Security services, tax fraud and death of a lawyer

Financial Times

3 Nov 2010: The case of Sergei Magnitsky – a lawyer who died in prison after testifying against police for allegedly participating in Russia’s largest tax fraud using companies belonging his to clients that they had in effect confiscated – focuses on the interior ministry. But according to one retired policeman with knowledge of the case, the police “were simply the arms and hands” of a much more shadowy organisation: the federal security service (FSB), successor to the Soviet KGB.

Based in the Lubyanka, the imposing Moscow building that once housed its predecessors, the FSB’s Directorate K has the task of ferreting out economic and financial crime. But it has also been at the centre of several scandals that appear to show it has a direct role in some of the worst frauds in modern Russian history.

Hermitage Capital Management, an investment fund run by the US-born Bill Browder, has obtained only one document that shows direct FSB involvement in the Magnitsky case. In May 2007, Viktor Voronin, head of Directorate K, issued a finding that companies belonging to Hermitage had underpaid taxes. Based on this document, police raided the fund’s offices, and that of the law firm it was using, where Magnitsky worked. It confiscated seals and stamps of three companies that had recently paid $230m in capital gains taxes, according to Hermitage. These items were then used to obtain a fraudulent tax rebate; the companies were re-registered under new owners, which then applied for the a refund of the $230m, which was granted almost immediately through friendly courts.

The new owner of the companies was eventually convicted of the tax fraud, but Hermitage chief executive Bill Browder says he was a “fall guy” and the real perpetrators got away.

In autumn 2008, Magnitsky testified to the police that the fraud had taken place using items seized in the police raid, and alleging police involvement in the crime. The man who had led the raid a year earlier, Lt Col Artyom Kuznetsov, was part of a team that arrested him on tax evasion charges, according to a police order obtained by Hermitage.

During pre-trial detention, Magnitsky testified that he was under pressure from investigators working with Lt Col Kuznetsov to retract his testimony. “The same operative Kuznetsov also provided his operative investigative support on the case . . . on the subject of the theft of the said companies [which were used in the tax fraud]. Kuznetsov also performed operative support on the criminal case under which I was involved as an accused person, and I believe that the criminal persecution against me is the revenge by the said person to punish me for my acts.” Magnitsky gave this testimony on October 13 2009, a month before his death. Mr Kuznetsov did not respond to requests for comment from the FT.

Magnitsky lasted 11 months in prison. He was in good health before his arrest but developed a stomach complaint in detention, for which he was denied medical treatment. The Moscow public oversight commission, created last year by President Dmitry Medvedev to oversee human rights in jails, claimed in a report in December that the denial of medical care was intended to coerce Magnitsky to change his testimony against interior ministry officials.

The most harrowing episodes of the commission report cover the last hours of Magnitsky’s life, when he was transferred to the Sailor’s Rest prison from the notorious Butyrka jail, supposedly for urgent medical treatment. After telling staff that someone was trying to murder him, provoking a decision that he was suffering from a “psychotic episode”, he was given an injection, placed in a straitjacket and put in an isolation ward, where he died just over an hour later. онлайн займы payday loan zp-pdl.com https://zp-pdl.com/apply-for-payday-loan-online.php займ на карту