Case 1:04-cv-05243-WHP Document 4 Filed 08/26/04 Page 1 of 27 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x ROXWELL HOLDINGS LIMITED, : Civil Action No. 04-cv-5243 (WHP) Individually and on Behalf of All Others : Similarly Situated, : CLASS ACTION : Plaintiff, : FIRST AMENDED COMPLAINT FOR : VIOLATIONS OF THE FEDERAL vs. : SECURITIES LAWS YUKOS OIL COMPANY, GROUP : MENATEP LIMITED, YUKOS : UNIVERSAL LIMITED, : PRICEWATERHOUSE COOPERS LLP, : MIKHAIL KHODORKOVSKY, PLATON : LEBEDEV, BRUCE MISAMORE, VASILY : SHAKNOVSKY AND CURTIS & CO., : Defendants. : : : x DEMAND FOR JURY TRIAL This writing/publication is a creative work fully protected by all applicable copyright laws, as well as by misappropriation, trade secret, unfair competition and other applicable laws. The authors of this work have added value to the underlying factual materials herein through one or more of the following: unique and original selection, coordination, expression, arrangement, and classification of the information. No copyright is claimed in the text of statutes, regulations, and any excerpts from analysts’ reports or news articles quoted within this work. Copyright© 2004 by William S. Lerach and Lerach Coughlin Stoia & Robbins LLP. William S. Lerach and Lerach Coughlin Stoia & Robbins LLP will vigorously defend all of their rights to this writing/publication. All rights reserved – including the right to reproduce in whole or in part in any form. Any reproduction in any form by anyone of the material contained herein without the permission of William S. Lerach and Lerach Coughlin Stoia & Robbins LLP is prohibited. Case 1:04-cv-05243-WHP Document 4 Filed 08/26/04 Page 2 of 27 INTRODUCTION & OVERVIEW 1. This is a securities fraud class action on behalf of purchasers of the common stock of Yukos Oil Company’s (“Yukos” or the “Company”) or Yukos American Depository Shares (collectively, “Yukos’ Securities”), between February 13, 2003 and October 25, 2003, inclusive (the “Class Period”), seeking to pursue remedies under the Securities Exchange Act of 1934 (the “Exchange Act”). 2. On October 25, 2003, the market for Yukos’ Securities (one of Russia’s largest publicly-owned oil companies), was crushed after it was revealed that Russian authorities had arrested the Company’s largest shareholder and CEO, defendant Mikhail Khodorkovsky, and had charged him with fraud, embezzlement and evading taxes on hundreds of millions of dollars that was owed to the government. At this time, the Russian authorities also announced that they would also pursue criminal prosecutions against other senior Yukos officials. 3. Days later, the seriousness of the Yukos situation worsened for investors after it was also reported that Russian authorities had seized control of defendant Khodorkovsky’s 44% interest in Yukos. By this time, Russian authorities estimated that Yukos and defendant Khodorkovsky had failed to pay at least US$1 billion in taxes , and that the seized shares would be held as “security against material damage.” According to at least one analyst at a Russian brokerage firm, this asset seizure was “in line with our worst-case scenario for Yukos.” In addition, it was also reported that London bankers, upon hearing of this asset seizure, speculated that this event could threaten at least $1 billion in loans to the Company. 4. Shortly thereafter, the Department of Information and Public Relations of The General Prosecutors Office of the Russian Federation, completed a 30-page report which accused defendants Khodorkovsky and Platon Lebedev, both major shareholders of the Company, with a host of fraud, tax evasion and criminal activities dating back to the early 1990’s, including: - 1 - Case 1:04-cv-05243-WHP Document 4 Filed 08/26/04 Page 3 of 27 • That Khodorkovsky had acted in concert with other members of the Company and members of Menatep Bank (a bank founded by defendant Khodorkovsky), to operate a host of shell companies, the sole purpose of which was to illegally avoid the payment of taxes – the US equivalent of an illegal tax shelter scheme. That Khodorkovsky and the other defendants, together with the sham general directors of the shell companies under their control, fraudulently engaged in the transference of huge amounts of funds through such companies for the sole purpose of avoiding the payment of taxes in violation of Russian law. That Khodorkovsky and Lebedev engaged in various fraudulent schemes involving a host of companies and the same time they falsely projected that they were “new” Russian managers who no longer conducted themselves as they did in the 1990’s. That Khodorkovsky and Lebedev were accused of stealing tens or hundreds of millions of dollars directly from the Company and its subsidiaries. 