Verdict in the “Kirovles Case”

Case No. 1-225/2013 (201/713068-11)

JUDGMENT

IN THE NAME OF THE RUSSIAN FEDERATION

July 18, 2013

Kirov

The Leninsky District Court of the city of Kirov, composed of presiding judge

S.V. Blinova,

with the participation of state prosecutors

S.V. Bogdanov, Head of the Department of Public Prosecution and Appeals of the Kirov Region Prosecutor's Office, and E.N. Cheremisinov, prosecutor of the Department of Public Prosecution and Appeals of the Kirov Region Prosecutor's Office,

the victim's representative, P.V. Smertin,

his defense counsel, attorney M.V. Blinov,

the defendant A.A. Navalny,

his defense counsel, attorneys O.O. Mikhailova, V.D. Kobzev, and S.V. Kobelev,

the defendant P.Yu. Ofitserov,

his defense counsel, attorney S.V. Davydova,

with court secretary E.V. Korshunova,

having examined in open court the materials of the criminal case against

Alexei Anatolyevich Navalny, born June 4, 1976, a native of the village of Butyn, Odintsovo District, Moscow Region, Russian, citizen of the Russian Federation, with higher education, married, supporting two minor children, attorney of the non-profit organization Moscow Bar Association "Mezhregion," liable for military service, registered and residing at: Moscow,

with no prior convictions,

accused of committing an offense under Part 3 of Article 33 and Part 4 of Article 160 of the Criminal Code of the Russian Federation,

Pyotr Yuryevich Ofitserov, born May 4, 1975, a native of the city of Frunze, Kirghiz SSR (now Bishkek, Kyrgyzstan), Russian, citizen of the Russian Federation, with higher education, married, supporting four minor children, General Director of Real-Work-Management LLC, not liable for military service, registered and residing at:

with no prior convictions,

accused of committing an offense under Part 5 of Article 33 and Part 4 of Article 160 of the Criminal Code of the Russian Federation,

ESTABLISHED:

A.A. Navalny organized the commission of the crime and directed the execution of an embezzlement, that is, the theft of another person's property entrusted to the offender, on an especially large scale.

2 P.Yu. Ofitserov aided and abetted the commission of embezzlement, that is, the theft of another person's property entrusted to the offender, by providing assistance on an especially large scale through the provision of information and means for committing the crime. The crime was committed under the following circumstances. At approximately the end of December 2008 to the beginning of January 2009, in the building of the Government of the Kirov Region, the Governor of the Kirov Region, N.Yu. Belykh, at a meeting with the heads of major regional enterprises, including V.N. Opalev, General Director of KOGUP "Kirovles," introduced his future unpaid advisers, including A.A. Navalny, who was officially appointed to that position by Order No. 60-K of the Governor of the Kirov Region dated May 21, 2009. Under the Temporary Regulations on an unpaid adviser (assistant) to the Governor of the Kirov Region, approved by Order No. 887 of the Governor of the Kirov Region dated July 14, 2000, an unpaid adviser to the Governor, in carrying out his powers, provides the Governor with advisory assistance free of charge, holds an official identification card of the established form, and is also vested with the authority to participate with an advisory vote in working meetings under the Governor and sectoral committees of the regional administration, to cooperate with legislative and executive authorities in preparing draft regional laws and regulations, to participate in developing the program of socio-economic development of the region, in forming and implementing regional procurement in strategically important areas of the region's vital support systems, and in developing programs for the restructuring and reorganization of inefficient enterprises of various forms of ownership. At approximately January-February 2009, A.A. Navalny, knowingly aware of his ability to influence the activities of state unitary enterprises of the Kirov Region by virtue of his actual performance of the powers of an unpaid adviser to the Governor, formed the intent to steal property belonging to KOGUP "Kirovles." Acting out of mercenary motives, as the organizer of the crime and simultaneously planning to direct its execution, A.A. Navalny, together with his acquaintance P.Yu. Ofitserov, enlisted as an accomplice to the crime, developed a criminal plan to steal the property of KOGUP "Kirovles" by embezzling it for the benefit of a newly created organization under their control, which P.Yu. Ofitserov was to establish and head. Pursuant to Order No. 492 of the Governor of the Kirov Region dated November 12, 2007, the Kirov Regional State Institution "Kirov Administration of Rural Forests" was transformed into the Kirov Regional State Unitary Enterprise, based on the right of economic management, "Kirovles." By Order No. 07-1588 of the Director of the Department of State Property of the Kirov Region dated December 7, 2007, and also in accordance with the employment agree-

11 this proposal, since it came from an adviser to the Governor of the Kirov Region. At the same time, he knew that Navalny was a close friend of the regional Governor. In March 2009, Ofitserov came to the enterprise and stated that, on Navalny's instructions, he had established VLK LLC as its founder, and that, according to Navalny's plan and instructions, it would handle the sale of the timber products held by KOGUP "Kirovles," while he was to assist in this matter in every respect in order jointly to organize substantial sales volumes through VLK LLC. He understood that KOGUP "Kirovles" was acquiring an intermediary for the sale of finished products. However, since Ofitserov was acting on the instructions of the Governor's adviser Navalny, he agreed to this proposal and told Ofitserov to prepare a contract between KOGUP "Kirovles" and VLK LLC, guaranteeing full assistance in VLK LLC's activities. Some time later, Ofitserov presented a draft contract between KOGUP "Kirovles" and VLK LLC for the supply of timber products, which contained no information about the prices of the products to be sold. Ofitserov said that all of this would be set out in separate appendices and that these matters had been agreed directly with Navalny. Ofitserov also stated that he and Navalny needed him to take steps to re-execute KOGUP "Kirovles"'s previously concluded contracts with regular and major clients in the name of VLK LLC, since neither Navalny nor Ofitserov had clients of their own. Ofitserov learned about these KOGUP "Kirovles" clients from Navalny, who had studied the financial documents received from KOGUP "Kirovles," indicating that the turnover of the state enterprise he headed had amounted to approximately 1 billion rubles in 2008. He delayed signing the supply contract with VLK LLC, including on the recommendation of his subordinate employees, because he understood that the organization was merely an intermediary and that such cooperation and the contract could cause property damage to KOGUP "Kirovles," since the price difference, that is, the profit earned, would remain with VLK LLC rather than KOGUP "Kirovles." Ofitserov and Navalny repeatedly asked why he was not concluding the contract with VLK LLC, to which he explained that the contract terms were unclear and disadvantageous for KOGUP "Kirovles." Despite this, Ofitserov maintained that this arrangement for working with VLK LLC had been approved by Navalny. Ofitserov also made threats that if he did not sign the contract, there would be negative consequences from the regional Government. At meetings, Navalny also insisted on the prompt conclusion of the supply contract and said that all issues should be discussed with Ofitserov, who was acting on his instructions. At the same time, Navalny promised to assist him in increasing budget funding for KOGUP "Kirovles." However, he understood that these promises were connected only with their interest in selling timber products through VLK LLC and in Ofitserov and Navalny, who maintained friendly relations, receiving profit from its activities. In addition, Ofitserov, referring to Navalny, promised that after KOGUP "Kirovles" secured significant volumes of timber product supplies for VLK LLC, his personal interest, in the form of receiving part of the profit from the activities

12 of VLK LLC, would also be taken into account. The text of the contract was prepared on behalf of VLK LLC by P.Yu. Ofitserov, while at KOGUP the contract was reviewed by lawyers and economists, including Makoveev, Bura, and Bastrygina, who did not recommend signing it because it was disadvantageous for KOGUP, since all liability for non-delivery, missed deadlines, and product quality was imposed on KOGUP "Kirovles," which accordingly entailed penalties. At the same time, the liability of VLK LLC was not specified. Nor did the contract specify what percentage VLK LLC would receive for its intermediary services, since payment from VLK for the delivered products was to be made only after the timber products had been delivered and paid for by the end buyer. At the same time, VLK LLC was not required to make any prepayment, nor did it bear any liability for delayed payment. And the enterprise was to supply products based on applications from VLK LLC. He also understood that as a result of signing this contract, the price difference, that is, the profit that should have gone directly to KOGUP "Kirovles" itself from the sale of its property, would instead be transferred to VLK LLC, that is, to Ofitserov, who would dispose of it at his own discretion. Ultimately, after all the meetings with Navalny and Ofitserov, in April 2009 he signed Supply Contract No. 01/2009 with VLK LLC on behalf of KOGUP "Kirovles." After that, as Ofitserov and Navalny insisted, he arranged for the re-execution of contracts that had previously been concluded with KOGUP "Kirovles"'s major clients. At his request, these matters were handled in the interests of VLK LLC by Bura, head of the commercial department of KOGUP "Kirovles," who also took a job at VLK LLC, where she received a salary. He also assisted in re-executing one of the contracts by personally calling the head of OJSC "KMDC" with that request. After the contract was concluded, at a meeting with the directors of the forestry units, attended by Ofitserov, he announced that timber products would be sold through VLK LLC. In May 2009, Ofitserov and Navalny, in order to ensure that products were sold only through VLK LLC, insisted that he issue an order within KOGUP "Kirovles" prohibiting the directors of the forestry units from independently concluding supply contracts for timber products, which he did. In performance of the supply contract concluded with VLK LLC, he signed appendices to that contract until September 2009. In fact, VLK LLC did not perform any real work in marketing the timber products produced by KOGUP "Kirovles," merely sending his employees applications indicating the consignees to whom timber products were to be supplied at reduced prices, while VLK LLC simultaneously profited by adding its own percentage to those reduced prices: from 5% to 30%. These matters were personally supervised by Ofitserov. Thus, by working with VLK LLC, KOGUP "Kirovles" received less revenue than it would have if it had worked directly with its own clients and new buyers. Such sales of timber products through VLK LLC were also loss-making for the enterprise's branches, the forestry units, which had previously sold timber products mainly locally to local buyers, since they had no transport of their own and no delivery capability. In the case of working with VLK LLC, however, the forestry units incurred loading and unloa-

13 ding operations and transport costs and did not receive money directly. In connection with numerous complaints from the directors of the forestry units, he gave them oral permission to ignore applications for timber product deliveries to VLK LLC's clients. This led Ofitserov to complain to Navalny, who began reproaching him for being unable to organize supplies through VLK LLC and demanded that sales volumes through that company be increased. From the moment the contract between KOGUP "Kirovles" and VLK LLC was concluded, and after appendices to it were signed, KOGUP "Kirovles" shipped timber products in the volumes specified in letters from VLK LLC, which periodically arrived bearing Ofitserov's signature; in total, KOGUP "Kirovles" shipped more than 10,000 cubic meters of timber. At the same time, VLK LLC often specified either impossible volumes or impossible delivery deadlines, and in the event of a breach of the delivery terms and deadlines stated in the letters, VLK LLC imposed penalties on KOGUP. Had all the applications been fulfilled, this would have entailed even more negative consequences for the enterprise. He decided not to continue causing damage to the enterprise and stopped carrying out Navalny's instructions. In the summer of 2009, an audit of KOGUP "Kirovles" established that the supply contract with VLK LLC was disadvantageous for KOGUP "Kirovles." Based on the results of that audit, a meeting was held with the Governor of the Kirov Region, attended, among others, by Navalny and Ofitserov. Following the meeting, he was removed from his position, and the contract with VLK LLC was terminated. In assessing the testimony of V.N. Opalev, given both during the preliminary investigation and in court, the court finds it reliable, since it is consistent, corroborated by other evidence collected in the case, and admissible, as it was obtained in accordance with the requirements of the law. Arena with The victim's representative, P.V. Smertin, testified to the court that since July 2011 he has been the Director of the Department of State Property of the Kirov Region; in 2009 he was Deputy Director. In relation to state enterprises, the Department exercises the rights of the property owner and acts as their founder, including as the founder of KOGUP "Kirovles," which in 2009 harvested timber on forest plots leased to it, sold those timber products, and performed state functions for the protection and regeneration of forests. He became aware of the activities of VLK LLC in 2009 at one of the meetings held in the Department at the initiative of L.G. Bastrygina, who at that time was acting head of KOGUP "Kirovles." Bastrygina expressed concern that A.A. Navalny, after V.N. Opalev's dismissal from the post of General Director of the enterprise, had attempted to direct the actions of KOGUP "Kirovles"; according to her, the enterprise's employees were frightened. On the instructions of the head of the Department, K.V. Arzamastsev, he went to KOGUP "Kirovles," gathered the management and the heads of departments and divisions, and explained that Navalny did not possess any official powers

for managing the enterprise, since he was an unpaid adviser to the Governor and no such functions had been assigned to him. He learned of the contract concluded between VLK LLC and KOGUP "Kirovles" at that same meeting. The issue raised was that the contract had been imposed on KOGUP "Kirovles," was extremely disadvantageous and inexpedient for the enterprise's operations, because it contained only one-sided liability of KOGUP to VLK LLC, while issues of price and delivery terms were not formalized in the contract. At the Department's initiative, an audit was conducted, which reached the same conclusions: that the contract between VLK LLC and KOGUP "Kirovles" was economically inexpedient for the enterprise and led, at a minimum, to lost income, since there was a difference between the price at which the enterprise itself sold timber products and the price at which VLK LLC sold them to, among others, the same counterparties. In the opinion of the Department's management, the relationship between KOGUP "Kirovles" and VLK LLC was disadvantageous for the enterprise and, accordingly, damage was caused to the enterprise. If the enterprise had itself made deliveries to those same counterparties, then, taking into account the price difference, it could have earned greater income. - Witness L.G. Bastrygina testified to the court that in 2009 she was Deputy General Director of KOGUP "Kirovles" and was engaged in drafting and implementing the production and financial plan and in distributing cash flows within the enterprise. She also set and sent to the forestry units, branches of KOGUP "Kirovles," the minimum sale prices for timber products that covered their production cost. The General Director was V.N. Opalev, who was her immediate supervisor. At the beginning of 2009, after a meeting in the building of the Government of the Kirov Region administration, which A.A. Navalny attended, Opalev said that they needed to go to Navalny's office because he had promised to help solve KOGUP "Kirovles"'s problems. Later, Navalny was introduced to her as an adviser to the Governor. She gave Navalny an oral description of KOGUP "Kirovles"'s problems, in particular informing him of the disadvantageous state contract and lease arrangement undertaken by the enterprise. Later, she prepared this information for Navalny in writing. Some time later, at a meeting with Deputy Governor S.V. Shcherchkov, Navalny stated that it was necessary to terminate the concluded state contract and also to create a single trading platform for the Kirov Region for the sale of timber products on the basis of KOGUP "Kirovles." It was proposed that all products of all enterprises in the Kirov Region, including low-grade timber, would be sold under commission agreements through this platform, a commercial organization. Then, in the KOGUP "Kirovles" building, she repeatedly saw P.Yu. Ofitserov with Opalev. Navalny also repeatedly visited KOGUP "Kirovles," including arriving with Ofitserov, whom he introduced to her as the director of VLK LLC. At that same time, at a meeting attended by the directors of the forestry units, it was announced that VLK LLC was being created, through which KOGUP "Kirovles" would sell

15 all products. A few days after that meeting, the directors of the Kumensky, Orlovsky, Orichevsky, and Slobodskoy forestry units began contacting her, reporting that it was unprofitable for them to work under the supply contract with VLK LLC because payment for shipped products was either not being received or was being received in smaller amounts. Opalev then gave her the contract concluded with VLK LLC to review. It turned out that this was not the commission agreement previously discussed, but a supply contract under which KOGUP "Kirovles" bore full responsibility, while VLK LLC merely received the money. This contract specified neither volumes, nor product types, nor place of sale. She expressed to Opalev her view that the contract was disadvantageous and one-sided, including because it provided for no prepayment whatsoever: money for sold timber products was paid into VLK LLC's account and only afterward transferred to KOGUP "Kirovles." Previously, KOGUP "Kirovles" had supplied timber products only after buyers made prepayments of 50% to 100%. KOGUP "Kirovles" also could not control whether money for the timber products had actually been received into VLK LLC's account. A meeting was held with Opalev, Bura, Makoveev, and Ofitserov, but no changes were made to the supply contract. VLK LLC paid for completed deliveries with delays. At the same time, contracts with approximately 10 major and regular counterparties of KOGUP "Kirovles" were re-executed in the name of VLK LLC; for those counterparties, the purchase price of timber products remained the same, while less money came into KOGUP "Kirovles" because VLK LLC kept a certain percentage for itself. Moreover, KOGUP "Kirovles" had previously concluded supply contracts only for the volume it actually had available. VLK LLC, however, concluded contracts with counterparties for larger volumes than KOGUP "Kirovles" could supply, which made it necessary to concentrate products in one place, leading to additional transport costs paid by the forestry units and increasing the cost of timber products. Based on the results of the first half of 2009, KOGUP "Kirovles" reported to the Department of State Property on the reasons for the enterprise's losses, and as a result an audit was ordered regarding the sale of KOGUP "Kirovles" products. The audit established that selling timber products through VLK LLC was disadvantageous. This conclusion was discussed at a meeting with K.V. Arzamastsev, Director of the Department of State Property, who agreed with the auditors' findings. Later, the audit was discussed with the regional Governor in the presence of Navalny, Ofitserov, Shcherchkov, Arzamastsev, and the auditor. At that meeting, Navalny and Ofitserov defended the interests of VLK LLC and stated that the audit had been conducted incorrectly. At other meetings as well, Navalny and Ofitserov were always together and expressed the same point of view. As a result of the discussion, Opalev was dismissed from his job. P.P. Tyshlek was appointed Acting General Director and ordered her to prepare documents for Navalny, who would be inspecting the enterprise, and to vacate an office for him. She refused to provide financial documents to Navalny without an appropriate letter from the regional Government. Despite Navalny's promise, he

16 never provided such a letter. The contract with VLK LLC was terminated, but after that KOGUP "Kirovles" received invoices from VLK LLC demanding payment of penalties. From the testimony of witness M.V. Bura given in court, as well as from the testimony she gave during the preliminary investigation and which was read out at the court hearing in Volume 26, sheets 44-48, 49-53, 54-58, 78-81, all of which the witness fully confirmed, it follows that from 2006 to June 2010 she worked at KOGUP "Kirovles," including as head of the commercial department. Her duties included organizing the sale of timber products produced by KOGUP "Kirovles" and finding new buyers. Her immediate supervisor was General Director V.N. Opalev. Before April 2009, KOGUP "Kirovles" had concluded timber supply contracts with the following buyers: Kirov Furniture and Woodworking Combine, Krasny Yakor plywood mill, Investlesprom CJSC, Solikamskbumprom CJSC, Domostroitel OJSC, LesGarant LLC, Vlada company, Belka-Favorit match factory, and others. Contracts with Volga CJSC, the Mari Pulp and Paper Mill, and Imont company were at the approval stage. The forestry units, which were branches of KOGUP "Kirovles," could also independently sell the products they had available. Around February-March 2009, Opalev informed her of an upcoming visit to KOGUP "Kirovles" by a representative of the Government of the Kirov Region, who was to analyze the enterprise's activities. Some time later, Opalev introduced her to P.Yu. Ofitserov, who explained that he was acting on the instructions of Governor N.Yu. Belykh and A.A. Navalny. Then, in February-March 2009, Ofitserov informed her that supplies of timber products produced by KOGUP "Kirovles" needed to be organized through a commercial enterprise being created at the initiative of the Government of the Kirov Region, which Ofitserov himself headed. In the course of their interactions, she fully acquainted Ofitserov with the activities of the commercial department and provided him with the necessary documentation. Around March 2009, Ofitserov sent her by email a draft supply contract between KOGUP "Kirovles" and VLK LLC, under which KOGUP was to supply timber products to VLK LLC. The contract contained no prices or terms, which were to be determined by appendices. The contract imposed one-sided liability on KOGUP "Kirovles" toward VLK LLC. She, Makoveev, the commercial department, the lawyers, and the accounting department of KOGUP "Kirovles" discussed the draft contract. She asked Ofitserov to amend the contract with respect to KOGUP "Kirovles"'s liability. However, Ofitserov said that the contract had to be signed unchanged. Ofitserov constantly hurried her to conclude this contract, asserting that the Government of the Kirov Region insisted on its conclusion and on beginning timber product supplies through VLK LLC, and he referred to the Governor's adviser Navalny. Later, Ofitserov began demanding that the contract be concluded in ultimatum form, asserting that if it was not concluded, Opalev, she, and the directors of the forestry uni-

17 ts would be dismissed. Ultimately, on April 15, 2009, Opalev signed the contract with VLK LLC. Then a meeting was held at KOGUP "Kirovles" with the participation of the directors of the forestry units, also attended by Ofitserov and Navalny. Another meeting was also held at which the directors of the forestry units were informed that shipments of timber products had to be centralized and that all products were to be sold through VLK LLC; a corresponding order was issued. After the contract with VLK LLC was concluded, Ofitserov informed her of the need to re-execute in the name of VLK LLC the contracts previously concluded by KOGUP "Kirovles" with timber product buyers. For this purpose, Ofitserov prepared a special script that she was to recite when visiting each client of KOGUP "Kirovles" in order to persuade them of the need to re-execute the contract with VLK LLC, allegedly as the official dealer of KOGUP "Kirovles." All contracts previously concluded by KOGUP "Kirovles" with its counterparties were re-executed in the name of VLK LLC. For deliveries to those counterparties, the price of timber products in the appendices to the supply contract between KOGUP and VLK LLC was reduced by 7%. Ofitserov explained that this was a standard percentage. In addition, given that she had connections with timber product buyers and experience in that field, Ofitserov offered her the position of Commercial Director at VLK LLC. She agreed to work part-time for VLK LLC, and an employment contract was concluded with her accordingly. Her workplace nevertheless remained at KOGUP "Kirovles." As a result, during the performance of the above-mentioned contract between KOGUP "Kirovles" and VLK LLC, approximately 36 appendices to the contract were concluded, and about 12 of the consignee enterprises listed in them had previously cooperated with KOGUP "Kirovles." During performance of the supply contract, the directors of the forestry units spoke out against the contract because timber products were being sold at a lower price, while the forestry units also had to bear transport costs, packaging, drying of timber products, and so forth. At the same time, there were constant problems with the timber product buyers found by VLK LLC regarding the required quality of the timber products and the delivery deadlines, which KOGUP "Kirovles" could not meet due to objective circumstances, and therefore in some cases it refused to make deliveries. In September 2009, the supply contract with VLK LLC was terminated. After Opalev had already been removed from the post of General Director, Navalny and Ofitserov arrived at the enterprise. Navalny demanded that all documents relating to the sale of timber products be produced, to which she refused, since he had no order from the Government of the Kirov Region authorizing an inspection of KOGUP "Kirovles." Witness S.N. Makoveev testified to the court that from April until June 11, 2009, he worked as Deputy General Director of KOGUP "Kirovles" for production and commercial activities and oversaw issues of production and sale of timber products. The General Director of the enterprise was V.N. Opalev. The enterprise independently sold the timber products it owned to those counterparties with whom transactions were profitable. The main buyers of the pro-

18 ducts of KOGUP "Kirovles" were Solikamskbumprom, Domostroitel, Vyatka Plywood Mill, Krasny Yakor, and others. A contract with Volga OJSC was being prepared for signing, but it was never signed because VLK LLC appeared and concluded the contract instead. KOGUP "Kirovles" had 36 forestry-unit branches in the districts of the region, headed by directors subordinate to the General Director. Since 2008, after the enterprise had been transformed from the Kirov Administration of Rural Forests into a state unitary enterprise, each branch manager could independently look for buyers and sell timber products. But by 2009, management had succeeded in organizing timber sales centrally through KOGUP "Kirovles," while management set the minimum prices. Prices could differ because the branches were located in different districts and selling timber products was not equally convenient everywhere. He was introduced to P.Yu. Ofitserov by Opalev, who said that Ofitserov would help with the sale of timber products. During a conversation that took place in the KOGUP "Kirovles" building, he told Ofitserov about the structure of the enterprise, the products it produced, which timber products had the highest added value, and how those timber products were sold. Then VLK LLC was created, with Ofitserov as its director. Opalev informed him that VLK LLC would sell the timber products produced by KOGUP "Kirovles." He asked Opalev why it was necessary to sell timber products through VLK LLC if sales could be carried out independently. Opalev replied that VLK LLC had been created with the support of the regional Government. He saw the contract between KOGUP "Kirovles" and VLK LLC on the day it was signed. Under the terms of the contract, VLK LLC merely made money, because whatever KOGUP "Kirovles" supplied, VLK LLC received its percentage from each transaction. He recommended not agreeing to the contract terms because KOGUP could not fulfill them. In response to his objections, Opalev said they had to accept it. He was not involved in carrying out this contract. When VLK LLC appeared, he effectively lost his powers as Commercial Director and was later laid off. Witness S.P. Zmeyev testified to the court that in 2009 he held the position of Deputy General Director of KOGUP "Kirovles" under V.N. Opalev for general matters and enterprise security. KOGUP "Kirovles" was engaged, among other things, in selling its timber products to buyers. The largest counterparties of KOGUP "Kirovles" were KMDC, the plywood mill, and Krasny Yakor. In spring 2009, Opalev informed him that, with the approval of the Government of the Kirov Region and on the personal initiative of A.A. Navalny, a company called VLK would be created, and all sales of products produced by KOGUP "Kirovles" would take place through this company, which would act as an intermediary. A contract was concluded between KOGUP "Kirovles" and VLK LLC, the draft of which had been provided by VLK LLC. At one of the meetings, attended by P.Yu. Ofitserov, director of VLK LLC, the directors of the forestry units were informed that all sales would be conducted through this company. It was assumed that VLK LLC was supposed to help sell low-

19 grade products of KOGUP "Kirovles." In the end, it turned out that VLK LLC purchased only high-grade timber. Then virtually all the directors of the forestry units, including to him personally, began reporting that because of the cooperation between VLK LLC and KOGUP "Kirovles," the forestry units had begun operating at a loss, since they were supplying their products at reduced prices dictated by VLK LLC, whereas locally the products could have been sold for much more. In addition, contracts with KOGUP "Kirovles"'s former clients were re-executed in the name of VLK LLC, to whom VLK LLC sold at market prices after purchasing from KOGUP at lower prices. After complaints from the forestry-unit directors, he and the financial and economic department analyzed the appendices to the contract concluded between KOGUP "Kirovles" and VLK LLC. The analysis showed that KOGUP "Kirovles" was losing about 700 rubles per cubic meter of timber. Opalev said that VLK LLC itself determined the prices for timber products. Navalny took an interest in the activities of KOGUP "Kirovles," came to meetings at KOGUP, and after Opalev was removed, came with Ofitserov to study the documentation; they spoke with KOGUP employees and demanded activity reports from each department. Later, the contract with VLK LLC was terminated, but VLK LLC did not fully settle accounts with KOGUP "Kirovles." ++ Witness T.N. Zagoskina testified to the court that she is an auditor at Vyatka-Akademaudit Management Consulting Center LLC. In the summer of 2009, she and auditor T.Yu. Shulyatyeva were given by the director of the firm a technical assignment from the Department of State Property of the Kirov Region to conduct an audit of KOGUP "Kirovles" within 5 days. Given such a short timeframe, it was agreed with the client that only contracts for the second quarter of 2009 would be reviewed. The audit established that one of the main buyers of KOGUP "Kirovles" timber products was VLK LLC. Other enterprises and individual entrepreneurs purchased timber products in small quantities through the forestry units, branches of KOGUP "Kirovles." Supply contracts previously concluded by KOGUP "Kirovles" with a number of enterprises were terminated and re-concluded, but now with VLK LLC. At the same time, the price for the same timber products under the same delivery terms was reduced, meaning that KOGUP "Kirovles" received smaller amounts, which indicated the economically disadvantageous nature of its relationship with VLK LLC. In addition, payment deadlines for timber products were delayed. Mainly high-grade timber was shipped to VLK LLC. An increase of 13% in low-grade timber stockpiles was established. The management of KOGUP "Kirovles" stated that they had been forced to sell products through VLK LLC. After the audit report was prepared, she was invited to a meeting with the Governor of the Kirov Region, where, among others, A.A. Navalny was present and expressed his disagreement with the audit conducted in relation to VLK LLC. Market price is the price at which goods can potentially be sold.

