Foreign: The richest man in Russia was a man named Michael Kodarkovsky who had an estimated net worth of 15 billion dollars. He owned a massive oil company called Yukos which produced 20 percent of Russia's total oil output and two percent of the entire world. However, his business and political Ambitions ran afoul of Russian President Vladimir Putin who had Kotokovsky arrested and the Russian government expropriated Yuko's after serving 10 years in a Russian prison. Kodarkovsky has been living in self-exile in Western Europe.

to this day. He maintains his innocence and claims the charges against him were politically motivated. He has dedicated the remainder of his life to pro-democracy activism with the stated goal of deposing Putin's regime. In 2014, an international tribunal in the Netherlands ruled that the Russian government needed to pay 50 billion dollars to Yuko's shareholders, including Kodarkovsky as compensation for the expropriation.

Of course, the Kremlin refused to pay and shareholders haven't received a penny. Despite this, the tribunal's verdict served as a public reinforcing His Image as a victim rather than a villain. But you don't become the richest man in Russia without collecting at least a few skeletons in your closet. And as we'll unpack in this video, there's a lot more to the story.

Join us as we take a deep dive into how Mikalicode Orkovsky became Russia's richest man and why he hates Putin so much. Foreign grew up in the suburbs of Moscow in what was then the Soviet Union. During school, he joined the Communist Party Youth league and in his early 20s, he became a junior official within the Party. By the 1980s, it became clear that the Communist economic model wasn't working and the Soviet Union was underperforming the U.S and Western Europe in terms of economic Prosperity.

Recognizing this reality, then Soviet leader Gorbachev implemented a series of reforms called Perestroika, which aimed to liberalize the economy by allowing private Enterprise. In theory, Soviet entrepreneurs were free to start their own businesses which should lead to Innovation and development. In practice, these reforms were fraught with bureaucracy and Corruption the main beneficiaries were well-connected Communist Party Officials with his Connections in the Communist Party Youth League A young Kodorkovski was in Prime position to benefit from this economic liberalization. His first business venture was importing computers and other electronic devices from the West and selling them in Russia.

In 1986, he reinvested his profits from the electronic importing business to found a commercial bank called Bank Metatab. Private Banks had just been legalized in the Soviet Union, making Minitep one of the first banks in the country. Thus, by the tail end of the Soviet Union, Kodorkovsky had already established himself as one of the leading figures in the nascent private sector. In 1991, the Soviet Union collapsed and Boris Yeltsin became president of the Russian Federation.

Wanting to Pivot Russia to a more free market, Direction Yeltsin Hired Kodorkovsky along with other prominent businessmen as economic advisers. One of the biggest reforms they suggested was a privatization of the country's massive state-owned Enterprises. The idea was that they'd be auctioned off to the highest bidder. These were valuable public assets and the government should receive fair compensation for their sale.

How it worked was the Russian government would transfer ownership of these state-owned Enterprises to privately owned Banks The banks would auction them off to the highest bidder and give the proceeds to the government. One of the banks involved in this process was none other than Bankmenotab owned by Kodarkovsky. Menotap was in charge of auctioning off a massive state-owned oil company called Yuko's. Kodorkovsky rigged the auction and Soldier Coast to himself for the equivalent of 310 million dollars.

Independent experts estimate that in a fair auction, Yukos would have been worth closer to 5 billion dollars. To be clear, coder cost. He wasn't the only businessman who did this. Almost all of the auctions were rigged, allowing well-connected businessmen to buy valuable public assets for pennies on the dollar foreign legitimate means he should get credit for competently managing it.

He focused heavily on exploration of new oil fields, and by 2003, they were producing 1.7 million barrels of oil per day. This represented 20 of Russia's entire oil production and two percent of the entire world's production. The success of Yukos made Kodakovsky the richest man in Russia with an estimated net worth of 15 billion dollars. Kodarkovsky also became a big believer in Liberal western-style economics.

He implemented strong corporate governance standards and had Yuko's publicly disclose its financial statements, which were audited by an independent accounting firm. Yukos was held as a successful example of a Soviet Enterprise transitioning to a liberal capitalist system. While Yukos appeared to be a well-run and successful business, there was a lot more going on. Under the surface, The chaotic privatizations of the 1990s created a fertile ground for money laundering.

At the time, Russia did not have sophisticated Financial Regulators as this was not an issue during the planned economy of the Soviet Union so the government basically had no idea what was going on and even when they did, they could usually be convinced to turn a blind eye with a big enough bribe. This gave oligarchs and businessman a huge opportunity for money laundering and tax evasion. Russia is a vast country. Certain metropolitan areas like Moscow and St Petersburg are relatively wealthy, but more remote areas in the Far East of the country are very poor.

In an effort to help the poor regions, the Russian government implemented a number of incentives for private business. If you set up a corporation in one of the poor regions, you pay a reduced corporate tax rate of 11 compared to the normal rate of 30 percent. The small Russian city of Lesnoy was included in one of these preferential tax zones. This region has no oil, and there is no reason for Yukos to set up operations there, and in fact, they did not set up any significant operations in the city.

The vast majority of Yukos's operations were unsurprisingly in oil-rich regions, which should not have the preferential tax treatment. They create a complex network of Shell companies in Lesnoy and other tax advantage cities. These companies existed only on paper, an employed few if any local residents. Yukos employed complex accounting gimmicks to run substantially all their profits through these Shell companies, saving them billions of dollars on taxes.

