Tuesday, October 17, 2006


Below is an article I found in my hometown newspaper regarding the experience a local man had while working with a Russian oil company. If you think things have really changed in the former Soviet Union, think again, and read what Vladimir Putin has been up to. Thank your lucky stars you're in the U.S.A.

Russian oil firm's demise detailed



Bruce Misamore's Houston home was broken into recently and his company computer was stolen. But at least he's not serving time in an eastern Siberian prison like his former boss.

Misamore, a native and a former Marathon Oil employee, was the chief financial officer of Yukos, Russia's second largest oil company, for several years.

That job ended in December 2005 when the Russian government made its move to take over the ultra-lucrative business in what industry experts and world government leaders viewed as a shady, retaliatory political maneuver.

Russian Mikhail Khodorkovsky and his banking empire, Menatep, once owned Yukos, but the former billionaire is now serving an eight-year prison sentence in Siberia and living next to a radium mine, Misamore told the Rotary Club on Monday.

"In the old days," Misamore said, the Russian government "would just lop your head off or something and be done with it. Radiation poisoning must be a new technique they're using."

Born in here in 1950, Misamore went on to serve in financial executive positions at companies like Marathon Oil and Pennzoil before becoming chief financial officer for Yukos in 2001.

Misamore spoke to Rotary members Monday about the downfall of Yukos, and shared his opinions on Russia's economic and political situation, which he doesn't view favorably.

"It's a tragic story," Misamore said of both Yukos' demise and the former Soviet Union as a whole.

"Russia has definitely turned around. It's regressed significantly. Russia ranks right down there with Somalia," he maintained.

It hasn't always been this bad, he said.

In fact, Misamore said he accepted the job at Yukos in the first place because he and Khodorkovsky saw progress and optimism for the country's future.

"It appeared to me, after President (Vladimir) Putin took office, that Russia was turning around and there was real reform going on. They wanted to compete with western oil companies and they needed western talent to do so," Misamore said.

Yukos reformed its accounting practices to comply with western standards, and Price Waterhouse Coopers was the company's auditor. By the end of 2003 the oil giant was worth $27 billion.

"We embarked on trying to create the best company in Russia from a western standpoint. We were leading Russia in the idea of corporate governance. We won all the awards in the investor relations field. We were leading everyone forward," said Misamore.

At his financial height, Khodorskovsky himself, thanks to soaring oil profits and Yukos' success, was worth $14 billion, according to Forbes magazine.

The trouble began that same year when Yukos planned on merging with a Russian petroleum company called Sibneft.

"Very shortly after that Mikhail became concerned; Putin was putting his buddies, who are ex-KGB and ex-military guys, in the Kremlin. Mikhail decided to start contributing personally to (political) candidates opposing Putin. Putin ended up not appreciating that very much and in October 2003 arrested my boss" for "absolutely nothing," Misamore said.

With Khodorkovsky in jail but still a rich man, the government decided it had to "destroy his wealth too" because he still could've financed opposing candidates. So it went after Yukos and slapped the company with "$31 billion in fraudulent tax charges," Misamore said. "They selectively reinterpreted their tax laws and applied the charges to Yukos."

With no independent judiciary system, Misamore said, the Kremlin "controls the prosecutor and all the courts," not to mention the press. Verdicts come down exactly as political officials want, Misamore noted.

"We're continuing to battle the charges, but we've lost every case," he said.

Misamore has been working with subsidiaries of the old Yukos, attempting to sell its refineries in other countries to non-Russian interests. He's had mixed results.

A Polish refinery was sold for $1.5 billion, "but last week I was told there was a fire of very suspicious origin that I think was an attempt to scuttle that transaction," he said. And "Russia has cut off all oil to the refinery, saying 'we're having a little problem with the pipeline and we need to shut it down for two years.'"

Misamore said Russia's government is an autocracy -- one person has absolute power. Political and industry leaders are quickly being replaced by Putin cronies who stand for nothing but "power and greed," Misamore said.

However, the quality of life in Russia may be better than in the Reagan years, when most Russian citizens were poor and commerce was inefficient. "It's a very consumer-oriented society today," with fresh produce and Mercedes Benz cars in good supply, Misamore explained.

"Moscow is actually a very interesting city. As long as you don't have the Russian government chasing you, it's a nice place to visit," Misamore said.

The Russians still have Misamore under criminal investigation. Secretary of State Condoleezza Rice met with that country's foreign minister and asked that Russian officials back off from pursuing the native and other American citizens who have been entangled in government takeovers, Misamore said.

But with the value of oil soaring, it's unlikely Russia is going to hand back its industry acquisitions and drop any charges anytime soon, Misamore said.

Despite his home being burglarized, Misamore said he doesn't "feel threatened personally or physically" while living in the U.S.

But, he pointed out, "life can change."


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