20 Witness M.V. Minin testified to the court that in 2009 he worked as regional manager for the Kirov Region at Investlesprom CJSC. On January 11, 2009, a timber supply contract was concluded between Investlesprom CJSC and KOGUP "Kirovles." In May 2009, M.V. Bura, head of the commercial department of KOGUP "Kirovles," and P.Yu. Ofitserov, who introduced himself as General Director of VLK LLC, came to the enterprise. It was stated that VLK LLC was a trader for KOGUP "Kirovles," that is, an intermediary, and it was proposed that supplies of KOGUP "Kirovles" timber products would be made through VLK LLC on the same terms for Investlesprom CJSC as under the contract with KOGUP "Kirovles." V.N. Opalev also stated that the sale of KOGUP "Kirovles" timber products would be handled by VLK LLC. Accordingly, on May 20, 2009, a supply contract was concluded between VLK LLC and Investlesprom CJSC.

Witness S.S. Chernik testified to the court that he is the General Director of Kirov Furniture and Woodworking Combine OJSC. Before the beginning of 2009, one of the suppliers of timber products to the enterprise he headed was KOGUP "Kirovles." He then learned from his employees that supplies of timber products produced by KOGUP "Kirovles" would be made through VLK LLC, without any change in delivery terms or price. For this purpose, KOGUP employee M.V. Bura came to KMDC. On this issue, he also spoke with V.N. Opalev, director of KOGUP "Kirovles," who confirmed that the sale of KOGUP "Kirovles" timber products would be carried out through VLK LLC. After that, a supply contract was concluded with VLK LLC.

From the testimony of witness M.N. Fursov given in court, as well as the testimony he gave during the preliminary investigation in Volume 21, sheets 4-6, which was read out and confirmed by him, it follows that from February 2009 he worked at Kirov Furniture and Woodworking Combine OJSC as head of the timber supply department. At that time, Kirov Furniture and Woodworking Combine OJSC already had a timber supply contract with KOGUP "Kirovles." In April 2009, employees of KOGUP "Kirovles" called him and asked him to arrange a working meeting with the management of Kirov Furniture and Woodworking Combine OJSC, which was attended by M.V. Bura, head of the commercial department of KOGUP "Kirovles," and P.Yu. Ofitserov, General Director of VLK LLC. They held negotiations with the General Director of Kirov Furniture and Woodworking Combine OJSC, after which they informed him that timber supplies to the enterprise would be made by VLK LLC at the same prices as those previously supplied by KOGUP "Kirovles." In May 2009, a contract was concluded between Kirov Furniture and Woodworking Combine OJSC and VLK LLC, under which timber products were supplied.

Witness R.A. Ovchinnikov testified to the court that he is the director of Vlada LLC, whose main line of business was the sale of sawn timber. In 2009, one of the suppliers of high-grade timber to Vlada LLC

21 was KOGUP "Kirovles." Later, he learned that KOGUP "Kirovles" had begun selling timber products through VLK LLC, and accordingly he concluded a timber supply contract with VLK LLC, although the cooperation with it was short-lived. Witness A.N. Fedotov testified to the court that in 2009 he was Director for Timber Supply at Solikamskbumprom OJSC, which purchased timber, including from KOGUP "Kirovles." In early May 2009, a conversation took place involving him, V.I. Baranov, General Director of Solikamskbumprom OJSC, and N.I. Belykh, Governor of the Kirov Region, during which the issue of increasing timber product supplies from the Kirov Region was discussed, but Belykh made no proposals concerning work with specific enterprises in the Kirov Region. At the end of May 2009, Solikamskbumprom OJSC received a letter concerning timber supplies signed by A.A. Navalny, adviser to the Governor of the Kirov Region; the letter was informational in nature. From the testimony of witness I.V. Kiselev given in court, as well as from the testimony he gave during the preliminary investigation in Volume 25, sheets 1-3, which was read out and confirmed by him, it follows that in 2009 he was acting director of the Kotelnich forestry unit, a branch of KOGUP "Kirovles," headed by General Director V.N. Opalev. As branch director, he had the right to conclude timber supply contracts independently. Because the forestry unit had no transport, timber products were released directly from the forestry unit. In spring 2009, a meeting was held at KOGUP "Kirovles" with the participation of the directors of the forestry units, at which Opalev introduced P.Yu. Ofitserov, General Director of VLK LLC, and ordered that the sale of produced timber products be carried out through VLK LLC. Subsequently, the forestry unit he headed supplied sawn timber to VLK LLC. At the same time, the Kotelnich forestry unit paid the costs associated with transporting the sawn timber from the sawing site to the rail spur. For this reason, supplies of timber products through VLK LLC were disadvantageous. Witness Witness V.S. Krylatov testified to the court that in 2009 he was director of the Kirov forestry unit, a branch of KOGUP "Kirovles," headed by V.N. Opalev. As director of the forestry unit, under a power of attorney he had the right to conclude timber supply contracts, and the forestry unit made deliveries to counterparties of KOGUP "Kirovles," including Krasny Yakor, KMDC, and others. He is aware that a supply contract was concluded between KOGUP "Kirovles" and VLK LLC, under which, on the basis of applications from KOGUP "Kirovles," the forestry unit supplied timber products to Kirov Furniture and Woodworking Combine OJSC, Plitspichprom CJSC, and Krasny Yakor CJSC.

22 Under a power of attorney from Opalev, he had the right to conclude supply contracts for timber products produced by the forestry unit. At a meeting at KOGUP "Kirovles," it was announced that VLK LLC had been created, with P.Yu. Ofitserov as its director, and that this company would purchase timber products from KOGUP "Kirovles." By order of KOGUP "Kirovles," the forestry unit made shipments to VLK LLC. At the same time, the forestry unit incurred costs for sawing and delivering the timber products. However, the forestry unit had previously sold similar timber products at the same price without those costs. Witness A.S. Asapov testified to the court that in 2009 he worked as director of Spetssemleskhoz, a branch of KOGUP "Kirovles," headed by General Director V.N. Opalev. The forestry unit had the right to sell timber products independently and made shipments, including to Domostroitel OJSC. After the supply contract between KOGUP "Kirovles" and VLK LLC was concluded, the forestry unit he headed also supplied timber products to Domostroitel OJSC, but now as a client of VLK LLC, as a result of which the sale price of timber products for the forestry unit decreased. Witness A.N. Zentsov testified to the court that in 2009 he worked as director of the Malmyzh forestry unit, a branch of KOGUP "Kirovles," headed by General Director V.N. Opalev. He had the right to conclude timber supply contracts. At a meeting of forestry-unit directors, Opalev, in the presence of P.Yu. Ofitserov, representative of VLK LLC, announced the need to organize timber product supplies through VLK LLC. Witness N.A. Sergeyev testified to the court that in 2009 he worked as director of the Zuyevka forestry unit, a branch of KOGUP "Kirovles." At one of the meetings with the participation of forestry-unit directors, General Director V.N. Opalev of KOGUP "Kirovles" stated that all timber products needed to be sold through VLK LLC. But since the forestry unit sold timber products directly from the logging site and had no ability to deliver timber products as required by VLK LLC, the forestry unit made no deliveries to VLK LLC. 4 Witness S.N. Panteleyev testified to the court that in 2009 he was director of the Uninsky forestry unit, a branch of KOGUP "Kirovles," headed by General Director V.N. Opalev. The forestry unit he headed had the right to conclude timber supply contracts independently. At one of the meetings with the participation of forestry-unit directors, Opalev stated that a decision had been made to create VLK LLC, through which the sale of timber products produced by the forestry units was to be organized. P.Yu. Ofitserov, General Director of VLK LLC, was also introduced. After that, on the instructions of KOGUP "Kirovles," the forestry unit made timber product deliveries under the contract concluded between KOGUP "Kirovles" and VLK LLC, but at prices lower than those for deliveries to other counterparties. According to the head of the commercial department of KOGUP

23 "Kirovles," prices for the supplied products were set by VLK LLC. With Opalev's consent, the forestry unit stopped deliveries to VLK LLC in August 2009 because delays in payment for delivered products had begun to occur. Witness R.T. Sadriev testified to the court that in 2009 he worked as director of the Darovsky forestry unit, a branch of KOGUP "Kirovles," headed by General Director V.N. Opalev. Under the power of attorney issued to him, he had the right to conclude timber supply contracts independently. In accordance with an order issued by the General Director of KOGUP "Kirovles" prohibiting the independent sale of timber products, from May 2009 the forestry unit he headed supplied produced timber products to VLK LLC and its consignees, including Domostroitel. At the same time, the forestry unit, at its own expense, delivered the timber products by truck to the railway station. These expenses were not reimbursed to the forestry unit, since payment was provided only for timber products loaded into railcars. Witness A.I. Buzmakov testified to the court that in 2009 he was director of the Kumensky forestry unit, a branch of KOGUP "Kirovles." His immediate supervisor was KOGUP General Director V.N. Opalev. In that same year, KOGUP "Kirovles" concluded a centralized timber supply contract with VLK LLC, while the forestry units were prohibited from selling timber products independently. On the application of KOGUP "Kirovles," the forestry unit made a timber product delivery to Kirov Furniture and Woodworking Combine OJSC, which was a counterparty of VLK LLC. However, the delivery price was lower than before, when the forestry unit shipped timber products to Kirov Furniture and Woodworking Combine OJSC without VLK LLC as an intermediary. + - + Witness D.V. Kuzyakin testified to the court that in 2009 he was director of the Kirovo-Chepetsk forestry unit, a branch of KOGUP "Kirovles." General Director V.N. Opalev of KOGUP "Kirovles" issued him a power of attorney including the right to conclude timber supply contracts independently. In spring 2009, at a meeting with the participation of forestry-unit directors, Opalev introduced P.Yu. Ofitserov, General Director of VLK LLC, who campaigned for timber product deliveries to be made to the company. After that, by order of KOGUP "Kirovles," the forestry unit made deliveries to VLK LLC's counterparty KMDC with delivery terms to the city of Kirov. Previously, the forestry unit had also made deliveries to KMDC and other counterparties of KOGUP "Kirovles," but the price of timber products had then been higher than for deliveries on similar terms through VLK LLC. He told Opalev that cooperation with VLK LLC was disadvantageous, to which Opalev replied that VLK LLC, headed by Ofitserov, was supervised by the regional government and personally by A.A. Navalny, who required products to be shipped through VLK LLC; therefore, Ofitserov himself determined the prices of the shipped timber products. f read out +

24

Witness A.V. Beloglazov testified to the court that in 2009 he held the position of director of the Luzsky forestry unit, a branch of KOGUP "Kirovles." In carrying out his duties, he had the right to conclude timber supply contracts independently. At a meeting at KOGUP "Kirovles," the directors of the forestry units were introduced to P.Yu. Ofitserov as the director of VLK LLC, through which timber products produced by the forestry units would be sold. After that, the forestry unit received specifications and timber shipment plans from KOGUP "Kirovles," which the forestry unit carried out. At the same time, the forestry unit incurred costs for delivering timber products from the logging plots to the railway station, and those costs were included in production cost.

Witness N.A. Koretnyuk testified to the court that in 2009 she worked as director of the Podosinovsky forestry unit, a branch of KOGUP "Kirovles." Her immediate supervisor was V.N. Opalev, General Director of KOGUP "Kirovles," who issued her a power of attorney authorizing her to conclude timber supply contracts. In spring 2009, at a meeting at KOGUP "Kirovles," P.Yu. Ofitserov was introduced as the director of VLK LLC, to which timber products had to be shipped. At one of the meetings at KOGUP, she also saw A.A. Navalny. Previously, the forestry unit had not experienced problems with sales and had a concluded contract with Volga. After the supply contract between KOGUP "Kirovles" and VLK LLC was concluded, the forestry unit shipped the timber products it produced to consignees. Previously, however, timber products had been sold to Volga at a higher price than through VLK LLC.

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Witness A.A. Postnov testified to the court that in 2009 he worked as director of the Omutninsky forestry unit, a branch of KOGUP "Kirovles." Under a power of attorney issued by V.N. Opalev, General Director of KOGUP "Kirovles," he had the right to conclude supply contracts for timber products produced by the forestry unit. At one of the meetings at KOGUP "Kirovles," VLK LLC was presented as a major consumer of timber products, and it was proposed that timber products be shipped to VLK LLC. However, making shipments to VLK LLC was disadvantageous for the forestry unit, including because shipments had to be made centrally in railcars. For this reason, Opalev allowed him not to make timber product deliveries to VLK LLC.

-

Witness S.N. Baldin testified to the court that in 2009 he was director of the Yaransky forestry unit, a branch of KOGUP "Kirovles," headed by General Director V.N. Opalev. He had the right to conclude supply contracts for produced timber products independently. At one of the meetings with the participation of forestry-unit directors, held in spring-summer 2009, Opalev stated that it was necessary to supply timber products under the centralized supply contract concluded between KOGUP "Kirovles" and VLK LLC. P.Yu. Ofitserov, director of VLK LLC, was present at the meeting. After that, on the applications of KOGUP "Ki-

25 ...the forestry enterprise made several deliveries to counterparties of VLK LLC, including to Mari Pulp and Paper Mill, to which it had also shipped timber products before the contract with VLK LLC was concluded. At the same time, the forestry enterprise was forced to hire freight transport at its own expense to deliver the timber products to the rail loading point. In addition, the price of the timber products supplied to VLK LLC was lower than the price at which they were sold in the district.

Witness N.V. Kolchin testified to the court that in 2009 he was the director of the Tuzha forestry enterprise, a branch of KOGUP Kirovles, headed by V.N. Opalev. He had the authority to independently conclude supply contracts for the timber products produced. At one of the meetings in April-May 2009, Opalev informed the forestry directors of the need to sell timber products through VLK LLC. Also present at that meeting was P.Yu. Ofitserov, director of VLK LLC, who tried to persuade the forestry directors that cooperation with VLK LLC would be beneficial. The forestry enterprise shipped timber products to Domostroitel, a counterparty of VLK LLC, while the forestry enterprise itself bore the cost of delivering the timber products to the railway station. This was unprofitable, and therefore the forestry enterprise stopped making deliveries to VLK LLC. Opalev also told him that VLK LLC received 5-7% of the transaction amount.

++ Witness Yu.N. Smertin testified to the court that in 2009 he was the director of the Sovetsky forestry enterprise, a branch of KOGUP Kirovles, headed by V.N. Opalev. In spring 2009, at a meeting of forestry directors, Opalev introduced P.Yu. Ofitserov, director of VLK LLC, stating that from then on the sale of timber products produced by the forestry enterprises had to be carried out through VLK LLC. Before that, the forestry enterprise had had no problems selling timber products because of its convenient transport links. The prices for the forestry enterprise's timber products had also been high. At the request of KOGUP Kirovles, the forestry enterprise supplied sawn timber to various consignees of VLK LLC. These deliveries were unprofitable for the forestry enterprise because they were made to the railway station in the city of Kotelnich at the forestry enterprise's own expense, and those costs were not reimbursed. The forestry enterprise sold similar products more profitably in the city of Sovetsk. After he appealed to Opalev, the latter allowed him to stop making shipments to VLK LLC.

Witness G.V. Litvinenko testified to the court that in 2009 he was the director of the Yurya forestry enterprise, a branch of KOGUP Kirovles. His immediate superior was V.N. Opalev, General Director of KOGUP Kirovles, who had given him a power of attorney authorizing him to independently conclude timber supply contracts. In April-May 2009, the forestry enterprises were instructed to sell timber products to VLK LLC. Complying with that instruction, the forestry enterprise made deliveries of timber products to VLK LLC, while K

26 the price of the timber products was lower than the price at which the forestry enterprise sold timber products from its warehouse to other counterparties.

Witness V.M. Sukhikh testified to the court that in 2009 he was the director of the Urzhum forestry enterprise, a branch of KOGUP Kirovles. His immediate superior was General Director V.N. Opalev. He had the authority to independently conclude supply contracts for the timber products produced. In spring 2009, at a meeting of forestry directors, Opalev announced that a centralized timber supply contract had been concluded with VLK LLC and that timber products now had to be sold through that company, although there had been no need to sell timber products through VLK LLC. After that, the forestry enterprise he headed made a number of deliveries of round timber to consignees of VLK LLC, on the terms and at the prices set by KOGUP Kirovles and VLK LLC. However, the forestry enterprise itself incurred transportation costs. The forestry enterprise could not fulfill all of VLK LLC's orders. A number of forestry directors also complained that deliveries to VLK LLC were unprofitable, stating that it was more profitable for them to sell the products independently.

From the testimony of witness P.F. Bulatov given in court, as well as from the testimony he gave during the preliminary investigation in Vol. 22, pp. 145-149, which was read out and confirmed by him, it follows that in 2009 he held the position of director of the Lebyazhye forestry enterprise, a branch of KOGUP Kirovles. On 15 April 2009, KOGUP Kirovles concluded a timber supply contract with VLK LLC. On the instructions of KOGUP Kirovles, the forestry enterprise made deliveries to counterparties of VLK LLC, including Red Anchor CJSC. At the same time, the forestry enterprise arranged delivery of the timber products at its own expense. The price of the shipped timber products was also lower than the price at which the forestry enterprise had previously sold the products independently. Because after the delivery the forestry enterprise received only 50% of the value of the timber products, it made no further deliveries to counterparties of VLK LLC.

From the testimony of witness O.I. Grebneva given in court, as well as from the testimony she gave during the preliminary investigation in Vol. 24, pp. 84-90, which was read out and fully confirmed by her, it follows that in 2009 she worked as director of the Slobodskoy forestry enterprise, a branch of KOGUP Kirovles, and reported directly to its General Director V.N. Opalev. Around spring 2009, at one of the meetings of forestry directors, Opalev introduced P.Yu. Ofitserov, General Director of VLK LLC, stating that timber products now had to be sold through that company. She later learned that on 15 April 2009 KOGUP Kirovles had concluded a supply contract with VLK LLC. In performance of that contract, the Slobodskoy forestry enterprise was required to organize deliveries to Red Anchor CJSC, to which the forestry enterprise had previously supplied products without VLK LLC's involvement, but at a higher price. In response to her complaints, Opalev said

27 that if KOGUP Kirovles refused to make deliveries under the contract with VLK LLC, there would be negative consequences for KOGUP.

Witness V.V. Glazyrin testified to the court that in 2009 he was the director of the Nagorsk forestry enterprise, a branch of KOGUP Kirovles, whose General Director was V.N. Opalev. At a meeting at KOGUP Kirovles, all forestry directors were informed of the need to cooperate with VLK LLC. After that, the Nagorsk forestry enterprise made a number of deliveries of timber products to consignees of VLK LLC, including the same ones to whom it had previously sold timber products independently. The forestry enterprise bore the transportation costs of delivery to the railway station.

From the testimony of witness V.M. Knyazev given in court, as well as from the testimony he gave during the preliminary investigation in Vol. 24, pp. 114-117, which was read out and confirmed by the witness, it follows that in 2009 he was the director of the Belaya Kholunitsa forestry enterprise, a branch of KOGUP Kirovles, and had the authority to independently conclude timber supply contracts. In spring 2009, at one of the meetings of forestry directors, management introduced P.Yu. Ofitserov, director of VLK LLC, whose company had concluded a timber supply contract with KOGUP Kirovles. In performance of that contract, the Belaya Kholunitsa forestry enterprise supplied timber products, including poles, to consignees of VLK LLC. Previously, poles had not been shipped to other counterparties because preparation and sorting by diameter required additional expense. The forestry enterprise also incurred the cost of loading the truck.

Witness S.I. Barantsev testified to the court that in 2009 he was deputy director of the Sorvizh forestry enterprise, a branch of KOGUP Kirovles, and had the authority to independently conclude supply contracts for the timber products produced. In accordance with the contract concluded by KOGUP Kirovles with VLK LLC, the Sorvizh forestry enterprise organized deliveries of timber products to Montazhnik OJSC.

From the testimony of witness A.P. Kuznetsov given in court, as well as from the testimony he gave during the preliminary investigation in Vol. 25, pp. 19-21 and read out at the hearing, which the witness confirmed, it follows that in 2009 he was the director of the Shabalino forestry enterprise, a branch of KOGUP Kirovles, under the supervision of General Director V.N. Opalev. The latter had given him a power of attorney authorizing him to conclude supply contracts for the timber products produced by the forestry enterprise. In spring 2009, at one of the meetings attended by forestry directors, Opalev stated that timber products had to be sold through VLK LLC, with which KOGUP Kirovles had concluded a centralized supply contract. The same was asserted by P.Yu. Ofitserov, General Director of VLK LLC, who at some meetings sat on the presidium. Under the supply contract concluded on 15 April 2009 between KOGUP Kirovles and VLK LLC, the Shaba- .

28 lino forestry enterprise was forced to organize, at its own expense, deliveries of timber products to consignees of VLK LLC. As a result, the forestry enterprise's expenses for transporting the products and for loading and unloading operations amounted to about 160,000 rubles. For that reason, selling timber products to VLK LLC was unprofitable for both the forestry enterprise and KOGUP Kirovles. In addition, VLK LLC delayed payment for the products sold, and for that reason, with Opalev's consent, he refused to make any further deliveries to VLK LLC.

From the testimony of witness V.A. Shutova given in court, as well as from the testimony she gave during the preliminary investigation in Vol. 25, pp. 23-28, which was read out and confirmed by her, it follows that in 2009 she was the director of the Orlov forestry enterprise, a branch of KOGUP Kirovles, under the supervision of General Director V.N. Opalev. The latter had given her a power of attorney authorizing her to independently conclude supply contracts for the timber products produced by the forestry enterprise. In addition, the forestry enterprise fulfilled centralized supply contracts concluded by buyers directly with KOGUP Kirovles. In spring 2009, Opalev gathered all forestry directors for a meeting where he introduced P.Yu. Ofitserov, General Director of VLK LLC, whose company the forestry enterprises were to supply with timber products. She is aware that on 15 April 2009 a supply contract was concluded between KOGUP Kirovles and VLK LLC, under which the Orlov forestry enterprise, at its own expense, organized deliveries of sawn timber to consignees of VLK LLC and bore the transportation costs of delivery to the railway station. Because of this, deliveries to VLK LLC were unprofitable for the forestry enterprise and, overall, for KOGUP Kirovles.

