and in a spirit of cooperation, recognizing that such agencies are servants of the public." Barack Obama, Freedom of Information Act: Memorandum for the Heads of Executive Departments and Agencies, Jan. 21, 2009. Similarly, the United States Supreme Court "repeatedly has stressed the fundamental principle of public access to Government documents that animates the FOIA." John Doe Agency v. John Doe Corp., 493 U.S. 146, 151 (1989). The court has declared that:

[w]ithout question, the Act is broadly conceived. It seeks to permit access to official information long shielded unnecessarily from public view and attempts to create a judicially enforceable public right to secure such information from possibly unwilling official hands. The Act's basic purpose reflected 'a general philosophy of full agency disclosure unless information is exempted under clearly delineated statutory language.'

Id. at 151-52 (quoting Dep't ofAir Force v. Rose, 425 U.S. 352, 360-61 (1976) and S. Rep. No. 89-813 (1965)). FOIA's disclosure provisions are to be read expansively, while its exemptions are to be construed narrowly. Id. ("But these limited exemptions [in the Act] do not obscure the

2 Case 4:12-cv-00003 Document 1-11 Filed in TXSD on 01/03/12 Page 5 of 7

basic policy that disclosure, not secrecy, is the dominant objective of the Act. Accordingly, these exemptions must be narrowly construed.") (internal citations omitted) (emphasis added). See also Dep't of Justice v. Tax Analysts, 492 U.S. 136, 151 (1989) (given FOIA's "goal of broad disclosure, these exemptions have been consistently given a narrow compass").

An "agency seeking to withhold information under an exemption to FOIA has the burden of proving that the information falls under the claimed exemption." Lewis v. IRS, 823 F.2d 375, 378 (9th Cir.1987). The Office of FOIA Services invoked Exemption 4, primarily asserting that release of the responsive information would "cause substantial competitive harm to the submitter." Ex. 5. Secondarily, the Office asserted that disclosure would adversely affect "governmental interests, such as compliance and program effectiveness." Id. In accordance with 5 U.S.C. 552(b)(4) and 17 C.F.R. 200.80(b)(4), information withheld under Exemption 4 must satisfy three requirements: (1) it is commercial or financial information; (2) obtained from a person; and (3) privileged or confidential. 5 U.S.C. §552(b)(4); Getman v. N.L.R.B., 450 F.2d 670, 673 (D.C. Cir. 1971). The responsive records identified and collected by the SEC may not be withheld because the SEC cannot meet its burden of proving criteria 2 and/or 3.

B. Exemption 4 does not apply to SEC-created documents The second criterion of Exemption 4, that information be "obtained from a person, requires that the information withheld under the exemption must have been produced outside the agency and provided to the agency by a non-governmental entity. Gulf Western Indus., Inc. v. United States, 615 F.2d 527, 529 (D.C. Cir. 1979). If the information is created by the agency, or received from another government entity, it does not fall within the exemption and therefore must be disclosed. See, e.g., Gruman Aircraft Eng'g Corp. v. Renegotiation Bd, 425 F.2d 578, 582 (D.C. Cir. 1970). Therefore, any responsive documents prepared by the SEC, such as meeting minutes or other memoranda describing the meeting(s), are not protected from disclosure by Exemption 4 and must be released.

C. Records submitted to the SEC by Yukos are not privileged or confidential In addition to the SEC-created documents, the FOIA request also sought records provided to the SEC by Yukos or its agents, including communications between the SEC and Yukos to which those records might have been attached. Respectfully, the SEC cannot meet its burden of proving the third criterion, namely that the records are "privileged or confidential."

1. Privilege no longer exists for Yukos "Several courts have agreed" that a defunct company cannot assert a privilege. See City ofRialto v. United States Dep't. ofDef, 492 F. Supp. 2d 1193, 1199-1200 (C.D. Cal 2007). See also Edgewater Med. Ctr. v. Rogan, Slip Op., 2010 WL 2711448 at *5 (N.D. III. July 6, 2010); TAS Distrib. Co., Inc. v. Cummins Inc., 2009 WL 3255297 at *1-2 (C.D. Ill. Oct. 7, 2009); Gilliland v. Geramita, 2006 WL 2642525 at *4 (W.D. Pa. Sep. 14, 2006); Lewis v. United States, 2004 WL 3203121 at *5 (W.D. Tenn. Dec. 7, 2004). The reasoning behind this general rule is enunciated in a treatise cited in the Rialto case:

Once the corporate entity has ceased to exist,... the privilege dies with the entity.... Since the logic for even extending the attorney-client privilege to corporate entities is suspect, because it gives the protection to a fictitious legal

3 Case 4:12-cv-00003 Document 1-11 Filed in TXSD on 01/03/12 Page 6 of 7

entity that cannot speak, and provides no direct protection to the individuals who have to speak for the entity, the termination of the entity's protection may be reasonable.

PAUL RICE, Attorney-CLIENT PRIVILEGE IN THE UNITED STATES, 2.5 (2d ed. 2007). Moreover, "[n]o real purpose would be served by continuing the privilege after operations cease, as the corporation would no longer have any goodwill or reputation to maintain." Gilliland, 2006 WL 2642525 at *4. Consequently, any information that Yukos or its agents provided to the SEC is no longer privileged.

