Freeport downgraded as analysts question shift into energy, stock slips

(Reuters) – Shares of Freeport-McMoRan Copper & Gold Inc fell further on Thursday, a day after it said it had struck deals to expand into energy by acquiring Plains Exploration & Production Co and McMoRan Exploration Co for $ 9 billion, and at least four analysts downgraded the miner’s stock.

The transactions, valued at $ 19.6 billion including debt, were lambasted by investors and analysts alike as being unnecessary and a distraction from Freeport‘s copper business.

Freeport shares fell 5 percent to a 15-month low of $ 30.58 in morning trade before recovering slightly. The stock fell 15 percent on Wednesday after the announcement of the deals.

The investor backlash was exacerbated by the disclosure after the announcement that shareholders won’t be allowed to vote on the deal, meaning the only way they have to express their dissatisfaction is to dump the stock.

“We believe that Freeport stock will remain in the penalty box for the foreseeable future and multiples will remain depressed on the back of these acquisition announcements, given investor uncertainty on the strategic merit,” analysts at Goldman Sachs wrote in a research note.

The move into oil and gas means the company will lose its status as a pure-play copper and gold miner, analysts said.

“Freeport’s diversification into oil and gas arguably removes a key investment draw of the company in its copper exposure,” BMO Capital Markets analysts wrote.

Evy Hambro, a managing director at BlackRock, one of Freeport’s top-five shareholders, condemned the deal on Wednesday, saying there was no reason why the three companies should be put together.

Plains shares, which rose 23.4 percent on Wednesday, were down 2.2 percent at $ 43.48 while McMoRan Exploration‘s shares, which had risen 87 percent, were down 3.4 percent at $ 15.27.

The deal’s high debt component was also viewed as negative.

Standard & Poor’s cut its rating outlook on Freeport to negative from stable, including the company’s BBB corporate credit rating. “The negative outlook on Freeport reflects the leveraged nature of the proposed acquisitions, as well as risks associated with integrating the targeted companies,” S&P said.

The cost of protecting debt issued by Freeport against potential default fell slightly after rising sharply on Wednesday immediately after the deal announcement.

Five-year credit default swaps were 1.5 basis points tighter at 153 basis points. That means it costs $ 153,000 a year to protect $ 10 million of debt for five years. The CDS widened about 12 percent on Wednesday.

Yield spreads on the company’s 3.55 percent bonds due March, 2022 widened another 4 basis points to 206 basis points over 10-year Treasuries.

INVESTOR CONCERNS

Freeport said on Wednesday that the rationale for entering into the deal was to use low-cost financing available to the company to make attractive investments.

But analysts including Citigroup’s Brian Yu said there was no or little strategic fit or rationale for the deal.

Yu said he expected the deal to dilute Freeport’s 2013 earnings per share by 3.2 percent.

The Goldman Sachs analysts said Freeport would have to address investor concerns about the valuations of the deal, considering cross-ownership and management links among the three companies.

Both Freeport-McMoRan Copper & Gold and the company now known as McMoRan Exploration Co were spun off in the 1980s and 1990s from the former Freeport-McMoRan Inc.

Jim Bob Moffett is chairman of Freeport-McMoRan and co-chairman and chief executive of McMoRan Exploration. In addition, Plains owns nearly one-third of McMoRan Exploration’s shares after a 2010 asset sale.

Some analysts said the $ 6.9 billion deal for Plains undervalued the company, while $ 2.1 billion for McMoRan was on the high end.

“If the high risk ultra-deep drilling does not work, Freeport greatly overpaid for McMoRan in our view,” analysts at RBC Capital Markets said.

McMoRan has struggled with delays at its Davy Jones deep gas prospect off Louisiana.

Analysts at Nomura said the high debt load made a special dividend less likely and eroded any takeover premium in Freeport’s stock.

Nomura cut its price target on Freeport’s stock to $ 36 from $ 40, while UBS decreased its target $ 40 from $ 47.