Witness N.Yu. Belykh testified to the court that he has been Governor of Kirov Region since 15 January 2009. While forming the staff of his advisers, he offered the post to A.A. Navalny, whom he had known since 2005 through joint political activity. Navalny was officially appointed to that position in May 2009; however, even before that date he took part in various meetings and sessions, including introductions to the heads of state-owned enterprises. Navalny was presented as a member of his new team, and his position was indicated in press releases. In the first half of 2009, he instructed Navalny to analyze the financial condition of KOGUP Kirovles. Following that analysis, Navalny prepared an internal memorandum stating that the enterprise had serious debts, problems with selling timber products, and also needed reorganization. In order to "improve" the situation in the timber industry sector, he and Navalny visited Solikamskbumprom OJSC, where issues concerning increased timber deliveries from Kirov Region were discussed. He did not give Navalny any instructions to prepare a written proposal to that company. Nor did they discuss creating a special company for the sale of timber products. He is not personally acquainted with P.Yu. Ofitserov; he saw him at a meeting in the adminis-

29 tration of Kirov Region following the audit of KOGUP Kirovles. He had not invited Ofitserov to that meeting, but Ofitserov also spoke regarding the contract that had been concluded. As a result of the meeting, it was decided to terminate the supply contract concluded between KOGUP Kirovles and VLK LLC and to remove Opalev from the position of General Director of KOGUP. One of the reasons for that decision was that Opalev's daughter, in addition to working for KOGUP Kirovles, also worked for VLK LLC, that is, for one of KOGUP Kirovles's counterparties, which could indicate a personal interest on Opalev's part.

Witness S.V. Shcherchkov testified to the court that from January 2009, by appointment of N.Yu. Belykh, Governor of Kirov Region, he worked as head of the advisers' group within the Governor's secretariat. In March 2009, he was appointed Deputy Chairman of the Government of Kirov Region. His official duties included oversight of, among other things, the Department of Forestry. At that time, A.A. Navalny was serving as an unpaid adviser to the Governor of Kirov Region and had his own office in the regional government building. He is aware that the Governor instructed Navalny to assess the effectiveness of KOGUP Kirovles. In that connection, he and Navalny visited KOGUP Kirovles to familiarize themselves with the enterprise's operations. Navalny also introduced him to P.Yu. Ofitserov, director of VLK LLC, which was engaged in the sale of timber products. At Navalny's invitation, Ofitserov repeatedly took part in working meetings concerning the activities of KOGUP Kirovles. He first learned of VLK LLC from V.N. Opalev, General Director of KOGUP Kirovles, who told him that the regional government had recommended that he work with that company in selling timber products. Later, K.V. Arzamastsev, Director of the Property Department, told him that the contract concluded between KOGUP Kirovles and VLK LLC was causing damage to KOGUP. At first Navalny spoke positively about Opalev's work, but later, including as a result of the audit, that assessment changed in a negative direction. Navalny proposed removing Opalev from office.

Witness A.V. Votinov testified to the court that in April 2009 he was appointed adviser to the Governor of Kirov Region and oversaw economic matters. Beginning in the winter of 2009, he familiarized himself with the activities of KOGUP Kirovles and, together with KOGUP's General Director V.N. Opalev, visited forestry enterprises. P.Yu. Ofitserov also took part in those trips, and he later saw him in the building of the Government of Kirov Region, including together with A.A. Navalny.

Witness M.E. Gaidar testified to the court that in 2009, like A.A. Navalny, she served as an unpaid adviser to the Governor of Kirov Region on a voluntary basis-

30 basis, and lived in the same residence as N.Yu. Belykh, A.A. Navalny, and S.V. Shcherchkov, and therefore communicated with them daily. From those conversations, she knows that the Governor instructed Navalny to assist KOGUP Kirovles, including with the sale of its products. Navalny also expressed the view that assistance should be provided in selling timber products, and later spoke in favor of removing Opalev from office. In this, Navalny's position differed from that of K.V. Arzamastsev, who associated Navalny's work with VLK LLC. She also knows P.Yu. Ofitserov, who came to Kirov Region in order to work on selling timber products. Ofitserov and Navalny were on friendly terms; when describing the activities of KOGUP Kirovles, Navalny referred to Ofitserov.

Witness I.O. Merkusheva testified to the court that from early April to August 2009 she worked in the commercial department of VLK LLC. After being hired, she was sent for training to KOGUP Kirovles, where under the supervision of M.V. Bura she familiarized herself with the paperwork for timber shipments. At the same time, the supply contract between VLK LLC and KOGUP Kirovles was being negotiated. Bura worked on the draft and proposed adding provisions because a long-term relationship was anticipated; she proposed shipping products on a prepayment basis. Ofitserov, however, proposed concluding a general contract within the framework of the law. Bura did not consult her about the conclusion of the contract, and she does not know who originally drafted it. Relations between Ofitserov and Bura were cordial. Before the supply contract with KOGUP Kirovles was concluded, VLK LLC had no other suppliers. VLK LLC's profit consisted of reselling the products supplied by KOGUP Kirovles at a markup. She left VLK LLC when deliveries from KOGUP Kirovles ceased. She describes P.Yu. Ofitserov in exclusively positive terms.

Witness E.A. Ovsyannikova testified to the court that from May 2009 she worked as an accountant at VLK LLC, whose business consisted of wholesale trade in timber materials. KOGUP Kirovles was VLK LLC's largest supplier; first a supply contract was concluded with it, and then appendices were added. Delays in payment to KOGUP Kirovles for timber products were due only to the fact that KOGUP Kirovles prepared documents improperly or that VLK LLC's counterparties did not settle accounts with it on time.

Witness D.Yu. Ofitserov testified that in October 2009 he became General Director of VLK LLC, where, at his brother's suggestion, he had worked as a manager since 1 June 2009. His task was to find other suppliers of timber products besides KOGUP Kirovles. VLK LLC's business consisted of buying and reselling timber products. He describes his brother in exclusively positive terms.

BY ORDER OF 3 12.12.2007, V.N. Opalev was appointed General Director of KOGUP Kirovles effective 12 December 2007.

Under clause 5.2 of the Charter of KOGUP Kirovles, approved by the Director of the Department of State Property of Kirov Region on 6 December 2007 and agreed on 6 December 2007 by the Head of the Department of Forestry of Kirov Region, the General Director of the enterprise acts on behalf of the enterprise without a power of attorney, represents its interests in good faith and reasonably within the territory of the Russian Federation and beyond, acts on the principle of sole authority, and bears responsibility for the consequences of his actions in accordance with federal laws, other regulatory legal acts of the Russian Federation and Kirov Region, the Charter, and the employment contract concluded with him.

By virtue of his official duties, his employment relationship with the Department of State Property of Kirov Region, and the enterprise's Charter, General Director V.N. Opalev, from 12 December 2007 onward, continuously performed organizational, administrative, and economic functions, that is, management functions in the unitary enterprise, and exercised powers of use, management, and disposal with respect to the property of KOGUP Kirovles.

On 10 November 2008, the Department of Forestry of Kirov Region and KOGUP Kirovles, represented by General Director V.N. Opalev, concluded forest-plot lease agreements Nos. 1, 2, and 3 for a term of 15 years, under which KOGUP Kirovles received for temporary use forest plots located in Kirov Region and owned by the state.

Under Article 606 of the Civil Code of the Russian Federation, the fruits, products, and income received by the lessee as a result of using the leased property in accordance with the contract are the lessee's property.

In addition, in 2009 the Department of Forestry of Kirov Region and KOGUP Kirovles, represented by General Director V.N. Opalev, concluded state contracts for work on the protection, conservation, and regeneration of forests located on state-owned forest-fund lands within the relevant forest districts in Kirov Region, not assigned to persons using the forests, together with the sale of forest stands for timber harvesting, under the terms of which the timber paid for and harvested under those contracts became the property of KOGUP Kirovles.

While preparing for the forthcoming embezzlement, around February 2009, A.A. Navalny, in effect exercising the above-mentioned powers of an unpaid adviser to the Governor, acting on instructions from the leadership of Kirov Region, who were unaware of the crime being committed, together with P.Yu. Ofitserov, ostensibly for the purpose of studying and analyzing the effectiveness of KOGUP Kirovles, arrived at that enterprise, located at: Kirov Region, Kirov, Avtotransportny Lane, 4. After that, Na-

4

valny introduced P.Yu. Ofitserov to General Director V.N. Opalev and instructed the latter to provide P.Yu. Ofitserov with information on the structure of KOGUP Kirovles, the range of timber products harvested and processed, as well as other necessary data, which V.N. Opalev did.

Around February-March 2009, A.A. Navalny, continuing to carry out his criminal intent aimed at stealing the property of KOGUP Kirovles, while directing the commission of the crime and being in the building of the Government of Kirov Region, located at: Kirov Region, Kirov, 64 Karl Liebknecht Street, informed V.N. Opalev of P.Yu. Ofitserov's forthcoming creation of a company to provide intermediary services for selling the timber products harvested and processed by KOGUP Kirovles, for the purpose of subsequently embezzling the property entrusted to V.N. Opalev.

In those circumstances, V.N. Opalev, realizing that the creation of that company and further dealings with it would cause property damage to KOGUP Kirovles, took no action aimed at preventing A.A. Navalny's unlawful acts and agreed to Navalny's proposal, thereby entering into a prior criminal conspiracy with A.A. Navalny and P.Yu. Ofitserov aimed at embezzling the property of KOGUP Kirovles entrusted to him (Opalev) on an especially large scale.

In order to carry out A.A. Navalny's criminal plan, P.Yu. Ofitserov, acting jointly and in coordination with him, in March 2009 ensured the creation and state registration in Kirov Region of a limited liability company under his and A.A. Navalny's control, Vyatka Timber Company LLC (hereinafter VLK LLC), as well as the opening of a settlement account, thereby aiding the commission of the crime by providing information and means for carrying it out.

On 18 March 2009, the Inspectorate of the Federal Tax Service for the city of Kirov carried out the state registration of VLK LLC (Tax ID 4345252729), with P.Yu. Ofitserov as its sole participant and General Director. On 25 March 2009, he also opened a settlement account for VLK LLC at Vyatka-Bank OJSC (City Additional Office), located at: Kirov Region, Kirov, 7 Chapaev Street.

Around March to the first half of April 2009, in the city of Kirov, Kirov Region, P.Yu. Ofitserov, acting on the instructions of the organizer of the crime, A.A. Navalny, and continuing to aid in the commission of the embezzlement, arranged for the preparation of a supply contract with VLK LLC that was knowingly loss-making for KOGUP Kirovles and signed it on behalf of VLK LLC.

Under that contract, KOGUP Kirovles assumed the obligation to supply timber products exclusively at its own expense to consignees - legal entities and individuals - including those who were in fact existing purchasers of timber products from KOGUP Kirovles, and therefore refusing to conclude direct supply contracts with them made no economic sense and caused damage to KOGUP Kirovles. In addition, in the said- 4

31 Witness N.N. Ratova testified that she is an auditor at Analitik CJSC Audit and Consulting Firm. In 2010, on instructions from the Department of State Property of Kirov Region, she conducted an audit of KOGUP Kirovles for 2008-2009. Based on the results of the audit, KOGUP Kirovles was found to be a loss-making enterprise, the main reason being the conclusion of the state contract and the forest lease agreement. During the audit, no attention was paid to the transaction between KOGUP Kirovles and VLK LLC. At the same time, the audit analyzed timber prices for the third quarter of 2009. A market price is the price that has formed at a given time in the market for services.

In assessing the testimony of the above witnesses in the part set out above, the court finds it to correspond to reality and accepts it as credible, since it is consistent, logical, and corroborated by written evidence examined at the hearing, as well as by physical evidence.

Thus, from the Charter of KOGUP Kirovles, approved by the Director of the Department of State Property of Kirov Region on 6 December 2007 and agreed on 6 December 2007 by the Head of the Department of Forestry of Kirov Region, it follows that the owner of the enterprise is the regional government; the General Director acts on behalf of the enterprise without a power of attorney, represents its interests in good faith and reasonably within the territory of the Russian Federation and beyond, acts on the principle of sole authority, and bears responsibility for the consequences of his actions in accordance with federal laws, other regulatory legal acts of the Russian Federation and Kirov Region, the Charter, and the employment contract concluded with him (Vol. 4, pp. 34-46).

From Order No. 07-1588 of the Department of State Property of Kirov Region dated 7 December 2007, it follows that V.N. Opalev was appointed General Director of KOGUP Kirovles effective 12 December 2007 (Vol. 26, p. 280).

From the employment contract dated 12 December 2007 between the Department of State Property of Kirov Region and V.N. Opalev, it follows that V.N. Opalev was appointed General Director of KOGUP Kirovles and charged with the duty to manage the enterprise in good faith and reasonably, in accordance with the requirements of current legislation, and to exercise other powers assigned to his competence by law, the enterprise's charter, and the employment contract (Vol. 26, pp. 281-287).

From state contracts Nos. 4, 5, 6, 7, and 8 dated 30 March 2009, and Nos. 92, 93, 94, 95, and 96 dated 12 August 2009, for work on the protection, conservation, and regeneration of forests located on state-owned forest-fund lands within the relevant forest districts in the terri- V

TORY 32 of Kirov Region, not assigned to persons using the forests, together with the sale of forest stands for timber harvesting, concluded between the Department of Forestry of Kirov Region and KOGUP Kirovles, represented by General Director V.N. Opalev, it follows that KOGUP Kirovles acquired forest stands in local forest districts of Kirov Region for timber harvesting, and under clause 6.4 of the state contracts, after payment the timber became the property of KOGUP Kirovles (Vol. 17, pp. 145-263).

From forest-plot lease agreements Nos. 1, 2, and 3 dated 10 November 2008, concerning federally owned forest plots and concluded between the Department of Forestry of Kirov Region and KOGUP Kirovles, represented by General Director V.N. Opalev, it follows that forest plots located in Kirov Region and owned by the state were transferred to KOGUP Kirovles for temporary use for a term of 15 years (Vol. 18, pp. 1-262).

From Supply Contract No. 31/KO dated 22 August 2008 between KOGUP Kirovles and KMDK OJSC with appendices; Contract No. 124 dated 4 March 2009 between KOGUP Kirovles and Domostroitel OJSC with appendices; Timber Supply Contract No. 33/09 dated 25 December 2008 between KOGUP Kirovles and Red Anchor CJSC with appendices; Supply Contract No. 13/09-ko dated 27 February 2009 between KOGUP Kirovles and LesGarant LLC with appendices; and Supply Contract No. 4/09-ko dated 27 January 2009 between KOGUP Kirovles and Vlada LLC with appendices, it follows that KOGUP Kirovles had obligations to supply timber products to those legal entities (Vol. 4, pp. 105-147).

From KOGUP Kirovles Order No. 76 dated 19 May 2009, "On Establishing the Procedure for the Sale of Timber Products by KOGUP Kirovles," it follows that from 20 May 2009 a ban was introduced prohibiting forestry-enterprise branches of KOGUP Kirovles from independently concluding supply and sale-and-purchase contracts for timber products with legal entities, individuals, and sole proprietors (Vol. 4, pp. 49-50).

From Order No. 60-k of the Governor of Kirov Region dated 21 May 2009, it follows that A.A. Navalny was appointed unpaid adviser to the Governor of Kirov Region effective 20 May 2009 (Vol. 5, p. 250).

From the temporary regulations on an unpaid adviser (assistant) to the Governor of Kirov Region, approved by Order No. 887 of the Governor of Kirov Region dated 14 July 2000, it follows that an unpaid adviser to the Governor, in exercising his powers, provides the Governor with advisory assistance free of charge, has an official identification card of the established form, and is also vested with the authority to participate with an advisory vote in working meetings under the Governor and sectoral committees of the regional administration

33 , cooperation with legislative and executive authorities in preparing draft regional laws and regulations, participation in developing the region's socio-economic development program, in forming and implementing regional procurement in strategically important areas of the region's vital support systems, and in developing programs for the restructuring and reorganization of inefficient enterprises of various forms of ownership (Vol. 2, pp. 8-9).

From the response of Kirov Furniture and Woodworking Combine OJSC, it follows that on 22 August 2008 Contract No. 31/KO for the supply of timber products, with the right to conclude appendices to it, was concluded between KOGUP Kirovles, represented by General Director V.N. Opalev, and Kirov Furniture and Woodworking Combine OJSC, represented by General Director S.S. Chernik.

On 12 March 2009, Appendix No. 7 to Supply Contract No. 31/KO dated 22 August 2008 was signed between those enterprises, under which KOGUP Kirovles undertook to deliver, by road transport and at its own expense, veneer logs with a diameter of 24-48 cm at a price of 2,000 rubles per cubic meter.

On 25 March 2009, an appendix to Supply Contract No. 31/KO dated 22 August 2008 was signed between those enterprises, under which KOGUP Kirovles undertook to deliver, by road transport and at its own expense, conifer sawlogs with a diameter of 18-48 cm at a price of 1,800 rubles per cubic meter.

On 5 May 2009, Contract No. 04/2009/58 for the supply of timber products, with the right to conclude appendices to it, was concluded between VLK LLC, represented by General Director P.Yu. Ofitserov, and Kirov Furniture and Woodworking Combine OJSC, represented by General Director S.S. Chernik.

On the same day, the following were signed between those enterprises: Appendix No. 5 to Supply Contract No. 04/2009/58, under which VLK LLC undertook to deliver, by road transport and at its own expense, conifer sawlogs (pine) with a diameter of 16-18 cm at a price of 1,200 rubles per cubic meter, and conifer sawlogs (pine) with a diameter of 20-46 cm, grades 1-2, at a price of 1,550 rubles per cubic meter; as well as Appendix No. 4, under which VLK LLC undertook to deliver, by road transport and at its own expense, veneer logs with a diameter of 24-48 cm at a price of 2,000 rubles per cubic meter.

On 1 July 2009, Appendix No. 12 to Supply Contract No. 31/KO dated 22 August 2008 was signed between those enterprises, under which KOGUP Kirovles undertook to deliver, by road transport and at its own expense, conifer sawlogs (pine) with a diameter of 16-18 cm, grades 1-2, at a price of 1,750 rubles per cubic meter, and conifer sawlogs (pine) with a diameter of 20-46 cm, grades 1-2, at a price of 1,850 rubles per cubic meter (Vol. 21, pp. 11-169). 7 > From the response of Vlada LLC, it follows that the following documents were submitted:

34 Contracts Nos. 19/03-08 dated 17 March 2009, 21/03-09 dated 30 March 2009, and 22/04-09 dated 10 April 2009, concluded between KOGUP Kirovles, represented by forestry directors, and Vlada LLC, represented by Director R.A. Ovchinnikov, for the supply of sawn timber; and Contract No. 25/05-09 dated 21 May 2009, concluded between VLK LLC, represented by General Director P.Yu. Ofitserov, and Vlada LLC, represented by Director R.A. Ovchinnikov, for the supply of sawn timber. According to the specifications to Contract No. 25/05-09 dated 21 May 2009 concluded with VLK LLC, the cost of timber products in the form of 100% freshly sawn spruce from freshly harvested wood, with cross-sections of 50x150/180/200/225/250, was 4,400 rubles, which fully corresponded to the cost of similar timber products indicated in the specification to Contract No. 19/03-08 dated 17 March 2009 concluded with KOGUP Kirovles (Vol. 21, pp. 205-223).

From the response of Domostroitel OJSC, it follows that on 20 January 2009 Contract No. 29 was concluded between Domostroitel OJSC and KOGUP Kirovles, represented by A.S. Asapov, director of the Vyatskiye Polyany forestry enterprise, for delivery by rail and road transport - buyer's warehouse delivery terms - of birch sawlogs at 1,800 rubles per m³, pine sawlogs at 2,000 rubles per m³, pulpwood at 800 rubles per m³, and firewood at 480 rubles per m³.

On 4 March 2009, Contract No. 124 was concluded between Domostroitel OJSC and KOGUP Kirovles, represented by A.S. Asapov, director of the Vyatskiye Polyany forestry enterprise, for delivery by rail and road transport - buyer's warehouse delivery terms - of pine sawlogs at 2,000 rubles per m³, pulpwood at 300 rubles per m³, and firewood at 50 rubles per m³.

On 4 May 2009, Domostroitel OJSC concluded Contract No. 219 with VLK LLC for delivery by rail and road transport - buyer's warehouse delivery terms - of pine sawlogs at 2,100 rubles per m³, pulpwood at 300 rubles per m³, and firewood at 50 rubles per m³ (Vol. 20, pp. 9-49).

From the response of the Kirovo-Chepetsk forestry enterprise, a branch of KOGUP Kirovles, it follows that according to the register of supply contracts concluded in 2009, in April 2009 the Kirovo-Chepetsk forestry enterprise sold to KMDK OJSC conifer sawlogs with diameters of 16 to 18 cm, grades 1-2, 6 m; 20 to 24 cm, grades 1-2, 6 m; 24 to 46 cm, grades 1-2, 6 m; 16 to 18 cm, grade 3, 6 m; 20 to 24 cm, grade 3, 6 m; and 26 to 46 cm, grade 3, 6 m, at prices of 1,400, 1,600, 1,750, 1,500, 1,600, and 1,750 rubles respectively.

In May 2009, the Kirovo-Chepetsk forestry enterprise sold the same assortment of timber products to VLK LLC, on equal delivery terms, at prices of 1,330, 1,520, 1,660, 1,330, 1,520, and 1,660 rubles respectively, that is, 70-90 rubles cheaper, and in one case 170 rubles cheaper.

In July 2009, after refusing to make deliveries to VLK LLC, the Kirovo-Chepetsk forestry enterprise sold the above assortment of timber products to

35 KMDK OJSC at prices of 1,750, 1,850, 1,850, 1,650, 1,650, and 1,650 rubles respectively (Vol. 24, pp. 48-75).

From the seizure record dated 8 June 2011, it follows that the following were seized from D.Yu. Ofitserov, General Director of VLK LLC: Contract No. 01/2009 dated 15 April 2009 between KOGUP Kirovles and VLK LLC for the supply of timber products; appendices to it; VLK LLC's contracts with counterparties; VLK LLC's primary accounting documents relating to the purchase and sale of timber products from KOGUP Kirovles and payment for them (invoices, waybills, commercial invoices, cargo customs declarations, payment orders, and bank account statements); as well as documents relating to the employment of M.V. Bura as Commercial Director and the accrual of her salary (Vol. 6, pp. 45-50).

From the seizure record dated 9 August 2012, it follows that at Vyatka-Bank OJSC the legal file of VLK LLC was seized, containing, among other documents, copies of tax authority certificates of state registration and tax registration of VLK LLC, as well as P.Yu. Ofitserov's application to open a settlement account for VLK LLC and the bank account opening agreement, as well as statements of transactions on VLK LLC's accounts at Vyatka-Bank OJSC for the period from 15 April 2009 to 1 October 2009 (Vol. 7, pp. 201-210).

From the seizure record dated 27 September 2012, it follows that at the Volga-Vyatka branch of Sberbank of Russia OJSC, the legal file of KOGUP Kirovles, a signature and seal specimen card for KOGUP Kirovles for settlement account No. 40602810427020100154 dated 3 November 2011, canceled signature and seal specimen cards of KOGUP Kirovles in originals and copies, as well as notices of account opening, a statement of transactions on KOGUP Kirovles account No. 40602810427020100154, and an optical DVD-R disc, serial No. 240 423 R LC 2493, containing statements for the accounts of KOGUP Kirovles and its branches for the period from 15 April 2009 to 1 October 2009, were seized (Vol. 7, pp. 193-196).

From the document inspection record dated 5 October 2012, it follows that the following were inspected: No. 1) seized during the 8 June 2011 seizure from D.Yu. Ofitserov, General Director of VLK LLC: Contract No. 01/2009 dated 15 April 2009 between KOGUP Kirovles and VLK LLC for the supply of timber products, with appendices, confirming the existence of business relations between VLK LLC and KOGUP Kirovles for the supply of timber products during the period from 15 April 2009 to 1 October 2009; contracts between VLK LLC and Domostroitel OJSC, Kirov Furniture and Woodworking Combine OJSC, ABC LLC, Plitspichprom CJSC, Volga OJSC, LesGarant LLC, Pobeda Match Factory LLC, Vlada LLC, Mari Pulp and Paper Mill OJSC, Red Anchor CJSC, Sevlespil LLC, sole proprietor D.A. Podgornov, Montazhnik OJSC, IMONT

36 (IMONT d.o.o.), confirming the existence of business relations between VLK LLC and its counterparties for the supply of timber products during the period from 15 April 2009 to 1 October 2009; waybills and invoices of KOGUP Kirovles issued to the purchaser of timber products - VLK LLC - confirming that VLK LLC purchased timber products from KOGUP Kirovles with a total volume of 10,084.277 cubic meters and a total value of 16,165,826.65 rubles for subsequent resale under Contract No. 01/2009 dated 15 April 2009; invoices, waybills, commercial invoices, and cargo customs declarations of VLK LLC issued to purchasers of timber products supplied by KOGUP Kirovles under Contract No. 01/2009 dated 15 April 2009; payment orders for the transfer of funds from VLK LLC's settlement account to KOGUP Kirovles's settlement account, confirming the transfer of funds for timber products purchased under Contract No. 01/2009 dated 15 April 2009; registers of amounts credited to VLK LLC's settlement account, confirming the transfer by VLK LLC's counterparties of funds to VLK LLC's settlement account for timber products supplied, in the total amount of 16,003,880.28 rubles, under Contract No. 01/2009 dated 15 April 2009 by payment orders; - VLK LLC timesheets dated 30 April 2009, 31 May 2009, and 30 June 2009, and VLK LLC payroll sheets from April through June 2009, confirming that M.V. Bura worked on the staff of VLK LLC; 2) seized during the 9 August 2012 seizure at the premises of Vyatka-Bank OJSC: - the legal file of VLK LLC, Tax ID 4345252729, including the application by P.Yu. Ofitserov, General Director of VLK LLC, to open settlement account No. 40702810300020129046 dated 24 March 2009, a copy of the certificate of state registration of VLK LLC under Primary State Registration Number 1094345004126 dated 18 March 2009, and a copy of the certificate dated 18 March 2009 of VLK LLC's tax registration with the Inspectorate of the Federal Tax Service for the city of Kirov, assigning Tax ID 4345252729 and Tax Registration Code 434501001; - statement of transactions on VLK LLC account No. 40702810300020129046 at Vyatka-Bank OJSC for the period from 15 April 2009 to 1 October 2009; - statement of transactions on VLK LLC account No. 40702978800022129046 at Vyatka-Bank OJSC (transit euro account) for the period from 15 April 2009 to 1 October 2009; - statement of transactions on VLK LLC account No. 40702978500021129046 at Vyatka-Bank OJSC (current euro account) for the period from 15 April 2009 to 1 October 2009; - statement of transactions on VLK LLC account No. 40702840100022229046 at Vyatka-Bank OJSC (transit U.S. dollar account) for the period from 15 April 2009 to 1 October 2009;

37

statement of transactions on VLK LLC account No. 40702840800021229046 at Vyatka-Bank OJSC (current U.S. dollar account) for the period from 15 April 2009 to 1 October 2009, confirming that VLK LLC had and used at Vyatka-Bank OJSC a ruble settlement account, a current euro account, and a current U.S. dollar account;

3) seized during the 27 September 2012 seizure at the premises of the Volga-Vyatka branch of Sberbank of Russia OJSC:

- the legal file of KOGUP Kirovles, Tax ID 4345217040; a signature and seal specimen card of KOGUP Kirovles for settlement account No. 40602810427020100154 dated 3 November 2011; canceled signature and seal specimen cards of KOGUP Kirovles in originals and copies, as well as notices of account opening;

- statement of transactions on KOGUP Kirovles account No. 40602810427020100154 at Sberbank of Russia OJSC for the period from 15 April 2009 to 1 October 2009;

- an optical DVD-R disc, serial No. 240423 R LC 2493, containing account statements of KOGUP Kirovles and its branches for the period from 15 April 2009 to 1 October 2009, confirming that KOGUP Kirovles had and used at Sberbank of Russia OJSC a ruble settlement account opened on 20 December 2007 (Vol. 8, pp. 1-250; Vol. 9, pp. 1-250; Vol. 10, pp. 1-250; Vol. 11, pp. 1-228).