2. The records are not confidential under FOIA in any event Information is confidential only "if disclosure would (1) impair the agency's ability to get information in the future or (2) cause substantial competitive harm to the entity that submitted the information." Nat'l Parks & Conserv. Ass 'n v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974).5 The National Parks test for confidentiality, and the various attempts to clarify it (e.g., Critical Mass Energy Project v. Nuclear Regulatory Comm'n, 975 F.2d 871 (D.C. Cir. 1992) (en bane)), is animated by the principle of balancing FOIA' s disclosure mandate with agencies' interest in program effectiveness and the regulated entities' interest in protecting their market position. Withholding the information in this case upsets that balance because it vitiates the disclosure mandate while doing nothing to protect the agency's or the former Yukos's interests. The burden for proving that information is confidential under Exemption 4 is on the agency. GC Micro Corp. v. Def Logistics Agency, 33 F.3d 1109, 1115 (9th Cir. 1994).

The SEC's invocation of Exemption 4 rested primarily on the second prong of the National Parks test: to prevent "substantial competitive harm to the submit-ter." Secondarily, the Office added that it was withholding the documents to "protect other governmental interests, such as compliance and program effectiveness"—ostensibly referencing the first prong. In reality, the documents cannot properly be withheld under either prong.

a. Yukos cannot sustain "substantial competitive harm"

To withhold information as confidential under the "substantial competitive harm" prong of the National Parks test, an agency must show "that there is (1) actual competition in the relevant market, and (2) a likelihood of substantial competitive injury if the information were released." Lion Raisins, 354 F.3d at 1079. Yukos no longer exists and therefore does not compete in any market. Yukos is thus incapable of sustaining any competitive injury, let alone "substantial competitive injury" if the information is released. It is therefore impossible for the SEC to carry its burden of showing substantial competitive harm to Yukos. Consequently, the SEC cannot rely upon this prong in invoking Exemption 4.

Furthermore, the information that Yukos provided to the SEC—registration statements, draft prospectuses, and other disclosures—was information that Yukos itself planned ultimately to disclose to the public. Yukos delivered the disclosures to the SEC for "preliminary review"

5 The National Parks test has been adopted broadly. See, e.g., Judicial Watch, Inc. v. FDA, 449 F3d 141, 148 (D.C. Cir. 2006); Lion Raisins v. US. Dept. ofAgric., 354 F.3d 1072, 1079 (9th Cir. 2004); United Tech. Corp. by Pratt & Whitney v. Fed. Aviation Admin., 102 F.3d 688, 692 (2d Cir. 1996); Cont'l Oil Co. v. Fed. Power Comm 'n, 519 F.2d 31, 35 (5th Cir. 1975).

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and approval for filing. Exs. 8 and 9. It is difficult to see how disclosure through FOIA of information that a company planned to disclose to the public would cause the company substantial competitive harm even if it were not defunct.

b. Release of the records will have no effect on "compliance and program effectiveness" A conclusory statement that an agency's ability to obtain information in the future will be impaired is insufficient to invoke Exemption 4. See Wash. Post Co. v. U S. Dept. ofHealth & Human Servs., 690 F.2d 252, 269 (D.C. Cir. 1982). Instead, the agency must provide "detailed factual justification for withholding under Exemption 4." Id. (citing Pacific Architects & Eng'rs the Inc. v. Renegotiation Bd, 505 F.2d 383, 385 (D.C. Cir. 1974)). As explained below, information that Yukos provided to the SEC is not of a character that implicates "program effectiveness" because it is mandatory information that the SEC can compel from any potential registrant. Thus the SEC caimot provide a detailed factual justification for withholding documents on the ground that the release would affect its ability to get information in the future.

Yukos and its agents met with the SEC to discuss registering Yukos shares for sale in the U.S. The SEC states on its website that it accomplishes the goals of the 1933 Act "primarily by requiring that companies disclose important financial information through the registration of securities." Registration Under the Securities Act of 1933, SEC.gov, http://www.sec.gov/ answers/regis33.htm (emphasis added). The F-1 registration statement, for example, is just such a required document. The discussions also related to Yukos obtaining a listing on a U.S. exchange. Yukos therefore was also statutorily bound to disclose the information listed in 12 of the 1934 Act. Because the statutes mandate that companies disclose the type of information that Yukos provided the SEC, no danger exists to the SEC's ability to obtain this information from future registrants. Consequently, the SEC cannot meet its burden and the information cannot be withheld as confidential under Exemption 4.

CONCLUSION

The decision by the SEC's Office of FOIA Services to withhold the requested information reads Exemption 4 much more broadly than is permissible. The decision relies upon vague and conclusory assertions regarding the effect of disclosure. These broad and vague assertions do not carry weight under the law and are contradicted by the facts known regarding the company's status and the information submitted. Affirming the Office of FOIA Services' invocation of Exemption 4 would therefore conflict with the mandate for expansive disclosure and limited exceptions. Consequently, its decision should be rejected and the Office of FOIA Services should be ordered to release the documents that the Office identified as responsive to Request No. 11-05724-FOIA.

F•crIpotfilltv Yniirc J. N..

//fOr, 'ichael Le on, Jr.

5