(2) State the dates of the participants involvement in the predicate acts and the facts surrounding the predicate acts

Due to the nature of the Illegal Scheme, Plaintiff does not have complete knowledge, absent discovery, as to the dates of each participant’s involvement in the predicate acts. However, to the best of Plaintiff’s information and belief, the following applies:

a. Access: 1997 to date
b. Blavatnik: 1997 to date.
c. Renova: 1997 to date
d. Vekselberg: 1997 to date
e. Alfa Group Consortium: 1997 to date
f. Crown Finance Foundation: 1997 to date
g. CTF Holdings Ltd: 1997 to date
h. Alfa Finance Holdings, SA: From 1999 to date
i. Crown Luxembourg Holdings: From 2000 to date
j. Elliot Spitz: From no later than 1998 to his departure from Crown in June, 2002
k. TNK: From 1997, after it was privatized, to date.
l. Simon Kukes: From 1998 to date.
m. Joseph Bakaleynik: From 1997 to date.
n. LT Enterprises: From 1999 to date
o. Sandwell: From 1998 to its alleged dissolution in 2000 or 2001.
p. Eastmount: From 1997 to date
q. Astons: From no later than 1998, when it founded Sandwell, to date.

Facts Surrounding The Predicate Acts

Defendants engaged in an illegal scheme and artifice (the “Illegal Scheme”) which is open-ended and which was intended to defraud Norex and other persons. Defendants conspired together and acted in concert to commit numerous acts of fraud, violence, and other illegal activity in furtherance of the Illegal Scheme. The Illegal Scheme began in 1997 when Access (through Blavatnik), Renova (through Vekselburg) and the Alfa Group, through various companies which it established and resulted in the Crown Finance Foundation as its ultimate parent, took over TNK through the 1997 Corrupt TNK Privatization. The Illegal Scheme continued with the taking of assets of Chernogorneft, Kondpetroleum, and NNG through corrupt bankruptcies. Complete control over TNK was effected in 1999 through the Corrupt 1999 Privatization. Yugraneft was taken over in 2001 through the Illegal Seizure. The facts surrounding each aspect of the Illegal Scheme are described below.

The Corrupt 1997 TNK Privatization

After the collapse of the Soviet Union in 1992, the Russian Federation began to privatize the Russian oil industry. In the industry, vertically integrated holding companies were established, each of which included a number of subsidiaries, including oil production units, refineries, and marketing units.

In 1997, TNK was partially privatized, with a 40% controlling stake purchased by Access/Renova and the Alfa Group, through joint venture investment vehicle known as ZAO Novy Holding.

The 1997 privatization of TNK was corrupt and scandalous, even by Russian standards. Rather than providing for the sale of TNK’s shares in a fair auction, the State Property Committee, headed by Alfred Koch (“Koch”), required any bidder to also own a certain refining unit, a controlling share of a company developing submersible oil pumps, and certain patents.

Not surprisingly, the companies which owned the refining unit, the controlling share of the submersible oil pump company, and certain patents were controlled by Access/Renova and the Alfa Group.

A successful bidder was then required to purchase these three assets at a price in excess of $90 million, which was far in excess of their worth, and, further, assume the risk that Access/Renova and Alfa, might resist such a sale. In essence, this rigged structure guaranteed that Access/Renova and Alfa would be the winner of the auction at the minimum bid (which included a requirement to invest certain funds in TNK), which was set hundreds of millions of dollars below the true value of such an interest in TNK.

For example, a special investigation by the General Accounting Chamber of Russia determined that the 1997 privatization violated numerous aspects of Russian law and plainly was concluded to favor the successful bidder.

Among the sixteen counts of violations of Russian laws and regulations listed by the General Accounting Chamber, was that the State Property Committee responsible for privatization failed to verify the legality of the source of funds used by Novy Holding to purchase its interest in TNK.

Upon information and belief, Access/Renova and Alfa paid bribes through the wiring of funds through banks in the United States to Koch and other Russian government officials in order to obtain their support for the corrupt privatization of TNK in 1997.