All of the above documents were recognized as physical evidence, examined by the court, and confirm the foregoing, including that in performance of the terms of Supply Contract No. 01/2009 dated 15 April 2009 and its appendices, during the period from 15 April 2009 to 30 September 2009 KOGUP Kirovles shipped timber products to the following counterparties of VLK LLC:

- Domostroitel OJSC in the amount of 1,966.65 cubic meters; - - ABC LLC in the amount of 62.972 cubic meters; - LesGarant LLC in the amount of 988.66 cubic meters; - KMDK OJSC in the amount of 796.754 cubic meters; - Volga OJSC in the amount of 3,068.29 cubic meters; - Vlada LLC in the amount of 698.35 cubic meters; - Montazhnik OJSC in the amount of 310.20 cubic meters; - SevLesPil LLC in the amount of 59.90 cubic meters; - sole proprietor D.A. Podgornov in the amount of 221.351 cubic meters; Mari Pulp and Paper Mill OJSC in the amount of 771.44 cubic meters; - Red Anchor CJSC in the amount of 265.42 cubic meters; Pobeda Match Factory LLC in the amount of 176.36 cubic meters; - Ufimskie Spichki LLC in the amount of 288.94 cubic meters; - Krymskie Zori LLC in the amount of 161.190 cubic meters; - Plitspichprom CJSC in the amount of 132.080 cubic meters; - Imont LLC (IMONT d.o.o.) in the amount of 115.72 cubic meters.

38 The volume of timber products supplied by KOGUP Kirovles to counterparties of VLK LLC amounted to 10,084.277 cubic meters, and that volume of timber products was sold by VLK LLC to counterparties for 16,165,826.65 rubles.

For those timber products, during the period from 15 April 2009 through December 2009, funds in the total amount of 16,003,880.28 rubles were received into VLK LLC settlement account No. 40702810300020129046, opened at Vyatka-Bank OJSC (City Additional Office), namely: rubles; - - from the settlement account of Domostroitel OJSC in the amount of 3,755,494.50 rubles; - from the settlement account of ABC LLC in the amount of 40,950 rubles; from the settlement account of LesGarant LLC in the amount of 1,525,166.08 rubles; - from the settlement account of KMDK OJSC in the amount of 1,325,919.75 rubles; - from the settlement account of Volga OJSC in the amount of 2,507,239.75 rubles; - from the settlement account of Vlada LLC in the amount of 3,136,904.5 rubles; - - for Montazhnik OJSC in the amount of 100,000 rubles; from the settlement account of SevLesPil LLC in the amount of 99,669.70 rubles; - from the settlement account of sole proprietor D.A. Podgornov in the amount of 1,151,025.20 rubles; - - - from the settlement account of Mari Pulp and Paper Mill OJSC in the amount of 545,783.20 rubles; from the settlement account of Red Anchor CJSC in the amount of 200,093.0 rubles; from the settlement account of Pobeda Match Factory LLC in the amount of 291,357.0 - from the settlement account of Ufimskie Spichki LLC in the amount of 282,686 rubles; - from the settlement account of Krymskie Zori LLC in the amount of 513,486.0 rubles; - from the settlement account of Plitspichprom CJSC in the amount of 177,945.60 rubles; from the settlement account of Imont LLC (IMONT d.o.o.) in the amount of 350,160 rubles.

From Supply Contract No. 01/2009 dated 15 April 2009, it follows that it was concluded between KOGUP Kirovles (supplier) and VLK LLC (buyer). The subject of the contract is timber products, which the supplier undertakes to supply in accordance with the technical requirements of the consignees and to the consignees specified in the appendices to the contract, while the buyer undertakes to pay for the goods on the terms established by the contract. Delivery of the goods must be carried out in accordance with the annual (quarterly, monthly) delivery schedule (quota) established in the appendices to the contract, which contain information on the name, quantity, price, terms, and delivery deadlines of the goods, etc. Title to the goods passes from the supplier to the buyer at the moment the goods are shipped to the consignee.

The contract specifically provides the following terms: in the event of delay in delivery of the goods, the buyer has the right to demand a penalty of 0.5% for each day of delay; in the event of partial non-fulfillment of an order, the supplier must pay the buyer a penalty of 5% of the total value of the undelivered goods; in the event of delivery of goods of improper quality, in a share exceeding 20% of the total shipment amount, the supplier bears the cost of returning the goods; if acceptance is refused

39 by the consignee on quality grounds, the order is deemed unfulfilled and penalties apply in that case.

The contract and its appendices were signed by V.N. Opalev, General Director of KOGUP Kirovles, and P.Yu. Ofitserov, General Director of VLK LLC.

From the 36 appendices to Supply Contract No. 01/2009 dated 15 April 2009, concluded in the city of Kirov during the period from 15 April to 13 July 2009, it follows that they specified the type of timber products, the volumes and terms of delivery, and the price.

From the document inspection record dated 17 October 2012, it follows that the employment contract dated 15 April 2009 between VLK LLC as employer and M.V. Bura as employee was inspected, confirming that M.V. Bura worked on the staff of VLK LLC (Vol. 12, pp. 207-209).

From personal income certificates, it follows that VLK LLC employee M.V. Bura received wages in April, May, and June 2009, and P.Yu. Ofitserov from April through December 2009 (Vol. 3, pp. 6, 10).

From Expert Report No. 79ek dated 12 December 2011, it follows that, in accordance with the waybills and invoices of KOGUP Kirovles and VLK LLC, it was established that during the period from 15 April 2009 to 30 September 2009, VLK LLC purchased timber products from KOGUP Kirovles, which were subsequently sold to the following counterparties: ABC LLC, LesGarant LLC, Domostroitel OJSC, KMDK OJSC, Volga OJSC, Vlada LLC, Pobeda Match Factory LLC, sole proprietor D.A. Podgornov, Red Anchor CJSC, SevLesPil LLC, Ufimskie Spichki LLC, Krymskie Zori LLC, Montazhnik OJSC, Plitspichprom CJSC, Mari Pulp and Paper Mill OJSC, and IMONT d.o.o. (Imont), in the amount of 14,785,944.66 rubles.

During the period from 15 April 2009 to 30 September 2009, VLK LLC shipped timber products to its counterparties - ABC LLC, LesGarant LLC, Domostroitel OJSC, KDMK OJSC, Volga OJSC, Vlada LLC, Pobeda Match Factory LLC, sole proprietor D.A. Podgornov, Red Anchor CJSC, SevLesPil LLC, Ufimskie Spichki LLC, Krymskie Zori LLC, Montazhnik OJSC, Plitspichprom CJSC, Mari Pulp and Paper Mill OJSC, and IMONT d.o.o. (Imont) - in the amount of 16,165,826.65 rubles.

The difference between the price of the timber products purchased by VLK LLC from KOGUP Kirovles and the resale price to counterparties ABC LLC, LesGarant LLC, Domostroitel OJSC, KDMK OJSC, Volga OJSC, Vlada LLC, Pobeda Match Factory LLC, sole proprietor D.A. Podgornov, Red Anchor CJSC, SevLesPil LLC, Ufimskie Spichki LLC, Krymskie Zori LLC, Montazhnik OJSC, Plitspichprom CJSC, Mari Pulp and Paper Mill OJSC, and IMONT d.o.o. (Imont) during the period from 15 April 2009 to 30 September 2009 amounted to 1,221,893.87 rubles.

According to the appendix to the expert report, the total volume of timber products sold by KOGUP Kirovles to VLK LLC amounted to 10,084.277 m³ (Vol. 17, pp. 13-54).

40 It follows from Document Examination Report No. 4/2011 dated 05.04.2011 that the price of timber products supplied by KOGUP Kirovles under Contract No. 1/09 dated 15.04.2009 to LLC VLK was lower than the price for timber products of the corresponding GOST standard and assortment supplied by KOGUP Kirovles to other buyers in the period from 15.04.2009 to 01.09.2009 by 115-500 rubles per cubic meter, or 3-24% in percentage terms (Vol. 5, case file pp. 28-39). 2 It follows from Expert Opinion No. 9/2012 dated 09.04.2012 that the difference between 000 the value of the timber products purchased by LLC VLK from KOGUP Kirovles and the value of their resale to former counterparties of KOGUP Kirovles — ABC, Lesgarant LLC, Domostroitel OJSC, KMDK OJSC, Vlada LLC, Krasny Yakor CJSC — for the period from 15.04.2009 to 30.09.2009 amounted in total to 589,110.87 rubles (Vol. 17, case file pp. 94-102). фоллика It follows from the seizure record dated 19.10.2012 that a letter from the Administration of the Government of Kirov Region was seized from V.I. Baranov, President of OJSC Solikamskbumprom, addressed to V.I. Baranov, President of OJSC Solikamskbumprom (Vol. 7, case file pp. 137-139). It follows from the document inspection record dated 22.10.2012 that a letter from the Administration of the Government of Kirov Region was inspected, signed in the name of A.A. Navalny, adviser to the Governor of Kirov Region, outgoing No. 1-01-07-l dated 21.05.2009, addressed to V.I. Baranov, President of OJSC Solikamskbumprom, concerning possible options for developing supplies of timber products from Kirov Region by a selected, reliable, and efficient organization capable of fulfilling a quota for rail delivery of 50,000 cubic meters of conifer pulpwood, namely LLC VLK, which is the official dealer of KOGUP Kirovles (Vol. 7, case file pp. 174-181). It follows from Expert Opinion No. 363 dated 06.12.2012 that the signature in the name of A.A. Navalny on the letter from the Administration of the Government of Kirov Region addressed to V.I. Baranov, President of OJSC Solikamskbumprom, was made by A.A. Navalny (Vol. 7, case file pp. 159-170). It follows from a copy of the search record dated 11.06.2012 that from Navalny’s residence A.A. at the address: Moscow, an Apple iPhone 32 Gb mobile phone, an ArgumentNT desktop computer system unit, a Samsung laptop, as well as a power supply unit and electrical cable for that laptop, were seized (Vol. 14, case file pp. 148-153). It follows from the item inspection record dated 28.12.2012 that the items seized during the search of A.A. Navalny’s residence were inspected:

41 an Apple iPhone 32 Gb mobile phone, with an MTS mobile operator SIM card, containing information on A.A. Navalny’s contacts; an ArgumentNT desktop computer system unit, containing a hard disk drive with a file <<_007562» containing a report and the texts of email messages; a Samsung laptop with a hard disk drive containing text files of email messages. The email messages contained on the hard disk drives of the desktop computer system unit and the laptop contain email correspondence between A.A. Navalny, using the email address and P.Yu. Ofitserov, using the email address and have the following content: <<03.04.2009 at 17:19 from P.Yu. Ofitserov to A.A. Navalny: Hi! Attached is the letter they gave to friend O. On the recommendation of that very guy. We need clarification. Because as I understand it, this duplicates the scheme. So now we need to understand whether they go through us or whether this will be something else? Reply by SMS, I’m already on the train.» <<09.04.2009 at 12:45 from P.Yu. Ofitserov to A.A. Navalny: Attachment No. 1: CONTRACT LLC VLK for review.doc Hi! Take a look.» <<09.04.2009 at 23:44 from A.A. Navalny to P.Yu. Ofitserov: Looks like everything’s okay. But did you leave out all those agency and commission fees? Where’s the 7%? Are you just agreeing on that verbally in advance and setting the price that way? And I didn’t understand the payment procedure. Where does it say whether this is prepayment or deferred payment? Or do we pay upon delivery? For example, VLK has an order for 500 cubic meters of timber from Kazakhstan. We place the order with KL, they supply us the timber, and we ship it to Kazakhstan. When does VLK transfer the money to KL? After the timber is accepted in Kazakhstan or after Kazakhstan makes an advance payment? And what if there is no advance payment?» <<10.04.2009 at 08:51 from P.Yu. Ofitserov to A.A. Navalny: Hi! The scheme here is a fun one. Any other way would be sharply more difficult. For example, with pulp-and-paper mills and plywood plants, the contracts will be on deferred payment terms; the delay may be 3 days or 30 days. Their volumes can be from 1,000 to 4,000 cubic meters or more. If it’s 5 days, fine, but what if it’s 35? And suppose we sign a contract with KL for 15 days. Where do we get the money? So I decided it would be more convenient and fair at the first stage to make an appendix for each client. ... but we’ll manage. That is, if the appendix says that we supply Company Daisy on a prepayment basis, then within 5 days after the acceptance certificate I send the money to KL; and if it’s a 30-day deferral, then after 30 days. For each delivery an appendix is made covering technical specifications, here ... transport conditions, etc. So if payment terms are also included there, that will be more convenient. That’s what I think.» <<10.04.2009 at 11:16 from A.A. Navalny to P.Yu. Ofitserov: ok» *** <<13.04.2009 at 22:21 from P.Yu. Ofitserov to A.A. Navalny: Hi! Attached is a logo option for the company’s corporate identity. What do you think?>>>

42 <<23.04.2009 at 10:59 from P.Yu. Ofitserov to A.A. Navalny: Hi! Attached is a memo. Everything in it is true. I didn’t exaggerate anything. Take a look — will it work?» <<23.04.2009 at 11:13 from A.A. Navalny to P.Yu. Ofitserov: Wow. Is all of that true? And with Domof did we sign for 130 cubic meters or 1,300?>>> <<23.04.2009 at 11:31 from P.Yu. Ofitserov to A.A. Navalny: It’s all true. So far only for 130 cubic meters. He wants another 3,000, but those are still up in the air; there’s no money yet from his clients, so we’re not even signing contracts for those. And also, already without KOGUP, for 8 railcars of edged lumber per month, also on prepayment. But for now those are only arrangements. You’ll get a letter now, about the money, with justification of what goes where.» <<23.04.2009 at 11:32 from P.Yu. Ofitserov to A.A. Navalny: As for the money needed: payroll fund — 11,700 including me. Without me, 72,000. Theoretically my pay can be postponed until next month. :) Payroll tax about 17,000; I’ll be able to say more precisely after the calculation, but the amount will stay about the same. We need 3,000 rubles now for developing the corporate identity, because with the current tree logo it’s ridiculous, and we need to make letterheads, business cards, envelopes, etc.; but that’s basically a deposit, the main amount can be paid later. Better now, so as not to drag it out. Internet and phone — 3,000 rubles needed now. Office supplies — 3,000, we have nothing. Total to prepare: 143,000; without me, 98,000. Right now I’m waiting for a payment of 260,000 from Domoff; my share in that is 13,000, minus taxes, etc. The big orders are still hanging; I don’t know whether I’ll manage to move anything before the end of April. Probably not. It’s not possible to speed things up, because the shipping cycle is still at least a week by rail. And there are no trucks yet. So we work and wait for May.» <<23.04.2009 at 12:41 from A.A. Navalny to P.Yu. Ofitserov: In the memo, the bit about the Volzhsky pulp-and-paper mill needs to be removed; it’s just OJSC Volga — basically the same thing. But better to correct it so there’s no awkward mix-up.» - <<03.05.2009 at 11:30 from P.Yu. Ofitserov to A.A. Navalny: Hi! Overall, there isn’t much info on it, as I expected. Makoveyev is supposed to prepare a memo on this; he was busy for two days. He tried hard, wants to get credit for it. So I think it will contain the maximum information on this pulp-and-paper mill. I can only dig things up from the internet. As of today, the situation is this: the contract is signed with KOGUP; ours is under review but not signed. There are two factors there: internal bureaucracy, and I think waiting for the situation to become clearer, plus probably Makoveyev muddying the waters to remain the top specialist on the mill. Next: a quota has been signed for 9,000 cubic meters of spruce-fir pulpwood, GOST 9463-88, grades 1-2, through the end of the year, for KOGUP; that’s a little over 1,000 cubic meters per month. We need at least 3,000 per month. More is possible, but there are several buts: 1. Payment deferral of 25 days. 2. Deferral on the rail tariff is about the same. And that means money being frozen today. 3. Very strict acceptance inspection, which leads to a large amount being sorted out and rejected. Though that’s a matter of arrangements — I think I’ll be able to handle that myself later. 4. KOGUP also complains about unstable operations, lack of delivery schedules, etc., but in my view that’s also a matter of arrangements; I think 1-3 working negotiations at my level will solve this problem, but if the conversation goes there, then at your level too. Overall my con-

43 clusion is this: the main issues that, in my view, are worth pushing for are: 1. increasing the quota to 3,500-5,000 cubic meters per month, that is, 25,000-30,000 cubic meters through the end of the year; 2. also reducing the payment deferral period by at least 10 days. But that is more a matter of development. Because from their point of view, why reduce the deferral? They will try to increase it instead. I would do the same. Canceling quotas for Kirov companies would lead to Perm companies and others registering instead, while buying timber in the same place. So it makes sense to talk about a share and an overall percentage in the supply volume, and about concluding a contract as a strategic supplier. But then they’ll squeeze every last drop out of the terms. So the strategic supplier angle has to be handled very carefully. In general, Nikita shouldn’t go there, but that’s just my purely subjective opinion, from under the bridge» - <<04.05.2009 at 15:14 from A.A. Navalny to P.Yu. Ofitserov: Petya, an important favor. Can you send one of your guys to buy an inexpensive Nokia phone (around 3,000 rubles) with a SIM card from any operator and put 1,000 rubles on it. Register the phone in anyone’s name, just not yours. Some tariff plan with no monthly fee, so it can sit as long as needed and still work. And tomorrow morning hand it over to me with no boxes or anything, just a ready-to-use phone. Really need it. And set up a Gmail account for yourself already, because there’s no secrecy at all with you.» <<05.05.2009 at 13:02 from P.Yu. Ofitserov (email address) to A.A. Navalny: hi! here’s my email.» 20:21 from P.Yu. Ofitserov (email address) to A.A. Navalny: http://www.newestsoft.com/cat29 2238.html here’s a link to the program, install it and we’ll exchange encrypted files. The password needs to be at least 7 characters long so it’s easy to re- <<11.05.2009 at member.» ... address <<12.05.2009 at 11:08 from P.Yu. Ofitserov to A.A. Navalny: Hi! Attached is a draft letter. Take a look, criticize it, what needs to be added, what removed, etc. Attachment. To N.Yu. Belykh, Governor of Kirov Region. From P.Yu. Ofitserov, General Director of LLC Vyatka Timber Company. Letter. Dear Nikita Yuryevich! In order to improve the efficiency of the timber industry complex as a whole, we propose creating a unified timber products trading platform for enterprises of Kirov Region. The main functions of this platform would be: ensuring stable sales for timber industry products throughout the year. Creating a consolidated marketing impact on the market in order to obtain more favorable conditions for timber products from Kirov Region. Organizing the logistics component to ensure cost competitiveness for enterprises of the timber industry complex of Kirov Region. Creating a unified trading platform for the region’s timber products will make it possible to create clear working conditions for timber producers and ensure stable sales for them, especially for products such as pulpwood, small-diameter timber, etc. Stable sales will allow enterprises to develop more steadily with greater confidence in the future. A single operator, for external cli- ents — pulp-and-paper mills, plywood plants, etc. — is a more attractive supplier

http://www.newestsoft.com/cat29 2238.html

44 and will be able to obtain more favorable contracts for larger supply volumes than the terms individual small producers can achieve. By con- centrating on customer service, it will be able to cover a larger share of these clients’ demand and also provide a higher level of service through organized logistics and streamlined business processes. Having at its disposal a larger volume of timber, the unified trading platform will be able to strengthen the position of the timber industry complex of Kirov Region in the European part of the Russian Federation. LLC Vyatka Timber Company is ready to create this trading platform on its own base; we have already carried out all the necessary calculations and held preliminary talks with most po- tential consumers of coniferous and deciduous pulpwood and other low-grade timber. For this we need:»

<<12.05.2009 at 11:15 from A.A. Navalny to P.Yu. Ofitserov: Everything is excellent. Only the word “chaotically” appears twice. And most importantly: “For this we need” — what exactly do we need at all?»

<<12.05.2009 at 16:20 from P.Yu. Ofitserov to A.A. Navalny: Attached is the sup- plemented version. Attachment. For this we need: approval for the creation of a Unified Timber Products Trading Platform at the regional administration level. The Region’s financial guarantees for obtaining a loan in the amount of 15 million rubles. This sum will be invested in the development of the timber sector through payment for actually shipped timber. We plan to purchase pulpwood and other timber under a 50% prepayment / 50% after payment by our clients — large pulp-and-paper mills, plywood plants, etc. — as well as to purchase equipment for organizing the collection of timber from remote areas from enterprises that do not have the ability to transport it themselves. In this activity, LLC “Vyatka Timber Company” plans to earn no more than 12%. I ask you to consider our proposal. We are ready to provide any additional infor- mation and calculations at your request. General Director of LLC “Vyatka Timber Company,” P.Yu. Ofitserov.»

....

<<12.05.2009 at 16:49 from P.Yu. Ofitserov to A.A. Navalny: Hi! I’ll change it to “unstructured.” I have a slight feeling that we’re rushing things. Look: The average price of pulpwood in the region is 700 rubles in the yard. At the same time, you can buy small batches for less, and there are higher prices up to 1,000 for pickup. With pulpwood, there’s a common practice: better to burn it or bury it than sell it cheaper. It turns out that we can earn 30-40 rubles more than with friend O. On pulpwood ... basically its cost is low, and even increasing the margin by 2-3% almost doesn’t change the picture in absolute figures. So I don’t know what to ask for; KOGUP has the ability to cover this order’s needs for the next 2-3 months. During that time, we can set up a collection system and negotiate with sup- pliers. But then the next question arises: delivery cost is not very different from rail, because you need to find trucks based there. Kirov carriers are quoting a preliminary price of 650-710 rubles per cubic meter. Rail cost is comparable. We may be able to squeeze the price down, but not much, and only if we find trucks there in the districts. We’ll need to haul about 7,000 cubic meters a month — that’s almost 5 million for transport services, with the money coming back within a month. Plus pur-

45 chasing is the same amount. In the end, we need at least 10 million rubles. In order to earn 849-750 purchase price = 100 rubles per cubic meter at best, and all the risks are ours. If through KOGUP, then we can make 59-65 and the risks are almost zero. We need to go 10 million into debt in order to get an extra 35 rubles — that would be 30-40 thousand dollars. At the same time, the cost of credit is at least 20-25% per year, which would be 2-2.5 million rubles. So the potential income is 1.5 million, and the guaranteed expense is 2.5 million. Primitive, but clear. Pulpwood is not something you can make good money on under these conditions. Maybe I’m mistaken somewhere; I’d be glad to be corrected. :) So I don’t know what we need from the administration right now. I really don’t know. They won’t give us money interest-free; we need to think through schemes without money, but they’ll sell only on prepayment or under regional guarantees... That’s the kind of letter it is.»