Freeport shares were down 3.9 percent at $ 30.91 in early afternoon trading on the New York Stock Exchange.

(Reporting by Swetha Gopinath in Bangalore; Editing by Ted Kerr)

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Toronto mayor to stay in power pending appeal of ouster

TORONTO (Reuters) – Toronto Mayor Rob Ford can stay in power pending an appeal of a conflict of interest ruling that ordered him out of his job as leader of Canada’s biggest city, a court ruled on Wednesday.

Madam Justice Gladys Pardu of the Ontario Divisional Court suspended a previous court ruling that said Ford should be ousted. Ford’s appeal of that ruling is set to be heard on January 7, but a decision on the appeal could take months.

Justice Pardu stressed that if she had not suspended the ruling, Ford would have been out of office by next week. “Significant uncertainty would result and needless expenses may be incurred if a by-election is called,” she said.

If Ford wins his appeal, he will get to keep his job until his term ends at the end of 2014. If he loses, the city council will either appoint a successor or call a special election, in which Ford is likely to run again.

“I can’t wait for the appeal, and I’m going to carry on doing what the people elected me to do,” Ford told reporters at City Hall following the decision.

Ford, a larger-than-life character who took power on a promise to “stop the gravy train” at City Hall, has argued that he did nothing wrong when he voted to overturn an order that he repay money that lobbyists had given to a charity he runs.

Superior Court Justice Charles Hackland disagreed, ruling last week that Ford acted with “willful blindness” in the case, and must leave office by December 10.

Ford was elected mayor in a landslide in 2010, but slashing costs without cutting services proved harder than he expected, and his popularity has fallen steeply.

He grabbed unwelcome headlines for reading while driving on a city expressway, for calling the police when a comedian tried to film part of a popular TV show outside his home, and after reports that city resources were used to help administer the high-school football team he coaches.

The conflict-of-interest drama began in 2010 when Ford, then a city councillor, used government letterhead to solicit donations for the football charity created in his name for underprivileged children.

Toronto’s integrity commissioner ordered Ford to repay the C$ 3,150 ($ 3,173) the charity received from lobbyists and companies that do business with the city.

Ford refused to repay the money, and in February 2012 he took part in a city council debate on the matter and then voted to remove the sanctions against him – despite being warned by the council speaker that voting would break the rules.

He pleaded not guilty in September, stating that he believed there was no conflict of interest as there was no financial benefit for the city. The judge dismissed that argument.

In a rare apology after last week’s court ruling, he said the matter began “because I love to help kids play football”.

Ford faces separate charges in a C$ 6 million libel case about remarks he made about corruption at City Hall, and is being audited for his campaign finances. The penalty in the audit case could also include removal from office.

(Reporting by Claire Sibonney; Editing by Janet Guttsman, Russ Blinch, Nick Zieminski; and Peter Galloway)

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Facebook’s Instagram cuts support for key Twitter integration

SAN FRANCISCO (Reuters) – Facebook Inc’s recently acquired photo-sharing service, Instagram, removed a key element of its integration with Twitter, signaling a deepening rift between two of the Web’s dominant social media companies.

Instagram’s Chief Executive Kevin Systrom said Wednesday his company turned off support for Twitter “cards” in order to drive Twitter users to Instagram’s own website. Twitter “cards” are a feature that allows multimedia content like YouTube videos and Instagram photos to be embedded and viewed directly within a Twitter message.

Instagram’s move marked the latest clash between Facebook and Twitter since April, when Facebook, the world’s no. 1 social network, outbid Twitter to nab fast-growing Instagram in a cash-and-stock deal valued at the time at $ 1 billion. The acquisition closed in September for roughly $ 715 million, due to Facebook’s recent stock drop.

The companies’ ties have been strained since. In July, Twitter blocked Instagram from using its data to help new Instagram users find friends.

Beginning earlier this week, Twitter’s users began to complain in public messages that Instagram photos did not seem to display properly on Twitter’s website.

Instagram CEO Kevin Systrom confirmed Wednesday that his company had decided that its users should view photos on Instagram’s own Web pages and took steps to change its policies.

