James B. Nicholson, Trustee vs. Harmon

David C. Farmer, Successor-Trustee vs. Harmon

(Formerly Woo vs. Harmon & Nicholson vs. Harmon)

CV05-00030 DAE KSC

U.S. District Court For the District of Hawaii

Judges: David A. Ezra; Kevin S. Chang

—

DEFENDANT’S WITNESS

HENRY R. KRAVIS

Address to be determined.

From Wikipedia, the free encyclopedia

Henry R. Kravis (born January 6, 1944 in Tulsa, Oklahoma, United States) is an American business financier and investor, notable for co-founding and heading the leading private equity firm, Kohlberg Kravis Roberts & Co. (KKR), whose major rival is the Blackstone Group.

With an estimated current net worth of around $2.6 billion, he is ranked by Forbes as the 107th richest person in the world.

The son of Bessie (Roberts) and Raymond Kravis, a successful Tulsa oil engineer who had been a business partner of Joseph P. Kennedy, Henry began his education at the Eaglebrook School followed by high school at The Loomis Chaffee School. He then majored in economics at Claremont McKenna College in Claremont, California before going on to Columbia University where he received an MBA degree in 1969.

After working at various jobs in New York City's financial sector, he and his first cousin, George R. Roberts, joined the staff of Bear, Stearns, and Company. There, they worked under the corporate finance manager, Jerome Kohlberg, Jr..

In 1976, the three men left Bear Stearns to set up their own investment company, Kohlberg Kravis Roberts & Co. (KKR) where Henry Kravis helped develop the acquisition concept known as the leveraged buyout (LBO). Kravis and his associates created a series of limited partnerships to acquire various corporations, ones they judged were performing well below their sales and profit potential. In most cases, Kohlberg Kravis Roberts & Co put up ten percent of the acquisition price from its own funds and borrowed the rest from investors by issuing high-yield bonds.

In the 1980s, these high-yield bonds, which were also high risk, became known as "junk bonds." Investment bankers such as Drexel Burnham Lambert, led by Michael Milken, raised enormous amounts of money for leveraged buyouts. Once the targeted company was successfully taken over, Kohlberg Kravis Roberts & Co then organized a drastic restructuring, selling off selected assets or subsidiaries and implementing a series of cost-cutting measures. The new, "leaner and more efficient" company was then resold, at a huge profit.

In 1987, Jerome Kohlberg, Jr. resigned from the firm, and Henry Kravis succeeded him as senior partner. Under Kravis, the firm was responsible for the 1988 leveraged buyout of RJR Nabisco. At a cost of $24.88 billion, it was then the highest price ever paid for a commercial enterprise. The publicity surrounding the event led to the story being dramatized in the book and film, Barbarians at the Gate. In early 1995, Kohlberg Kravis Roberts & Co divested its remaining holdings in RJR Nabisco.

The list of companies Henry Kravis has bought and sold over the years includes many of the great American brand names such as the health care provider HCA Inc., Texaco, Gillette, Playtex, Beatrice, Safeway, Borden, and Samsonite.

Politics

A supporter of Republican politics, he is a supporter and fundraiser for President George W. Bush and John McCain. He was a major contributor to the failed 1992 re-election campaign of President George H. W. Bush. In 1997, Henry Kravis joined with Edgar Bronfman, Sr. and Lewis Eisenberg, to establish the Republican Leadership Council.

Public positions and charity

Kravis has given a great deal of money and personal time to charitable causes. He funds the Henry Kravis Leadership Institute that sponsors the leadership studies programs at his alma mater, Claremont McKenna College, and the "Henry Kravis Internships for Teachers of Color" program. He has also financed the construction of extensive facilities at the Eaglebrook school and Deerfield Academy.

He is a benefactor and a past chairman of New York's public television station and sits on the board of the Metropolitan Museum of Art. A Trustee of the Mount Sinai Medical Center, Henry and wife Marie-Josée Kravis donated $15 million to establish the "Center for Cardiovascular Health" as well as funding a Professorship. They have also endowed the chair in Human Oncology at Memorial Sloan-Kettering Cancer Center in New York.

He previously co-chaired with Jerry Speyer the influential Partnership for New York City, founded by David Rockefeller in 1979, and now sits on its board of directors. He created the New York City Investment Fund, a non-profit organization to create jobs and new business in New York City.