Such allegation is based on common knowledge that Russian government officials were routinely bribed during privatization of state industries. Such allegation is based on the lack of any other credible explanation for the requirement that the three assets be owned by the successful bidder and, further, by the failure of the State Property Committee to compel the fulfillment of all investment conditions – even in violation of an edict by then President Boris Yeltsin that prohibited the transfer of title to the shares in TNK until all investment conditions were fulfilled.

The Corrupt 1999 TNK Privatization

Ultimately, in 1999, TNK was fully privatized, with the remaining portion of its shares sold to Access/Renova and the Alfa Group, this time through ZAO Noviye Prioritety. The 1999 final privatization of TNK was equally corrupt.

Once again, the terms of the privatization were set by the State Property Committee in a fashion unduly favorable to Access/Renova and Alfa. The minimum price set for the 1999 auction was so low (and obviously corrupted) that the Russian Duma even passed a resolution urging the cancellation of the sale. Nonetheless, despite the Duma’s resolution, the 1999 auction resulted in Access/Renova and Alfa acquiring the remaining shares.

The Corrupt Nizhnevartovsk Nefte Gaz Proceedings

Nizhnevartovsk Nefte Gaz (“NNG”) is an oil company located in the Khanty-Mansiysky Autonomous District of Russia which is part of the Tyumen Oblast (Region).

In 1997, after acquiring 40% of TNK, Access/Renova and Alfa Group arranged through corrupted governmental officials to divert flow of oil from NNG to TNK. As a result, TNK was able to take over NNG and force it into bankruptcy proceedings which resulted into stripping of assets of NNG and their transfer to other TNK controlled companies.

Norex’s interests were thus directly and adversely affected by the Corrupt NNG Takeover and Bankruptcy and stripping of assets, because, Yugraneft, in which Norex was the majority shareholder, did not receive the oil owed to it by NNG.

The Corrupt Kondpetroleum Bankruptcy

Kondpetroleum, a subsidiary of Sidanco at all relevant times, is located in the Khanty-Mansiysky Autonomous District of Russia, which is part of the Tyumen Oblast (Region). During the time of the bankruptcy, the governor of the Tyumen Oblast was Leonid Roketsky, who also was the chairman of TNK’s Board of Directors.

In September 1998, the Kondpetroleum bankruptcy was initiated. During the bankruptcy, TNK arranged for the appointment of its handpicked candidate, Boris Nuriev (“Nuriev”) as Kondpetroleum’s external manager. Nuriev immediately cancelled most of the oil sale contracts with Sidanco, and, not surprisingly, replaced them with contracts with TNK controlled entities eventually diverting the oil flows to Crown Group.

These sales of oil were at drastically reduced prices, resulting in the diversion of millions of dollars of profit to Crown Group. As a result of these diverted profits, the external manager “found” that Kondpetroleum was insolvent and proposed sale of assets, which was approved by the corrupt court on December 7, 1998.

Bidders other than TNK were wrongfully obstructed from bidding in the auction process. As a result, on October 21, 1999, the assets of Kondpetroleum were auctioned to a TNK affiliate created for the purposes of this bankruptcy, at approximately one-third of their appraised value.

The Corrupt Chernogorneft Bankruptcy

Chernogorneft is also located in the Khanty-Mansiysky Autonomous District of Russia which is part of the Tyumen Oblast (Region). In October 1998, the bankruptcy of Chernogorneft was initiated. During the bankruptcy, TNK arranged for the appointment of its handpicked candidate, Vasily Bikin, as the external manager on May 27, 1999. Shortly thereafter, Bikin was replaced with another TNK ally, Alexander Gorshkov (“Gorshkov”) as the external manager on August 3, 1999.