They also set up Shell companies in Switzerland which should buy oil from Yukos at artificially low prices and sell them to end customers at a substantial markup. The oil was never physically in Switzerland They were a purely paper transactions, but this allowed Kodorkovsky to move money out of Russia without paying any taxes. Foreign success had to be taken into context with the broader economic and political developments in Russia at the time. With the oligarchs having essentially looted the government out of hundreds of billions of dollars along with General economic mismanagement, the Russian economy experienced a financial crisis in a severe depression in the late 1990s.

President Boris Yeltsin came to be viewed as an incompetent clown and his approval rating fell to a measly six percent in the year 2000. Yeltsin saw the writing on the wall and stepped down as president. He was replaced by the former KGB officer. Vladimir Putin Putin was not well known on the political scene at the time, and the oligarchs, including Kodorkovsky didn't know what to make of him as the richest man in Russia Kodorkovsky had a good deal of influence and attempted to use this to reshape Russia's judicial and legal systems.

His main goal was for Russia to adopt Western practices of rule of law and protections for private property. It's hard to tell if Kodorkovsky's Newfound obsession with Western ideals were driven by ideology or self-interest It's easy to see why why the richest man in the country would want a fair legal system to protect his vast wealth from expropriation. To further his cause, he founded the Open Russia Foundation a non-profit focused on promoting reforms to the judicial system and supporting Independent Media. In the early years of Putin's Reign Russia still had something of an independent media.

in the Open. Russia Foundation became one of the leading organizations criticizing the government. In the early days of his presidency, it was unclear whether or not Putin had the political wherewithal to crack down against dissidents, especially coming from the powerful oligarch class of which Kodakovsky was a member. As it turned out, Kodorkovsky miscalculated disastrously in 2003.

he was arrested and charged with tax evasion and money laundering. The money laundering case was related to Kodorkovsky and his associates taking great pains to conceal the ill-gotten gains of their tax evasion scheme, so both charges were related to the same original crime of tax evasion. They also ordered Yukos to pay 27 billion dollars in back taxes. Yukos didn't have nearly as much cash on hand, Unable to pay the tax liability, Yukos went bankrupt and was expropriated by the Russian government and eventually subsumed into the state-run oil company Rosnaft.

Yukos was probably worth around 50 billion dollars at the time, but shareholders received nothing. Koderkovsky ultimately spent 10 years doing hard labor in a Siberian prison camp in a surprise move. Putin Pardoned him in 2013, but only on the condition that he leave Russia and never come back. He has been living in various cities throughout Western Europe Ever since.

Prior to his arrest, Coderkovsky was able to transfer about 100 million dollars out of Russia which he gained access to upon his release. He has given up his career as a businessman and has dedicated his life to political activism. He still operates the open Russia Foundation as well as a few other non-government organizations aimed at bolstering dissident voices within Russia, but given that all of his organizations and websites are banned in the country, the effectiveness of his activism is very limited. To this day, he portrays himself as an honest businessman who face persecution due to his criticisms of Putin.

However, being a victim of political persecution and being an actual criminal are not mutually exclusive. While academics can debate the legal technicalities of Yuko's tax optimization strategies, their use of Shell companies clearly abused the system to avoid paying taxes. And it is indisputable that is. Acquisition of Yukos in the 1990s was corrupt as his own bank was in charge of the auction process.

But it's important to note that almost all Russian oil companies use similar tax evasion strategies as Zukos, yet Yukos was the only company charged. Likewise, almost all billionaires in Russia Today can trace their wealth back to the corrupt privatizations of the 1990s Many oligarchs have committed Financial crimes far more egregious than what Kotorkovsky is alleged to have done, but very few of them have ever been charged. Kodorkovsky's prosecution was certainly selective and politically motivated Putin wanted to make an example out of anyone who dares to defy him. The fact that substantially all the billionaires in Russia have benefited from corruption means that any one of them could end up like Kodorkovsky if they step out of line.

As for Kodorkovsky himself, it's very difficult to tell whether his anti-putin activism as a result of Real ideological concerns or self-interest and personal Vendetta One thing to note is that a strongly held ideological views seem to change with surprising ease. Before the collapse of the Soviet Union he was heavily involved in the Communist Party Youth League. According to people familiar with him at the time, he seemed to be a True Believer in communist ideals, but following which has economic liberalization and then the fall of the Soviet Union, he saw an opportunity to make money. He immediately disavowed his communist views and became obsessed with amassing material wealth.

In the Yeltsin years, he leveraged his political connections to obtain vast wealth through the corrupt privatization auctions. Once he became wealthy, he suddenly became an advocate of the rule of law and property rights. He didn't want his own property to be confiscated, despite the fact that his gains were ill-gotten in the first place. He is now one of the leading dissident voices calling the Putin regime a mob of gangsters.

While this may be true, he fails to acknowledge that he used to be the chief beneficiary of the very corrupt system he is now fighting against. Alright guys, that wraps it up for this video. What do you think about Macaulay Cordorkovsky let us know in the comments section below. As always, thank you so much for watching and we'll see you in the next one! Wall Street Millennial Signing out.