Cablegate: Gor Agencies Visit Pwc Moscow Office March 9

VZCZCXYZ0013
PP RUEHWEB

DE RUEHMO #1028 0711322
ZNR UUUUU ZZH
P 121322Z MAR 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC PRIORITY 8145
INFO RUEHFT/AMCONSUL FRANKFURT PRIORITY 3233
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS MOSCOW 001028

SIPDIS

SIPDIS
SENSITIVE

STATE FOR EUR/RUS, EB/CBA
FRANKFURT FOR SUSAN STANLEY, BILL COTTER
TREASURY FOR BAKER/GAERTNER
NSC FOR KLECHESKI AND MCKIBBEN
USDOC FOR 4231/IEP/EUR/JBROUGHER

E.O. 12958: N/A
TAGS: EFIN ECON RS
SUBJECT: GOR AGENCIES VISIT PWC MOSCOW OFFICE MARCH 9

REF: A. MOSCOW 664
B. MOSCOW 466

1. (SBU) Some 50 Officials from the Interior Ministry's
(MVD) Department of Economic Security and the Procuracy
General spent the better part of Friday, March 9, in the
Moscow office of PricewaterhouseCoopers (PWC) in connection
with the two cases pending against the firm (reftels). The
MVD was on a search for documents related to the outstanding
tax case against PWC, which involves accounting for
expatriate salaries. The Procuracy was looking for documents
relating to charges that PWC falsified its 2002-2004 audits
of former oil giant Yukos.

2. (SBU) The head of PWC's Russia operations, Mike Kubena
(amcit, protect) described the MVD raid as a "disgrace."
Some 45 MVD officers rifled through PWC's office for hours on
Friday and treated PWC employees "shockingly." They took
with them a significant amount of documentation -- none of
which Kubena judged to be relevant to the tax case against
the firm. The MVD continues to threaten to bring criminal
charges, but has not done so as of today. (Note: In November
2006, PWC lost its final automatic appeal of its claim that
its expatriate salary accounting was in keeping with Russian
law and international practice, and PWC has paid the USD 14
million tax authorities argued PWC had underpaid.)

3. (SBU) Kubena said the Procuracy's visit to PWC, which
happened concurrently, but nevertheless separately from the
MVD raid, was more tempered, if not professional. The team
of 4-5 officials examined and removed documents relating to
PWC's audits of Yukos in 2002-2004. (Note: PWC had isolated
and stored these documents more than two years ago in
anticipation of such a request from the GOR, but had not been
approached for them prior to March 9.) As of the sending of
this message, previously scheduled arbitration court hearings
in this case had just begun.

4. (SBU) Despite his obvious distress about the manner in
which the MVD conducted itself in PWC's offices on Friday,
Kubena urged continued restraint when discussing the firm's
case in public. "Not all the facts are clear yet," he told
us, and better not to raise the public profile of the case in
ways that could come back to hurt the prospects for a
reasonable solution.
BURNS

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