“We believe the best experience is for us to link back to where the content lives,” Systrom said in a statement, citing recent improvements to Instagram’s website.

“A handful of months ago, we supported Twitter cards because we had a minimal web presence,” Systrom said, noting that the company has since released new features that allow users to comment about and “like” photos directly on Instagram’s website.

The move escalates a rivalry in the fast-growing social networking sector, where the biggest players have sought to wall off access to content from rival services and to their ranks of users. Photos are among the most popular features on both Facebook and Twitter, and Instagram’s meteoric rise in recent years has further proved how picture-sharing has become a key front in the battle for social Internet supremacy.

Instagram, which has 100 million users, allows consumers to tweak the photos they take on their smartphones and share the images with their friends, a feature that Twitter has reportedly also begun to develop. Twitter’s executive chairman Jack Dorsey was an investor in Instagram and hoped to acquire it before Facebook CEO Mark Zuckerberg tabled a successful bid.

When Zuckerberg announced the acquisition in an April blog post, he said one of Instagram’s strengths was its inter-connectivity with other social networks and pledged to continue running it as an independent service.

“We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience,” Zuckerberg wrote. “We plan on keeping features like the ability to post to other social networks.”

A Twitter spokesman declined comment Wednesday, but a status message on Twitter’s website confirmed that users are “experiencing issues,” such as “cropped images” when viewing Instagram photos on Twitter.

Systrom noted that Instagram users will be able to “continue to be able to share to Twitter as they originally did before the Twitter Cards implementation.”

(Reporting By Alexei Oreskovic and Gerry Shih; Editing by Nick Zieminski)

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With Teva at crossroads, new CEO set to unveil vision

NEW YORK/TEL AVIV (Reuters) – Teva Pharmaceutical Industries‘ new Chief Executive Jeremy Levin has promised investors it will be a very different company going forward. Next week he has to prove it.

Levin’s ability to paint a bright future for the world’s biggest maker of generic drugs at a meeting with investors and analysts on December 11 in New York became a bit more difficult last week, when Teva issued a 2013 earnings forecast that fell short of Wall Street estimates.

Levin, a big pharma veteran, is expected to shift Teva’s focus to branded drugs even as its most important such product, top-selling multiple sclerosis treatment Copaxone, faces new competition and a 2015 patent expiration. Investors are also hoping for a meaningful boost to the annual dividend while new management works to jumpstart a stagnant share performance.

“I’ve made a lot of money in Teva and I’ve seen this company wither in front of my eyes,” said Dan Hunt, a co-portfolio manager for RCM Capital Management’s Wellness Fund. Hunt’s fund no longer includes Teva shares, but RCM has small Teva holdings.

“The most important signal (shareholders) need to hear on the record from Levin is ‘whatever it takes I will protect you’,” Hunt said, adding that Teva has not delivered for its shareholders in years.

Teva’s U.S. shares are up about 2 percent in 2012 after falling 22.6 percent in 2011. They are off 35 percent from a 2010 peak at about $ 64. Shareholders of smaller Teva rivals Watson Pharmaceuticals Inc and Mylan Inc have fared far better with Watson up about 45 percent this year and Mylan shares up about 27 percent over the same period.

Levin has taken some preemptive steps to placate investors ahead of the meeting by announcing that the company plans to cut $ 1.5 billion to $ 2 billion in costs over the next five years, streamline operations and discontinue some research programs.

Morgan Stanley estimated that Copaxone sales account for 58 percent of Teva’s projected 2013 earnings. Levin will have to reveal how he plans to make up for the anticipated decline in Copaxone revenue beyond cost-cutting efforts.

Generic drugs accounted for 56 percent of Teva’s revenue last year, but the company faces obstacles to generic growth in the United States, the world’s largest market.

Following a wave of major patent expirations, the number of multibillion-dollar drugs going generic will diminish after the next couple of years. And new generic drugs are facing competition sooner along with faster price declines. Generic drugs are also facing considerable price pressure in Europe.