In order to take control of the creditors’ committee of Chernogorneft, TNK arranged for Alfa Bank to lend Chernogorneft $15 million in order to pay a debt owed to the United States Export-Import Bank (“Ex-Im Bank”), providing an illegal preference to the Ex-Im Bank over Chernogorneft’s other creditors. Additionally, in order to take control of the creditor’s committee of Chernogorneft, TNK arranged for the illegal reduction of the $35 million debt to the European Bank of the Reconstruction and Development (“EBRD”) to $26 million, providing an illegal preference to the EBRD over Chernogorneft’s other creditors.

The purpose of this was to remove the Ex-Im Bank and EBRD as creditors, thus strengthening TNK’s control over the creditors’ committee. At TNK’s direction, Bikin and Gorshkov arranged for the sale of Chernogorneft oil through TNK-controlled entities, which, in turn, directed the oil flows to the Crown Group, at below market prices in order to divert the revenues and profits of Chernogorneft to the Crown Group. Gorshkov later stopped the export of oil in order to cause Chernogorneft to be unable to pay its debts.

Following the diversion of profits from Chernogorneft to the Crown Group, Gorshkov made the determination that Chernogorneft was insolvent and that its assets needed to be sold at auction. The conduct of Gorshkov was so blatantly illegal that his license was revoked by the Federal Service of Russia for Insolvency Proceedings in October 1999.

Even though Gorshkov’s license was revoked at that time, in October 1999, he presided over the TNK-controlled creditors’ committee which approved the terms of the sale of Chernogorneft’s assets at a bankruptcy auction. Not surprisingly, the terms of the auction were designed to discourage any persons other than TNK from participating and, in fact, only two bidders attended the auction: TNK and TNK-NV. Furthermore, Gorshkov’s actions in preparing the auction essentially precluded other companies from participating in it.

For example, despite Sidanco’s request for a list of assets to be auctioned, Gorshkov refused to provide such, alleging he did not have enough paper on which to print the list. In fact, no requested documents were provided to Sidanco prior to the rigged auction. Ultimately, the auction was held despite several decisions of Russian courts prohibiting the sale and the assets of Chernogorneft were transferred to TNK-NV at below market prices, including its shares in Yugraneft which violated Norex’s right of first refusal set forth in the Yugraneft shareholders agreement.

Norex’s interests were, thus, directly and adversely affected by the corrupt Chernogorneft bankruptcy because its right of first refusal for Chernogorneft’s shares in Yugraneft was violated, and, further, Yugraneft, in which Norex was majority shareholder, did not receive the oil owed to it by Chernogorneft.

Yugraneft’s Dispute With TNK
Yugraneft

In October 1991, Yugraneft was formed. As of 1999, Norex owned 60% of the shares of Yugraneft and Chernogorneft owed 40% of the shares. In 1999, an audit of the books and records of Yugraneft determined that Chernogorneft had not contributed the full amount of capital to Yugraneft for its 40% share. Ultimately, Chernogorneft’s interest in Yugraneft was reduced based on the determination of the firm’s auditors, and, as a result, Norex’s interest in Yugraneft increased to 97.3%. During all relevant times, Yugraneft maintained a corporate headquarters in Nizhnevartovsk, operating and oil production facilities in Nizhnevartovsk region and a representative office in Moscow.

The Dispute Over The 70,000 Tons

In December 1993, Yugraneft lent 300,000 metric tons of oil to Chernogorneft. As of November 1998, the balance of oil owed to Yugraneft was approximately 70,000 metric tons of oil. In October 1998, the corrupt bankruptcy was initiated against Chernogorneft and by May 1999, an external manager of Chernogorneft controlled by TNK had been appointed. Throughout the bankruptcy proceedings, Yugraneft, while controlled by Norex, attempted to enforce its rights for the return of the oil. Such efforts were unsuccessful.

The Dispute Over The 102,000 Tons

In May 1996, Yugraneft loaned 290,000 metric tons of oil to Nizhnevartovsk Nefte Gaz (“NNG”), and owned 38% by TNK (which was yet to be privatized). As of mid, 1997, the NNG owed a balance of approximately 102,000 metric tons. In the fall, 1997, corrupt proceedings were initiated against NNG in order to remove its then management in order to facilitate the corrupt privatization of TNK and establish full control over NNG.

