Posts Tagged ‘barron’s’
From Moscow to Manhattan, the Long Way
U.S. prosecutors are trying to seize millions of dollars in ritzy New York City real estate they say are laundered rubles linked to the death of Moscow lawyer Sergei Magnitsky.
Federal prosecutors last week sought the forfeiture of $24 million worth of Manhattan real estate they say was purchased in part with funds connected to the notorious theft of $230 million from Russia’s Treasury in 2007. The crime assumed international importance later when lawyer Sergei Magnitsky died in the custody of Russian police he’d accused of complicity in the theft. Magnitsky was representing a Western-backed hedge fund that was victimized in the massive tax fraud.
“A Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate,” said Preet Bharara, the U.S. Attorney for the Southern District of New York, in a statement. “While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot.” An order freezing the properties and related bank accounts was signed on Wednesday by U.S. District Judge Thomas P. Griesa.
The government’s civil complaint is the first U.S. law-enforcement response to the 2007 seizure of the Russian subsidiaries of Hermitage Capital, once the largest foreign investor in Russia. The complaint states that back then criminals stole the corporate identities of the money manager and used them to falsely claim the refund of $230 million for taxes that Hermitage had paid in prior years. When Moscow attorney Magnitsky presented evidence that he believed showed the involvement of police and tax officials, the complaint continues, he was arrested and died in prison a year later under suspicious circumstances. Barron’s reported on the case in detail in “Crime and Punishment in Putin’s Russia,” in our edition of April 18, 2011.
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U.S. Seeks Ritzy NY Properties in Russian Money Laundering Case
Federal prosecutors Tuesday sought the forfeiture of $24 million worth of Manhattan real estate they say was purchased in part with funds connected to the notorious theft of $230 million from Russia’s Treasury in 2007. The crime assumed international importance when lawyer Sergei Magnitsky later died in the custody of Russian police he’d accused of complicity in the theft. Magnitsky was representing a Western-backed hedge fund that was victimized in the massive tax fraud.
“A Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate,” said Preet Bharara, the U.S. Attorney for the Southern District of New York, in a statement. “While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot.”
The government’s complaint is the first U.S. law-enforcement response to the 2007 seizure of the Russian subsidiaries of Hermitage Capital, once the largest foreign investor in Russia. The complaint states that criminals stole the corporate identities of the money manager and used them to falsely claim the refund of $230 million for taxes that Hermitage had paid in prior years. When Moscow attorney Magnitsky presented evidence that he believed showed the involvement of police and tax officials, the complaint continues, Magnitsky was himself arrested and died in prison a year later under suspicious circumstances (as reported in “Crime and Punishment in Putin’s Russia,” Barron’s, April 18, 2011).
The luxury apartments and fancy retail spaces that are subject to Tuesday’s civil forfeiture complaint were discovered last summer by Barron’s as part of a journalism collaboration that included Russia’s Novaya Gayzeta and an Eastern European not-for-profit journalism group known as the Organized Crime and Corruption Reporting Project. The Manhattan properties are owned by U.S. entities associated with a Cyprus corporation, Prevezon Holding, whose name had turned up in Eastern European bank transfers after the Russian Treasury heist. The forfeiture complaint alleges that these funds were laundered proceeds from the tax scam, and names both the U.S. and Cyprus corporations as defendants.
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Interpol Stands Up to Putin
The international police organization Interpol on Friday rejected Russia’s request for help in arresting a hedge-fund chief who has accused the Russians of looting his fund.
William Browder, a London-based investor, has stubbornly railed against Russian corruption since the arrest and death in a Moscow prison of Sergei Magnitsky — a lawyer for Browder’s Hermitage Capital. Magnitsky exposed a $230 million tax fraud that seemed to involve Russian police, tax officials and organized criminals (see “Crime and Punishment in Putin’s Russia,” April 16, 2011). A Moscow criminal court issued a warrant for Browder’s arrest on April 27, and Interpol duly put out an “all points bulletin” asking its 190 member states to detain Browder for extradition to Russia.