SMALL ACQUISITIONS

South African-born Levin, a former senior vice president for strategy at Bristol-Myers Squibb Co, took over as CEO of Israel’s biggest company in May, replacing Shlomo Yanai.

In five years at the helm, Yanai engineered a number of large acquisitions, including last year’s $ 6.5 billion purchase of U.S. drugmaker Cephalon, which has been viewed by some analysts as a disappointment. The company last month took a $ 481 million impairment charge related to the Cephalon deal.

Levin last week signaled a desire for more targeted acquisitions focused on Teva’s core areas of expertise, such as central nervous system disorders and respiratory diseases.

He has begun to whittle away at non-core businesses, selling Teva’s U.S. animal health unit to Bayer for up to $ 145 million. Investors said Teva needs to improve production efficiency and downsize or close some of its plants.

Levin, who implemented at Bristol-Myers a series of deals and alliances with small and large companies, has been credited with helping to guide Bristol through its enormous patent cliff as the blood clot preventer Plavix, which had been the world’s second biggest selling prescription medicine, lost exclusivity.

“The key is smart deals and getting an estimate of what a reasonable growth rate is going forward,” said Robert Caravella, equity research analyst for Victory Capital Management, which holds about $ 9 million in Teva convertible bonds.

“The biggest issue is there’s not an understanding of where revenue and earnings are going to go and how we’re going to get to that point,” he said.

BIGGER DIVIDEND?

Shareholders would also like to see Teva raise its dividend, which provides only a 2.5 percent return on the stock, below the industry average of about 4 percent. Alternatively, the company may decide to increase shareholder returns by boosting its $ 3 billion share buyback.

Steven Tepper, an analyst at brokerage Harel Finance, said Levin must demonstrate how Teva can again become a growth company or that it will be a value investment going forward through a significant dividend increase. “This plan will have to convince investors it’s making that move,” Tepper said.

RCM Capital’s Hunt said Levin must present “a strong, formed, clear strategic vision” of where the company is headed.

The question is whether it will be enough to convince disenchanted investors such as Stewart Capital, which has more than $ 1 billion in assets under management but sold its Teva holdings shortly after Levin took over.

Matthew DiFilippo, chief portfolio strategist for Stewart, was skeptical that one individual could effect the change necessary to transform Teva back into an industry darling. “So while we recognized his talents, we also recognized the challenges they face and we sold,” he said.

A lot of money remains on the sidelines waiting for what Levin has to say, said Ori Hershkovitz, managing partner at Israel-based pharmaceutical hedge fund Sphera. Levin needs to say he is committed to replenishing Teva’s branded pipeline and will do whatever it takes to replace those lost sales by 2016, Hershkovitz said, and he must “make the market believe it”.

(Additional reporting by Steven Scheer in Jerusalem; Editing by Leslie Gevirtz)

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Citigroup in 11,000 staff cull

5 December 2012 Last updated at 14:17 ET

Citigroup says it is cutting 11,000 jobs worldwide in an efficiency drive, with most of the jobs being lost in its consumer banking division.

The bank said the move, which will see its headcount shrink by 4%, would cost it about $ 1bn (£621m) in pre-tax charges.

Shares in the bank rose 7% following the announcement.

The move comes two months after the bank’s former chief executive, Vikram Pandit, suddenly resigned.

Michael Corbat took over from Mr Pandit as chief executive.

The bank said the $ 1bn charge would be recorded in its fourth-quarter figures for this year.

It said it would also add another $ 100m in charges to the first half profits for 2013.

Citigroup said the changes would leave it $ 900m better off in 2013 and a further $ 1.1bn the following year.

The company said that about 25% of the charges for the fourth quarter related to its securities and banking division, with another 10% in transaction services.

Another third would come from reductions in its global consumer banking division, where 6,200 positions would be cut.

Moving out

The banking group said it would be selling or scaling back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay.

Other countries affected by the changes would be Brazil, Hong Kong, Hungary, South Korea and the US.