He is a Trustee of the Council on Foreign Relations in New York and is a member of the leading business group, the Business Council. He co-chairs the Columbia Business School Board of Overseers and is a vice-chairman of Rockefeller University.

Quotes

"We've got a portfolio of companies that range all the way from hotels to television stations and cable TV companies, oil and gas, consumer products, and industrial products. If there's anything that I want to know more about, I have the opportunity. It's right in our portfolio. I can spend time at the factory or with the management and learn as much as I want. You can't get bored doing that."

"A real entrepreneur is somebody who has no safety net underneath them."

http://en.wikipedia.org/wiki/Henry_Kravis

~ ~ ~

February 26, 2007

TXU announces $32B sale
to private firms

By David Koenig, AP

DALLAS - TXU Corp., Texas' largest electricity producer, said Monday it has agreed to be sold to a group of private-equity firms for about $32 billion in what would be the largest private buyout in U.S. corporate history if shareholders go along.

Kohlberg Kravis Roberts & Co. and Texas Pacific Group led a group that included Goldman Sachs & Co. and three other Wall Street firms that will pay $69.25 per share for TXU. They will also assume about $13 billion in debt.

The firms won support for the buyout from some environmentalists who have criticized TXU by agreeing to sharply scale back TXU's controversial $10 billion plan to build 11 new coal-fired power plants that would produce tons of new greenhouse gas emissions.

http://news.yahoo.com/s/ap/20070226/ap_on_bi_ge/txu_sale_21 ~ ~ ~

December 19, 2006

Kissinger, Peterson, 57 Major Donors Join Team McCain

Ex-Sec/State Henry Kissinger has agreed to become an honorary co-chair for Sen. John McCain's presidential campaign in New York, McCain aides said. Along with Kissinger, McCain has won the support of Pete Peterson, a former U.S. ambassador to Vietnam and POW, and John Whitehead, the former Goldman Sachs chair and Reagan admin official.

Also -- on the eve of ex-NYC mayor Rudy Giuliani's first exploratory committee fundraiser, McCain also unveiled the names of the 57 wealthy and famous donors who've agreed to serve on his NY, CT and NJ finance teams.

They include Henry Kravis, a founding partner of the KKR conglomerate, John Lehman, the 9/11 commissioner and ex-Navy sec. and Woody Johnson, the owner of the New York Jets.

~ ~ ~

November 13, 2006

Delaware court approves $50M settlement
covering ex-Hollinger directors

Canadian Press

CHICAGO (CP) - Delaware Chancery Court has approved a $50-million settlement involving Henry Kissinger, Marie-Josee Kravis and other former directors of Hollinger International Inc.

Sun-Times Media Group Inc. (NYSE:SVN), as Hollinger International now is known, said Monday that the settlement, announced in May 2005, will be funded from its officers-and-directors liability insurance policies.

The claim had been filed in 2003 by Hollinger International investor Cardinal Value Equity Partners, whose law firm pockets $2.5 million of the $50 million being paid to Sun-Times Media.

As part of the settlement, Cardinal's claims against deposed Hollinger chairman and CEO Conrad Black and others, including his wife Barbara Amiel Black and associates Daniel Colson and David Radler, are dismissed without prejudice.

Sun-Times Media said the dismissal without prejudice enables the company to continue pursuing its claims against Black and the others.

This litigation has been stayed pending the outcome of the criminal cases against Black and others, who were charged last year in Chicago.

Sun-Times Media "is committed to continuing our efforts to obtain additional recoveries," Gordon Paris, the company's CEO and chairman of a special committee of the board, said Monday.

The former directors covered by the Cardinal settlement include former U.S. state secretary Kissinger, former Illinois governor James Thompson, former U.S. diplomat Richard Burt, and Kravis, a Quebec-born economist formerly married to symphony conductor Charles Dutoit and now the spouse of New York financier Henry Kravis.

Other ex-directors included in the agreement are Shmuel Meitar, Dwayne Andreas, Raymond Chambers, Robert Strauss, Alfred Taubman, Lord Weidenfeld and Leslie Wexner.

The settlement contains no admission of wrongdoing.

The Delaware court also approved a previously announced $2.8-million settlement with former company executive Peter Atkinson, who was once part of Black's inner circle who later agreed to help Hollinger International's investigation.

Sun-Times Media, which at its late-1990s peak under Black's direction included Canada's dominant group of big-city newspapers, the Telegraph of London and the Jerusalem Post, has shrunk to the Chicago Sun-Times and an assortment of other Chicago-area publications.

