07MOSCOW664, RUSSIA: PRICEWATERHOUSECOOPERS UPDATE

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Reference ID Created Released Classification Origin
07MOSCOW664 2007-02-15 13:22 2011-08-30 01:44 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Moscow

VZCZCXYZ0033
RR RUEHWEB

DE RUEHMO #0664 0461322
ZNR UUUUU ZZH
R 151322Z FEB 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 7489
INFO RUEHFT/AMCONSUL FRANKFURT 3180
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC

UNCLAS MOSCOW 000664 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
STATE FOR EUR/RUS, EB/CBA 
FRANKFURT FOR SUSAN STANLEY, BILL COTTER 
TREASURY FOR BAKER/GAERTNER 
NSC FOR MCKIBBEN 
USDOC FOR 4231/IEP/EUR/JBROUGHER 
 
E.O. 12958: N/A 
TAGS: EFIN ECON RS
SUBJECT: RUSSIA: PRICEWATERHOUSECOOPERS UPDATE 
 
REF: A. MOSCOW 466 
 
     B. MOSCOW 177 
 
1.  (SBU) The February 14 start to Moscow Arbitration Court 
proceedings against PricewaterhouseCoopers (PWC) on charges 
of falsifying its 2002-2004 audits of former oil giant Yukos 
was relatively quiet.  The composition of the three-person 
panel was approved, with PWC and the prosecution each being 
allowed to name one member, the third being the judge in the 
case.  Arguments are scheduled to begin February 26. In this 
case, tax authorities claim that PWC aided Yukos' tax evasion 
schemes, and the prosecution is demanding that PWC pay the 
Federal Tax Service a fine of USD 480,000, which is the 
amount PWC received for its Yukos audits. 
 
2.  (SBU) In the second case against PWC, in which the 
Federal Tax Service charges PWC underpaid USD 14 million in 
taxes as a result of improperly expensing expatriate 
salaries, PWC is preparing to file an appeal to the Supreme 
Arbitration Court February 16.  The court can then take up to 
30 days to decide whether to hear the case.  (Note:  In 
November 2006 the Federal Arbitration Court -- the last court 
of automatic appeal -- ruled against PWC.)  Despite 
aggressive questioning of PWC senior management about this 
case on January 30 by the MVD, no criminal charges have been 
filed. 
 
3. (SBU) PWC Global CEO Sam DiPiazzo (Amcit) spent the first 
part of this week in Moscow, touching base with the firm's 
major clients and a selection of GOR representatives, 
although notably not Finance Minister Alexandr Kudrin.  With 
the Ambassador, DiPiazzo said he believed that a number of 
discrete USG approaches to the GOR over the past two weeks, 
including that of Secretary Rice with Foreign Minister Lavrov 
on February 2, and Ambassador's consultations with Gref, 
Prikhodko and Miller, had usefully raised the profile of 
their case among senior GOR officials, including President 
Putin. 
 
4. (SBU)  COMMENT.  As these two PWC cases unfold, slow is 
generally good, fast is generally bad, and the good news is 
that things have noticeably slowed over the past ten days. 
It is not clear if this is because senior GOR officials are 
taking a closer look at the case, or due to simple 
bureaucratic inertia.  It stands to reason that if PWC was/is 
an integral part of someone's calculations in the evolving 
money laundering case against Khodorkovsky and Lebedev, it 
may take sometime to adjust the strategy, should a decision 
be made not to catch PWC in the Yukos net. 
BURNS

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