****

<<12.05.2009 at 17:08 from A.A. Navalny to P.Yu. Ofitserov: Budget guaran- tees are unrealistic there. I checked. Collateral is needed, so let’s drop that for now.» <<12.05.2009 at 17:53 from P.Yu. Ofitserov to A.A. Navalny: Then what do we need? Just approval? Like, boys, go play around ...? And what would the bank lend against? It’s not an altruist either, to throw out 15 million under risk. What we need is legalization, and does this letter lead to that goal? That’s all it can give. And the mon- ey for this has to be found, or we lean on friend O until we scrape it together. But on the other hand, selling 1,000 cubic meters of edged board will give us 3 million; that’s 3-5 deals. All on friend O’s resources. Well, all right — do you need me to bring it to you tomorrow with signature and seal?>> <<12.05.2009 at 18:01 from A.A. Navalny to P.Yu. Ofitserov: Exactly. What we need is legalization, institutionalization, and recognition. The platform project is precisely for that. And get the cash through your lumber.» <<12.05.2009 at 22:00 from P.Yu. Ofitserov to A.A. Navalny: So in reality we’re returning to the KOGUP scheme, working through it and gradually preparing a spring- board for development, possibly buying goods under a letter with the governor’s approval. How else can the letter help? If they sign it, maybe then they’ll give us sidings? But then it would be better to ask for specific sidings. Or maybe leave the money in the letter, then later it’ll be easier — like, they didn’t give money, but give us sidings. You think about it. And I’ll call you tomorrow and we’ll discuss it. Because this letter can only be the basis for an order in the style of “provide support to the initiative of LLC ‘Vyatka Timber Company’ to create a unified trading platform...” which in principle could also play out pretty well. Think about it, I’ll call tomorrow.» «13.05.2009 at 00:48 from P.Yu. Ofitserov to A.A. Navalny: Would this ending work? “For this we need: 1. Approval for the creation of a Unified Timber Products Trading Platform by LLC ‘Vyatka Timber Company’ at the regional ad- ministration level. 2. Assistance from the Department of Forestry and the Department of Industry in organizing this process. I ask you to consider our pro- posal. We are ready to provide any additional information and calculations at your request.” «13.05.2009 at 17:24 from P.Yu. Ofitserov to A.A. Navalny: Hi! When are you ready tomorrow to meet with Agrosimul? I’ll give you the letter tomorrow on the unified

46 platform. As for Solikamsk, I need them to sign the contract with me; they’ve already had the contract with LLC “Vyatka Timber Company” under review for the fourth week. Someone needs to call and ask them to speed up signing the contract with us. Can you do it? If necessary, I can go there. Otherwise what’s the point. Waiting.»

«13.05.2009 at 17:30 from A.A. Navalny to P.Yu. Ofitserov: We’ll sort everything out with Solikamsk».

«11.06.2009 at 11:00 from P.Yu. Ofitserov to A.A. Navalny: Hi! Attached is the contract; take a look, you’re a lawyer. Is there anything unclear or incorrect there? The contract is big, dangerous. There we ship at one price, then add to the price for transport services, etc.; those will be in a supplementary agreement, which is also attached. And I’ll ask you two questions: 1. What’s happening with Solikamsk? 2. What is being done to speed up the department’s work on processing the contract and lease for KOGUP? There’s a serious slowdown on their side. Looks like the dirty word sabotage. (Attached is a draft contract in Russian and a foreign language between 000 “VLK” and the planned company)»

«11.06.2009 at 11:13 from A.A. Navalny to P.Yu. Ofitserov: ... And where are the appendices to the contract? I’m trying to reach Baranov today. Yes, it probably is sab- otage. Tell me how exactly it’s showing itself and I’ll ...»

<<11.06.2009 at 11:46 from P.Yu. Ofitserov to A.A. Navalny: Well, we’ll meet and I’ll tell you, or friend O wanted to come see you today and he’ll explain it in detail. And I’ll ask him to put it together properly.»

<<11.06.2009 at 11:51 from A.A. Navalny to P.Yu. Ofitserov: Ok.»

<<15.06.2009 at 14:52 from P.Yu. Ofitserov to A.A. Navalny: Hi! Did you look at the contract? Any comments?»

<<15.06.2009 at 15:16 from A.A. Navalny to P.Yu. Ofitserov: Hi. Well, everything seems fine...»

<<02.07.2009 at 13:33 from P.Yu. Ofitserov to A.A. Navalny: Hi! Did you ask friend O for a list of forestry directors who have their own business in the timber sector? I’m meeting with him now and want to raise that issue too. And also, you promised an introduction to the person in charge of the prison colonies, so we could buy timber from them.»

<<02.07.2009 at 14:55 from A.A. Navalny to P.Yu. Ofitserov: yes, I asked, a long time ago already, and you can press him hard on it. Haven’t spoken about the colonies yet.»

<<02.07.2009 at 16:25 from P.Yu. Ofitserov to A.A. Navalny: I’ve just written letters demanding penalties from KOGUP for 100 thousand; of course they won’t pay most of it, but I’ll keep scaring them to the end. I want now to do a full inventory of the re- maining stock — or rather, demand that they do it. Here I’m asking you to require them to conduct an inventory, maybe with a department representative; I can assign one of my people too, let him go around. Of course he won’t actually count anything, but he’ll puff up his cheeks and look the part. I think they really have little harvested timber left, and measures will need to be taken to block any sales by the forestry units themselves. Officially they supposedly can’t do that now. But I think they really are trading. I’m in a mess: the contract with Marbum (the Volzhsky pulp-and-paper mill) is on the verge of collapse; those ... have run out of deciduous pulp- wood! They’ll ship only 700 cubic meters and that’s it, and for the next three months I’ll have to ... ....

47

another 700 cubic meters per month. Given the low price, I won’t be able to buy in style for it across the whole region. In short, a total horror show. What do we do? Who do I beat? ... Basically everything is flowing toward full-scale trading and procurement activity, with our own money, at our own risk. All very funny and cheerful. Waiting for you to tell me a meeting time; I’m busy until 15:00, negotiations where I’ll be telling clients that I have timber ... lots and lots! Do you know where friend O is? Didn’t he tell you anything? He’s disappeared for the whole day somewhere. When are we meeting today?»

In addition to the above email correspondence between A.A. Navalny and P.Yu. Ofitserov, electronic files were found containing the text of draft Contract No. 01/2009 between LLC VLK and KOGUP Kirovles, a profit and loss statement, the 2008 balance sheet of KOGUP Kirovles, a work plan for analyzing the fi- nancial and economic situation at KOGUP Kirovles, a letter from the Administra- tion of the Government of Kirov Region to V.I. Baranov, President of OJSC Solikamskbumprom, a negative review of the report by the firm Vyatka-Akademaudit in the name of A.A. Navalny, and a memorandum on the results of the joint activities of VLK and KOGUP Kirovles in the name of P.Yu. Ofitserov (Vol. 14, case file pp. 214-225, Vol. 15, case file pp. 1-250, Vol. 16, case file pp. 1-143). ции Правительства Кировской области B

It follows from the document inspection record dated 02.08.2011 that information obtained by court order on connections between the subscribers and subscriber devices of P.Yu. Ofitserov and A.A. Navalny was inspected:

a CD-R optical disc containing information on connections for the period from 01.01.2009 to 01.12.2009 for subscriber number 8-9: 65, registered with the Kirov regional office of the Ural branch of OJSC MegaFon in the name of P.Yu. Ofitserov, and it was established that in the period from 02.04.2009 to 29.10.2009 there were more than 100 incoming and outgoing calls, including received and sent SMS messages, with subscriber number 8-9 76;

a CD-R optical disc containing information on connections for the period from 01.01.2009 to 01.12.2009 for subscriber number 8-9 76, registered with OJSC Mobile TeleSystems to the Kobyakov wickerwork factory, used by A.A. Navalny, and it was established that in the pe- riod from 22.01.2009 to 06.10.2009 there were more than 40 incoming and outgoing connections with sub- scriber number 8-9 39;

a CD-R optical disc containing information on connections for the period from 01.01.2009 to 01.12.2009 for subscriber number 8-9 39, registered with the Kirov branch of OJSC VimpelCom in the name of P.Yu. Ofitserov, and it was established that there were 858 outgoing and incoming connections with subscriber number 8-9 76;

51, regis- information on connections of subscriber number 8-9 tered with the Kirov branch of OJSC VimpelCom in the name of P.Yu. Ofitserov, for the pe- riod from 01.01.2009 to 01.12.2009, and it was established that there were outgoing calls and SMS messages with subscriber number 8-9 76 (Vol. 12, case file pp. 54-121).

48 It follows from the cover letter of the FSB Directorate for Kirov Region (UFSB) dated 19.07.2012 outgoing No. 3/2555, the order on providing the results of operational- search activity to the investigator dated 19.07.2012, and the order on declassi- fying information constituting a state secret and its carriers dated 18.07.2012, that the results of the operational-search mea- sure “wiretapping of telephone conversations” concerning A.A. Navalny and P.Yu. Ofitserov, obtained on the basis of a court order, were forwarded (Vol. 12, case file pp. 130- 167).

It follows from Expert Opinion No. 246-64f dated 15.10.2012 that the verbatim content of the conversations on the audio recordings obtained as a result of the operational- search measure “wiretapping of telephone con- versations” and contained on CD-R optical discs was established, as well as the identification of the voice and speech of A.A. Navalny and P.Yu. Ofitserov on the audio recordings contained in the files <b978e002.wav», «b7528003.wav», «са647002.wav», «83292003.wav», <6a8f6002.wav». No signs of editing or changes made during the recording process or after its completion were found in the conversations recorded on the phonograms located on the said discs (Vol. 13, case file pp. 2-158).

It follows from the record of inspection and listening to audio recordings dated 08.08.2012 that the CD-R optical discs obtained by the FSB Directorate for Kirov Region as a result of the operational-search measure “wiretapping of telephone con- versations” were inspected; taking into account the results of Expert Opinion No. 246-64f dated 15.10.2012, they contain audio recordings of telephone conversations between A.A. Navalny and P.Yu. Ofitserov.

The following content of the audio recordings was established:

The file <<67528003.wav» contains a phonogram recording of a telephone con- versation between A.A. Navalny and P.Yu. Ofitserov that took place on 06.08.2009 at 20:51, in which A.A. Navalny asks whether V.N. Opalev’s daughter is still working for P.Yu. Ofitserov, whether she worked officially, and whether she received a salary.

In turn, P.Yu. Ofitserov states that he did not renew her con- tract. After that, A.A. Navalny tells P.Yu. Ofitserov about the particular features of the activities of state enterprises in Kaluga Region performing functions similar to those assigned to KOGUP Ki- rovles, asserting that speculation in timber sales in Kaluga Region is carried out by a specific state enterprise. P.Yu. Ofitserov asks A.A. Navalny to find the relevant documents so they can be studied.

The file «са647002.wav» contains a phonogram recording of a telephone con- versation between A.A. Navalny and P.Yu. Ofitserov that took place on 06.08.2009 at 23:01, in which A.A. Navalny talks about the results of a meeting with S.V. Shcherchko- v, and also expresses concern that as a result of the audit of KOGUP Kirovles, LLC VLK may lose its clients.

49 recording The file <b978e002.wav» contains a phonogram with a recording of a telephone conversation between A.A. Navalny and P.Yu. Ofitserov, which took place on 11.08.2009 at 21:06, according to which A.A. Navalny informs P.Yu. Ofitserov about a meeting (conference) that took place with the participation of N.Yu. Belykh, S.V. Shcherchkov, and A.A. Navalny, at which the consequences of con- cluding the supply contract between KOGUP Kirovles and LLC VLK were discussed. Invited to the meeting were the chief accountant of KOGUP Kirovles, L.G. Bastry- gina, and the head of the Department of State Property of Kirov Region, K.V. Arzamastsev, who claimed that the sale of timber products by KOGUP Kirovles to LLC VLK had been carried out at understated prices, and also under contracts with counterparties, most of which had previously been concluded directly with KOGUP Kirovles without the intermediary LLC VLK. According to A.A. Navalny, he insisted that the sale of timber products produced by KOGUP Kirovles to LLC VLK had been carried out at mar- ket prices, without understatement. At the same time, A.A. Navalny plans to take part on Friday in another similar meeting on issues related to KOGUP Kirovles’s performance of the supply contract with LLC VLK, the outcome of which should be the dismissal of the management of KOGUP Kirovles. The file «ба8f6002.wav» contains a recording of a telephone conversation between P.Yu. Ofitserov and A.A. Navalny that took place on 19.08.2009 at 12:07, in which the latter recounts the content of a conversation with S.V. Shcherchkov and Governor N.Yu. Belykh regarding the creation of a working group on issues related to the activities of KOGUP Kirovles. Among others, this working group was to include P.Yu. Ofitserov and A.A. Navalny. This group would consider a number of issues, including the removal of V.N. Opalev from the post of Gen- eral Director of KOGUP Kirovles and the conduct of an audit of the activities of this enterprise. In this connection, A.A. Navalny instructs P.Yu. Ofitserov to go to KOGUP Kirovles and throw the commercial director out of his office, citing A.A. Navalny’s instruction. The file <<83292003.wav» contains a phonogram recording of a telephone con- versation that took place on 02.10.2009 at 14:55 between P.Yu. Ofitserov and A.A. Navalny, in which the latter recounts the content of a conversation with S.V. Shcherch- kov and the discussion of a candidate for the post of General Director of KO- GUP Kirovles in place of V.N. Opalev. Acting General Director of KOGUP Kirovles P.P. Tyshlek proposed reinstating V.N. Opalev, however A.A. Navalny was against this. In addition, P.Yu. Ofitserov’s candidacy was discussed for the above-mentioned position. In turn, P.Yu. Ofitserov, not wishing to bear responsibility as Gen- eral Director of KOGUP Kirovles, and also because of the impossibility of performing those duties on a permanent basis, proposes to A.A. Navalny the option of appointing him (Ofitserov) to the post of Executive Director of KOGUP Kirovles with the transfer to him of authority to manage the enterprise’s finances

50 thereby completely restricting the nominal general manager of the enterprise in matters of allocation and expenditure of funds (Vol. 12, case file pp. 168-206). The examination of the audio recordings in the court hearing showed that their content corresponded to the text set out in the record of inspection and listening to the audio re- cordings. It follows from Expert Opinion No. 002/13 dated 08.01.2013 that the semantic meaning of the conversations of A.A. Navalny and P.Yu. Ofitserov on the audio re- cordings obtained as a result of the operational-search measure “wiretapping of telephone conversations” and contained on the CD-R optical disc was established. Both A.A. Navalny and P.Yu. Ofitserov display high communicative activity when discussing various elements of the situation connected with KOGUP Kirovles and LLC VLK. In the conversations studied, A.A. Navalny is charac- terized by high communicative activity when discussing with P.Yu. Ofitserov the actions of the government of Kirov Region in connection with the situation at KOGUP Kirov- les (holding meetings, ordering an audit, discussing the re- sults of that audit, forming a working group to assess the effectiveness of the enterprise), A.A. Navalny’s participation in defending P.Yu. Ofitserov’s interests in the regional government, as well as when making proposals, giving advice, and issuing instructions to P.Yu. Ofitserov. P.Yu. Ofitserov displays high communica- tive activity when discussing with A.A. Navalny the report on the audit at KOGUP Kirovles, accusations by KOGUP Kirovles against 000 VLK, the imposition of penalties for KOGUP Kirovles’s failure to fulfill in full LLC VLK’s orders for the supply of timber products, and the identification of the main tasks facing A.A. Navalny and P.Yu. Ofitserov. The relationship between A.A. Navalny and P.Yu. Ofitserov, in terms of communication type, is char- acterized as informal; in terms of social-status relations, as sym- metrical; and in terms of degree of closeness, as close (friendly). The analyzed conversations contain signs indicating a communica- tively dependent position of P.Yu. Ofitserov vis-à-vis A.A. Navalny: calling his speech partner “boss”; insufficient awareness of affairs; a modality of doubt; receiving instructions from A.A. Navalny; rejection by A.A. Navalny of a proposal by P.Yu. Ofitserov. At the same time, this functional inequality is not strongly pronounced: the communicants are engaged in joint ac- tivity, they are interested in it, and they distribute their roles in accordance with their levels of competence. In the speech of the participants in the conversations presented for expert examina- tion, there are inducements to perform the following actions (or omissions), ex- pressed toward each other. Inducements from A.A. Navalny to P.Yu. Ofitserov:

5 in the said contract, information on the price of the timber products was initially absent — a price that would have corresponded to and equivalently compensated, on the part of 000 VLK, the market value of the timber products supplied by KOGUP Kirovles. Further, P.Yu. Ofitserov submitted the said contract to V.N. Opalev for signature, and on 15.04.2009, while in the KOGUP Kirovles building at the address: Kirov Region, Kirov, Avtotransportny Lane, 4, acting intentionally and in concert with A.A. Navalny and P.Yu. Ofitserov, being the General Direc- tor of KOGUP Kirovles and using his official position, signed the said Supply Contract No. 01/2009 with LLC VLK, providing for the conclu- sion of appendices to it defining the main terms of supply of the timber products, including their price. At the same time, V.N. Opalev, having received on the said draft supply contract an oral negative opinion from KOGUP Kirovles employees responsible for the sale of timber products, fully understood the social danger of his ac- tions and the inevitability of socially dangerous consequences as a result of concluding the supply contract with LLC VLK, in the form of embezzlement of the timber products of KOGUP Kirovles entrusted to him in favor of LLC VLK and causing property damage due to the absence on the part of LLC VLK of equivalent compensa- tion for the market value of the said timber products. Under the contract concluded with LLC VLK, KOGUP Kirovles under- took to supply timber products to the consignees specified in the appendices to that contract, and LLC VLK undertook to pay for those goods. At the same time, A.A. Navalny, V.N. Opalev, and P.Yu. Ofitserov reliably knew that LLC VLK would pay for the goods on the terms established by the con- tract and its appendices, at a knowingly understated price compared with the price that KOGUP Kirovles could have obtained from buyers without using the intermediary services of LLC VLK, and that the said contract was aimed solely at creating the appearance that KOGUP Kirovles had civil-law obligations toward LLC VLK to transfer timber products to consignees supposedly for consideration, whereas in reality those goods would be transferred without corresponding and equivalent compensation from LLC VLK. In the period from 15 April to 13 July 2009 in the city of Kirov, in execution of a joint criminal intent, V.N. Opalev, using his official position as Gen- eral Director of KOGUP Kirovles, and also the General Director of 000 VLK, P.Yu. Ofitserov, acting intentionally and in concert in complicity with A.A. Navalny, who organized the commission of the said crime and directed its execution, signed 36 appendices to Supply Contract No. 01/2009 dated 15.04.2009, which defined the name of the timber products, the vol- umes and conditions of supply, as well as the price, which, without any economic necessity, was deliberately understated by all participants in the crime compared with the price at which KOGUP Kirovles products could have been sold directly to LLC VLK’s counterparties.

6

In turn, during the above-mentioned period, P.Yu. Ofitserov, acting on behalf of LLC VLK, concluded supply contracts with buyers for timber products produced by KO- GUP Kirovles.

For the purpose of increasing the volume of KOGUP Kirovles property subject to embezzlement, and also creating conditions for LLC VLK allowing it alone to sup- ply and sell the timber products produced by KOGUP Kirovles, V.N. Opalev, acting on the instructions of A.A. Navalny, intentionally and in concert with him and P.Yu. Ofitserov, using his official position as Gen- eral Director, issued Order No. 76 “On Establishing the Procedure for the Sale of Tim- ber Products by KOGUP Kirovles” dated 19.05.2009, which introduced a ban on the for- estry-unit branches of KOGUP Kirovles independently concluding supply and sale-and-purchase contracts for timber products with legal entities and individuals, as well as sole proprietors.

At the same time, A.A. Navalny and P.Yu. Ofitserov were aware that V.N. Opalev, by un- lawfully depriving KOGUP Kirovles of the ability independently to sell the timber products it produced at market prices, was thereby placing those timber products at the disposal of LLC VLK without corresponding and equiva- lent compensation for their market value.

In the period from 15 April to 30 September 2009 in the city of Kirov, V.N. Opalev, using his official position, and P.Yu. Ofitserov, acting intentionally, in concert with A.A. Navalny and on his instructions, ensured performance of the terms of Supply Contract No. 01/2009 dated 15.04.2009 and its appendices, as a result of which KOGUP Kirovles shipped timber products worth 16,165,826.65 rubles to the following counterparties of LLC VLK:

- Domostroitel OJSC, in the amount of 1,966.65 cubic meters, with delivery to: Kirov Region, settlement of Krasnaya Polyana, 1 Druzhby St.;

- ABC LLC, in the amount of 62.972 cubic meters, with delivery to: Kirov Region, Kotelnich, 43-25 Sovetskaya St.;

LesGarant LLC, in the amount of 988.66 cubic meters, with delivery to: Kirov, 92 Lenin St.;

KMDK OJSC, in the amount of 796.754 cubic meters, with delivery to: Kirov, 10a Lesozavodskaya St.;

- Volga OJSC, in the amount of 3,068.29 cubic meters, with delivery to: Nizhny Novgorod Region, Balakhna, 1 Gorky St.;

- 000 Vlada, in the amount of 698.35 cubic meters, with delivery to: Kirov, 32-7 Pugachev St.;

Montazhnik OJSC, in the amount of 310.20 cubic meters, with delivery to: Kirov Region, Sovetsk, 10a Engels St.;

- SevLesPil LLC, in the amount of 59.90 cubic meters, with delivery to: Komi Republic, Syktyvkar, 2/4 Lesnaya St.;

- Individual entrepreneur D.A. Podgornov, in the amount of 221.351 cubic meters, with delivery to: Krasnodar Territory, Novorossiysk, Tsemdolina settlement, 1a Svobody St.;

instruction 51 to take a copy of an unnamed document (judging from the materials of the criminal case, probably the audit report on KOGUP “Kirovles”), work with it, call A.A. Navalny in the evening on the day of the con- versation, meet with him the next morning, and combine into a single whole the information they had; - advice to note down that the audit report on KOGUP “Kirovles” compares prices from different periods, not to repeat such a mistake, and to record how P.Yu. Ofitserov set prices for timber products; - advice not to give in to provocations by KOGUP “Kirovles” employees, not to con- flict with them over poaching clients for LLC “VLK,” and to forbid P.Yu. Ofitserov’s employees from communicating with KOGUP “Kirovles” employees; - advice to refute the information stated in the audit report on KOGUP “Kirovles” and to provide all documents necessary for that; - a request to provide in writing information on forestry man- agement and timber speculation in Kaluga Region; - an instruction to make a selection of LLC “VLK” contracts in connection with accusations against the company that it had taken over most of KOGUP “Kirovles” contracts and had purchased timber products at understated prices; - an instruction to explain where LLC “VLK” got its prices for timber products, to confirm that they corresponded to market prices, and to refute the results of the audit report on KOGUP “Kirovles”; - an instruction to come to A.A. Navalny the day after the conversation to discuss and coordinate information on the transfer of contracts from KOGUP “Kirovles” to LLC “VLK”; - a prohibition on coming to A.A. Navalny with LLC “VLK” contracts, and an instruc- tion to come without the contracts to discuss the state of affairs; - a proposal to impose on KOGUP “Kirovles” a penalty in the amount of five percen- t of the value of the unfulfilled order, and an instruction to write in the report that KO- GUP “Kirovles” failed to supply timber products worth twenty mil- lion rubles; - advice to send a letter to KOGUP “Kirovles” demanding payment of a penalty of one million rubles for failure to supply timber products; - an instruction to refuse the company “Vyatka-Akademaudit” the provision of identifying infor- mation and invoices concerning P.Yu. Ofitserov’s clients; - an instruction to contact S.V. Shcherchkov, show him the work plan of the group for assessing the effectiveness of KOGUP “Kirovles,” ask him about signing the document on forming the working group, appear at KOGUP “Kirovles,” occupy the office of the commercial director of that organization under the pretext of the activi- ties of the working group, inform KOGUP “Kirovles” of the imminent arrival of A.A. Navalny, and begin work on solving the problems of the said enterprise; - an instruction to chase away from himself, upon arrival at KOGUP “Kirovles,” a man by the first name and patronymic “Pyotr Petrovich”;

- 52 - an instruction to meet with A.A. Navalny to discuss the details of issues concerning KOGUP “Kirovles”; - a proposal to meet with A.A. Navalny in Moscow and arrange such a meeting. Inducements from P.Yu. Ofitserov to A.A. Navalny: - a proposal to meet the day after the conversation; - an instruction to resolve three issues most significant for P.Yu. Ofitserov and A.A. Navalny, including the issue of not returning V.N. Opalev to the post of Gen- eral Director of KOGUP “Kirovles”; - a request to resolve the situation concerning KOGUP “Kirovles” in favor of P.Yu. Ofitserov and A.A. Navalny. Based on the linguistic and paralinguistic features of the analyzed conversations, signs were identified that A.A. Navalny and P.Yu. Ofitserov have shared understandings and mutual comprehension regarding the topics discussed. The participants in the conversations do not display signs of surprise or indignation at the words of the other participant. Based on the linguistic and paralinguistic features of the studied conversations, there are signs indicating the interest and agreement of A.A. Navalny and P.Yu. Ofitserov in obtaining benefit from the activi- ties and management of KOGUP “Kirovles” in favor of LLC “VLK.” In the course of the studied conversations, A.A. Navalny and P.Yu. Ofitserov indicate that they have common goals and tasks, plan and carry out joint actions with respect to KOGUP “Kirovles,” including discussing P.Yu. Ofitserov’s participation in the management of that organization (appointing him to a managerial position in KOGUP “Kirovles,” including him in the working group for assessing the effective- ness of KOGUP “Kirovles,” developing that group’s work plan), and the realiza- tion of LLC “VLK”’s interests (imposing a large monetary penalty for KOGUP “Kirovles”’s failure to fulfill LLC “VLK”’s orders for timber product supplies; refuting accusations by KOGUP “Kirovles” against LLC “VLK” that it had appropriated a significant part of KOGUP “Kirovles”’s contracts with clients and pur- chased timber products from KOGUP “Kirovles” at understated prices) (Vol. 13, case file pp. 215- 260). www. I wo расты. Сыплачена Analyzing the evidence presented by the parties in the case as a whole, the court comes to the conclusion that the guilt of A.A. Navalny and P.Yu. Ofitserov in the com- mission of the crime under the circumstances set out in the judgment has been fully proved. The witness testimony and written evidence set out above are relevant, admissible, and reliable, and taken together sufficient for the issuance of a guilty verdict. A.A. Navalny’s arguments that he was criminally prosecuted for political motives are unsupported by anything, and the defense has not presented a single pie-

53 ece of evidence of the interest or bias of the officials who investigated the criminal case, or of the persons who gave expert opinions.