In January 1998, Yugraneft and NNG executed a verification act confirming the amount of oil owed shortly before TNK obtained effective control of NNG to be approximately 102,000 metric tons. Subsequently, a person controlled by TNK was appointed as the external manager of NNG. During the ensuing two years, Yugraneft attempted to enforce its rights for the return of the oil. Such efforts were unsuccessful.

The Conversation Between Khan And Rotzang

Alexander Rotzang (“Rotzang”), the Chairman of the Board of Norex, the majority shareholder of Yugraneft, spoke with Khan while in San Francisco, CA in November 1999. Khan demanded that Yugraneft forget about repayment of the oil owed to it and threatened that if Yugraneft did not forget that TNK “would run over Yugraneft like a steamroller” and that “we eliminate those who go against us.”

The August 2000 Meeting With Khan

In August 2000, Lyudmilla Kondrashina (“Kondrashina”), the general director of Yugraneft, met with German Khan (“Khan”), an officer of TNK. At that meeting, Khan told Kondrashina that Yugraneft should accept 30% of the value of the 70,000 and 102,000 tons of oil as settlement. Khan threatened Kondrashina that if Yugraneft did not accept its offer that Yugraneft would get nothing because TNK has its “own people at all levels of government.” Yugraneft refused this offer and continued its efforts to collect the 70,000 and 102,000-ton debts without success.

The January 2001 Meeting With Khan

In January 2001, Kondrashina met again with Khan. Khan warned Kondrashina that unless Yugraneft accepted the offer on the debts of oil that in a few months TNK would take over Yugraneft. Khan also stated that it would be fruitless to pursue litigation because TNK “controlled” Russia’s Supreme Arbitration Court where commercial disputes were ultimately decided. In retrospect, it is clear that at this point, Access/Renova and Alfa had agreed upon a plan, which was directed by the Alfa Group on the one hand and Access/Renova, including Blavatnik and Vekselberg in their offices in New York on the other, to take over Yugraneft through corrupted court proceedings and the use of pure physical force.

The Scheduling Of The Yugraneft Shareholders’ Meeting

In May 2001, TNK, through its subsidiary TNK-NV which had purportedly obtained ownership of the shares of Yugraneft from Chernogorneft as a result of the rigged bankruptcy auction, demanded that Yugraneft hold a shareholder’s meeting.

At the time when the TNK-NV’s demand was made, neither TNK nor TNK-NV was registered shareholders of Yugraneft. At the same time, Norex submitted a demand to Yugraneft to hold a shareholders meeting. The meeting was then scheduled for June 28, 2001.

The June 2001 Meeting With Khan

In June 2001, Kondrashina met with Khan again. Khan bluntly asked Kondrashina to betray the shareholders of Yugraneft and directly asked her how much money she needed to betray Yugraneft. Kondrashina refused the bribe opportunity.

Khan then warned her to “stay in the shadows” during the TNK’s fight for Yugraneft.

The Illegal Takeover Of Yugraneft
The Ex Parte Court Action

Just a few days prior to the scheduled Yugraneft shareholders meeting, on June 25, 2001, TNK, through its subsidiary TNK-NV, filed a complaint in the Russian courts and petitioned to arrest a major portion of the shares of Yugraneft held by Norex. TNK-NV falsely represented that it had obtained legal ownership of shares in Yugraneft from the auction of Chernogorneft’s assets – even though the shareholders agreement between Chernogorneft and Norex provided Norex with the right of first refusal to purchase any shares of Yugraneft offered for sale by Chernogorneft.

TNK-NV also falsely represented that Norex had been served with the complaint which was required to be filed prior to or with the petition seeking to arrest its shares. On June, 26, 2001, the Russian court enjoined Norex from voting a major portion of its Yugraneft shares and prohibited Yugraneft from counting a major portion of Norex’s shares at any shareholders meeting, even though Norex was never served or notified of the hearing and TNK-NV was not listed as a shareholder of Yugraneft.