5. Ultimately at year end 2003, the Russian Tax Ministry, after conducting a field tax audit for the tax year 2000, served Yukos with a tax bill for $3.4 billion for back taxes - $1.6 billion for unpaid taxes for the year and $1.8 billion for interest and penalties. The Tax Ministry found that defendants created a complex network of seventeen “front companies” or “shell companies” to evade taxes on the production, refining and sale of oil and oil products. These “front companies” were registered in regions with preferential tax treatment to enable these companies to receive special tax exemptions in order to minimize Yukos’ tax liability. As these shell companies were not separate legal entities but rather Yukos maintained control over the operations of these organizations, Yukos was required to recognize the full amount of the receipts associated with these transactions for its own taxes purposes and further it was not entitled to the preferential tax treatment these shell organizations were granted. Accordingly, Yukos’ tax liability was materially understated and its earnings were materially overstated for the period in violation of GAAP. 6. It is now projected that through this abusive tax scheme Yukos has avoided the payment of at least US$5 billion and as much as US$10 billion – the minimum amount of which was - 2 - Case 1:04-cv-05243-WHP Document 4 Filed 08/26/04 Page 4 of 27 sufficient to push the Company into bankruptcy. By late October, shares of Yukos’ Securities traded down over 30% from their Class Period high reached only a few weeks earlier. 7. As a result of the revelation of defendants’ wrongdoing, investors have suffered massive damages as the prices of their Yukos equity shares have plummeted. In addition to the foregoing, defendants have also now jeopardized the continued financial and operational well being of Yukos. Billions of dollars in Company debt and pending loans are now in jeopardy, and the Russian government has stated that it may assume defendant Khodorkovsky’s entire equity share as punishment for failing to pay the billions of dollars in taxes owed to that government. JURISDICTION AND VENUE 8. The claims asserted herein arise under and pursuant to Sections 10(b) and 20(a) of the Exchange Act [15 U.S.C. §§78j(b) and 78t(a)] and Rule 10b-5 promulgated thereunder by the United States Securities and Exchange Commission (“SEC”) [17 C.F.R. §240.10b-5]. 9. This Court has jurisdiction over the subject matter of this action pursuant to 28 U.S.C. §§1331 and 1337, and Section 27 of the Exchange Act [15 U.S.C. §78aa]. 10. Venue is proper in this District pursuant to Section 27 of the Exchange Act, and 28 U.S.C. §1391(b). Many of the acts and practices complained of herein occurred in substantial part in this District. 11. In addition, pursuant to the provisions of the Agreement governing the ADSs, Yukos has consented to personal jurisdiction for claims arising from violation of the federal securities laws in the federal district court located in Manhattan and has agreed to waive various objections to litigation in this court, including forum non conveniens . 12. In connection with the acts alleged in this complaint, defendants, directly or indirectly, used the means and instrumentalities of interstate commerce, including, but not limited to, the mails, interstate telephone communications and the facilities of the national securities markets. - 3 - Case 1:04-cv-05243-WHP Document 4 Filed 08/26/04 Page 5 of 27 PARTIES 13. Plaintiff ROXWELL HOLDINGS LIMITED (“Roxwell”) as set forth in the accompanying certification, incorporated by reference herein, purchased Yukos Securities at artificially inflated prices during the Class Period and has been damaged thereby. 14. Defendant YUKOS OIL COMPANY (“Yukos”) is a joint stock company organized under the laws of the Russian Federation. In addition to trading on the Russian stock exchange and certain other European exchanges, Yukos Securities shares of the Company also trade as American Depositary Shares (“ADS”) on the Over the Counter Exchange. Each ADS unit represents 4 shares of Yukos common stock. Yukos is a leading Russian vertically-integrated oil company. 15. Defendant YUKOS UNIVERSAL LIMITED (“Yukos Universal”) is a holding company organized under the laws of the Isle of Man. During the Class Period, Yukos Universal owned and/or controlled at least 61% of the outstanding shares of the Company. Yukos Universal is owned and/or controlled by defendant Khodorkovsky as a result of his ownership and/or control over Menatep Limited. 16. Defendant MENATEP LIMITED (together with its subsidiaries and or successors, (“Menatep”) is a limited liability company organized under the laws of Gibraltar. During the Class Period, Menatep owned and/or controlled 100% of Yukos Universal, which in turn was owned and/or controlled by defendant Khodorkovsky. 17. Defendant PRICEWATERHOUSECOOPERS INTERNATIONAL LIMITED, head- quartered in New York City, New York, is a professional services organization with member firms around the world, including members in the United States and New York. Defendants PricewaterhouseCoopers LLP (U.K.), PricewaterhouseCoopers LLP (U.S.A.) and PricewaterhouseCoopers Russia are part of PricewaterhouseCoopers International Limited (collectively with PricewaterhouseCoopers International Limited “PWC”).