No circumstances were established at the court hearing indicating that any of the witnesses had grounds to give false testimony in the case. The court finds contrived and unfounded the defense arguments that V.N. Opalev is giving false testimony because he had a con- flict with A.A. Navalny, and also because another criminal case against him was dis- continued; that M.V. Bura is giving false testimony because she is Opalev’s adopted daughter and thinks well of him; and that L.G. Bastrygina is giving false testimony because she lost her job as a result of Navalny’s activi- ties. The testimony of these persons fully corresponds to and is confirmed by the testimony of other witnesses questioned in the case, by the written ma- terials of the case, including the email correspondence of Navalny and Ofitserov. Moreover, the defense fails to take into account that Opalev, by testifying about the com- mission of the crime with Navalny and Ofitserov, admitted his guilt, and as a result he himself was convicted by the judgment of the Leninsky District Court of the city of Kirov dated 24.12.2012 as the perpetrator of the embezzlement of timber products in the amount of 10,084.277 cubic meters worth 16,165,826.65 rubles under the circumstances imputed to the defendants Navalny and Ofitserov; that is, his testimony served as the basis for bringing him himself to criminal liability. Under these circumstances, the claim that Opalev’s testimony and Bura’s testimony are false is, among other things, illog- ical and unfounded. No evidence was also presented to the court that Opalev, Bura, and Bastrygina had hostile relations with defendant Ofi- tserov. On the contrary, witness Merkusheva told the court that relations between Bura and Ofitserov were friendly. The court was also not presented with evi- dence that Bastrygina lost her job as a result of Navalny’s activities. As the witness herself explained, she resigned from KOGUP “Kirovles” of her own accord. None of the witnesses questioned in the case stated that Navalny demanded Bastrygina’s dismissal, which caused her to feel hostility toward him; Navalny himself also did not indicate that he was the initiator of Bastrygina’s dismissal. In addition, Bura and Bastrygina were obliged to give truthful testimony under threat of criminal liability under Article 307 of the Criminal Code of the Russian Federation. Overall, the witness testimony in the case is consistent and logical and, in the cited part, agrees with each other and with the other materials of the criminal case. Contradictions in the testimony given by witnesses during the preliminary investi- gation and at the court hearing were all explained by the witnesses as due to the remoteness of the events, which the court finds to be an objective reason, since in court they were giving tes- timony about circumstances that had occurred about 4 years earlier. After the reading out of the testimony given during the preliminary investigation, the witnesses confirmed it in full.

54 above written The evidence examined in the case and cited above was obtained in accordance with the requirements of the Criminal Procedure Code of the Russian Federation, properly certified, and the court has no grounds to doubt its reliability. There are no grounds in the case to doubt the conclusions of the expert examinations set out above, conducted by competent specialists in the course of the criminal investigation in com- pliance with the procedure provided for by the Criminal Procedure Code of the Russian Federation. The experts’ conclusions are set out fully and with reasons; they are scientifically grounded and objective, and agree with the other evidence collected in the case. The court finds the defense arguments that the circumstances of the com- mission of the crime set out in the charge have not been proven to be unfounded. - It follows from the testimony of witnesses N.Yu. Belykh, V.N. Opalev, and defendant A.A. Navalny that at the end of December 2008 and the beginning of January 2009, the Governor of Ki- rov Region, N.Yu. Belykh, at a meeting with enterprise managers introduced the members of his team, including A.A. Navalny, who were to join the regional government. From the testimony of these same witnesses, the defendant, as well as witnesses S.V. Shcherchkov, M.E. Gaidar, L.G. Bastrygina, and the appointment order, it was es- tablished that A.A. Navalny in fact performed the duties of adviser to the Go- vernor of Kirov Region on a voluntary basis from January 2009, and had an of- fice in the regional government building. By virtue of his actual performance of the du- ties of adviser to the Governor, as well as Governor N.Yu. Belykh’s order to in- vestigate the business activities of KOGUP “Kirovles,” A.A. Navalny reques- ted the relevant documents of the enterprise, visited it, familiarized himself with the struc- ture and activities of the enterprise, and participated in meetings of commissions and working groups of the regional government with the right to an advisory vote. In addition, Opalev V.N. testified that he knew of the close friendship between A.A. Navalny and the Governor of the region, V.N. Belykh. Under these circumstances, the court finds unfounded the defense arguments, with reference to the testimony of witnesses N.Yu. Belykh, M.E. Gaidar, and S.V. Shcherchkov, that Opalev could not have been mistaken in believing that A.A. Navalny did not have the right to give Opalev V.N. any binding instructions. The witnesses’ testimony in this part is speculative. None of the witnesses testified that the powers of voluntary advisers to the Governor were communicated to the heads of regional enterprises. The attitude of V.N. Opalev toward A.A. Navalny as a member of the Government of Kirov Region is also evidenced by the testimony of witness S.V. Shcherchkov that Opalev told him he had been recommended from the regional government to work with LLC “VLK.” And, as Opalev testified, it was precisely A.A. Navalny who gave him such an instruction. A.A. Navalny himself, referring to P.Yu. Ofitserov’s обращения to him as adviser to the Governor of the region, explained that Ofitserov considered him his boss. All of the above circumstances lead to the conclusion that A.A. Navalny knew of the possibility of influencing the activities of state unitary

55 enterprises in Kirov Region, by virtue of his actual exercise of the powers of an unpaid adviser to the Governor.

In addition, Alexei Navalny is not charged with committing the crime through abuse of official position. Therefore, the defense’s arguments that an unpaid adviser to the regional Governor had no authority to issue binding instructions to enterprise managers do not refute the prosecution’s case and do not show that Alexei Navalny was unable to organize the crime and direct its execution.

The testimony of witness V.N. Opalev shows that P.Yu. Ofitserov was aware of the activities of KOGUP Kirovles and of his joint plans with Alexei Navalny. He explained that on one day in February 2009, the Kirov Region government informed him in advance of Navalny’s visit to KOGUP Kirovles. Navalny arrived together with Ofitserov, after which, at Navalny’s instruction, Opalev familiarized Ofitserov with the enterprise’s operations. This is also confirmed by the testimony of witness M.V. Bura, to whom Opalev reported Navalny’s visit and whom he later introduced to Ofitserov, telling her that he was acting on the instructions of Governor N.Yu. Belykh and Alexei Navalny.

The fact that P.Yu. Ofitserov was becoming acquainted with the activities of KOGUP Kirovles was also confirmed by witness A.V. Votinov, who took part with Ofitserov in joint trips to KOGUP Kirovles branches, as well as by witness S.N. Makoveev, who testified that V.N. Opalev introduced Ofitserov to him, saying that he would help with sales of timber products, after which he familiarized Ofitserov with the company’s structure and explained which timber products had the highest added value.

The emergence of intent on the part of Alexei Navalny and P.Yu. Ofitserov to steal property belonging to KOGUP Kirovles by selling its products through VLK LLC, and their preparation for the crime, is also evidenced by the testimony of V.N. Opalev and L.G. Bastrygina. They stated that in February–March 2009, after one of the meetings in an office of the Kirov Region government, Navalny said that all timber products needed to be sold through a commercial organization that was to be created. Opalev also testified that Navalny directly told him that this organization would be created by his acquaintance P.Yu. Ofitserov in the form of an LLC, and that he agreed because the proposal came from an adviser to the Governor of Kirov Region.

Witness M.V. Bura testified that in February–March 2009, P.Yu. Ofitserov told her that supplies of timber products produced by KOGUP Kirovles needed to be organized through a commercial company being created on the initiative of the Kirov Region government and headed by him.

The intent of Alexei Navalny and P.Yu. Ofitserov to steal property belonging to KOGUP Kirovles by selling products through VLK LLC, and their preparation for the crime, is also confirmed by their email correspondence, from which

56

it follows that, even before the contract between VLK LLC and KOGUP Kirovles was concluded, P.Yu. Ofitserov was coordinating with Alexei Navalny the scheme for inserting VLK LLC into KOGUP Kirovles’s timber supply chain, as well as the legal details of the draft contract between Vyatka Timber Company LLC and KOGUP Kirovles, headed by V.N. Opalev, including the amount of the planned profit. It is also telling that, when planning work under the contract, Navalny and Ofitserov use the words “we” and “us,” which indicates a shared objective. They also discuss the company’s branding and the expenses involved in setting up its operations, which points to their common interest in establishing VLK LLC.

Alexei Navalny and P.Yu. Ofitserov also planned steps to justify to the regional Governor the creation, on the basis of VLK LLC, of a single timber trading platform, while discussing the subsequent allocation of loan funds for the development of VLK LLC as a structure created with the consent of the Kirov Region government. They also discussed Navalny’s use of influence on the competent authority to speed up the processing of a contract and lease arrangements for KOGUP Kirovles.

The constant communication between Alexei Navalny and P.Yu. Ofitserov before the supply contract with KOGUP Kirovles was concluded, as well as during its performance, is also confirmed by records of their numerous phone calls beginning in January 2009.

The above evidence completely refutes the defendants’ testimony and the defense’s arguments that Alexei Navalny had no connection whatsoever to the activities of VLK LLC; that he communicated with P.Yu. Ofitserov solely to obtain information about KOGUP Kirovles; that his interest in KOGUP Kirovles was connected exclusively with performing his duties as an adviser to the Governor and carrying out the latter’s instructions; and that Navalny did not respond to Ofitserov’s letters and did not review the draft supply contract.

Based on the above circumstances, the court also rejects the evidence submitted in support of the defense’s arguments concerning Alexei Navalny’s participation in meetings of the interagency commission on efficient forest use in Kirov Region, in Vol. 4, case file pp. 157–164, 165–171, 172–176, since that commission did not discuss the work of KOGUP Kirovles and Navalny was not a presenter there. The court likewise rejects the evidence concerning the activities of the working group on evaluating the effectiveness of KOGUP Kirovles, of which Navalny was a member, in Vol. 4, case file pp. 217–218, because that working group was created by order of the Chairman of the Government of Kirov Region only on 01.09.2009.

The corporate file of VLK LLC establishes that this legal entity was created and duly registered by the state, and that its founder, sole participant, and general director was P.Yu. Ofitserov, who opened a settlement account at Vyatka-Bank.

57 Further evidence that VLK LLC was created in order to transfer KOGUP Kirovles timber products for the benefit of VLK LLC is found in the testimony of defendant P.Yu. Ofitserov himself, who stated that if V.N. Opalev had not agreed to sell timber products through the legal entity he was creating, he would have abandoned the creation of VLK LLC. Witness I.O. Merkusheva also testified that, before the supply contract with KOGUP Kirovles was agreed, VLK LLC had no other suppliers.

The following circumstances show that there was no need to conclude a supply contract between VLK LLC and KOGUP Kirovles, and that the contract was concluded solely to facilitate the commission of the crime.

Even before this transaction, KOGUP Kirovles had already been selling harvested timber. The testimony of witnesses—all questioned employees of KOGUP Kirovles, employees of legal entities that were counterparties of KOGUP Kirovles—together with letters from OJSC KMDK, Vlada LLC, OJSC Domostroitel, supply contracts concluded with OJSC KMDK, OJSC Domostroitel, CJSC Krasny Yakor, LesGarant LLC, Vlada LLC, and expert opinion No. 9/2012 dated 09.04.2012, shows that KOGUP Kirovles had active contracts with ABC LLC, LesGarant LLC, OJSC Domostroitel, OJSC KMDK, Vlada LLC, CJSC Krasny Yakor, and sold timber products to other counterparties as well, including through its branches. For the sale of timber products, KOGUP Kirovles had a commercial department on staff, and branch directors had been issued powers of attorney authorizing them to sell timber products.

Witness L.G. Bastrygina testified to the inexpediency and disadvantage of selling timber products through VLK LLC, explaining that after reviewing the supply contract with VLK LLC, she concluded that the contract provided that KOGUP Kirovles bore full responsibility, while VLK LLC merely received money. The contract contained no prices and did not provide for prepayment for the goods supplied, although previously KOGUP Kirovles had supplied timber products to its counterparties, including on the basis of full or partial prepayment. Witness M.V. Bura said the same, also stating that she had proposed that P.Yu. Ofitserov amend the draft contract with respect to KOGUP’s liability. Witness I.O. Merkusheva also testified that Bura had proposed amending the draft contract to include terms for shipping timber products on a prepayment basis. Witness S.N. Makoveev testified that under the contract’s terms, VLK LLC merely made money, because whatever KOGUP Kirovles supplied, VLK LLC received its percentage from each transaction. He recommended that Opalev not agree to the contract terms, which were impossible to perform. V.N. Opalev also testified that he fully understood that the contract was disadvantageous for KOGUP Kirovles, because all responsibility for non-delivery, missed deadlines, and product quality was placed on KOGUP Kirovles, which accordingly entailed penalties, while the liability of VLK LLC was not specified,

58 nor was it specified what percentage VLK LLC would receive for its intermediary services, since payment from VLK LLC for the supplied products was to be made only after the timber products had been delivered and paid for by the end buyer, while the enterprise was to supply products in response to orders from VLK LLC.

Despite the negative opinion of the KOGUP Kirovles employees responsible for timber sales, V.N. Opalev—also understanding that the contract with VLK LLC did not provide for equivalent compensation for the timber products supplied to VLK LLC—signed Supply Contract No. 01/2009 dated 15.04.2009.

Under these circumstances, the court finds it established that, when concluding this contract, V.N. Opalev, Alexei Navalny, and P.Yu. Ofitserov acted in pursuit of a common objective aimed solely at creating the appearance that KOGUP Kirovles had civil-law obligations to VLK LLC to transfer timber products to consignees supposedly for consideration, whereas in reality those goods would be transferred without equivalent and proper compensation from VLK LLC.

V.N. Opalev testified that he agreed to conclude this contract only because P.Yu. Ofitserov was acting on the instructions of Alexei Navalny, an adviser to the regional Governor who was also a close friend of the Governor. Ofitserov told him that this arrangement for working with VLK LLC had been approved by Navalny, and threatened that if he did not sign the contract there would be negative consequences from the regional government. At the same time, Ofitserov, referring to Navalny, promised that once KOGUP Kirovles ensured significant volumes of timber supplies for VLK LLC, his personal interest in the form of receiving part of the profits from VLK LLC’s activities would also be taken into account. Navalny also insisted on the prompt conclusion of the supply contract, said that all issues should be discussed with Ofitserov, who was acting on his instructions, and at the same time promised to help secure increased budget financing for KOGUP Kirovles. Witness M.V. Bura testified that P.Yu. Ofitserov pressed her to conclude the contract, claiming that the Kirov Region government insisted on its conclusion and the start of deliveries, referring to Governor’s adviser Alexei Navalny, and later stated that if they refused to conclude the contract, Opalev, she, and the directors of the forestry enterprises would be dismissed. Witness S.N. Makoveev testified that, when concluding the contract with VLK LLC, Opalev referred to the regional government.

In addition, the court finds it established that the draft contract between KOGUP Kirovles and VLK LLC was drawn up by P.Yu. Ofitserov himself and coordinated with Alexei Navalny. This is evidenced by the following. From the testimony of V.N. Opalev, it follows that, having agreed to the sale of KOGUP Kirovles products, he told P.Yu. Ofitserov to prepare a contract between KOGUP Kirovles and VLK LLC, which Ofitserov did. Witness M.V. Bura testified that Ofitse-

59 rov emailed her the draft supply contract in March 2009. Witness S.N. Zmeev testified that the draft contract was submitted by VLK LLC.

It also follows from the email correspondence between Alexei Navalny and P.Yu. Ofitserov that, while discussing the draft contract, Ofitserov identified himself as its author. In particular, on 09.04.2009, Ofitserov sent Navalny “VLK LLC contract for review,” to which Navalny replied: “Looks okay. Didn’t you include all those agency and commission arrangements?” In an email dated 10.04.2009, Ofitserov told Navalny: “I decided it would be more convenient at the first stage to make an appendix for each client,” to which Navalny replied the same day: “ok.”

...

Under these circumstances, the court finds unconvincing the defense’s argument that it was KOGUP Kirovles, represented by M.V. Bura, that drafted the supply contract and sent it to VLK LLC.

For these reasons, the court also rejects the draft supply contract submitted by the defense in support of this argument, which M.V. Bura sent to P.Yu. Ofitserov and which appears in Vol. 27, case file pp. 17–20. The fact that witness Bura sent this draft to P.Yu. Ofitserov shows only that the draft supply contract was indeed discussed at KOGUP Kirovles, but no substantial changes were made to it, for the reasons described by witnesses V.N. Opalev, M.V. Bura, and S.N. Makoveev.

Nor do the court’s conclusions here get refuted by the testimony of witness I.O. Merkusheva, on which the defense relies, to the effect that during work on the draft, relations between M.V. Bura and P.Yu. Ofitserov were not conflictual. Witness Merkusheva testified that Bura did not consult her about the conclusion of this contract, and that she does not know who originally drafted it. Before witness Merkusheva was questioned in court, defendant Ofitserov also testified that none of the employees of VLK LLC—including Merkusheva—knew how the supply contract had been concluded, because he conducted all negotiations personally. In addition, witness M.V. Bura testified that Ofitserov presented the draft contract to her in March 2009, while witness Merkusheva testified that she worked at VLK LLC from April 2009, when she witnessed some conversations between Ofitserov and Bura.

The defendants’ intent specifically to steal KOGUP Kirovles timber products is also shown by the fact that VLK LLC concluded contracts with KOGUP Kirovles’s existing counterparties, to whom KOGUP Kirovles continued making deliveries, but now through the intermediary VLK LLC. As noted earlier, VLK LLC concluded contracts with ABC LLC, LesGarant LLC, OJSC Domostroitel, OJSC KMDK, Vlada LLC, and CJSC Krasny Yakor. Regarding the circumstances of re-executing contracts with these counterparties in the name of VLK LLC, witness V.N. Opalev testified that P.Yu. Ofitserov told him that he and Alexei Navalny needed him to take steps to have the previously concluded KOGUP Kirovles contracts with regular

60 and major clients re-execute their contracts in the name of VLK LLC, because Navalny and Ofitserov had no clients of their own. At his request, M.V. Bura dealt with these matters, and he personally called the head of OJSC KMDK with such a request. Witness M.V. Bura testified that, in order to have the previously concluded KOGUP Kirovles contracts with timber buyers re-executed in favor of VLK LLC, Ofitserov prepared a special script that she was to recite when visiting each KOGUP Kirovles client, in order to persuade them of the need to re-execute the contract with VLK LLC, supposedly as KOGUP Kirovles’s official dealer.

The testimony of Opalev and Bura is confirmed by the testimony of employees of KOGUP Kirovles’s former counterparties—M.V. Minin, S.S. Chernik, M.N. Fursov, and R.A. Ovchinnikov—who confirmed P.Yu. Ofitserov’s personal involvement in resolving issues related to the re-execution of contracts.

This testimony refutes defendant P.Yu. Ofitserov’s claim that M.V. Bura organized the re-execution of contracts with KOGUP Kirovles’s former counterparties without any request from him. In addition, as witness M.V. Bura testified, because she had connections with timber buyers and experience in that field, Ofitserov offered her the position of commercial director at VLK LLC, which she accepted.

Under the terms of the state contracts concluded between the Kirov Region Forestry Department and KOGUP Kirovles for forest protection, conservation, and regeneration work, the timber paid for and harvested under those contracts was the property of KOGUP Kirovles. The same followed from the forest plot lease agreements concluded between those parties and from Article 606 of the Civil Code of the Russian Federation.

According to the charter of KOGUP Kirovles, the order appointing him to office, and his employment contract, V.N. Opalev, as general director of KOGUP Kirovles, managed the enterprise on the principle of sole authority, that is, he performed organizational-managerial and administrative-economic functions in the unitary enterprise, and therefore the timber harvested by KOGUP Kirovles, including by its branches, was entrusted to Opalev.

The fact that V.I. Opalev and P.Yu. Ofitserov concluded Supply Contract No. 01/2009 dated 15.04.2009 between KOGUP Kirovles and VLK LLC, as well as 36 appendices to it during the period from 15.04.2009 to 13.07.2009, is confirmed by the accounting documentation set out above, by witness testimony, and is not disputed by the defendants.

It was precisely the appendices to the supply contract that specified the type of timber products, the volumes and terms of delivery, and the price.

The fact that the price of the timber products was deliberately understated by all participants in the crime, without any economic necessity, compared with the price at which KOGUP Kirovles could have sold the products directly to VLK LLC’s counterparties, is confirmed by the following evidence.

61

From the testimony of V.N. Opalev, M.V. Bura, L.G. Bastrygina, S.P. Zmeev, T.N. Zagoskina, V.S. Krylatov, A.S. Asapov, S.N. Panteleev, A.I. Buzmakov, D.V. Kuzyakin, N.A. Koretnyuk, S.N. Baldin, G.V. Litvinenko, P.F. Bulatov, and O.I. Grebneva, it follows that for deliveries to KOGUP Kirovles’s former counterparties, the price in the appendices to the supply contract between KOGUP Kirovles and VLK LLC was reduced by several percent and was also lower than the price at which KOGUP Kirovles branches sold timber products in their local areas. Witnesses M.V. Minin, S.S. Chernik, M.N. Fursov, and R.A. Ovchinnikov, who were employees of KOGUP Kirovles’s former counterparties, also testified that after the contracts were re-executed in favor of VLK LLC, the price of timber products for their enterprises did not change compared with the price previously in effect under contracts with KOGUP Kirovles. This is also confirmed by letters from OJSC KMDK, Vlada LLC, OJSC Domostroitel, and the Kirovo-Chepetsk forestry enterprise, a branch of KOGUP Kirovles. These circumstances are also confirmed by Document Review Report No. 4/2011 dated 05.04.2011, according to which the price of timber products supplied by KOGUP Kirovles to VLK LLC under Contract No. 1/09 dated 15.04.2009 was lower than the price of corresponding GOST-standard grades and assortments of timber products supplied by KOGUP Kirovles to other buyers during the period from 15.04.2009 to 01.09.2009 by 115–500 rubles per cubic meter, or 3–24 percent. Expert opinion No. 9/2012 dated 09.04.2012 also established that the difference between the value of timber products purchased by VLK LLC from KOGUP Kirovles and the value of their resale to KOGUP Kirovles’s former counterparties—ABC LLC, LesGarant LLC, OJSC Domostroitel, OJSC KMDK, Vlada LLC, and CJSC Krasny Yakor—during the period from 15.04.2009 to 30.09.2009 amounted in total to 589,110.87 rubles.

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From the testimony of witnesses V.N. Opalev, M.V. Bura, I.V. Kiselev, R.V. Kozlov, R.T. Sadriev, A.V. Beloglazov, S.N. Baldin, N.V. Kolchin, Yu.N. Smertin, V.M. Sukhikh, P.F. Bulatov, V.V. Glazyrin, V.M. Knyazev, A.P. Kuznetsov, and V.A. Shutova, it follows that when supplying timber products to VLK LLC, the forestry enterprises incurred additional expenses for drying, packaging, transportation to the railway station, and loading and unloading—expenses that did not arise when supplying other counterparties—and these costs were not reimbursed by VLK LLC.

At the same time, witnesses V.N. Opalev and M.V. Bura testified that pricing issues under the appendices to Supply Contract No. 01/2009 dated 15.04.2009 were personally controlled by P.Yu. Ofitserov. The truthfulness of this testimony is confirmed by witness S.N. Panteleev, who knew as early as 2009 from M.V. Bura that the prices for the supplied products were set by VLK LLC, as well as by witness D.V. Kuzyakin, who testified that as early as 2009 V.N. Opalev told him that P.Yu. Ofitserov himself set the prices for the shipped products.

For these reasons, the court rejects the defense’s argument that it was KOGUP Kirovles itself that decided whether or not to ship timber products at the prices proposed by VLK LLC.

62 In support of these arguments, the defense relies on the testimony of witnesses I.O. Merkusheva, E.A. Ovsyannikova, and D.Yu. Ofitserov, who explained that during the performance of the supply contract concluded between KOGUP Kirovles and VLK LLC, they searched for counterparties for VLK LLC, added a percentage to the prices at which those counterparties were willing to buy timber products, and then sent orders to KOGUP Kirovles, which then decided whether or not to make shipments at those prices. The defense also relies on correspondence between VLK LLC and KOGUP in Vol. 26, case file pp. 59–77, 82–86, 89–91, from which it follows that VLK LLC sent orders to KOGUP Kirovles that were not fulfilled, as a result of which penalties were assessed against KOGUP.

