Africa Investigates is a new podcast from World Policy Institute in partnership with the African Network of Centers for Investigative Reporting and with funds from the Open Society Initiative for West Africa. Join Chris Roper as he showcases recent exposés into corruption across Africa. Click here to subscribe on iTunes and listen on iono.fm.
By Michael Zelenko
On November 16, 2009, after 355 days of pre-trial detention, Sergei Magnitsky passed away in a Russian prison—his ailing body untreated and cruelly bound by straitjacket—as medical staff idled just outside his door. In the year since his arrest, Magnitsky had endured incarceration in a below-freezing open-air cell, living amidst sleep deprivation, isolation, raw sewage, and psychological torture. It was an unthinkable position to be in for Sergei Magnitsky, a studious and timid tax lawyer. Magnitsky’s apparent crime? Uncovering one of the largest tax frauds in Russia’s history—estimated at $230 million—and implicating a cabal of corrupt Russian Interior Ministry officers, judges, tax service officials, and known criminals.
In Putin’s Russia today, the Magnitsky case may have passed unnoticed. Here, even the most powerful voices can be silenced—no better example of this exists than the continued imprisonment of Mikhail Khodorkovsky. But due to meticulous documentation, the heinousness of the crime, and a well-organized network of advocates, the Magnitsky case has struck a rare chord of outrage in both Russia and the international community. Thanks to the campaigning of U.S. Congress members, Magnitsky’s former client, and an organization called Russian Untouchables, the Magnitsky case may yet force the Russian government to address human rights abuse allegations.
As William Browder, former client of Magnitsky and founder and CEO of Hermitage Capital Management—a global investment advisory firm—outlined in a 2009 article titled “They Killed My Lawyer,” the complicated machination that resulted in the defrauding of $230 million and Sergei Magnitsky’s death started in 2007. In June of that year, dozens of police officers raided the offices of Hermitage Capital Management and law firm Firestone Duncan—where Magnitsky worked—under the premise of tax investigation. In the months that followed, Interior Ministry officers used the confiscated and illegally obtained seals, documents, and charters of Hermitage Capital to secretly re-register Hermitage’s various investment companies in the name of a third party.
At the behest of his clients, Sergei Magnitsky uncovered the scheme: The stolen companies were being used to claim overpaid taxes—to the tune of $230 million. In turn, crooked tax authorities processed the claims and wired money to obscure shell banks. As research into the case continued and complaints by Hermitage mounted, the Interior Ministry struck back by opening criminal cases against the Hermitage lawyers investigating the fraud. As a result of harassment or threat, all but one Hermitage lawyer either left the country or went into hiding. That lawyer was Sergei Magnitsky.
On October 7, 2008, Magnitsky testified against two of the Interior Ministry officials allegedly involved in the over-paid tax fraud. One month later, Magnitsky was arrested—the arrest made by the same officers he had indicted—and placed in pre-trial detention. Shuttled between Butyrka and Matrosskaya Tishina prisons, Magnitsky spent nearly one year in detention, accused of being involved in the very fraud he had worked to uncover. Handwritten accounts by Magnitsky paint tortuous prison conditions: wretched sanitation coupled with a lack of food, water, toilet access, and outside contact. Magnitsky’s physical condition deteriorated precipitously. Six months into detainment Magnitsky was diagnosed with pancreatitis and gallstones. Denied medical treatment repeatedly, Magnitsky underwent rapid weight loss. On November 13, 2009, after complaining of extreme pain, Magnitsky was transferred to Matrosskaya Tishina prison for medical attention. Medical attention, however, was not provided. On November 16, Sergei Magnitsky was put in a straightjacket and placed in an unattended room. Just over an hour later, Sergei Magnitsky was dead.
In the wake of Sergei Magnitsky’s death, friends, colleagues, clients, and supporters came together to form Russian Untouchables, an organization dedicated to bringing justice to the officials responsible for Magnitsky’s death. Their website, www.RussianUntouchables.com is a vast repository of scanned documents, letters, official paperwork, photos, and videos implicating Russian judges, Interior Ministry officials, and criminals in Magnitsky’s death.
