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    Court to hear tax lawsuit against Yukos auditor PwC February 14

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    MOSCOW, January 17 (RIA Novosti) - The Moscow Arbitration Court said Wednesday a lawsuit by Russian tax authorities against the local branch of UK-based PricewaterhouseCoopers (PwC), the auditor for the now bankrupt oil company Yukos in 2002-2004, will be heard February 14.

    The Federal Tax Service of Russia applied to the court in December 2006, accusing PwC of covering up Yukos' illegal financial schemes and drawing up two different audits.

    "The tax service has evidence that the auditor's report to the [oil] company's management and the official report were mutually contradictory," the tax service earlier said.

    The court satisfied Wednesday the tax authorities' request to change the litigation claims. Now the service is seeking to invalidate relevant contracts for 2002-2004 and charge $480,000 from PwC.

    The tax authorities said Yukos failed to correct violations discovered in 2002 in the subsequent two years.

    "The company continued to illegally transfer money to the Production Development Financial Support Fund in 2003-04. Nor did the company start mentioning its profitless operations with bonds in its financial reports," the tax service said.

    Tax officials also said that the violations did not stop PwC from confirming that Yukos's financial operations in 2003-04 were in full compliance with Russian legislation.

    In 2005, another auditor, Horwath, refused to approve the oil company's financial report, the tax authorities said, adding that it was further evidence of PwC's involvement in Yukos's grey operations.

    But PwC said its report on Yukos contained an amendment highlighting the revealed irregularities, which PwC also included in a written statement recommending that the company review its operations.

    Tax officials said PwC approved Yukos' financial performance in 2002 but then notified the PwC management of the deficiencies and lack of basic documents.

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