It is also closing branches in Greece and Spain, countries hard-hit by the eurozone crisis.

It intends to focus on the 150 cities that have the highest growth potential in consumer banking.

After the changes, Citi said it would have more than 4,000 retail branches around the world.

At the time of Mr Pandit’s sudden departure, the bank’s chairman, Michael O’Neill, said the departure was not due to any “strategic, regulatory or operating issue”.

Mr Pandit left the bank with a settlement of more than $ 15m.

He resigned a day after Citi reported an 88% drop in quarterly profits to $ 468m.

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Death toll from Philippine typhoon nears 300

NEW BATAAN, Philippines (AP) — Stunned parents searching for missing children examined a row of mud-stained bodies covered with banana leaves while survivors dried their soaked belongings on roadsides Wednesday, a day after a powerful typhoon killed nearly 300 people in the southern Philippines.

Officials fear more bodies may be found as rescuers reach hard-hit areas that were isolated by landslides, floods and downed communications.

At least 151 people died in the worst-hit province of Compostela Valley when Typhoon Bopha lashed the region Tuesday, including 78 villagers and soldiers who perished in a flash flood that swamped two emergency shelters and a military camp, provincial spokeswoman Fe Maestre said.

Disaster-response agencies reported 284 dead in the region and 14 fatalities elsewhere from the typhoon, one of the strongest to hit the country this year.

About 80 people survived the deluge in New Bataan with injuries, and Interior Secretary Mar Roxas, who visited the town, said 319 others remained missing.

“These were whole families among the registered missing,” Roxas told the ABS-CBN TV network. “Entire families may have been washed away.”

The farming town of 45,000 people was a muddy wasteland of collapsed houses and coconut and banana trees felled by Bopha’s ferocious winds.

Bodies of victims were laid on the ground for viewing by people searching for missing relatives. Some were badly mangled after being dragged by raging flood waters over rocks and other debris. A man sprayed insecticide on the remains to keep away swarms of flies.

A father wept when he found the body of his child after lifting a plastic cover. A mother, meanwhile, went away in tears, unable to find her missing children. “I have three children,” she said repeatedly, flashing three fingers before a TV cameraman.

Two men carried the mud-caked body of an unidentified girl that was covered with coconut leaves on a makeshift stretcher made from a blanket and wooden poles.

Dionisia Requinto, 43, felt lucky to have survived with her husband and their eight children after swirling flood waters surrounded their home. She said they escaped and made their way up a hill to safety, bracing themselves against boulders and fallen trees as they climbed.

“The water rose so fast,” she told AP. “It was horrible. I thought it was going to be our end.”

In nearby Davao Oriental, the coastal province first struck by the typhoon as it blew from the Pacific Ocean, at least 115 people perished, mostly in three towns that were so battered that it was hard to find any buildings with roofs remaining, provincial officer Freddie Bendulo and other officials said.

“We had a problem where to take the evacuees. All the evacuation centers have lost their roofs,” Davao Oriental Gov. Corazon Malanyaon said.

The International Federation of Red Cross and Red Crescent Societies issued an urgent appeal for $ 4.8 million to help people directly affected by the typhoon.

The sun was shining brightly for most of the day Wednesday, prompting residents to lay their soaked clothes, books and other belongings out on roadsides to dry and revealing the extent of the damage to farmland. Thousands of banana trees in one Compostela Valley plantation were toppled by the wind, the young bananas still wrapped in blue plastic covers.

But as night fell, however, rain started pouring again over New Bataan, triggering panic among some residents who feared a repeat of the previous day’s flash floods. Some carried whatever belongings they could as they hurried to nearby towns or higher ground.

After slamming into Davao Oriental and Compostela Valley, Bopha roared quickly across the southern Mindanao and central regions, knocking out power in two entire provinces, triggering landslides and leaving houses and plantations damaged. More than 170,000 fled to evacuation centers.

As of Wednesday evening, the typhoon was over the South China Sea west of Palawan province. It was blowing northwestward and could be headed to Vietnam or southern China, according to government forecasters.