Cardinal was among the first to raise complaints about Black's corporate governance, which ultimately led to his removal from the company's lushly appointed executive suite amid an avalanche of ongoing legal proceedings....

www.cbc.ca/cp/media/061113/X111322U.html

~ ~ ~

AIG Subsidiary, Chubb Allowed to Pay
Hollinger Director Accord

Bloomberg

May 31 (Bloomberg) -- American Home Assurance Co., a unit of American International Group Inc., and Chubb Corp. may pay $50 million to cover a settlement by ex-Hollinger International Inc. directors sued by a minority shareholder, a Canadian judge ruled.

In exchange for the $50 million, Hollinger shareholder Cardinal Capital Management LLC agreed to drop its lawsuit against directors accused of disregarding the alleged looting of the company by ex-Chief Executive Officer Conrad Black.

The proposed payout was opposed by excess insurers Ace Ltd., Zurich Insurance Co. and Royal Insurance Plc, which cover losses over $50 million. Having exhausted the limits of American Home and Chubb coverage for Hollinger directors, the May 23 ruling puts the onus on Ace, Zurich and Royal to cover future settlements in the case.

Ontario Superior Court Judge Colin Campbell's ruling, ``held, in effect, that they can't just veto the settlement,'' Eric Hoaken, lawyer for Hollinger International, said in a telephone interview. ``I think it's an important case that clarifies the obligations of insurers.''

Insurance companies generally don't provide coverage for derivative lawsuits, where a shareholder sues on behalf of the company, Gary Luftspring, a lawyer representing Ace, Zurich and Royal, said. Where coverage is provided, it's usually limited to derivative suits where a shareholder has a stake of less than 10 percent in the company, as in this case.

Approval

Chubb, based in Warren, New Jersey, is the second-largest U.S. insurer of corporate boards. American Home is a subsidiary of New York-based American International Group, Inc., the world's largest insurance company. The $50 million payout must still be approved by a judge in Delaware, where the Cardinal suit was initially filed, Hoaken said.

Hollinger International, based in Chicago, publishes the Chicago Sun-Times, among other newspapers.

The company's board ousted Black as CEO in November 2003, sued him and stripped him of the title of chairman the following January. Hollinger International sued Black to recover more than $425 million that it accused him and his associates of stealing to finance lavish lifestyles.

Black, 61, was also sued by his holding company, Hollinger Inc., and by the U.S. Securities and Exchange Commission. He pleaded not guilty to U.S. criminal charges of racketeering, money laundering, wire fraud and obstruction of justice. His trial is set for March 5, 2007.

The case is Re: Hollinger International Inc. No. 05-CV- 285277PD3, Ontario Superior Court, Toronto.

~ ~ ~

Leveraging: Henry Kravis

The king of the buyout has lately been humbled and
would like to return to the more freewheeling '80s

By L.J. Davis, Mother Jones

Henry Kravis' high point as king of the leveraged buyout came in 1989, when he paid a staggering $25 billion for RJR Nabisco. But times have changed, and Wall Street is more cautious. Kravis' buyout firm, Kohlberg Kravis Roberts, sold off its final shares of RJR Nabisco at a loss in 1995. Nevertheless, the firm's buyouts continue: Kravis owns K-III Communications, which has been on a feeding frenzy in recent years, buying everything from magazines like New Woman and Seventeen to the controversial in-school TV network, Channel One.

To really return to the heyday of the buyout, Kravis will need a little help from Congress. Legislation sponsored by Rep. Jack Fields (R-Texas), for example, abolishes the Williams Act, the anti-fraud law used to prosecute Ivan Boesky and Michael Milken. Kravis is banking heavily on the Republicans to bring back the freewheeling '80s: To celebrate Bob Dole's birthday last summer, Kravis threw a $300,000 fundraising bash for the senator.

~ ~ ~

October 9, 2002

Buyout firms seek equity partners

By Randy Whitestone

Kohlberg Kravis Roberts & Co and other private equity firms are selling stakes in themselves to ensure their survival after their founding partners retire.

Kohlberg is in talks with two of its biggest investors, the Washington State Investment Board and Oregon Investment Council. The funds, with more than $US90 billion ($A164 billion) in assets, have agreed to provide almost half of Kohlberg's newest $US5.1 billion buyout pool.

Kohlberg is still run by founders Henry Kravis, 58, and George Roberts, 59. They have told investors they have no immediate plans to retire.