But after deliberations at Interpol headquarters in Lyon, France, the police agency rejected Russia’s request as having a “predominant political character.”
“This will be very humiliating for Putin,” Browder told Barron’s. “His whole position on the Magnitsky case has been rejected by an independent international law enforcement body.”
As an organization designed to apprehend international criminal fugitives, Interpol’s constitution bars the agency from matters of “a political, military, religious or racial character.” But the 90-year-old organization rarely refuses requests like Russia’s. Browder says that only about 3% of requests to Interpol are reviewed for impropriety by the agency’s governing committee.
Browder successfully lobbied for the December 2012 passage of a U.S. law that bans travel and freezes assets of Russian officials involved in the Magnitsky affair. Russia retaliated with its own list of sanctioned U.S. officials, and also forbade the adoption of its orphans by Americans. Russian prosecutors launched a criminal case against Magnitsky, posthumously, and Browder, in absentia, charging them with improperly purchasing shares of the oil and gas giant Gazprom about a decade ago, in an investment that Hermitage made with no government objections at the time.
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Dead Men Tell No Tales
Russia is about to put a dead man on trial, the whistle-blower Sergei Magnitsky who died in the custody of the police officials he’d earlier accused of taking part in what Magnitsky said was a huge 2007 Russian tax fraud. The $230 million swindle involved stealing the corporate identity of Hermitage Capital, a Western-run hedge fund and a legal client of Magnitsky’s firm (see “Crime and Punishment in Putin’s Russia,” April 16, 2011). When Magnitsky told Russian authorities in 2008 that corrupt tax and police officials seemed to have victimized Hermitage, it was him they arrested. Several weeks ago, Russian prosecutors set in motion a case that will blame Hermitage and Magnitsky for the frauds he alleged.
The prosecution may have trouble reconciling its theory of Magnitsky as mastermind with a newly-published investigation in Russia’s Novaya Gazeta. The newspaper reports that the same tax offices Magnitsky had fingered were the loci of apparent tax fraud even after the lawyer’s arrest and 2009 death in prison. Barron’s has reviewed prosecution documents that show the involvement of the FSB – successor to the KGB – in the activities that victimized Magnitsky and Hermitage, including the 2007 confiscation of Hermitage records and the 2008 arrest of Magnitsky.
“My investigation shows that after [Magnitsky’s] death, the very same tax office workers were continuing to steal from the people in the same exact way,” said Roman Anin, the reporter who wrote the Novaya Gazeta piece, in an interview with Barron’s. “This has to do with every single Russian citizen. If you add up the fraud from 2007 to 2010 committed by these tax officers, you would see that they stole the equivalent amount to the pensions of 20 million Russian citizens.” Barron’s tried, without success, to reach Russian tax officials responsible for what’s now alleged to have been a total of more than $700 million in fraudulent refunds.
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Scam Patrol: Following Moscow’s Money
Russian law enforcement jumped into action after we highlighted the sudden wealth enjoyed by some Moscow tax officials last spring. Their bureaus had handled a $230 million tax scam that victimized the hedge-fund firm Hermitage Capital and led to the 2009 prison death of Hermitage’s whistle-blowing lawyer, Sergei Magnitsky (“Crime and Punishment in Putin’s Russia,” Barron’s, April 18).
Prosecutors and police say they are reopening their criminal investigation…of Magnitsky, two years after the young lawyer died in the custody of the very officials he accused of participating in the tax scam. In pressing their case against the dead man, the cops have summoned Magnitsky’s elderly mother for interrogation. And they’ve vowed to ignore the findings of a human-rights council appointed by President Dmitry Medvedev, which concluded that Magnitsky had been framed by his arresting officers and beaten to death in jail.
