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Anti-Putin Activist Navalny Faces 10 Years for Embezzlement

Russian opposition leader Alexey Navalny faces as much as 10 years in jail after being charged with embezzlement, marking an escalation in President Vladimir Putin’s crackdown on the biggest unrest of his 12-year rule.

The Investigative Committee increased the severity of the charges against Navalny, accusing him of defrauding a state timber company of 16 million rubles ($496,000) in the Kirov region, the agency said on its website today. Navalny, 36, an anti-corruption activist who helped organize mass protests against Putin, previously risked a maximum sentence of five years for causing a 1.3 million-ruble loss to the firm.

Navalny was barred from leaving Russia by investigators, who said that two more people linked to the case will soon be charged. The accusations are “astonishing,” Navalny said on his blog.

Putin, 59, who won another six years at the Kremlin in March, has responded to the largest demonstrations since he came to power in 2000 by tightening controls over the Internet and prosecuting opposition activists and leaders.

‘Fierce’ Activist

“We should be concerned with attempts in Russia to silence fierce opposition activist Alexey Navalny,” Swedish Foreign Minister Carl Bildt said on his Twitter Inc. account.

The authorities have charged 15 protesters over clashes with police on the eve of the Russian leader’s May 7 inauguration, and are holding 13 of them in pre-trial detention. Opposition leaders including Navalny also face possible charges of inciting violence against officials carrying a maximum sentence of 10 years in jail. Three activists have asked for political asylum abroad, according to Ekho Moskvy.

Russian billionaire newspaper owner Alexander Lebedev, who backs the opposition movement, said in a July 24 interview that he expects to be charged in a criminal case relating to his brawl with a rival businessman last September.

Lebedev has been investigated on charges of hooliganism, which carry a maximum prison term of five years. He’s financing the anti-graft drive of Navalny, who was elected last month to the board of state carrier OAO Aeroflot after Lebedev proposed him as an independent director.

Show Trials

“This is political dissent against Putin and that is why the state is overreacting,” Lebedev said yesterday in an interview with Sky News, comparing the crackdown to the Soviet- era “trials against political dissenters at the end of the 1960s and in the 1970s.”

In November 2010, Navalny published on his website what he said was a report by the government budget watchdog showing that officials at state oil pipeline operator OAO Transneft embezzled $4 billion while building a link to the Pacific Ocean that opened a year late in December 2009. The allegation has been denied by the company and the Audit Chamber watchdog.

“It will be a pity if he gets put away,” Michael Kart, managing partner at Spectrum Partners in Moscow, which has about $150 million under management. “Without Navalny, activism won’t die in Russia but if he is going to be arrested, it will be a major step back for the political advocacy movement.”

The 30-stock Micex Index (INDEXCF) slumped for the first time in five days, retreating 1 percent to 1,413.95 by 5:09 p.m. Russia’s benchmark gauge trades at 5.2 times estimated earnings, having added 0.8 percent this year. That compares with a multiple of 9.8 times for companies in the MSCI Emerging Market Index (MXEF), which has added 4.5 percent this year. Russian equities have the cheapest valuations based on estimated earnings among 21 emerging markets tracked by Bloomberg.

Kirov Wood

Investigators say that Navalny and two others embezzled more than 10,000 cubic meters of wood products at timber company Kirovles from May through September 2009. Navalny, a lawyer, was working at the time as an unpaid adviser on corporate governance to Kirov Governor Nikita Belykh, who came to his defense after the accusations were first made public.

In February 2011 and May this year, the Investigative Committee twice overruled regional prosecutors who had dropped the case against Navalny.

Increasing pressure against dissenters, three members of a Russian all-female punk group are facing seven years in jail for a political protest in February targeting Putin inside Moscow’s Christ the Savior cathedral. Their trial began yesterday.

Putin’s Premiership

Putin kept power from 2008 as prime minister after handing the presidency to his protege, Dmitry Medvedev, because of a constitutional ban on three consecutive Kremlin terms. Putin’s decision in September to reclaim the top job and push Medvedev aside, followed by allegations of fraud in December parliamentary elections, brought tens of thousands onto the streets of Russian cities.

Mikhail Khodorkovsky, once the richest man in the country, is serving 13 years in prison for two separate convictions for fraud, embezzlement and tax evasion. The former billionaire owner of Yukos Oil Co. was arrested at gunpoint when his private jet was stormed at a Siberian airport in October 2003 and his company was dismantled over tax claims and largely nationalized. Khodorkovsky said it was retribution for his funding political parties opposing Putin, claims that the Kremlin rejected.

The U.S. and European Union criticized Khodorkovsky’s latest conviction in December 2010, saying it showed a failure to respect the rule of law that was harmful to the investment climate.

To contact the reporter on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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