Firms including Blackstone Group, Carlyle Group, and Thomas H. Lee Partners have accepted outside investments from institutions, tying them to long-term sources of capital and giving their investors a share of profits and management fees that typically amount to 1.5 per cent of capital a year.

In 1999, Credit Suisse First Boston acquired 19.9 per cent of Warburg Pincus LLC. This year, the New York private equity firm raised a $US5.3 billion fund and passed control from Lionel Pincus, 71, to Joseph Landy, 40, and Charles Kaye, 38.

Buyout firms are also selling stakes in themselves because they need bigger chunks of capital to win acquisition contests.

Bidding contests are becoming common. About two dozen firms, many with more than $US5 billion each in available capital, bid for Qwest Communications International's yellow pages business earlier this year. The final price of $US7.1 billion required Carlyle Group and Welsh, Carson, Anderson & Stowe to commit $US750 million each.

Kohlberg's partnership sale would be a first for the biggest buyout firm, which was founded in 1976 by cousins Kravis and Roberts and fellow Bear Stearns banker Jerome Kohlberg. In 1989, the firm completed the biggest leveraged buyout with the $US31.4 billion purchase of RJR Nabisco.

Even with its reputation, it took Kohlberg two years to raise the $US5.1 billion fund.

Three years ago, mutual fund manager Putnam Investments put $US500 million into Thomas H. Lee Partners. The money was parcelled out among executives of the Boston buyout firm, including founder Thomas Lee.

Insurers are hunting for higher returns because stockmarket declines could force them to add to reserves in meeting guaranteed minimum death payments on equity-linked annuity contracts. American International Group, for example, has taken stakes in Blackstone and General Atlantic Partners.

AIG in 1998 agreed to invest $US150 million in Blackstone for a 7 per cent non-voting interest, and committed to put an additional $US1.2 billion in its funds over time.

The agreement "gives us more freedom to explore new opportunities", and signalled the "maturation" of the firm, said Blackstone spokesman John Ford.

- Bloomberg

www.theage.com.au/articles/2002/10/08/1034061204226.html

~ ~ ~

October 12, 1999

THE NEW GLOBAL ORDER

The next Bilderberg meeting

Secret roster, agenda for Washington conference

The secretive Bilderberg society, a group some believe conspires semi-annually to foster global government, will hold a steering committee meeting in Washington next month, WorldNetDaily has learned.

The Nov. 4-5 conference, featuring invited guests such as Vice President Al Gore and presidential candidate John McCain, is scheduled for the Library of Congress in the nation's capital and is sponsored by the American Friends of Bilderberg. The U.S. group is directed by Henry Kissinger, David Rockefeller, Paul Allaire and Richard C. Holbrooke.

Since 1953, the Bilderberg group has convened government, business, academic and journalistic representatives from the U.S., Canada and Europe with the express purpose of exploring the future of the North Atlantic community. The international steering committee includes Conrad Black, publisher of newspapers throughout Canada, the U.S. and the London Telegraph and Jerusalem Post, Vernon Jordan, George Mitchell, Kissinger and Rockefeller.

On the agenda for the November meeting is a panel discussion of the U.S. presidential elections and an exploration of the national security requirements for the 21st century. Among those involved in the discussion of the latter subject will be former U.S. Sens. Gary Hart and Warren Rudman, former Speaker of the House Newt Gingrich, journalist Leslie Gelb and Secretary of Defense William Cohen. McCain, at the special invitation of Kissinger, will speak at breakfast Friday morning and Gore will make a Thursday night dinner address, according to the agenda obtained by WorldNetDaily.

Others making presentations include Rep. Bill Thomas of California, Sen. Christopher Dodd of Connecticut, Evan Bayh of Indiana and former White House Chief of Staff Erskine Bowles.