The deaths came despite efforts by President Benigno Aquino III’s government to force residents out of high-risk communities as the typhoon approached.

Some 20 typhoons and storms lash the northern and central Philippines each year, but they rarely hit the vast southern Mindanao region where sprawling export banana plantations have been planted over the decades because it seldom experiences strong winds that could blow down the trees.

A rare storm in the south last December killed more than 1,200 people and left many more homeless.

The United States extended its condolences and offered to help its Asian ally deal with the typhoon’s devastation. It praised government efforts to minimize the deaths and damage.

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Associated Press writers Jim Gomez, Teresa Cerojano and Oliver Teves in Manila contributed to this report.

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China goes crazy for iPhone 5: Preorders hit 100,000 units in under 24 hours

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Longtime editor at DC’s Vertigo imprint leaving

PHILADELPHIA (AP) — DC Entertainment says its executive editor and senior vice president of Vertigo — a groundbreaking imprint whose titles have included “Hellblazer,” ”DMZ” and “Sandman” — is leaving early next year.

Karen Berger will step down in March after nearly 20 years at the helm, saying in a statement released by DC late Monday that she is ready for a professional change.

During her tenure at Vertigo, the imprint saw a wide range of writers and artists — Neil Gaiman, Jill Thompson, Becky Cloonan and Brian Wood, among them — who produced titles beyond the traditional superhero and villain archetype.

Gerard Way of My Chemical Romance and writer of “The Umbrella Academy” tweeted that Berger gave “us weird kids in high school a Sub Pop Records for comics.”

___

Online:

http://www.vertigocomics.com

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After parent’s cancer death, one in five kids self-injure

NEW YORK (Reuters Health) – One in five teens who lost one of their parents to cancer cut or burn themselves, compared to one in ten teens with two living parents, according to a new Swedish study.

“We were very surprised to find that so many did it,” said lead researcher Tove Grenklo, a behavioral scientist at the Karolinska Institutet in Stockholm.

Cutting and burning is thought to be how some troubled teens express their emotions, according to the American Academy of Child and Adolescent Psychiatry. Those teens may hurt themselves if they can’t talk about their feelings, are upset or have low self esteem.

Earlier this year, a study found that children start harming themselves as early as third grade. (see Reuters Health article of June 11, 2012. http://reut.rs/Kveo8v)

The study’s researchers write in the Archives of Pediatrics and Adolescent Medicine that past research showed children with one dead parent are already more likely to have – among other things – psychiatric problems, depression, drug and alcohol abuse and anxiety.

Grenklo and her colleagues wanted to see if they were also more likely to hurt themselves.

For the study, they used Sweden’s national death databases to find and survey teens who lost one of their parents to cancer between 2000 and 2003, when they were between 13 and 16.

They then found teens who still had two living parents for a comparison group.

Of the 851 teens who lost a parent, 622 returned their survey, as did 330 of the 451 teens in the comparison group.

Overall, about 20 percent of the teens with only one surviving parent said they hurt themselves, compared to about 10 percent of teens with both parents living.

‘WE SHOULD TALK WITH EACH OTHER’

“This study is one of the first to establish that (losing a parent to cancer) might be a unique risk factor for this behavior,” said Stephen Lewis, who was not involved with the new study but has studied self-injury at the University of Guelph in Ontario, Canada.

Lewis added that the study’s findings seem to be in line with other estimates of how many teens injure themselves.

The researchers say teens may be driven to self-injure after their parents’ deaths by an increased sense of emotional distress and numbness.

Another possible explanation for the increase is that the teens lost a caretaker who would notice their emotional suffering and prevent self-injury, they add.

As for prevention, both Grenklo and Lewis emphasized communication.

“I’m a strong believer that we should talk with each other,” said Grenklo. “Children need to know the facts of what happened and why. And that it’s OK to be sad and talk about the diseased parent.”