Upon information and belief, the proceedings were designed to control illegally the shareholders meeting of Yugraneft of June 28, 2001.

The Shareholders’ Meeting

On June 28, 2001, a Yugraneft’s shareholders’ meeting was held at its offices in Moscow. A representative of Norex attended the meeting. No representatives of Chernogorneft, the registered owner of the remaining shares of Yugraneft, attended the meeting, although it had been duly notified. Norex voted its shares which had not been arrested in favor of re-electing Kondrashina as the general director of Yugraneft. No votes were cast against her reelection.

The Fraudulent Takeover

On June 29, 2001, TNK took over the offices of Yugraneft in Nizhnevartovsk. Alexander Berman, an officer of a TNK affiliate, accompanied by six TNK attorneys and at least 16 thugs wearing military style fatigues and armed with machine guns invaded Yugraneft’s office in Nizhnevartovsk. Their legal authority was a purported shareholders meeting of Yugraneft on June 28 at which Berman was allegedly elected as general director of Yugraneft, allegedly attended by Norex. Such a meeting never took place.

On the same day, TNK sent security guards to inspect Yugraneft’s field operations and, a few days later, on July 6, 2001, TNK security guards armed with handguns and machine guns took over the oil field and field office. The TNK thugs cut off phone and Internet service in order to prevent the Yugraneft employees from communicating with the outside world.

On July 17, Kukes, the president of TNK, came to Yugraneft’s field operations and informed the employees that Yugraneft had been taken over by TNK. He informed them that they were required to either sign employee agreements with TNK or leave. Amazingly, after the seizure of Yugraneft, Khan admitted in a media interview that TNK decided to take over Yugraneft because it was unwilling to accept the 30% offer for the return of oil owed to Yugraneft.

The Threats By TNK

In July 2001, a Russian court issued an order enjoining Berman from acting as the General Director of Yugraneft. On or about August 1, 2001, Kondrashina, Alexander Radov, an attorney for Yugraneft (pre-takeover), together with attorney Alexey Timoshkin, came to the offices of Yugraneft with a marshal in order to enforce the order.

When Radov arrived at the Yugraneft office, one of the leaders of TNK’s security stated, “We know who you are and where you live. Why do you need problems?” Shortly thereafter, Nam, along with TNK armed thugs, came to Yugraneft’s offices.

Nam called the local chief marshal, who then came to Yugraneft’s office, and, instead of enforcing the order, based on the false minutes of the non-existent shareholders’ meeting, instructed Kondrashina and the others to leave. During this encounter, Nam picked up the telephone and instructed someone to give orders to J. Paznikov, the chief judge of the Nizhnevartovsk Regional court to dismiss the order. Such an order was entered by J. Paznikov the next day.

During this encounter, Nam told Kondrashina that she should stop fighting TNK, that TNK controlled the local government and that if she came over to their side that she would be offered the position of Deputy Mayor of Nizhnevartovsk.

During the initial part of this encounter, Timoshkin arranged for videotaping of the effort to enforce the order. When Nam arrived, security guards of TNK prevented further videotaping. Later, Mr. Sidorov, the head of TNK’s local security, demanded that Timoskin turn over the videotape. A representative of TNK then offered Timoskin $100,000 for the videotape.

When Timoskin refused the offer, the TNK representative stated, “Do you have life insurance? You might need it because anything can happen. It might happen that some drunk will meet you near your house and nobody will be able to trace it to anything.” This was an obvious attempt to threaten Timoskin. Also, after the meeting, Mr. Belevtsov, the chief of a TNK legal department, asked Radov to “step outside.”

Belevtsov stated, “Why do you need these problems? Let’s talk about your working for TNK.” This was an obvious attempt to threaten and bribe Radov.

The Stripping Of Yugraneft Assets

Following the Illegal Takeover, TNK stripped Yugraneft of its assets including ruble denominated bank deposits, dollar denominated bank deposits, ruble denominated savings certificates (known as “veksels” in Russia), and dollar denominated savings certificates. The stripped assets included the transfer of $40 million (including $24 million in dollar denominated accounts) to accounts at Alfa Bank for no apparent consideration. The net result was to strip the cash from Yugraneft and transfer it to Alfa Bank for use by the Defendants.