The list of potential invitees to the Washington conference includes the following: Dwayne O. Andreas, Michael H. Armacost, Robert Bartley, Samuel R. Berger, C. Fred Bergsten, Richard Bernstein, James H. Billington, Gen. Charles G. Boyd, Bill Bradley, John H. Bryan, William F. Buckley, William P. Bundy, John H. Chafee, E. Gerald Corrigan, Kenneth W. Dam, Lynne E. Davis, John M. Deutch, Thomas E. Donilon, Theodore L. Eliot Jr., Dianne Feinstein, Martin S. Feldstein, Stanley Fischer, James J. Florio, Lynn Forester, Charles W. Freedman Jr., Stephen Friedman, Thomas Friedman, David Frum, Richard Furland, Orit Gadiesh, Gen. John R. Glavin, David Gergen, Louis V. Gerstner, Paul Gigot, Katherine Graham, Donald Graham, Marc Grossman, Chuck Hagel, Jim Hoagland, James F. Hoge Jr., Mrs. Karen Elliott House, Sen. Kay Bailey Hutchison, Peter Jennings, Jems Johnson, Peter Kahn, Nancy Landon Kassebaum, Robert M. Kimmitt, Henry Kravis, William Kristol, Jan Leschly, Winston Lord, Jessica T. Matthews, Charles Mac Mathias, William J. McDonough, George C. McGhee, Richard A. McGinn, Donald F. McHenry, Sam Nunn, Joseph S. Nye Jr., John M. Page Jr., Norman Pearlstine, William J. Perry, Thomas R. Pickering, Gen. Colin Powell, Sir Kieran Prendergast, Larry Pressler, Clyde V. Prestowitz, Steven Rattner, William Rhodes, William Richardson, Sharon Percy Rockefeller, Gen. Brent Scowcroft, Robert Shapiro, George Soros, Lesley Stahl, James B. Steinberg, George Stephanopoulos, Lawrence H. Summers, G. Richard Thornan, Franklin A. Thomas, Alexander J. Trotman, Wiliam Clay Ford Jr., Laura D'Andrea Tyson, Lodewijk J.R. de Vink, Dr. Ezra F. Vogel, Paul A. Volcker, Stanley A. Weiss, John C. Whitehead, Christine Todd Whitman, James D. Wolfensohn and Casimir A. Yost.

The 1999 annual meeting of the Bilderberg group took place in Sintra, Portugal, June 3-6. The November meeting at the Library of Congress is being billed as a special steering committee session.

According to sources which penetrated the high-security meetings in the past, the Bilderberg meetings emphasize a globalist agenda and promote the idea that the notion of national sovereignty is antiquated and regressive.

In 1998, British free-lance journalist Campbell Thomas attempted to cover the conference in Turnberry, Scotland, for the Daily Mail. Thomas began by seeking the opinions of neighbors to the secret meeting being held nearby. One of those was a young woman who told him he was in the hotel's staff quarters and should leave immediately, which he did.

A short while later, two local police officers arrested Thomas, who reportedly remained in custody for eight hours.

Not all journalists are treated quite so harshly, as the guest roster for the November meeting indicates.

www.wnd.com/news/article.asp?ARTICLE_ID=17214

(For more on the Bilderbergers, GO TO > > > The Freedom to Sing)

~ ~ ~

August 11, 1997

WAS HENRY KRAVIS OUTFOXED
IN RUSSIA?

KKR claims it deserves a payout in Tatarstan.
The government says ''no deal''

In the U.S., they're Masters of the Universe. In Russia, they could be just another piece of roadkill. Three years ago, Kohlberg Kravis Roberts & Co. struck a deal with truckmaker Kamaz on the steppes of Tatarstan in central Russia. KKR agreed to raise money to pull the newly privatized company out of a deep financial ditch. In exchange, KKR got an option to buy a big stake in Kamaz. Since 1993, KKR partners logged hundreds of hours, spent millions out of pocket, lined up more than $750 million in loans and refinancing, and dispatched consultants and lawyers to help Kamaz restructure.

With Russia's economy showing signs of recovery and its stock market surging, Kamaz may be on the brink of a turnaround. But Kamaz' management changed in June, and KKR's big payoff--control of a 16.5% stake currently worth $50 million--may be snatched away. The government of Tatarstan, an autonomous republic within Russia, has taken control of Kamaz, and all bets are off as to whether KKR will receive its promised equity.

Ravil Muratov, who is both Tatarstan's Deputy Prime Minister and Kamaz' new chairman, claims that KKR was required to raise equity capital, not bank loans. KKR declined public comment.

TOO OPTIMISTIC. Muratov contends that KKR took advantage of Kamaz when it was desperate. ''I said to KKR: 'Can you show me where in your experience in Europe and America you can find idiots in a government who will give you something for nothing,''' he recalls. Unless the leveraged buyout firm immediately raises $300 million in new equity, Muratov says, ''KKR is not going to get hold of those shares.''

