Russian and U.S. Prosecutions of Businesspeople

Former billionaire Russian oil magnate Mikhail Khodorkovsky was sentenced to nine years in prison yesterday by a Russian court in a case that businesspersons from around the world have followed carefully as a sign of the Russian government’s willingness to treat business interests fairly.

Russian governmental officials have presented the case against Mr. Khodorkovsky as a repudiation of the corrupt capitalism in the early days of Russia’s market economy of the 1990s that allowed Mr. Khodorkovsky to win control over Yukos, which was then Russia’s largest oil company.

Thus, the Russian government’s actions against allegedly corrupt business leaders is quite popular among most Russians, who resent Mr. Khodorkovsky and the other Russian tycoons who made fortunes during the 1990’s while most Russians struggled under the new market economy.

Nevetheless, the price that the Russian government will pay for prosecuting Mr. Khodorkovsky may be costly.

Western governments and investors have begun to question the Russian government’s commitment to the rule of law in regard to its treatment of business interests that compete with the government’s business interests.

Moreover, the government’s dismantling of Yukos has made given foreign investors yet another reason to avoid investment in Russian capital markets precisely at a time when Russia’s undercapitalized economy desperately needs that investment.

But lest we in the U.S. get too self-righteous about the Russian government’s handling of Mr. Khodorkovsky’s case, remember that the sentence pursued by U.S. prosecutors and handed down by a U.S. federal court in the sad case of Jamie Olis makes the Russian government’s handling of Mr. Khodorkovsky’s case look downright reasonable.

And if you do not believe that a prosecution of a U.S. business figure could be based on similar political aspirations as those involved in Mr. Khodorkovsky’s case, just watch the upcoming case against Maurice “Hank” Greenberg develop.

What parallel universe are we living in when the U.S. government’s criminalization of business interests appears as bad, if not worse, than that of the Russian government’s?

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