“We know one of the reasons people self injure is that they use injuring as a way to release their emotions,” said Lewis, who added that it’s important for parents, family members and teachers to know how to talk about self-injury and how to prevent it.

Lewis said information on preventing and handling self injury can be found at SIOutreach.org – a Web site where he is co-director.

SOURCE: http://bit.ly/TLILN8 Archives of Pediatrics and Adolescent Medicine, online December 3, 2012.

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Insight: UK court reveals fear and mistrust at TNK-BP

LONDON (Reuters) – A former TNK-BP employee may have confessed to fraud out of fear during a meeting in the office of German Khan, the head of the oil company and one of Russia’s most prominent businessmen, according to a British High Court judge.

In the first judicial account of encounters earlier this year between Khan and his former subordinate Igor Lazurenko, testimonies from the two men paint a picture of fear and mistrust at TNK-BP, one of the country’s largest private companies which is half-owned by Britain’s BP.

The actions and methods of Khan and other oligarchs who grew rich from the privatizations of the 1990s are a sensitive issue in Russia, where President Vladimir Putin is trying to increase state control and crack down on profiteering without scaring off investment. The case opens a window on a world where courts, police and imprisonment are seen by many Russians as tools of the wealthy.

Khan, BP and TNK-BP’s other shareholders are trying to fold their business into state oil company Rosneft. Closing the deal, one of the biggest energy takeovers in history, would net them billions of dollars in cash and could make them shareholders in the state company.

BP has secured government approval to acquire Rosneft shares from the state and expects to complete its part of the sale by mid-2013, but Khan’s side of the deal is only partly formed and has no approvals yet. The whole deal is worth $ 55 billion.

“Whilst it is clearly not possible at this stage to make any definitive findings… Mr. Khan’s own evidence provides some support for Mr. Lazurenko‘s evidence that he was coerced into making this confession,” said Andrew Sutcliffe QC, sitting as judge of London’s High Court, in a November 20 decision.

This week, TNK-BP decided not to appeal the judgment, and on Tuesday, Lazurenko’s lawyers were seeking a total of 1.6 million pounds ($ 2.6 million) in costs from the company.

In his 88-page ruling, Sutcliffe dismissed TNK-BP’s attempts to bring fraud charges against Lazurenko, a one-time Russian army officer who was in charge of organizing oil transport contracts. Sutcliffe called TNK-BP’s potential for a case “very weak”, described some claims as “false and misleading” and was critical about its lack of evidence against Lazurenko.

TNK-BP has also abandoned its attempts to stop Lazurenko from publishing certain documents in his possession. Lazurenko has said they provide evidence of high-level corporate and government corruption and implicate high ranking Russian officials. He has not published them.

The claimant in the November 20 ruling is OJSC TNK-BP Holding, the main holding company of TNK-BP. The defendants are Lazurenko, three other individuals, and a number of companies with which he is connected.

TNK-BP alleged that Lazurenko, who worked for the company from 2003 until he quit this year, took bribes and laundered the money through businesses operating in Montenegro. In August, TNK-BP obtained a UK court order that froze 39 million euros ($ 51 million) worth of the defendants’ assets.

The judge’s account in the November 20 ruling reveals a detailed picture of the encounters in Khan’s office.

In one of them, Lazurenko’s testimony says, Khan told him he stood accused of accepting $ 8 million in bribes for oil transport contracts and threatened “strong action” against him and his family if he did not admit to doing so. Lazurenko denied the allegations on that occasion.

As he arrived for a later meeting, Lazurenko says he saw a man sitting outside “who looked to me like he was from the Moscow police or Ministry of Internal Affairs. I find it hard to explain in the English court how and why I formed this impression,” he said, “but I think it would be very obvious to a Russian judge. It relates to the way this individual looked and was dressed.”

Inside, “Khan told me he had someone outside his office who would arrest me unless I admitted that I had received this money and agreed to repay it”.

He said Khan also told him to remember the fate of Viktor Paliy, a business associate of AAR, through which Khan holds his stake in TNK-BP, who ended up in prison.