Upon receiving Muratov's ultimatum, KKR executives immediately hopped on a plane to Moscow to meet with him. The chairman refused to budge. KKR clearly will fight to protect its stake. And no wonder. KKR partners are among the world's savviest dealmakers, and they negotiated terms on a high-risk deal that could give them a huge potential payoff with only a $50,000 up-front investment. If Kamaz gets back on track--and if KKR ever collects its equity--it will have paid a song to make a $34 million profit on its stake.

Still, sources familiar with the deal note that Kamaz hasn't paid KKR a promised $10 million a year in management fees since 1993. It's clear that KKR considers Kamaz' about-face a violation of Russian and international law. ''This is a major international incident. They are thumbing their nose at the entire Western financial Establishment,'' says a key source.

For its part, KKR may have misjudged the difficulty of turning around a Soviet-style industrial behemoth. And it may have been overly optimistic for Kravis and partners to expect to squeeze American-style fees out of a destitute truck factory. What is certain, though, is that the LBO firm underestimated the power of Tatarstan, one of Russia's richest and most fiercely independent regions.

Tatarstan may well get away with its move against KKR even though the firm has a strong claim to the equity. A lawyer who represented Kamaz in drafting the agreement says it clearly specified that bank loans would satisfy KKR's fund-raising obligations. The agreement permits KKR to seek arbitration outside Russia to settle the dispute. But an arbitrator's decision would have to be enforced by the Russian government. And Moscow may not want to pick a fight with Tatarstan, one of the few Russian regions not in debt to the federal treasury. ''KKR is probably sorry they ever heard of Kamaz,'' says a Western banker who watched the drama unfold.

At least KKR has only the firm's--and not their investors'--money at stake. Still, KKR invested large amounts of management time, including the personal involvement of the firm's two founders, Henry R. Kravis and George R. Roberts. Partner Michael T. Tokarz, KKR's point man on the project, averages an hour a day on Kamaz and is a frequent visitor to the factory. Time is a valuable commodity at a firm where just 11 partners manage a portfolio of 21 companies with combined revenues of $47 billion.

The KKR dispute may scare away potential foreign investment in Russia. For instance, it could affect Tatneft, a big oil company based in Tatarstan that is poised to become the first privatized Russian company to get a full American depositary receipt listing on the New York Stock Exchange. The Tatarstan government hopes to issue Eurobonds by the end of 1997.

In hindsight, KKR's investment may appear rash for a firm without international experience. But in 1993, Russia's investment potential seemed limitless. Industries were being privatized with the stroke of a pen, Western aid was pouring in, and Boris Yeltsin's government was wooing foreign investors. And Kamaz' management was eager for help. When it opened in 1975, Kamaz was the world's largest truck factory with 117,000 employees. In 1990, the company was privatized and the Tatarstan government retained an 8.3% stake.

But even after privatization, the company's problems were massive. Its trucks were outmoded and its market dried up. Kamaz even served as the municipal government of Naberezhnye Chelny and had to provide services for a city of 500,000. Then, in 1993, a fire destroyed the engine plant where Kamaz and Cummins Engine Corp. had a joint venture. Desperate Kamaz managers called American Re-Insurance Corp., then owned by KKR, to assess the damage. AmRe suggested calling KKR.

Soon after, when a delegation of Kamaz managers showed up at their Manhattan offices, Kravis and his colleagues.

es listened politely and sent them away. ''We told them: 'You don't qualify for investments like we make,''' says a source who attended the meeting. Twice more Kamaz persisted, before offering KKR an option to acquire shares in the company in exchange for fund-raising and management assistance.

Bolstered by expensive legal advice--and the possibility of a huge payoff--KKR took the plunge. ''Henry and George didn't put up any real money. And if it did work, there would be enormous upside,'' says one U.S. banker. In 1993, KKR paid $50,000 for a 1% stake in Kamaz and signed a consulting agreement. Soon after, KKR agreed to the complex arrangement under which it could acquire Kamaz stock.

KKR quickly lined up a $100 million loan from the European Bank for Reconstruction & Development and $150 million from Vneshtorgbank, a Russian bank. It also secured refinancing of more than $500 million in bank debt, saving Kamaz millions in interest payments. With help from consultants--recruited by KKR but paid for by Kamaz--the truck company made considerable progress, shedding most of its social responsibilities and stepping up production of a popular 3.5-horsepower micro-car called the Oka.

