If there remains any pretense that justice and rule of law exist in Moscow today, that notion should now be counted as pure fantasy. The case of Sergei Magnitsky — a senior partner at my law firm who was imprisoned, tortured, and murdered after his efforts to shed light on a massive governmental fraud by Interior Ministry officials stealing subsidiaries of my client’s company, the Hermitage Fund, and the $230 million of taxes they had paid — has illuminated the cruelty and criminality of Russian legal enforcement. And new evidence released last week on YouTube as part of the broad campaign seeking justice for Sergei, goes even further — exposing the blatant theft, impunity, and ill-gotten gains of senior Russian tax officials who were complicit in the fraud and subsequent murder of my colleague.
The very bureaucrats — government tax officials on modest salaries in Moscow Tax Office 28 — exposed by Sergei three years ago of perpetrating the massive fraud stashed millions of dollars in overseas bank accounts, created offshore companies, and purchased luxury villas in Dubai, Montenegro, and Moscow. Worse still, the Kremlin and Russian President Dmitry Medvedev, in particular, have refused — out of embarrassment, inability, culpability, or incompetence — to review and prosecute what is now overwhelming evidence of this clear crime.
When I opened my law firm, Firestone Duncan, in Moscow in 1993, I was aware of the dangers of doing business in Russia. The stories about “mafia” groups of tracksuited thugs extorting businesses were well known to me. What I never expected was that the Russian mafia would merge with the government; its members are now the same officials who are supposed to be protecting the public.
The story begins in July 2007, when Russian Interior Ministry officers Artem Kuznetsov and Pavel Karpov raided my law offices in Moscow and seized without a warrant two vanloads of documents and corporate seals (imprints that go along with the signature on any signed document in Russia) from companies belonging to my firm’s clients, including the Hermitage Fund, which had once been Russia’s largest foreign investor. At the time, one of my junior lawyers protested that their search was illegal. He was taken into a conference room by the officers and beaten so severely that he was hospitalized for three weeks.
A few months later, we learned that the materials seized by the police had been handed over to a criminal group that used them to fraudulently re-register the companies under the name of a frontman, the convicted murderer, Viktor Markelov. Markelov had been recently released from pretrial detention on an unrelated kidnapping and extortion charge involving the same officers, Kuznetsov and Karpov. The seized documents were also used to create $1 billion of fake backdated contracts. Markelov and two other ex-convicts were made directors of the re-registered companies and, through their lawyers, pleaded guilty in several regional courts to $1 billion in these fake liabilities. We learned this from a bailiff in the St. Petersburg court who called our office looking for hundreds of millions of dollars of assets to satisfy those claims.
At this point, Sergei got involved. He started investigating the scheme and, after a few weeks, pieced the story together through court records, registration files, and bank statements. He prepared a number of very detailed criminal complaints against the police officers and perpetrators involved in the massive fraud. These complaints were filed with the most senior Russian law enforcement authorities on Dec. 3, 2007. The police did nothing.