Theft of Additional $240 Million from the Russian Treasury

During 2009, the investigation by Hermitage lawyers uncovered that the $230 million theft of state funds perpetrated by Russian Interior Ministry officers, other officials and criminals was not an isolated event.

Hermitage lawyers discovered that since 2006, beginning one year before the Hermitage Fund companies were stolen, the same criminal group had committed exactly the same kind of theft at least three times and stolen at least another $240 million from the Russian Government. In October 2009, Hermitage lawyers filed petitions with Russian authorities challenging the absence of investigation of the misappropriation of Hermitage Fund’s Russian companies and stating that their findings revealed the existence of “an organised criminal group, comprised of private individuals and government officials, which has been systematically misappropriating dozens of billions of roubles from the Russian Treasury over the last three years.  This criminal group, through its fraudulent activity [including through the thefts of the Hermitage companies] has stolen some 11.2 billion roubles [$470 million] since November 2006”.

The petition described the theft of $230 million with the complicity of Interior Ministry officers who seized Hermitage Fund companies in 2007. It also identified previous acts of several fraudulent tax refunds carried out by the same officials and called upon Russian authorities “to investigate these reoccurring crimes and to bring the perpetrators to justice.

In Hermitage petition to Russian authorities, the perpetrators were named by their names:

The frauds detailed below would not have been possible without the direct involvement of officials from the Moscow Tax Services, in particular from Moscow Tax Authorities Number 25 and 28.  These two tax authorities played a central role in the 5.4 billion rouble [$230 million] fraud, which occurred in December 2007, against Hermitage and the State Russian budget.  In fact, Hermitage’s investigation has produced evidence of the involvement of Mr Sergei Zhemtchuzhnikov, the Deputy Head of Moscow Tax Authority Number 25, and Ms Olga Tzyimai, the Head of the Audit in Camera Department Number 1 of Moscow Tax Authority Number 28, in the fraud.”

The methods adopted by the criminal group have been consistent throughout. On each occasion the perpetrators created fake liabilities through fake court cases using the same lawyers and the same judges, and then they filed fraudulent tax refund requests, which, following approval, have then been paid into a small commercial bank in Moscow, the Universal Savings Bank. In June 2008, shortly after the thefts of budget funds, the Universal Savings Bank filed for voluntary liquidation.

Hermitage lawyers pointed out that while Russian authorities recognized that $230 million had been stolen, the only person charged with conducting this sophisticated crime was a formerly convicted criminal and a sawmill employee, Victor Markelov, and questioned how this man could have perpetrated a scheme, which involved obtaining materials from Ministry of Interior custody, sham lawsuits in various Russian courts, false tax refunds and fraudulent changes in corporate registry.

The petition concluded:

Perhaps more importantly, there is no mention of any efforts to return to the state budget any of the funds that had been misappropriated.  This is particularly absurd as, to date, it remains the single largest fraud to be uncovered against the Russian state budget in Russia’s history”.

After filing this complaint it became public that officers Kuznetsov and Karpov who Sergei Magnitsky had testified against were previously investigated in a $20 million kidnapping and extortion case with both the convicted criminal Victor Markelov and Dmitry Klyuev who is the reported  beneficial owner of the Universal Savings Bank, where all the stolen money went.


Complaint by Hermitage Capital to the General Prosecutor’s Office (Chaika) on the systematic theft by government officials of budget funds totaling 11.2 billion rubles ($470 million) (13 October 2009)
Complaint by Hermitage to the Russian General Prosecutor notifying him of the systematic embezzlement of budget funds and the role of state officials in the theft.
[Download this document in PDF]


Complaint by Hermitage Capital to the Investigative Committee of the General Prosecutor’s Office (Bastrykin) on the systematic theft by government officials of budget funds totaling 11.2 billion rubles ($470 million) (13 October 2009)
Complaint by Hermitage to the Head of the Investigative Committee of the Russian General Prosecutor’s Office (Bastrykin) notifying him of the systematic embezzlement of budget funds and the role of officials in the thefts.
[Download this document in PDF]


Complaint by Hermitage Capital to the Russian Audit Chamber (Stepashin) on the systematic theft by government officials of budget funds totaling 11.2 billion rubles ($470 million) (13 October 2009)
Complaint by Hermitage to the Russian Audit Chamber notifying them of the systematic embezzlement of budget funds and the role of officials in the thefts.
[Download this document in PDF]


Subpoena of U.S. Banks to disclose flow of money embezzled from the Russian budget (28 July 2009)
Request for discovery filed by Hermitage Capital in the Southern District of New York seeking information about the transfer – via US banks – of $230 million embezzled by Russian officials and their criminal accomplices through a small Russian bank, Universal Savings Bank.
[Download this document in PDF]

Share:
  • Facebook
  • Twitter
  • Google Buzz
  • LinkedIn
  • del.icio.us
  • Google Bookmarks
  • Yahoo! Buzz
  • Tumblr
  • StumbleUpon
  • FriendFeed
  • NewsVine
  • Digg