Bill Browder, founder and CEO of Hermitage Capital, is at the heart of Russian Untouchables. Sitting in a hotel off Central Park, Browder says, “I vowed, on the day Sergei died, that I was going to use whatever time, energy, and resources to bring Sergei’s killers to justice.”
Browder is in New York, laid over on his way home to London. He is travelling from Washington D.C., where last Tuesday in association with the Freedom House, he premiered “The Magnitsky Files,” the fourth and final installment of the Russian Untouchables video series. At just over 18 minutes long, the video doesn’t make for blithe viewing. By way of densely packed maps, flowcharts, photos, and diagrams, “The Magnitsky Files” deftly reconstructs the events of the case and builds a compelling argument against the accused parties.
On hand at the premiere of the video was Senator John McCain, who has taken an active role in the Magnitsky cause. Along with 70-odd members of Congress, Senator McCain has called for the passing of the Sergei Magnitsky Rule of Law Accountability, a bill tailored to impose sanctions on any persons “responsible for the detention, abuse, or death of Sergei Magnitsky, for the conspiracy to defraud the Russian Federation of taxes on corporate profits through fraudulent transactions and lawsuits.” If passed, the bill would, among other actions, ban officials involved in the case from traveling within the United States and prohibit U.S. property transactions of any individual on the list.
The Russian reaction to the bill has been fervid. Speaking at the G8 summit in Mexico, Putin threatened that if the law were passed, Russia would respond by passing similar legislation. In response to the Senate Foreign Relations Committee passing the law unanimously last week, Duma deputy Vyacheslav Nikonov told the RIA Novosti news group: “We need to create conditions so the law will not be adopted. And if they adopt it, Russia will have no choice but to give a symmetrical answer.” Deputy Foreign Minister Sergei Ryabkov was quoted by the Itar-Tass agency as saying: “We are not only deeply sorry but outraged that—despite common sense and all signals Moscow has sent and keeps sending about the counterproductive nature of such steps—work on the Magnitsky Law continues.”
But why would Russia risk its international reputation to protect the roughly 60 people thought to be involved in the fraud? “Those 60 people must be the tip of an enormous iceberg,” Browder answers. Garry Kasparov, a former Russian presidential candidate and the world’s highest ranked chess player, offers an alternate analysis in the current issue of the World Policy Journal: “It’s all about Putin’s subordinates. The mafia structure still follows him, because he offers them the key element of survival for any mafia: immunity. As long as they know that the big boss—the capo di tutti capi—offers them immunity, they can do whatever they want. The moment they recognize he is not able to protect them, they will not follow his orders. That’s why Putin is so adamantly fighting against the Magnitsky Act, both here and in Europe.” (Versions of the Magnitsky Law are being pushed in Sweden, Holland, Poland, and elsewhere in Europe.)
Asked what influence the Magnitsky Law would have within Russia, Pavel Khodorkovsky—human rights advocate and son of Mikhail Khodorkovsky—answers via e-mail:
“These types of laws send a strong signal to those in power that they cannot continue jailing, abusing, and even killing while enjoying the pleasures of Western life bought with their corrupt gains. The bill hits them [Russian officials] where it hurts.”
Despite support in Congress, prospects of the bill being signed into law are tenuous. The Obama Administration is weary the law may have a pernicious effect on the so-called “Russian-American reset.” The administration points out that individuals involved in the murder of Sergei Magnitsky have already been placed on an unpublished visa restriction list. Browder and supporters of the Magnitsky Law argue the secret list is not enough.
Browder is certain that if the Magnitsky act gets past Congress, election year politics will help his cause.
“Obama’s not going to veto this legislation in an election year. It would be political suicide,” Browder says.
Advocates of the Magnitsky cause are hoping he’s right.
Michael Zelenko is an Editorial Assistant at World Policy Journal.
[Photo courtesy of Shutterstock]