But Kamaz slid deeper into debt. In June, Kamaz' board agreed to give Tatarstan a 43% stake in Kamaz in exchange for loan guarantees and restructuring Kamaz' bank debts. KKR supported the transaction. The board also ousted longtime Chairman Nikolai I. Bekh, who had wooed KKR, and replaced him with Muratov, a leading power in the autocratic regime of Tatarstan's Prime Minister Shaimiev. The Shaimiev government had grown impatient with Kamaz' slow progress under Bekh and felt he had let KKR take advantage of the company.

WHITE KNIGHT? Today, things are looking up. Kamaz, which plans to spin off its Oka division, has watched its stock soar 175% this year. ''Kamaz is at a turning point,'' says Igor S. Antonov, deputy chairman of Oneximbank, a major Russian bank considering a loan to the company.

Muratov depicts Tatarstan as a white knight that is helping Kamaz much as the U.S. government bailed out Chrysler Corp. He pledges to pursue the restructuring plan recommended by KKR, while shoring up the truckmaker with tax breaks, subsidies, and loan guarantees. But just as KKR underestimated the difficulties of rescuing Kamaz, Tatarstan may not realize the damage it could cause itself by reneging on the KKR deal. ''It will piss off a hell of a lot of people,'' says a key source. If KKR gets run off the road, Tatarstan and Kamaz could be the real victims.

By Carol Matlack in Moscow, with Patricia Kranz in Naberezhnye Chelny and Leah Nathans Spiro in New York

www.businessweek.com/1997/32/b353990.htm

~ ~ ~

Henry Kravis is expected to testify regarding his business, professional, personal and political relationships with Jack Abramoff, Harken Energy, Aloha Petroleum, James Ahloy, Kamehameha School/Bishop Estate, Henry Peters, Robert Kihune, Gilbert Tam, Sandwich Isles Communications, Summit Communications, Tom Brown Inc., Gale Norton, Dan Inouye, Daniel Akaka, Norm Brownstein, Governor Linda Lingle, McKenzie Methane, The Office of Hawaiian Affairs, Haunani Apoliona, John Waihee, The Nature Conservancy, Henry Paulson, Goldman Sachs, Robert Rubin, Citigroup, Bank of America, Kohlberg Kravis Roberts & Co., Donald Evans, Faye Kurren, Tesoro Petroleum, Chevron-Texaco, The Ocean Conservancy, Earl Anzai, Lyn Anzai, Eric Shine, The World Trade Organization, Norman Mineta, Peter Savio, Ben Benson, James B. Nicholson, Jim Nicholson, Lamar Hunt, Barron Hilton, Carol Muranaka, William Simon, Paul Alston, Hawaiian Airlines, Joshua Gotbaum, James Duca, Duke Cunningham, Hospital Corporation of America (HCA), Bill Frist, Richard Rainwater, John Schilling, Larry Mizel, Tom DeLay, AIG, Hank Greenberg, Chubb Group, Marsh & McLennan, Putnam Investments, Kroll Associates, Marsh Affinity Group Services, Integrated Resources, Sukamto Sia, Guido Giacometti, Susan Tius, Hawaiian Electric Co., Constance Lau, American Savings Bank, First Hawaiian Bank, Bank of Hawaii, Diane Plotts, Mark Hemmeter, Ron Rewald, BCCI, Carlyle Group, Frank Carlucci, Henry Kissinger, Jon Miho, Blackstone Group, Leon Black, Apollo Advisors, American Mutual Underwriters, Ltd, John Garamendi, Executive Life Insurance Co., Investors Equity Insurance Co., Wayne Metcalf, Rey Graulty, Linda Chu Takayama, Gordon Tanioka, Gerald Tanioka, Central Pacific Bank, Dan Inouye, Sumitomo Bank, Colbert Matsumoto, Carl Icahn, Steve Case, AOL, Mitch Gilbert, Yukio Takemoto, Bruce Nakaoka, Eric Martinson, Nathan Aipa, Colleen Wong, Judith Neustadter Fuqua, Judge Harold Shintaku, Judge Barry Kurren, Judge David Ezra, Eric Shinseki, Helen Cullen, Quintana Petroleum, Dennis Fern, CV Starr, Governor Ben Cayetano, Bob Dole, Harold Okimoto, Wackenhut, Larry Mehau, Jeff Stone, Richard Wong, WCI Communities, American Re, Louanne Kam, Jeffrey Sia, Rocco Sansone, Conrad Black, Paul Allaire, Phil Graham, Christopher Browne, The Nature Conservancy, and other entities to be named upon discovery.