‘Magnitsky law’ makes progress in Senate

The Financial Times

By Catherine Belton in Moscow and Geoff Dyer in Washington

A US Senate committee has approved a bill named after Russian anti-corruption lawyer Sergei Magnitsky that would impose sanctions on human rights abusers as new evidence emerged concerning the events leading up to Mr Magnitsky’s death.

On Tuesday the Senate foreign relations committee approved the “Magnitsky Law”, which has also passed a committee in the House of Representatives and which imposes restrictions on the financial activities and travel of Russian officials allegedly involved in the case.

The vote was held as friends and former colleagues of Mr Magnitsky released evidence that showed those accused by the lawyer of taking part in a lucrative tax rebate fraud had flown on numerous trips abroad with the owner of the bank that received the funds.

Mr Magnitsky died in a pre-trial detention centre in November 2009, more than a year after he alleged that a circle of interior and tax ministry officials had conspired to defraud the Russian budget through a $230m tax fraud scam.

The federal prison service has assumed partial responsibility for his death, accepting he was denied medical attention, while a government human rights council concluded that he was probably beaten to death while in custody on separate tax fraud charges.

His case has become a big irritant for the Obama administration’s efforts to “reset” relations with Russia and Moscow has threatened retaliation if the Magnitsky bill becomes law.

John McCain, the US senator, called on the US government to designate a group of Russian officials as a “transnational criminal organisation” in a further high-profile intervention into the Magnitsky case.

Speaking at an event in Washington where the new information on the case was released, Mr McCain said it amounted to evidence the officials were part of a criminal group headed by the bank’s owner, Dmitry Kluyev, that had defrauded the Russian government – and then arrested Mr Magnitsky.

“This case shows that corruption in Russia goes to the highest levels of the Russian government,” Mr McCain said.

The latest evidence gathered by Mr Magnitsky’s associates and seen by the Financial Times is drawn from flight records and shows that police investigators involved in the criminal case against Mr Magnitsky, other officials linked to the tax rebate scheme and the bank owner flew to Cyprus and Dubai either together or within days of each other.

In a new video presenting the evidence, Mr Magnitsky’s friends and former colleagues say the new revelations add to a growing body of material relating to the case of the lawyer, who died in jail after he refused to stop testifying against the group of officials.

Mr Kluyev told the Financial Times that the claims were “absolute nonsense” and represented “a distorted rearrangement of the facts”. He said he had never even heard of Mr Magnitsky until he read about his “tragic” death in jail and that he had nothing to do with the tax rebate schemes.

What appears to be the most significant allegation is that Mr Kluyev, who once owned the Universal Savings Bank, which received funds into accounts from two sets of questionable rebates worth $230m and $107m each, flew to Cyprus for a holiday with Major Pavel Karpov, the interior ministry official behind Mr Magnitsky’s arrest.
Mr Kluyev told the FT on Tuesday that he was friends with Maj Karpov and did not rule out that he may have travelled with him to Cyprus at that time. Through an intermediary Maj Karpov said on Tuesday that he could not immediately comment on the allegations.

Andrei Pavlov, Mr Kluyev’s former legal adviser, flew to London on the same flight as Major Karpov on January 1, 2007 and spent four days there with him.
Mr Pavlov confirmed he was friends with Maj Karpov and had flown to London to vacation with him there in the first few days of 2007. But he claimed he knew nothing of the tax rebate scheme.

A few months before the Hermitage Capital Management investment fund that previously employed Mr Magnitsky was raided, Mr Kluyev made another trip to Larnaca, flight records show. This time he flew on a private jet together with the police official who led the raid on Hermitage, where company charters and stamps were seized that Hermitage claims were later used in a scam fraudulently to get a rebate of $230m in taxes.

Mr Pavlov and Maj Karpov also flew to Larnaca two days later.

Mr Kluyev said he may have flown with the police official, whom he also knew, but said any suggestion he had gone there to co-ordinate the tax rebate scheme was “absolute nonsense”.

“Do you know how many Russians go to Larnaca?” he asked. “It’s like a second Russia.”

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