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A Return Visit to Earlier Stories: The Trouble with Russia
Russia’s official version of the prison death of Hermitage Capital lawyer Sergei Magnitsky got a sharp revision on July 5, when a human-rights council appointed by President Dmitry Medvedev reported that Magnitsky had been illegally detained and had probably died from a truncheon beating inflicted by eight guards in November 2009 — and not from heart failure, as claimed by prison doctors.
When Magnitsky’s family received the body of the 37-year-old lawyer, it was bruised and his fingers were broken, said the report (“Crime and Punishment in Putin’s Russia,” April 18).
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New Complaint Alleges Theft of $107 Million in Russia
Hermitage Capital filed a new criminal complaint, alleging Moscow tax officials helped steal $107 million through an earlier fraudulent tax-refund scheme in 2006.
Bill Browder, founder of the Russia-focused hedge fund Hermitage Capital, continues to seek justice from a seemingly corrupt system. “We hope to thoroughly embarrass the Russian government into action,” said Browder in a phone interview this morning.
On Friday, Hermitage Capital filed its latest criminal complaint with Russia’s State Investigative Committee, demanding that prosecutors investigate the second massive tax rebate fraud exposed by the late Sergei Magnitsky, a lawyer working for Hermitage before his death in the custody of Russian cops he’d accused of corruption. Before his arrest, Magnitsky had helped Hermitage file a detailed criminal complaint in July of 2008 that provided evidence of a $230 million tax-refund scheme in 2007 (later described by Barron’s in “Crime and Punishment in Putin’s Russia,” April 16).
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After Swiss Freeze Millions, Stepanov Swings Back
An abbreviated version of this story ran in May 28 edition of Barron’s Magazine.
Swiss prosecutors have frozen Eur. 8 million in Credit Suisse bank accounts of Vladlen Stepanov, a subject of our story about a $230 million tax scam in Russia that victimized the hedge fund firm Hermitage Capital and led to the death in police custody of Hermitage’s whistle blowing lawyer Sergei Magnitsky (“Crime and Punishment in Putin’s Russia,” April 16).
Stepanov isn’t taking the Swiss action lying down. Last week he placed a self-justifying advertisement in a Russian newspaper, and this week he appeared for a video-taped interview at the Russian financial daily Vedomosti. In both forums, Stepanov denies that the Swiss bank money, and other riches detailed in our article, were illicitly obtained or derived from the hundreds of millions in dubious Russian tax refunds doled out by Olga Stepanova, a former tax official from whom Stepanov says he’s been divorced since 1992.
The evidence of corruption amongst police and other officials involved in the Magnitsky case has created enough of a stink that President Dmitry Medvedev called a press conference last week to discuss an independent inquiry into the scandal.
“I do not want to be a wood chip,” is the headline of Stepanov’s May 17th ad in the RBK Daily newspaper – an allusion to a Russian proverb suggesting that he sees himself as an innocent victim who’s been ground up in the chainsawing of a forest. He dismisses as “recreational arithmetic,” the estimates of his wealth presented in “horror videos” about the Magnitsky case produced by Hermitage Capital’s founder William F. Browder (see www.russian-untouchables.com).
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Russian Accounts Frozen at Credit Suisse
Swiss authorities have apparently closed bank accounts held by Russians alleged to have been part of a giant Russian tax swindle.
Swiss law enforcement officials have apparently frozen the Credit Suisse (ticker: CS) bank accounts of the Russians alleged to have participated in Russia’s largest reported tax swindle.
Records from those bank accounts formed the basis of a Barron’s story (“Crime and Punishment in Putin’s Russia,” April 18) which showed that the family of an influential Russian tax official, Olga Stepanova, became fabulously wealthy after she approved part of a $230 million tax refund to scammers in 2007 who used corporate identities stolen from the well-known Russia-focused hedge fund Hermitage Capital. When Hermitage and its attorney Sergei Magnitsky presented evidence that the conspiracy involved Stepanova and police officials in Russia’s Internal Ministry, the police instead arrested Magnitsky and kept him in detention until he died in prison in November 2009.
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