However, neither this witness testimony nor the correspondence refutes the prosecution’s case, since the defendants are charged with organizing and assisting in the embezzlement of KOGUP Kirovles property only to the extent of the products actually supplied under Supply Contract No. 01/2009 dated 15.04.2009 and its appendices, which does not include the volume of timber products that KOGUP Kirovles refused to supply.

Moreover, the court takes a critical view of the testimony of these witnesses in this respect and finds that they were mistaken, since they were not aware of the circumstances, terms, and purposes of concluding the supply contract between VLK LLC and KOGUP Kirovles, and merely carried out instructions from their immediate superior, P.Yu. Ofitserov, who together with V.N. Opalev made the final decisions on whether to conclude a particular appendix to the supply contract specifying the price of the timber products, by signing that appendix. The correspondence cited by the defense merely confirms the testimony of V.N. Opalev, M.V. Bura, and the directors of the forestry enterprises that, because some deliveries to VLK LLC were unprofitable and impossible to perform, they were not carried out in full.

The court also finds unconvincing the defense’s argument that the forestry enterprises’ costs of supplying timber products to VLK LLC arose solely through the fault of KOGUP Kirovles, which allegedly lacked effective management. These arguments are refuted by the testimony of witnesses V.N. Opalev, L.G. Bastrygina, and M.V. Bura, as well as by Supply Contract No. 01/2009 dated 15.04.2009 itself, from which it follows that VLK LLC demanded deliveries of timber products in volumes that KOGUP Kirovles, with its 36 branches, could not provide, and that in the event of under-delivery KOGUP was required to pay a penalty to VLK LLC. As the witness forestry directors testified, they were forced to follow instructions from V.N. Opalev, who was their immediate superior. Witness L.G. Bastrygina directly stated that VLK LLC concluded contracts with counterparties for larger volumes than KOGUP Kirovles could supply, which made it necessary to concentrate products in one place. At the same time, the defense overlooks the fact that V.N. Opalev, whose ineffective management they invoke, has already been convicted of causing damage to KOGUP Kirovles by embezzling property entrusted to him.

63

The following evidence, in addition to the established fact that contracts were re-executed with KOGUP Kirovles’s former counterparties, shows that Navalny and Ofitserov took steps to secure and increase the volume of products supplied to VLK LLC and, accordingly, to cause damage through embezzlement.

For example, witness V.N. Opalev testified that after the supply contract with VLK LLC was concluded, at a meeting with the directors of the forestry enterprises, attended by P.Yu. Ofitserov, he announced that timber sales would be carried out through VLK LLC. Opalev’s testimony is confirmed by the testimony of the questioned employees of KOGUP Kirovles, including the forestry directors. P.Yu. Ofitserov himself does not dispute that he attended and spoke at that meeting.

Witness V.N. Opalev also testified that in May 2009, Ofitserov and Navalny, in order to ensure that products were sold only through VLK LLC, insisted that he issue an order prohibiting forestry directors from independently concluding timber supply contracts, which he did. Opalev’s testimony is confirmed by the issuance of the corresponding order and by the email correspondence between Alexei Navalny and P.Yu. Ofitserov.

Thus, Order No. 76 “On Establishing the Procedure for the Sale of Timber Products at KOGUP Kirovles” dated 19.05.2009, signed by V.N. Opalev, shows that a ban was introduced prohibiting the forestry branches of KOGUP Kirovles from independently concluding supply and sale contracts for timber products with legal entities, individuals, and sole proprietors.

The email correspondence shows that Alexei Navalny and P.Yu. Ofitserov planned measures to monitor compliance by the forestry branches of KOGUP Kirovles with the ban on independently concluding supply and sale contracts for timber products.

In addition, the email correspondence shows that Alexei Navalny and P.Yu. Ofitserov were handling issues related to signing a contract between VLK LLC and OJSC Solikamskbumprom. In particular, in an email dated 13.05.2009, Ofitserov asked Navalny to speed up the signing of this contract on Solikamsk’s side, to which Navalny replied the same day that he would take care of everything. The email correspondence between Navalny and Ofitserov also contained a letter from the Administration of the Government of Kirov Region addressed to V.I. Baranov, President of OJSC Solikamskbumprom.

The text of this letter, sent on 21.05.2009 and signed by Alexei Navalny as adviser to the Governor of Kirov Region, shows that he proposed developing supplies of timber products from Kirov Region through VLK LLC, which he described as the official dealer of KOGUP Kirovles.

At the same time, witness N.Yu. Belykh testified that he did not instruct Alexei Navalny to prepare a written proposal addressed to OJSC Solikamskbumprom and did not discuss with Navalny the creation of a special enterprise for the sale of timber products.

This indicates that Alexei Navalny acted in accordance with a plan coordinated with P.Yu. Ofitserov and aimed at the embezzlement of prop-

64 erty of the unitary enterprise, and once again refutes the defense’s argument that, in dealing with KOGUP Kirovles, Alexei Navalny acted solely on the instructions of the Governor of Kirov Region, who had tasked him with analyzing the enterprise’s problems.

As witnesses V.N. Opalev, L.G. Bastrygina, and S.P. Zmeev testified, after shipments to VLK LLC consignees began, the directors of the forestry enterprises began approaching them with complaints about the unprofitability of such deliveries. V.N. Opalev also testified that, in response to the forestry directors’ complaints, he orally authorized them to ignore orders for timber deliveries to VLK LLC’s clients. These circumstances are confirmed by the testimony of witnesses D.V. Kuzyakin, Yu.N. Smertin, S.N. Panteleev, A.A. Postnov, and O.I. Grebneva.

After that, according to V.N. Opalev’s testimony, P.Yu. Ofitserov began complaining to Alexei Navalny, who in turn began reproaching him for being unable to organize supplies through VLK LLC and demanded that sales volumes through that company be increased. These circumstances are also confirmed by the email correspondence between Alexei Navalny and P.Yu. Ofitserov, from which it follows that in an email dated 02.07.2009, Ofitserov informed Navalny that he had sent letters to KOGUP demanding penalties, asked Navalny to require KOGUP to conduct a full audit of timber product inventories with the participation of a department representative, and asked him to take measures to block any sales by the forestry enterprises themselves, which “now supposedly can’t. But I think they’re actually trading...,” causing his contracts to be on the verge of collapse.

Opalev’s testimony about complaints from Alexei Navalny is indirectly confirmed by witness V.N. Shcherchkov, who testified that at first Navalny spoke positively about Opalev’s work, but later that assessment turned negative. Witness M.E. Gaidar testified that at first Alexei Navalny expressed the view that assistance should be provided in selling timber products, and later advocated removing V.N. Opalev from his position.

During this same period, Alexei Navalny and P.Yu. Ofitserov began discussing in their email correspondence issues of secrecy in sending mail messages.

The following evidence shows that KOGUP Kirovles suffered actual damage as a result of concluding Supply Contract No. 01/2009 dated 15.04.2009, thereby achieving the objective of the crime.

Thus, contracts concluded by P.Yu. Ofitserov on behalf of VLK LLC with OJSC Domostroitel, OJSC Kirov Furniture and Woodworking Combine, ABC LLC, CJSC Plitspichprom, OJSC Volga, LesGarant LLC, Match Factory Pobeda LLC, Vlada LLC, OJSC Mari Pulp and Paper Mill, CJSC Krasny Yakor, Sevlespil LLC, sole proprietor D.A. Podgornov, OJSC Montazhnik, and Imont (IMONT d.o.o.), together with appendices to the supply con-

65 tract No. 01/2009 dated 15.04.2009, confirm that timber products produced by KOGUP Kirovles were supplied to VLK LLC’s counterparties.

Shipping and accounting documentation, together with expert opinion No. 79ek dated 12.12.2011, confirm that during the period from 15.04.2009 to 30.09.2009, KOGUP Kirovles supplied timber products totaling 10,084.277 cubic meters to VLK LLC, which VLK LLC subsequently sold to its counterparties for 16,165,826.65 rubles.

These circumstances are not disputed by the defense either.

According to paragraph 25 of Resolution No. 51 of the Plenum of the Supreme Court of the Russian Federation dated 27.12.2007 “On judicial practice in cases of fraud, misappropriation, and embezzlement,” when determining the value of property stolen through fraud, misappropriation, or embezzlement, one must proceed from its actual value at the time the crime was committed.

From the testimony of witnesses T.N. Zagoskina and N.N. Ratova, competent specialists in financial auditing, it follows that the market price of a product is the price at which it could be sold at a given time.

Shipping and accounting documentation, as well as the concluded contracts and appendices to them, confirm that VLK LLC’s purchase of timber products from KOGUP Kirovles and VLK LLC’s resale of them to its counterparties were not separated in time. At the same time, the evidence set out in the judgment shows that VLK LLC was merely an intermediary in these product sale transactions between KOGUP Kirovles and the end buyers.

Accordingly, the court finds it established that the actual market value of the 10,084.277 cubic meters of timber products supplied by KOGUP Kirovles to VLK LLC under Contract No. 01/2009 dated 15.04.2009 was 16,165,826.65 rubles, which constituted the actual damage caused to KOGUP Kirovles.

For these reasons, the court finds unconvincing the defense’s argument that VLK LLC purchased timber products from KOGUP Kirovles at above-market prices.

In support of these arguments, the defense relies on specialist opinion No. 3S-13/592 and information from Kirovstat on average timber product prices. However, the court rejects this evidence, because in preparing the opinion the specialist did not assess the prices at which KOGUP Kirovles sold timber products to other counterparties, except for VLK LLC, and witness N.N. Ratova testified that the Kirovstat data used by the specialist contains information on timber prices without taking into account the specific delivery terms. In this connection, the court concludes that the specialist opinion in question, being based on incomplete information, lacks indicia of reliability and therefore cannot serve as a basis for the judgment.

The court also finds unconvincing the defense’s argument that the contract between KOGUP Kirovles and VLK LLC was not loss-making, with reference to

66 the auditor’s report on the inspection of KOGUP Kirovles for the results of its operations in 2008–2009 in Vol. 7, case file pp. 3–97, and the testimony of auditor N.N. Ratova that the contract between KOGUP Kirovles and VLK LLC did not stand out from the others. Witness N.N. Ratova testified that when reviewing KOGUP Kirovles’s sales policy, only timber prices for the third quarter of 2009 were analyzed. However, the materials of the criminal case establish that the appendices to Contract No. 01/2009 dated 15.04.2009 that set the prices were concluded during the period from 15 April to 13 July 2009, that is, mainly in the second quarter of 2009. At the same time, witness T.N. Zagoskina, who conducted the audit of KOGUP Kirovles specifically for the second quarter of 2009, testified that the concluded supply contract was disadvantageous and that timber prices had been understated.

The court also finds unconvincing the defense’s argument that in 2009, because of the crisis, KOGUP Kirovles could not sell timber products at prices higher than those at which it sold them to VLK LLC. In support of this argument, the defense cites a response from Nizhny Novgorod Customs regarding a decline in timber exports in 2009. The court rejects this argument and this evidence, since it has been established that VLK LLC sold the timber products supplied by KOGUP Kirovles at a higher price than the price it paid KOGUP Kirovles.

Under these circumstances, the defense’s arguments, with reference to evidence in Vol. 22, case file pp. 44–55; Vol. 23, case file pp. 46–82; Vol. 24, case file pp. 118–119, 126, 130; and Vol. 25, case file pp. 33–34, do not refute the prosecution’s case but, on the contrary, indirectly confirm it. That evidence shows that in some cases VLK LLC purchased timber products at prices higher than the minimum sale prices established for KOGUP Kirovles branches. From the testimony of witness L.G. Bastrygina, it follows that the minimum prices established by KOGUP Kirovles for the forestry enterprises merely covered the production cost of those timber products. Consequently, those minimum prices were not the products’ actual value.

Nor do the above evidence and specialist opinion No. 3S-13/592 refute the fact that the price of the timber products was understated by the participants in the crime. As noted above, VLK LLC sold the timber products supplied by KOGUP Kirovles at a higher price than the price it paid KOGUP Kirovles. In addition, Document Review Report No. 4/2011 dated 05.04.2011, also submitted to the court by the defense, shows that the price of timber products supplied by KOGUP Kirovles to VLK LLC was lower than the price of corresponding GOST-standard grades and assortments of timber products supplied by KOGUP Kirovles to other buyers during the period from 15.04.2009 to 01.09.2009 by 115–500 rubles per cubic meter, or 3–24 percent.

The absence of equivalent compensation for the timber products supplied by KOGUP Kirovles to VLK LLC consignees is confirmed by the accounting documentation examined in the case and by expert opinion No. 79ek dated 12.12.2011, from which it follows that the difference between the price of timber products purchased by VLK LLC from KOGUP Kirovles and the resale price to VLK LLC’s counterparties

—ABC LLC, LesGarant LLC, 67 OJSC Domostroitel, OJSC KDMK, OJSC Volga, Vlada LLC, Match Factory Pobeda LLC, sole proprietor D.A. Podgornov, CJSC Krasny Yakor, SevLesPil LLC, Ufimskie Spichki LLC, Krymskie Zori LLC, OJSC Montazhnik, CJSC Plitspichprom, OJSC Mari Pulp and Paper Mill, and IMONT d.o.o. (Imont)—during the period from 15.04.2009 to 30.09.2009 amounted to 1,221,893.87 rubles.

The absence of equivalent compensation is also confirmed by expert opinion No. 9/2012 dated 09.04.2012, from which it follows that the difference between the value of timber products purchased by VLK LLC from KOGUP Kirovles and the value of their resale to KOGUP Kirovles’s former counterparties during the period from 15.04.2009 to 30.09.2009 amounted in total to 589,110.87 rubles.

The following evidence also shows the common objectives of Alexei Navalny and P.Yu. Ofitserov, their coordination both of a common position regarding VLK LLC’s contractual relations with KOGUP Kirovles and of how to justify that position before the regional leadership, as well as each person’s role in the crime committed.

From the testimony of witnesses V.N. Opalev, L.G. Bastrygina, T.N. Zagoskina, and P.V. Smertin, the representative of the injured party, it follows that an audit conducted in the summer of 2009 established that the supply contract concluded between KOGUP Kirovles and VLK LLC was economically disadvantageous. Following the audit, meetings were held both at the Property Department and under the Governor of Kirov Region. Alexei Navalny and P.Yu. Ofitserov were also present at the meeting under the Governor and expressed their disagreement with the audit’s conclusions concerning VLK LLC.

Witness N.Yu. Belykh testified that he had not invited P.Yu. Ofitserov to that meeting, but Ofitserov nevertheless spoke about the concluded contract, and as a result of the meeting it was decided to terminate the contract between KOGUP Kirovles and VLK LLC. Witness S.V. Shcherchkov testified that, among other things after the audit, Navalny’s assessment of Opalev’s work turned negative, and Navalny proposed removing Opalev from office. Following the meeting, V.N. Opalev was removed from his position.

As witnesses L.G. Bastrygina, M.V. Bura, and S.P. Zmeev testified, after V.N. Opalev was removed from office, Alexei Navalny came to KOGUP Kirovles and, without any corresponding order from the regional government, demanded KOGUP Kirovles’s financial documents.

The fact that Alexei Navalny’s and P.Yu. Ofitserov’s position regarding the audit—and therefore regarding the supply contract concluded between VLK LLC and KOGUP Kirovles—was coordinated between them is evidenced by the presence in their email correspondence of a negative review of the report by the firm Vyatka-Akademaudit in the name of Alexei Navalny, and a memorandum on the results of the joint activities of VLK LLC and KOGUP Kirovles in the name of P.Yu. Ofitserov.

68 Audio recordings of telephone conversations between Alexei Navalny and P.Yu. Ofitserov on 06.08.2009, 11.08.2009, 19.08.2009, and 02.10.2009, including at 20:51, 21:06, and 23:01, show that they discussed, among other things, the possibility that as a result of the audit of KOGUP Kirovles, VLK LLC might lose its clients; meetings under the Governor of Kirov Region concerning the consequences of concluding the supply contract between KOGUP Kirovles and VLK LLC; and Navalny disputed the audit’s conclusions, the dismissal of KOGUP Kirovles management, and the appointment of P.Yu. Ofitserov to a position at KOGUP Kirovles.

From the audio recordings of telephone conversations between Alexei Navalny and P.Yu. Ofitserov, as well as from expert opinion No. 002/13 dated 08.01.2013, it follows that Alexei Navalny displays a high degree of communicative activity when discussing the actions of the Kirov Region government in connection with the situation at KOGUP Kirovles, his participation in defending P.Yu. Ofitserov’s interests in the regional government, and when making proposals, giving advice, and issuing instructions to P.Yu. Ofitserov. P.Yu. Ofitserov displays a high degree of communicative activity when discussing with Alexei Navalny the audit report on KOGUP Kirovles, accusations by KOGUP Kirovles against VLK LLC, the imposition of penalties for KOGUP Kirovles’s failure to fully meet VLK LLC’s timber supply orders, and the main tasks facing Alexei Navalny and P.Yu. Ofitserov. The relationship between Alexei Navalny and P.Yu. Ofitserov, in terms of communication style, is characterized as close (friendly). The analyzed conversations contain signs indicating that P.Yu. Ofitserov was in a communicatively dependent position relative to Alexei Navalny. At the same time, this functional inequality is not strongly pronounced: the communicants are engaged in joint activity, are interested in it, and distribute their roles according to their respective levels of competence. Signs were identified that Alexei Navalny and P.Yu. Ofitserov shared common views and mutual understanding on the topics discussed. There are also signs indicating that Alexei Navalny and P.Yu. Ofitserov had a shared interest and agreement in obtaining benefit from the activities and management of KOGUP Kirovles in favor of VLK LLC. In the conversations examined, Alexei Navalny and P.Yu. Ofitserov indicate that they have common goals and tasks, and that they plan and carry out joint actions in relation to KOGUP Kirovles and the advancement of VLK LLC’s interests.

This evidence once again refutes the defense’s arguments and the defendants’ testimony that Alexei Navalny was not involved in the activities of VLK LLC and had no interest in the timber supply contract concluded between VLK LLC and KOGUP Kirovles.

In support of these arguments, the defense relies on the search record in Vol. 14, case file pp. 132–136, from which it follows that no documents relating to the present case were found in Navalny’s personal safe-deposit box at Raiffeisenbank. However, this evidence does not refute the prosecution’s case, since Alexei Navalny’s involvement in the commission of the crime has been established

69 by other evidence, including email correspondence found in his possession and documents relating to the activities of VLK LLC and KOGUP Kirovles.

In an attempt to support its position that Alexei Navalny’s activities as an unpaid adviser to the Governor of Kirov Region were aimed exclusively at identifying the causes of KOGUP Kirovles’s losses, providing a reasoned opinion on the financial condition and inefficient operation of the unitary enterprise, and also to support the claim that VLK LLC caused no damage, the defense relies on the following documents: the results of KOGUP Kirovles’s work for the first half of 2009 in Vol. 2, case file pp. 24–25, confirming the existence of accounts receivable owed to KOGUP Kirovles, and the explanatory note to KOGUP Kirovles’s accounting statements for the first nine months of 2009 in Vol. 2, case file pp. 26–69. However, these documents are unsigned and contain no identifying details and therefore, under Article 75 of the Criminal Procedure Code of the Russian Federation, are inadmissible evidence.

Also in support of the argument that KOGUP Kirovles’s financial condition worsened not because of the contract concluded with VLK LLC, the defense relies on the following evidence: expert opinion No. 6/2012 dated 06.03.2012, from which it follows that KOGUP Kirovles’s financial condition deteriorated during the period from 15.04.2009 to 30.09.2009 and that even if KOGUP Kirovles had received additional profit in the amount of 1,221,893.87 rubles, the enterprise’s financial and economic condition during that period would not have changed; expert opinion No. 9/2012 dated 09.04.2012, stating that VLK LLC’s timber sales in the amount of 14,785,944.66 rubles accounted for 5% of KOGUP Kirovles’s total timber sales during the period from 15.04.2009 to 30.09.2009; the auditor’s report on the inspection of KOGUP Kirovles for 2008–2009 in Vol. 7, case file pp. 3–97, from which it follows that KOGUP Kirovles’s management was ineffective and that its decisions caused losses; and the ruling of the Arbitration Court of Kirov Region dated 09.02.2011 introducing supervision proceedings in respect of KOGUP Kirovles, in Vol. 4, case file pp. 220–226. However, these documents do not affect the court’s conclusions, since the defendants are not charged with driving KOGUP Kirovles into bankruptcy, and for that reason the court rejects them.

In giving a legal assessment of the defendants’ actions, the court proceeds from the circumstances of the case established by the evidence set out above.

Under the meaning of the law, embezzlement includes unlawful actions by a person who, for selfish purposes, spent property entrusted to him against the owner’s will by consuming that property, expending it, or transferring it to other persons (paragraph 19 of Resolution No. 51 of the Plenum of the Supreme Court of the Russian Federation dated 27.12.2007 “On judicial practice in cases of fraud, misappropriation, and embezzlement”).

Contrary to the defense’s arguments, 70 the court finds it proven that this act did occur and that the defendants’ actions contain all the elements of the crime charged against them.

The court finds unconvincing the defense’s argument that a necessary element of theft is missing—namely, the unlawfulness of taking property against the owner’s will—because what occurred was an ordinary civil-law transaction concluded by persons authorized to do so.

On behalf of the owner of KOGUP Kirovles, the Kirov Region Department of State Property, through the charter and employment contract, obligated V.N. Opalev to perform his duties conscientiously and reasonably, in accordance with applicable law.

Under Part 1 of Article 10 of the Civil Code of the Russian Federation, the exercise of civil rights solely with the intent to cause harm to another person, actions taken in circumvention of the law for an unlawful purpose, and other knowingly bad-faith exercises of civil rights (abuse of rights) are not permitted.

The court has established that V.N. Opalev, in violation of the above requirements of the charter, the employment contract, and the law, on behalf of the enterprise he headed, concluded Supply Contract No. 01/2009 dated 15.04.2009 with VLK LLC, represented by P.Yu. Ofitserov, solely to facilitate the theft of KOGUP Kirovles property and the transfer of the unitary enterprise’s property for the benefit of VLK LLC, whose sole participant and founder was P.Yu. Ofitserov. As a result of concluding this supply contract, KOGUP Kirovles suffered property damage.

Thus, the court finds it established that KOGUP Kirovles property was transferred for the benefit of VLK LLC unlawfully and against the owner’s will.

At the same time, the court finds unconvincing and rejects the defense’s arguments based on decisions of the Arbitration Court of Kirov Region dated 25.11.2010, 25.09.2012, 24.12.2012, and 26.02.2013 on recovering from VLK LLC sums owed to KOGUP Kirovles in performance of obligations under Supply Contract No. 01/2009 dated 15.04.2009, as well as on a payment order from VLK LLC transferring funds to KOGUP Kirovles in performance of that contract, and on payment instructions by which funds were transferred to KOGUP Kirovles under that contract.

By citing this evidence, the defense argues that VLK LLC and KOGUP Kirovles were performing obligations under a lawfully concluded supply contract, and that the arbitration court decisions have prejudicial effect, since the contract was recognized as valid and therefore there was no unlawful taking of KOGUP Kirovles property.

A review of the cited decisions of the Arbitration Court of Kirov Region showed that it considered only issues of debt collection on obligations arising from the performance by KOGUP Kirovles and VLK LLC of Supply Contract No. 01/2009 dated 15.04.2009. The Arbitration Court did not examine the circumstances of the conclusion of the supply contract, the purposes for which it was concluded, the harm caused,

- 7 OJSC Mari Pulp and Paper Mill, volume 771.44 cubic meters, with delivery address: Mari El Republic, Volzhsk, 10 K. Marx St.; - CJSC Krasny Yakor, volume 265.42 cubic meters, with delivery address: Kirov Region, Slobodskoy, 132 Sovetskaya St.; Match Factory Pobeda LLC, volume 176.36 cubic meters, with delivery address: Penza Region, Nizhnelomovsky District, Upper Lomov village, 1 Moskovskaya St.; Ufimskie Spichki LLC, volume 288.94 cubic meters, with delivery address: Republic of Bashkortostan, Ufa, 88 Novozhenova St.; - Krymskie Zori LLC, volume 161.190 cubic meters, with delivery address: Krasnodar Territory, Krymsk, 65 Stroitelnaya St.; CJSC Plitspichprom, volume 132.080 cubic meters, with delivery address: Kaluga Region, Balabanovo, 3 50 Let Oktyabrya Square; Imont (IMONT d.o.o.), volume 115.72 cubic meters, with delivery address: Republic of Poland, Koźmin, 5 Tovarova St.

As a result, the total volume of timber products supplied by KOGUP Kirovles to VLK LLC’s counterparties amounted to 10,084.277 cubic meters.

During the period from 15 April to December 2009, for the указанного volume of timber products, funds totaling 16,003,880.28 rubles were received into settlement account No. 40702810300020129046 of VLK LLC, controlled by Alexei Navalny and P.Yu. Ofitserov, opened at Vyatka-Bank OJSC (City Additional Office), located at 7 Chapaeva St., Kirov, Kirov Region, namely: rubles; - - - - - - -

from the settlement account of OJSC Domostroitel in the amount of 3,755,494.50 rubles; from the settlement account of ABC LLC in the amount of 40,950 rubles; from the settlement account of LesGarant LLC in the amount of 1,525,166.08 rubles; from the settlement account of OJSC KMDK in the amount of 1,325,919.75 rubles; from the settlement account of OJSC Volga in the amount of 2,507,239.75 rubles; from the settlement account of Vlada LLC in the amount of 3,136,904.5 rubles; on behalf of OJSC Montazhnik in the amount of 100,000 rubles; from the settlement account of SevLesPil LLC in the amount of 99,669.70 rubles; from the settlement account of sole proprietor D.A. Podgornov in the amount of 1,151,025.20 rubles; from the settlement account of OJSC MTsBK in the amount of 545,783.20 rubles; from the settlement account of CJSC Krasny Yakor in the amount of 200,093.0 rubles; from the settlement account of Match Factory Pobeda LLC in the amount of 291,357.0 from the settlement account of Ufimskie Spichki LLC in the amount of 282,686 rubles; from the settlement account of Krymskie Zori LLC in the amount of 513,486.0 rubles; from the settlement account of CJSC Plitspichprom in the amount of 177,945.60 rubles; from the settlement account of Imont (IMONT d.o.o.) in the amount of 350,160 rubles.