The Forged Yugraneft Corporate Documents

As part of its justification for the Illegal Takeover of Yugraneft, TNK-NV produced “minutes” of a shareholders meeting which allegedly took place on June 28, 2001 which was allegedly attended by Norex and TNK-NV at which the shareholders allegedly voted to replace Kondrashina with Berman as Yugraneft’s general director.

The attendance of Norex was critical for such meeting because without Norex’s attendance a quorum would not have been present. Such “minutes” were fabricated -- Norex never attended such a meeting at which Kondrashina was replaced by Berman as Yugraneft’s general director.

The Use Of Arranged Criminal Proceedings

In order to deter Norex and the legally elected officers of Yugraneft from opposing the Illegal Takeover of Yugraneft, the Defendants arranged for false criminal proceedings to be brought against Rotzang, the chairman of Norex, and Kondrashina, the General Director of Yugraneft. The use of false criminal proceedings is a typical tool used by corrupt businesspersons in Russia to wipe out adversaries and is possible because of the generally corrupt nature of Russian government, particularly at local levels.

The false criminal proceedings include an investigation of Kondrashina who was alleged by TNK of embezzling certain Sberbank savings certificates, which were in her possession because she was the legitimate General Director of Yugraneft.

The purpose of this “investigation” was to both intimidate Kondrashina and to use the criminal proceedings for TNK to gain control over the bonds. The false criminal proceedings include the investigation of Rotzang for using savings certificates to pay legitimate debts of Yugraneft. The purpose of this “investigation” was to both intimidate Rotzang and to use the criminal proceedings for TNK to gain control over the certificates.

The false criminal proceedings were instigated by TNK and were designed to intimidate persons from cooperating with Norex and Kondrashina, the legitimate General Director of Yugraneft.

The Role Of TNK And The Crown Group In Regard To The Sale Of Yugraneft Oil After The Illegal Takeover

Subsequent to the Illegal Takeover of Yugraneft, oil from Yugraneft has been converted and sold by TNK and the Crown Group. Yugraneft oil for the Russian domestic market has been converted and sold through TNK. Yugraneft oil for the foreign markets has been converted and sold through TNK and the Crown Group and substantial revenues received by them through wires through banks in the United States.

The Slush Fund And Massive Tax Fraud

After its takeover of TNK, the Alfa and Access/Renova sides arranged for all petroleum exported by TNK to be sold through Crown Enterprise. The trading between TNK and the Alfa/Crown affiliates were designed for TNK to sell product at a greatly lowered price in order to transfer the profits from Russia to offshore structures controlled by Access/Renova Groups and Alfa. This resulted in a massive tax fraud on the Russian government and the improper diversion of profits from TNK to Alfa/Crown, to the detriment of TNK’s other shareholders, including the Russian government from 1997 through 1999.

In order to effect this aspect of the Illegal Scheme, Access/Renova and Alfa/Crown, through Astons, established offshore companies which were purportedly independent from TNK but which Access/Renova and Alfa secretly controlled. These companies included the Slush Fund Companies. The Slush Fund Companies would send invoices for fabricated services to Crown Group companies.

In return, the Crown Group companies wired tens of millions of dollars to the Slush Fund Companies through banks in the United States. One effect of the Slush Fund was to hide the fact that profits were diverted from TNK to the Crown Group.

A second effect of the Slush Fund was to create a fund which was used to pay salary and bonuses to members of the Conspiracy, including Spitz. Spitz, through Futura, personally received millions of dollars through the Slush Fund. Upon information and belief, a third effect of the Slush Fund was to create a fund used to pay bribes to Russian government officials. A critical aspect of the Illegal Scheme was worldwide tax evasion, which permitted some Defendants to keep a much larger portion of the profits than would have occurred if all income was properly declared and all taxes properly paid.