“I was scared and knew that I could not continue to deny his allegations if I wanted to get out of his office and leave the building. Therefore I admitted the allegation, even though I knew it to be untrue,” the court document cited Lazurenko saying.

Khan, in his testimony, acknowledged that he referred to the implications for Lazurenko’s family, and that he mentioned the fate of Paliy. He said his intention was to persuade Lazurenko to admit to his crimes.

BETTER TO CONFESS

“I may well have said that if he did not make an admission it would cause serious problems for him. I did not say that he had to confess if he wanted to get out of my office freely and leave the building,” said Khan in his testimony.

Khan denied there had been a policeman outside the office, but said “there may have been someone from internal security service, many of whom are former law enforcement officers.”

He went on to say Lazurenko had “a reputation as a very cold, detached individual”, and that any suggestion he was frightened was “wholly ridiculous.”

However, Sutcliffe used more of Khan’s own testimony to back up his judicial view that Lazurenko might have been right to be scared.

“I told Mr. Lazurenko on at least one occasion that he should think about his family,” the judge quoted Khan as saying. “This was not a threat to harm either Mr. Lazurenko or any members of his family … It is a well-known fact that persons accused of economic crimes can spend years in prison even before being tried, and risk having their assets frozen by the state pending trial… I was offering Mr. Lazurenko a sensible alternative. Pay back the money he stole from TNK-BP and thus avoid the risk of prison.”

The judge also noted Khan’s response to Lazurenko’s description of him as “extremely ruthless”.

“As is well known,” Khan said, “Doing business in Russia is not for the faint hearted.”

Asked for a response to the judgment and the judge’s remarks, TNK-BP said in an emailed statement it was “confident in our position and will continue pursuing Mr. Lazurenko in all appropriate jurisdictions.”

It added: “Before fleeing Russia Mr. Lazurenko admitted his wrongdoing against the company… Mr. Lazurenko did not make any reports to the Russian or English police about any coercion.”

A spokesman for Lazurenko said: “The two damning judgments against TNK-BP… bring to an end a seven month campaign instigated by TNK-BP in an attempt to gag Mr Lazurenko and guarantee his silence.

“Despite its vast resources and lengthy investigations, TNK-BP has been unable to produce any evidence to support its allegations against Mr Lazurenko,” he said in an email.

BP and AAR, a consortium holding 50 percent of TNK-BP, both declined to comment on the contents of the court document.

GAGGING ORDER

The separate UK gagging order keeping Lazurenko’s documents secret was lifted on October 16. The judge who lifted it revealed that Transneft, the Russian pipelines monopoly, was named in the corruption allegations. Transneft has declined to comment on the subject. TNK-BP had plans to appeal against the lifting of the injunction, but has since dropped that action too.

The Khan-Lazurenko dispute dates back to March when Khan made Lazurenko the subject of an internal inquiry. In April, Lazurenko resigned and left Russia.

TNK-BP is a 50-50 venture between BP and AAR. AAR is a consortium owned by Khan and fellow tycoons Mikhail Fridman, Viktor Vekselberg and Len Blavatnik.

BP has been at odds with the AAR shareholders on and off for years. Problems came to a head in 2010 when BP wanted to do business with increasingly powerful Rosneft, and the tycoons resisted. The sale to Rosneft is set to bring the saga to an end.

BP last month won Russian government approval to acquire Rosneft shares from the state holding company Rosneftegaz, a step on the way to securing $ 12.3 billion of cash and an 18.5 percent stake in Rosneft that will raise its holding to 19.75 percent. AAR’s side of the deal is less complete, but Rosneft has said it hopes to agree it in December.

After the acquisition, Rosneft, headed by Putin ally Igor Sechin, will be pumping 4.6 million barrels of oil equivalent, more than U.S.-based Exxon Mobil.

Lazurenko was represented by solicitors Mischon de Reya and TNK-BP by Bryan Cave.

(additional reporting by Doug Busvine in Moscow and Dmitry Zhdannikov in London; editing by Janet McBride)

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