The Kremlin's Natural “Sputnik”
// Boris Jordan Switches to the Oil Sector
The YUKOS Affair
Yesterday it was learned that Boris Jordan, president of the Sputnik Group, sent a letter to YUKOS's minority shareholders offering his services as mediator “in negotiations with the authorities on settling the situation around YUKOS.” Mr. Jordan claims he has already discussed this possibility with government officials. The head of Sputnik makes no secret of the fact that he is prepared to play the same role in the YUKOS affair as he played in the dispute between Vladimir Gusinsky and the Kremlin over NTV. Mr. Jordan named the replacement of YUKOS's management as one of the main conditions for “saving” the company. A spokesman for YUKOS's principal shareholders says they have no need of Sputnik's assistance.
Interfax-ANI reported on Mr. Jordan's letter addressed to YUKOS's minority shareholders yesterday evening. Oleg Sapozhnikov, press secretary for the Sputnik Group, confirmed the existence of this document to Kommersant, but expressed surprise that this “confidential document” addressed to Western investors (it was written in English) had reached the press.
In the Russian translation of the letter cited by Interfax, Mr. Jordan offers to act as mediator in arranging negotiations between the government and “a large group of independent shareholders interested in the reconstruction and rehabilitation of YUKOS,” suggesting that a wide circle of owners of YUKOS securities join with them. “I wish to inform you, dear shareholders, that I have discussed the possibility of settling the YUKOS affair” with the Russian authorities, and they have assured me that the government has a strong interest in an economically rational and equitable settlement of this dispute,” Mr. Jordan says in his letter.
In his letter, Mr. Jordan reveals some of the aspects of a possible agreement between the minority shareholders and the government. If the minority shareholders entrust their interests to him, Sputnik will ask that YUKOS be maintained in working order, that it have the possibility of paying its creditors “according to a reasonable schedule (i.e., bankruptcy protection), and that seats on YUKOS's board of directors be offered to minority shareholders. In return, Mr. Jordan offers “full payment of taxes, if they are justly calculated.”
The last point of Mr. Jordan's proposed “dispute settlement principles” is “the possibility of changing the composition of the company's management.” The current management appointed by the company's principal shareholders continues to represent their interests, which are in serious disagreement with the interests of the company and the remaining shareholders,” Mr. Jordan maintains.
Oleg Sapozhnikov explains the appearance of the letter as Sputnik's wish as a minority YUKOS shareholder to form a consolidated position of all minority shareholders and not allow the company to go bankrupt. However, it is more likely that the intent of the letter is a proposal to consolidate opposition to Mikhail Khodorkovsky and Group MENATEP among YUKOS shareholders with the aim of replacing the senior management headed by Semen Kukes.
Boris Jordan is actually offering to play the same role as he played in the dispute between Vladimir Gusinsky and the Kremlin in summer 2002. The letter mentions two corporate disputes in which Sputnik participated: the rehabilitation of SIDANKO, which was threatened with bankruptcy, and the managerial reorganization of NTV and Gazprom Media.
However, as in the case with Mr. Gusinsky, replacing the management without the consent of Group MENATEP (after the cancellation of an additional issue of YUKOS shares previously exchanged for Sibneft securities, it owns 61% of the company's shares) is legally impossible. Nevertheless, Sputnik intends to conduct negotiations on behalf of the minority shareholders with the government, not with Group MENATEP. Obviously, the “government” in the broad sense of the word does not have the legal capacity to dismiss Semen Kukes. However, it does have other resources: in Mr. Gusinsky's case, this was the famous “Protocol #6” signed by the media magnate in the same premises where Mikhail Khodorkovsky is currently residing (i.e., prison).
The appearance of Mr. Jordan's letter amidst rumors that the actual owners of the largest packages of YUKOS shares, i.e., defendants Khodorkovsky and Lebedev, are prepared to sign a “freedom in exchange for shares” deal with the Kremlin is symptomatic. There are high expectations of such an “out-of-court deal”, and the appearance of the letter is probably evidence of an internal Kremlin struggle to divide the “YUKOS inheritance” after a “final resolution of the Khodorkovsky question.” And the letter's appearance in the media in this case is probably an act of Sputnik's rivals, who also want to take part in dividing the “inheritance”. It is not inconceivable that this group is competing with forces that intend to secure deputy Viktor Gerashchenko's election as chairman of YUKOS's board of directors in July.
Yury Beilin, deputy chairman of the board of OOO YUKOS-Moscow, told Kommersant that the company received the text of the letter yesterday morning. He said that Sputnik's letter contained unjustified assessments of the actions of YUKOS's management as representatives of only principal shareholders. In his words, either today or tomorrow the company's management was planning to send the government a document containing a similar plan for getting the company out of crisis, but without Sputnik's participation. “This plan already contains everything Jordan might contrive,” the manager said. According to Mr. Beilin, the primary objective of YUKOS”s current management team is not to allow the company to go bankrupt. It is asking the government for a tax deferral in order to pay a debt of 99 billion rubles to the Ministry of Taxation, as weel as for permission to sell YUKOS assets, under government control if necessary. However, according to Mr. Beilin, “YUKOS's principal shareholders must participate in the settlement process.”
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How Boris Jordan Has Settled Disputes
By fall 1998, the situation at SIDANKO had become critical – its debts amounted to $400 million, and Boris Jordan was called into the company as an anticrisis manager. In December 1998 he became chairman of the board of directors and announced sweeping plans: reorganization of the company, a 48% staff reduction, and achievement of a significant decrease in oil production costs. However, on February 5, 1999, the Moscow Region Arbitration Court initiated bankruptcy proceedings against SIDANKO, and within a week Boris Jordan quit as head of the company. In December 1999, Mr. Jordan made another attempt to save SIDANKO: the Sputnik fund headed by him took part in and auction for the sale of Chernogorneft, one of SIDANKO's largest subsidiaries, but the deal fell through. The company managed to avoid total bankruptcy after lengthy negotiations.
The dispute between Gazprom and Media-Most flared up in summer 1999 in connection with the media company's failure to pay debts on loans. After legal proceedings, Gazprom Media got control over 46% of Media-Most's shares, but ran into opposition from the company's employees. In order to settle the situation, Gazprom called in Boris Jordan, and on April 3 a shareholder's meeting elected him as general manager of NTV in place of Evgeny Kiselev. Mr. Jordan began work on April 14, just when there was a forced change of power at the TV company. After that, the conflict between shareholders and journalists quickly subsided as opposing NTV employees left the company. Boris Jordan himself was fired from NTV in January 2003.
Dmitry Butrin, Petr Sapozhnikov
All the Article in Russian as of June 10, 2004
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