Thus, these Defendants accumulated tremendous wealth which was used to effect further acquisitions and, upon information and belief, bribe Russian government officials, all in furtherance of the Illegal Scheme.

The Crown Commodities UK Tax Fraud

Defendants created a plan by which Crown Trade and Finance Limited, which was based in Gibraltar, would purportedly act as a principal in its trading with TNK’s oil. In fact, Crown Trade and Finance Limited was a mere shell corporation; all real trading was done in London by Crown Commodities. Nonetheless, Crown Commodities falsely represented to the Inland Revenue in the United Kingdom that it was merely acting as a service agent for Crown Trade and Finance Limited so that it could limit its profits to 10% of its costs.

Crown Commodities, acting as a principal in regard to all trading of petroleum sourced from the TNK, should have been liable in the United Kingdom for taxes on the worldwide income earned from its trading; the activities of the Gibraltar office were limited to literally rubber-stamping contracts with a rubber stamp signature facsimile.

As a result of the UK tax fraud, Crown Commodities avoided over $30 million in taxes and penalties.

Ultimately, upon information and belief, Crown Commodities function may have been replaced with Crown Resources AG, which registered a branch in England in order to continue the same illegal activities, much in the same way as previously conducted.

The Crown Management US and UK Tax Fraud Crown established a system by which it only reported base salaries for its management, such as Spitz and Kuzmichev. Such base salaries were supplemented by periodic bonus payments made to offshore accounts established by Astons and controlled by management, including Eastmount Properties, which was controlled by Kuzmichev, and Futura, which was controlled by Spitz.

Upon information and belief, such income was never declared for tax purposes by Crown employees, such as Kuzmichev in the United Kingdom or Spitz in the United States.

The Sham Invoice Fraud

Pursuant to certain contracts between TNK and Crown, Crown purported to act as an agent for TNK, responsible for accounting for the profits which it made on trading to TNK. In practice, it was intended for Crown to act as a principal and for all trading profits to accrue to Crown. In order to conceal the real trading profits, Crown and TNK adopted a plan called “Rondo” by which Crown would issues sham invoices for the sale of petroleum. This plan involved the initial sale of petroleum received by Crown from TNK to a third party at an agreed-upon lower price. A copy of this sham invoice was then submitted to TNK for accounting and tax evasion purposes.

In the meantime, Crown arranged for a second transaction by which the third party would resell the petroleum to Crown at this lowered price and then Crown would resell the petroleum to the third party at a higher, market price. The effect of this plan was to hide the true profit and price actually received by Crown from the sale of petroleum received from TNK to the detriment of its non Access/Renova and Alfa shareholders, including American shareholders of TNK controlled companies and the Russian government, which was a shareholder of TNK.

This plan also perpetrated a tax (as well as customs) fraud on Russia because the true profit from the sale of oil was transferred from TNK to a Crown company located outside of Russia such as the UK (and then transfers the profit to one of the Slush Fund Companies through the invoices for fabricated services).

The Diverted Address Commissions

In the oil brokerage business, it is normal business practice for traders, such as the Crown Group, to arrange for the charter of vessels with shipbrokers. It is also normal for the shipbrokers to pay an “address commission” of a percent of the cost of the vessel charter to the trader for selecting such shipbroker.

Such address commission is normally 1 to 2 percent of the cost of chartering the vessel. In order to divert funds to the Slush Fund Companies, the Crown Group arranged with shipbrokers, such as Simpson Spence & Young (“Simpson”), which has offices in Stamford, Connecticut and London, England, to strike the “address commission” provision from its agreements and, instead, pay the address commissions to various Slush Fund Companies controlled by Defendants, including Eastmount, Ringford Trading Limited and Fulbrook Trading Limited.

The diversion of such payments also operated as a tax fraud on Inland Revenue in the United Kingdom because the true income of Crown was understated and the true incomes of the Defendants, such as Spitz, who received bonus payments from this fund were understated. Upon information and belief, such payments amounted to tens of millions of dollars.