Stop the Untouchables. Justice for Sergei Magnitsky.

Tinker, tailor, lawyer, fraudster

Cobbetts

24th April 2012

A sad chain of events, worthy of a classic Cold War thriller, has revealed the disturbing connection between sophisticated financial fraud, geo-politics and international laws.

In 2007, Sergei Magnitsky received death threats following his discovery of a tax fraud worth £144m, the most substantial in Russian history. The allegations of fraud made by Magnitsky implicated police officers, politicians, judges and individuals connected with the Russian organised-crime underworld. During the following year, Magnitsky was arrested by the very police officers he publicly named as being involved in the tax fraud. One year later, Magnitsky was found dead in a Russian prison cell, having been mistreated and denied medication.

The great rebate scam
At the time of exposing the tax fraud, 37-year-old Magnitsky was employed by a British-based investment fund, Hermitage Capital Management. Now his work is the focus of an increasingly bitter international dispute involving dozens of foreign officials.

In 2008, Magnitsky was imprisoned in connection with unrelated tax fraud charges shortly after he made allegations that a cabal of Russian tax officials had attempted to defraud the Russian government by means of a tax rebate in the sum of $230 million involving the use of company charters and seals belonging to Hermitage Capital Management, which were confiscated in the course of a police raid.

Remarkably, the two tax departments at the centre of that murky affair were still distributing large sums, through authorising highly dubious rebates, as recently as 2010. The latest rebates are vast when compared with the previous contentious rebates and were granted by the same tax officials within two or three days of the application.