Thus, V.N. Opalev, acting jointly with Alexei Navalny, who organized and directed the commission of the crime, and with P.Yu. Ofitserov, with the use of

using 8 his official position as General Director of KOGUP Kirovles, and acting out of self-interest, unlawfully embezzled property entrusted to him belonging to another party, namely KOGUP Kirovles timber products in the amount of 10,084.277 cubic meters, worth 16,165,826.65 rubles, that is, on an especially large scale, for the benefit of third parties who were accomplices in the crime and the LLC VLK controlled by them, thereby causing property damage to the owner of that property, KOGUP Kirovles.

- It follows from the judgment of the Leninsky District Court of the city of Kirov dated 24 December 2012 that V.N. Opalev was found guilty of embezzlement, that is, the theft of property of KOGUP Kirovles entrusted to V.N. Opalev, through the use of his official position, on an especially large scale, committed jointly with N. and O., that is, of the offense предусмотренного by Part 4 of Article 160 of the Criminal Code of the Russian Federation (Vol. 26, case file pp. 289-294).

At the court hearing, defendant A.A. Navalny did not admit guilt in committing the crime. He stated that he arrived in Kirov Region in January 2009 to work as an adviser at the invitation of N.Yu. Belykh, whose candidacy for Governor had been submitted for approval to the Legislative Assembly. At meetings with representatives of major companies, V.N. Opalev, Director of KOGUP Kirovles, reported the enterprise's difficult financial situation and asked for help in selling its timber products. Belykh instructed him to find out what was really happening at KOGUP Kirovles. For that purpose, he studied the company's documents and met with counterparties. He and Belykh traveled to the city of Solikamsk to help expand the sales market for KOGUP Kirovles. In early 2009, he received a call from his acquaintance P.Yu. Ofitserov, who said he wanted to engage in the sale of timber products in Kirov Region. Ofitserov knew of his status as an adviser to the Governor and therefore regarded him as his superior. Ofitserov met Opalev on his own, told him that he intended to conclude a supply contract, and sent him a draft supply agreement with KOGUP Kirovles for review, to which he never responded. Later, Ofitserov complained to him that the state enterprise was not selling him timber products. He merely used his acquaintance with Ofitserov to determine the true state of affairs at KOGUP Kirovles. In this way he obtained information and demanded that KOGUP Kirovles centralize product sales, that is, route them through a single account. He came into conflict with Opalev after accusing him, Bastrygina, and Bura of corruption. He also prepared a response to the audit report, using information received from Ofitserov, who attended meetings at his request in order to confirm his conclusions about the state enterprise. He believes that Opalev is giving false testimony against him and that the audit report was fabricated by KOGUP Kirovles.

At the court hearing, defendant P.Yu. Ofitserov did not admit guilt in committing the crime. He stated that he arrived in the city of Kirov in February 2009 in order to

71 caused as a result of concluding the supply contract, or the intent of the persons who concluded the contract, that is, issues that may be resolved only within criminal proceedings. In addition, in its decision of 18 October 2012, the Arbitration Court of Kirov Region, in dismissing the claim of KOGUP Kirovles, stated that there were no grounds for recognizing the contract in question, or the one-off transactions for the transfer of goods, as having been concluded. Nevertheless, the court notes that neither Navalny nor Ofitserov is charged with organizing or aiding in the conclusion of a supply contract that lacked legal force. On the contrary, the defendants are charged with organizing and aiding the embezzlement of KOGUP Kirovles property through the conclusion of a supply contract with LLC VLK, which was aimed solely at creating the appearance that KOGUP Kirovles had civil-law obligations to LLC VLK to transfer timber products to consignees on a supposedly paid basis, whereas in reality those goods were to be transferred without equivalent and appropriate compensation from LLC VLK. These circumstances are not refuted by the cited decisions of the Arbitration Court or by the documents.

The court finds unpersuasive the defense's argument that a necessary element of theft— the causing of damage—is absent.

According to Resolution No. 51 of the Plenum of the Supreme Court of the Russian Federation dated 27 December 2007, "On Judicial Practice in Cases of Fraud, Misappropriation, and Embezzlement," when determining the amount in which a person committed fraud, misappropriation, or embezzlement, courts must bear in mind that the theft of property accompanied by its replacement with property of lesser value is to be classified as theft in the amount of the value of the property taken. In determining the value of property stolen through fraud, misappropriation, or embezzlement, one must proceed from its actual value at the time the crime was committed.

As stated above, the result of the unlawful actions of all accomplices in the crime was the transfer for the benefit of LLC VLK of KOGUP Kirovles timber products in the amount of 10,084.277 cubic meters, worth 16,165,826.65 rubles, together with compensation that was inadequate in relation to the property stolen.

Accordingly, the court concludes that the damage caused to KOGUP Kirovles was properly calculated in accordance with the actual market value of the timber products at the price for which LLC VLK sold them to its buyers, that is, in the amount of 16,165,826.65 rubles.

Since it has been established that KOGUP Kirovles suffered material damage in the amount of 16,165,826.65 rubles, and this was encompassed by the defendants' intent, the court finds proven the qualifying element of embezzlement: the commission of theft on an especially large scale.

The court finds unpersuasive the defense's argument that a necessary element of theft— the uncompensated taking of property—is absent, since LLC VLK purchased the timber products supplied by KOGUP Kirovles for 14,785,944.66 rubles.

72 unfounded, because under the meaning of the law, the taking of property entrusted to the offender by replacing it with property of lesser value, committed for the purpose of appropriating it or transferring it into the ownership of other persons, is classified as theft (para. 25 of Resolution No. 51 of the Plenum of the Supreme Court of the Russian Federation dated 27 December 2007, "On Judicial Practice in Cases of Fraud, Misappropriation, and Embezzlement"). During the trial, it was established that the timber products produced by KOGUP Kirovles were transferred for the benefit of LLC VLK at deliberately understated prices, and were subsequently sold by LLC VLK at prices exceeding the cost at which they had been purchased from KOGUP Kirovles. At the same time, the court finds that payment of 14,785,944.66 rubles, as provided for in the appendices to Supply Contract No. 01/2009 dated 15 April 2009, was not equivalent compensation for timber products with a total value of 16,165,826.65 rubles. Moreover, according to Resolution No. 51 of the Plenum of the Supreme Court of the Russian Federation dated 27 December 2007, "On Judicial Practice in Cases of Fraud, Misappropriation, and Embezzlement," partial compensation of the victim's losses cannot in itself indicate the absence of intent to appropriate or embezzle property entrusted to a person. The defense also argues that another necessary element of theft is absent, namely a self-interested purpose, and in support of this argument refers to LLC VLK's profit and loss report for the first 9 months of 2009 in Vol. 3, case file pp. 102-104, indicating that the company incurred losses during that period, as well as to the absence in LLC VLK's accounting records of information showing any transfer of funds to A.A. Navalny. The court finds these arguments unpersuasive. According to Resolution No. 51 of the Plenum of the Supreme Court of the Russian Federation dated 27 December 2007, "On Judicial Practice in Cases of Fraud, Misappropriation, and Embezzlement," when deciding the question of the guilt of persons in committing fraud, misappropriation, or embezzlement, courts must bear in mind that an essential element of theft is the presence of a self-interested purpose, that is, the intent to take and/or convert another's property for one's own benefit or to dispose of that property as one's own, including by transferring it into the possession of other persons. The materials examined in the criminal case establish that KOGUP Kirovles timber products in the amount of 10,084.277 cubic meters were transferred for the benefit of LLC VLK and, under Contract No. 01/2009 dated 15 April 2009, passed into the ownership of LLC VLK from the moment the goods were shipped to the consignee. The transfer of the property for the benefit of LLC VLK was encompassed by the defendants' intent, as follows from witness testimony and the electronic correspondence between P.Yu. Ofitserov and A.A. Navalny. Thus, the court established that all accomplices in the crime, by transferring KOGUP Kirovles property for the benefit of LLC VLK through the conclusion of Supply Contract No. 01/2009 dated 15 April 2009, acted with a self-interested purpose.

At the same time, 73 the court rejects the profit and loss report of LLC VLK for the first 9 months of 2009, submitted by the defense and contained in Vol. 3, case file pp. 102-104, since P.Yu. Ofitserov, as the company's General Director, personally managed its financial operations and distributed its profits and, accordingly, he himself decided how to dispose of the funds received from the sale of timber products transferred from KOGUP Kirovles.

According to Resolution No. 51 of the Plenum of the Supreme Court of the Russian Federation dated 27 December 2007, "On Judicial Practice in Cases of Fraud, Misappropriation, and Embezzlement," only a person to whom another's property was lawfully entrusted by a legal entity or an individual for a specific purpose or activity may be the direct perpetrator of misappropriation or embezzlement. Under Part 4 of Article 34 of the Criminal Code of the Russian Federation, persons who do not possess the specified characteristics of the special subject of misappropriation or embezzlement, but who directly participated in the theft of property pursuant to a prior agreement with the person to whom that property was entrusted, shall bear criminal liability under Article 33 and Article 160 of the Criminal Code of the Russian Federation as organizers, instigators, or accomplices.

According to the judgment of the Leninsky District Court of the city of Kirov dated 24 December 2012, which has entered into legal force, V.N. Opalev was recognized as the direct perpetrator of the crime imputed to A.A. Navalny and P.Yu. Ofitserov; the property of KOGUP Kirovles had been entrusted to him in his capacity as General Director. The court classified V.N. Opalev's actions under Part 4 of Article 160 of the Criminal Code of the Russian Federation.

The following circumstances, which the court finds proven, demonstrate A.A. Navalny's role in the commission of the crime charged against him:

After studying the structure of KOGUP Kirovles, its financial position, and its contractual relations, A.A. Navalny deliberately took steps to organize LLC VLK, whose role was to provide intermediary services in the sale of KOGUP Kirovles timber products despite the absence of any need for an intermediary, namely: he coordinated the creation of LLC VLK with P.Yu. Ofitserov; discussed with Ofitserov and gave instructions on how to justify to the regional Governor the creation in Kirov Region of a single trading platform, in the form of LLC VLK, for the sale of timber products; persuaded V.N. Opalev, General Director of KOGUP Kirovles, of the need to cooperate with LLC VLK, demanding that he conclude a supply contract with LLC VLK as quickly as possible; and, while fully aware that the contract between KOGUP Kirovles and LLC VLK was disadvantageous, took measures aimed at increasing the sale of timber products through LLC VLK, namely: he discussed with Ofitserov and promised to influence the competent authority in order to expedite the processing of a contract and lease for KOGUP Kirovles; justified the need to centralize the sale of timber products specifically through LLC VLK; instructed Opalev to issue a corresponding order prohibiting the forestry units from selling timber products independently; and discussed with Ofitserov conducting an audit concerning under-deliveries of timber products

74 to LLC VLK; prepared and sent a letter to OJSC Solikamskbumprom, in which he argued that LLC VLK, as a dealer of KOGUP Kirovles, was capable of supplying timber products; and defended the interests of LLC VLK in the Government of Kirov Region by challenging the conclusions of the audit conducted by LLC Center for Management Consulting Vyatka-Akademaudit. In these circumstances, the court concludes that A.A. Navalny was the organizer of the crime, that is, the person who organized the commission of the crime and directed its execution. The following circumstances, which the court finds proven, demonstrate P.Yu. Ofitserov's role in the commission of the crime charged against him: P.Yu. Ofitserov, having created LLC VLK in agreement with A.A. Navalny, opened the company's settlement account, drafted a timber supply contract that was knowingly unfavorable to KOGUP Kirovles and that contained specially stipulated liability for KOGUP Kirovles in the event of non-performance of supply terms, drafted appendices to that contract with knowingly unfavorable pricing and transportation terms, used Navalny's support to persuade Opalev to sign those documents, and facilitated the re-execution of contracts with KOGUP Kirovles' former counterparties in the name of LLC VLK, which he presented as the official dealer of KOGUP Kirovles. In these circumstances, the court concludes that P.Yu. Ofitserov is an accomplice to the crime, that is, a person who facilitated the commission of the crime by providing information and means for committing it. On the basis of the foregoing, the court classifies the actions of A.A. Navalny under Part 3 of Article 33 and Part 4 of Article 160 of the Criminal Code of the Russian Federation (as amended by Federal Law No. 26-FZ of 7 March 2011) as organizing the commission of the crime and directing the execution of embezzlement, that is, the theft of another's property entrusted to the offender, on an especially large scale. - The court classifies the actions of P.Yu. Ofitserov under Part 5 of Article 33 and Part 4 of Article 160 of the Criminal Code of the Russian Federation (as amended by Federal Law No. 26-FZ of 7 March 2011) as aiding the commission of embezzlement, that is, the theft of another's property entrusted to the offender, on an especially large scale, by providing information and means for committing the crime. In determining the sentence, the court takes into account the nature and degree of social danger of the crime committed, the role of each person in the commission of the crime, the conduct of the guilty parties both during and after the commission of the crime, the impact of the sentence imposed on their rehabilitation, the living conditions of their families, and information concerning their personalities, including that presented by the defense. A.A. Navalny has no prior convictions, has repeatedly been held administratively liable, is not registered with a psychiatrist or narcologist, and is characterized positively at his place of residence. P.Yu. Ofitserov has no prior convictions, has not been held administratively liable, is not registered with a narcologist or psychiatrist, and is characterized at his place of residence

satisfactorily, 75 is characterized positively by the Yabloko party (a Russian liberal political party), of which he is a member, and has a chronic illness. The court also takes into account that witnesses D.Yu. Ofitserov and I.O. Merkusheva characterize P.Yu. Ofitserov positively. No aggravating circumstances предусмотренные by Article 63 of the Criminal Code of the Russian Federation have been established with respect to either defendant. As mitigating circumstances for both defendants, the court, on the basis of Parts 1 and 2 of Article 61 of the Criminal Code of the Russian Federation, recognizes the fact that they have minor and young children as dependents. Navalny and Ofitserov committed a serious crime for which Part 4 of Article 160 of the Criminal Code of the Russian Federation provides no punishment more lenient than imprisonment. Taking into account the factual circumstances of the case, the nature and degree of social danger of the crime, and the role of each defendant in its commission, the court sees no grounds for applying Part 6 of Article 15 of the Criminal Code of the Russian Federation regarding a change in the category of the crime, or for applying Article 73 of the Criminal Code of the Russian Federation regarding a suspended sentence. Nor does the court see grounds for applying Article 64 of the Criminal Code of the Russian Federation and imposing a sentence below the statutory minimum or a different type of punishment than that provided for by the sanction. Taking into account the defendants' conduct after the commission of the crime and the absence of any violations of public order, the court considers it possible not to impose the additional punishment of restriction of liberty. At the same time, given the circumstances of the crime involving the embezzlement of property of a state unitary enterprise on an especially large scale, and the fact that the damage caused has not been fully compensated, the court considers it necessary to impose an additional punishment in the form of a fine. In determining the amount of the additional punishment, the court takes into account the defendants' financial situation and the fact that they have minor children as dependents. The principal punishment of imprisonment, in accordance with subparagraph "b" of Part 1 of Article 58 of the Criminal Code of the Russian Federation, is to be served by the defendants in a general-regime correctional colony. In order to secure enforcement of the sentence, on 30 November 2012, on the basis of a ruling of the Basmanny District Court of the city of Moscow dated 20 November 2012, P.Yu. Ofitserov's property was placed under arrest: Also, by ruling of the Basmanny District Court of the city of Moscow dated 20 November 2012, the attachment of A.A. Navalny's property was authorized: a HYUNDAI ELANTRA 1.6 GLS AUTO automobile; a VAZ 21083 automobile; however, because the actual location of the property could not be established

76

On 26 November 2012, a notice was sent to the Moscow traffic police department of the Main Directorate of the Ministry of Internal Affairs of Russia ordering the suspension of registration actions with respect to the указанным property of A.A. Navalny.

Since the court is imposing an additional punishment in the form of a fine on the defendants, the attachment of P.Yu. Ofitserov's property, as well as the prohibition on registration actions with respect to A.A. Navalny's property, shall not be lifted.

If P.Yu. Ofitserov lacks sufficient funds to pay the imposed fine, recovery for payment of the fine must be levied against the attached property.

The court considers it necessary to dispose of the physical evidence in the case in accordance with Article 81 of the Criminal Procedure Code of the Russian Federation.

court

On the basis of the foregoing and guided by Articles 307, 308, and 309 of the Criminal Procedure Code of the Russian Federation,

HEREBY SENTENCES:

Find Alexei Anatolyevich Navalny guilty of committing the crime provided for by Part 3 of Article 33 and Part 4 of Article 160 of the Criminal Code of the Russian Federation (as amended by Federal Law No. 26-FZ of 7 March 2011), and sentence him to 5 (five) years of imprisonment without restriction of liberty, with a fine of 500,000 (five hundred thousand) rubles payable to the state, with the term of imprisonment to be served in a general-regime correctional colony.

Part 5 of Art.

Find Pyotr Yuryevich Ofitserov guilty of committing the crime provided for by Part 33, Part 4 of Article 160 of the Criminal Code of the Russian Federation (as amended by Federal Law No. 26-FZ of 7 March 2011), and sentence him to 4 (four) years of imprisonment without restriction of liberty, with a fine of 500,000 (five hundred thousand) rubles payable to the state, with the term of imprisonment to be served in a general-regime correctional colony.

Change the measure of restraint for each defendant, A.A. Navalny and P.Yu. Ofitserov, from a written undertaking not to leave and to behave properly to detention in custody, and take them into custody immediately in the courtroom. The term of punishment for A.A. Navalny and P.Yu. Ofitserov shall be calculated from the moment they are taken into custody in accordance with this judgment, that is, from 18 July 2013.

The attachment imposed on the property of P.Yu. Ofitserov, as well as the prohibition on registration actions with respect to the property of A.A. Navalny: a HYUNDAI ELANTRA 1.6 GLS AUTO automobile, model year 2004, state registration plate A954HX97, vehicle identification number (VIN) KMHDN41BP4U846075; a VAZ 21083 automobile, model year 1997,

manufacture, 77 state registration plate M255TB77, vehicle identification number (VIN) - XTA210830V2159491, shall not be lifted.

If P.Yu. Ofitserov lacks sufficient funds to pay the fine imposed on him, recovery for payment of the fine shall be levied against the attached property.

The physical evidence in the case—timber supply contracts with appendices, the agreement terminating the contract, delivery notes, invoices, bills, payment orders, registers of amounts, a memorial order, the agreement and application for opening a bank account, timesheets and payroll statements, the employment contract between LLC VLK and M.V. Bura, information on subscriber-number connections, the corporate file of LLC VLK, the corporate file of KOGUP Kirovles, account transaction statements, optical discs containing audio recordings of telephone conversations, electronic correspondence, account statements of KOGUP Kirovles and its branches, and a letter from the Administration of the Government of Kirov Region—shall be kept with the materials of the criminal case; the HP Pavilion Entertainment PC laptop with cable and power supply shall be returned to P.Yu. Ofitserov as its rightful owner; the Apple iPhone 32 Gb mobile phone with SIM card of a cellular operator; the system unit of an ArgumentNT personal computer; and the Samsung laptop with power supply and electrical cable shall be returned to A.A. Navalny as their rightful owner.

The judgment may be appealed to the Kirov Regional Court through the Leninsky District Court of the city of Kirov within 10 days from the date of its pronouncement, and by convicted persons held in custody, within the same period from the date they are served with a copy of the judgment. If an appeal complaint or prosecutorial submission is filed, the convicted persons have the right to petition to participate in the consideration of the case by the appellate court, which must be stated in the appeal or in objections to the appeal or submission.

Presiding Judge S.V. Blinov District Court Judge KOPEL ZERNA Kaninoy Court Secretary

starting a new business, he decided to engage in the sale of timber products. For that purpose, he met V.N. Opalev at KOGUP Kirovles and offered to help with the sale of its timber products. Opalev agreed. Having obtained Opalev's consent, in March 2009 he created LLC VLK and then continued negotiations with Opalev. If V.N. Opalev had not agreed to the sale of timber products through the legal entity he was creating, he would have abandoned the creation of LLC VLK. M.V. Bura, an employee of KOGUP Kirovles, sent him a draft supply contract. He merely expressed the wish that the contract include provisions on liability for non-performance of obligations. At the same time, none of the employees of LLC VLK knew how the supply contract was concluded; he conducted all negotiations personally. He signed the contract. A.A. Navalny took no part whatsoever in the conclusion of the supply contract; they communicated as acquaintances and only occasionally met and spoke by phone. He sent Navalny the draft supply contract, but Navalny did not respond to his email. At Opalev's invitation, he participated in a meeting with the directors of the forestry units, but he made no promises to sell all of KOGUP Kirovles' products. In performing the contract, LLC VLK staff searched for clients and sent applications to KOGUP Kirovles, which itself decided whether or not to make deliveries to those counterparties. The supply prices were also always agreed with KOGUP Kirovles. In April-May 2009, KOGUP Kirovles sent inflated prices for timber products, but after his objections they corrected the prices to average market levels. It was more profitable for KOGUP Kirovles to sell timber products through the forestry units. He needed M.V. Bura in order to understand the forestry sector, and therefore, at Opalev's suggestion, she was hired by LLC VLK. She also, without any request from him, organized the re-execution of contracts with KOGUP Kirovles' former counterparties. / The price of timber products for those counterparties did not change, but the price difference for the state enterprise was justified by LLC VLK's work on document processing. Cooperation with KOGUP Kirovles continued until the regional Governor demanded termination of the supply contract, but in fact there were already no shipments under the contract by that time.

Despite the defendants' refusal to admit guilt in committing the crime under the circumstances set out above, the court finds that their guilt is proven by the testimony of the following witnesses.

Thus, from the testimony of V.N. Opalev, examined at the court hearing as a witness, as well as from his testimony read out in court and fully confirmed by him, given during the preliminary investigation as an accused person in the presence of counsel and contained in Vol. 26, case file pp. 202-214, 233-245, 256-268, it follows that he served as General Director of KOGUP Kirovles from late 2007 until 16 December 2010. The principal activity of the enterprise he headed was forestry management and logging operations, as well as timber processing in Kirov Region. His duties included overall management of the enterprise and its branches, which were the forestry units. The latter were not

10 legal entities, but their directors had powers of attorney authorizing them to conclude timber supply contracts independently. On the part of the Government of Kirov Region, the activities of KOGUP Kirovles were overseen by Deputy Chairman S.V. Shcherchkov. Each year, KOGUP Kirovles entered into state contracts for forestry management activities together with the purchase and sale of standing timber, which the enterprise harvested and then sold to buyers. All timber products made from timber acquired under state contracts were the property of KOGUP Kirovles and were entrusted to him as General Director of the enterprise. In addition, KOGUP Kirovles leased forest plots in Kirov Region on which logging and forestry management work was carried out. Timber products made from timber growing on the leased forest plots were also the property of KOGUP Kirovles and were entrusted to him as head of the enterprise.

At approximately the end of December 2008, N.Yu. Belykh—the future Governor of Kirov Region—arrived in Kirov Region. Around the same time, he held a meeting attended, among others, by heads of enterprises in the region's forestry sector, at which he introduced members of his team—A.A. Navalny, Shcherchkov, and others—who, according to Belykh, were to join the Government of Kirov Region. After that, he repeatedly saw Navalny in the Government building of Kirov Region, where Navalny had his own office. Already in early 2009, Navalny began taking an interest in the activities of KOGUP Kirovles, requesting documents relating to the enterprise's business operations. On one day in February 2009, he was informed by the Government of Kirov Region of the forthcoming visit to KOGUP Kirovles of Navalny, an unpaid assistant to the Governor of Kirov Region, for the purpose of familiarizing himself with the structure and activities of the enterprise. That same day, Navalny arrived at his office at the enterprise together with P.Yu. Ofitserov, who, according to Navalny, would assist KOGUP Kirovles in organizing the sale of timber products. Following Navalny's instruction, he told Ofitserov about the state enterprise he headed, and a few days later he arranged a trip for him to look over the region's forestry units.

Then, approximately in February-March 2009, after one of the meetings held by Shcherchkov at which problems in the development of KOGUP Kirovles were discussed, Navalny invited him to an office in the regional Government building. In that conversation, Navalny proposed that he, together with the heads of other major logging and timber-processing enterprises, create an open joint-stock company to organize the sale of timber products, which, according to Navalny, would solve KOGUP Kirovles' problems with marketing its timber products.

In March 2009, after another meeting with Shcherchkov, Navalny informed him that, instead of the previously discussed open joint-stock company, the sale of timber products produced by KOGUP Kirovles would be handled by a private limited liability company created by his acquaintance Ofitserov, which later turned out to be LLC VLK. He agreed to +