Mikhail Khodorkovsky
1963–



Former chairman and chief executive officer, Yukos Oil Corporation

Nationality: Russian.

Born: June 26, 1963, in Moscow, USSR.

Education: Mendeleev Institute of Chemical Technologies, BA, 1986.

Family: Son of a construction worker and a production engineer; married twice; children: four.

Career: Menetep Bank, 1989–1993, president; Russian Ministry of Fuel and Energy, deputy minister, 1993–1994; Rosprom, 1994–1996, chief executive officer; Yukos Oil Corporation, 1996–2003, chairman and chief executive officer.

■ Mikhail Khodorkovsky, the world's 16th-wealthiest person in 2004, rose from the ashes of the Soviet Union to become the richest of the "oligarchs," the hyperwealthy billionaires who rapidly gained control of Russian industry during President Boris Yeltsin's anything-goes privatization of Soviet-era assets. The former Communist Youth League activist bought Yukos Oil Company for a pittance in 1995, but hardball tactics raised the ire of shareholders, foreign banks, and Western partners. Khodorkovsky responded by making Yukos the most transparent of Russian companies, further increasing his wealth. Accompanying that wealth was a growing interest in Russian politics; in October 2003 Khodorkovsky was jailed, charged with embezzlement, theft, and tax evasion by Russian authorities. Khodorkovsky and his supporters blamed Russian President Vladimir Putin, and fear of the oligarch's political influence, for the arrest.

A COMMUNIST CAPITALIST

A leading figure in one of his country's most turbulent times, Mikhail Khodorkovsky thrived as both a Soviet and a Russian. Born to a lower-middle-class Jewish family in Moscow, he was a straight-A student all through school, eventually

Mikhail Khodorkovsky. AP/Wide World Photos.
Mikhail Khodorkovsky.
AP/Wide World Photos
.

studying at two of Moscow's most prestigious universities. When the Soviet leader Mikhail Gorbachev began liberalizing the Soviet economy in 1986, Khodorkovsky was deputy chief of a Young Communist League district committee in Moscow. As private business opportunities slowly became legal, the young Communist quickly became a young entrepreneur, trafficking in blue jeans, brandy, and computers. Like others who rapidly became wealthy as the USSR crumbled, he also had ties with the Russian mafia—money laundering and trafficking in women were among his other alleged activities.

With Gorbachev's blessing, Khodorkovsky and his business partners established Menetep Bank, one of the Soviet Union's first private banks, in 1988. Handling payments to victims of the Chernobyl nuclear reactor meltdown was one of its first tasks. Menetep evolved into Rosprom, an investment company that managed and modernized hundreds of post–Soviet era companies. The capital of that company, and the rising mogul's political connections, enabled Khodorkovsky to buy Yukos, placing himself at the oil company's head. Aggressive (and in most countries, illegal) acquisitions quickly made Yukos Russia's second-largest oil company, but it also led to a crossroads in Khodorkovsky's career.

PURER CAPITALISM, IMPURE POLITICS

Like fellow oligarchs, such as the car shark Boris Berezovsky and the media magnate Vladimir Gusinsky, Khodorkovky essentially pursued gangster methods to push out competitors and rise to power in Yeltsin's Russia. That strategy worked less well beyond Russia's borders, however. Foreign investors were suspicious of the company's books, and the instability of Russia's economy as a whole, highlighted by the devaluation of the ruble in 1998, made outside capital difficult to attract. Khodorkovsky responded by making Yukos Russia's most transparent company. Yukos was the first major Russian corporation to have a Western-style vertically integrated management structure, featuring a board of directors with Americans and Europeans overseeing the company. Yukos also followed American accounting standards, and by the turn of the twenty-first century was a model for orderly capitalism in the new Russia.

Meanwhile, Khodorkovsky attempt to rehabilitate his gangster image by employing the public relations firm APCO Worldwide to build investors' trust. APCO told Khodorkovsky to adopt "honesty, openness, responsibility" as his new model. Khodorkovsky made himself available for sympathetic press interviews that highlighted his workaholic drive for success and common-man values. "I have to travel a lot, but relaxation to me is when I am at home" (Tavernise, October 31, 2003). He also began supporting free-market Russian political parties, allowing open speculation that he would be open to running for the Russian presidency in 2008.

Here he ran afoul of Vladimir Putin, who, since succeeding Yeltsin at the dawn of 2000, had successfully consolidated power and shown little tolerance of genuine political opposition. Months of investigation led to Khodorkovsky's arrest in October 2003—the charges mainly dated to the 1994 privatization of a fertilizer plant. Khodorkovsky's many Western supporters cried selective prosecution and considered the tycoon a political prisoner. Putin called the arrest a statement that no one in Russia is above the law, even the wealthiest oligarch. In the spring of 2004 Khodorkovsky remained in jail, but Yukos continued to thrive—an orderly succession plan crafted before the CEO's jailing maintained investor confidence, and the company saw profits increase greatly as oil prices reached record levels in 2004. As a result, Khodorkovsky's wealth doubled, even as he languished in jail and Yukos's assets were frozen by the Russian government. With a net worth of $15 billion, the onetime Communist from the lower middle class was 16th on Forbes magazine's list of the world's richest people, up from $8 billion and 26th place in 2003.

sources for further information

"Fortune in Hand, Russian Tries to Polish Image," New York Times , August 18, 2001.

Gumbel, Peter, "Down by Law: The Arrest of Mikhail Khodorkovsky, Russia's Richest Man, Sends Markets Tumbling and Stokes Fears That Putin Is Moving Toward Authoritarianism," Time International , November 10, 2003, pp. 26–31.

Heintz, Jim, "Russian Tycoon Arrest Could Hurt Economy," Guardian (UK), October 26, 2003.

Hoffman, David, "Russia's Billionaire Matchmaker to the West," Washington Post , September 24, 2002.

Isachenchov, Vladimir, "Tycoon Khodorkovsky Offers More Repentance for Liberals' Mistakes," Associated Press, April 14, 2004.

Myers, Steven Lee, "Criminal Inquiry into Russian Oil Company Is Renewed," New York Times , October 4, 2003.

Tavernise, Sabrina, "Interview with Mikhail Khodorkovsky: Money, Power and Politics," Frontline/World , October 31, 2003.

—Alan Bjerga

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