Tuesday, 16 August 2011

Magnitsky Report

click to enlarge and read the fine print
image source: http://zed244.wordpress.com/2010/07/20/%E2%80%9Cnashi%E2%80%9D-chicago-style-updated/

1. Magnitsky was an accountant who died in Russian prison in November 2009 under unclear circumstances, while under detention for tax fraud on behalf of his client, Hermitage Capital.

Sergei Leonidovich Magnitsky was a Russian accountant in the employ of Firestone Duncan. Based out of Moscow, Firestone Duncan is a law and audit firm specializing in servicing the specialized legal, tax, accounting, and audit needs of foreign ventures doing business in Russia or with Russian parties. Magnitsky is almost always presented as a lawyer, which brings him under the protection of the attorney-client privilege. However as an accountant, no such protection exists. We have read countless times that Magnitsky was a lawyer. Lawyer lawyer lawyer. Sometimes we read he is a lawyer and accountant, acknowledging his accountant's training as a second mention. The half-truth about his role is central to the narrative. Whether he was a lawyer or accountant in this case changes everything.


At the time of his death, Magnitsky was in prison for tax evasion on behalf of one of his clients, Hermitage Capital. Hermitage was founded by William Browder and Edmond Safra. Safra, a well known Sephardi Jewish philanthropist, financed the construction and renovation of synagogues worldwide. Amongst his other financings were schools and hospitals exclusively of benefit to Israelis. He was murdered in December of 1999 during a deliberate act of arson, just after selling the ownership of Heritage to HSBC, one of the biggest banking groups in the world. Five years later Hermitage was hugely successful.

Browder portrays himself as an American investor from Chicago with British citizenship. However, Browder's grandmother was a Russian Jewess named Raisa Irene Berkman. Jewish lineage is traced on the mother's side. Therefore, according to Jewish custom, Browder is Jewish. Nonetheless, Browder presents himself as an American investor from the midwest, a self-made man bravely battling Russian corruption -- the kind of story that appeals to certain Americans.



In fact, Browder's family history includes his grandfather, Earl Browder, Raisa's husband and leader of the American Communist Party, and in addition, through Earl Browder and his wives and a niece, ties to Soviet intelligence. See here, page 15. Also see Venona files: here, here, here here and here. Which is simply to point out the family history of DECEPTION, ESPIONAGE, and COMMUNISM in the Browder family tree. As a result of these family ties to the intelligence community, we expect that Browder probably has connections to the intelligence world, in addition to his connections to the banking world.

In reviewing the stories of the Safra murder, as well as another associate of Browder who died in suspicious circumstances, Edouard Stern, it becomes very clear that these people -- Browder's close partners and associates -- are extremely wealthy people. Stern, for instance, married into the Lazard family, one of the top banking families of the world. These are Browder's peers. Stern was supposed to meet Browder the morning he was discovered dead in a latex bodysuit in his penthouse Geneva apartment, a murder which shocked the financial elite. Many people thought Safra and Stern were Russian mafia hits related to business deals, but both mysteries were supposedly solved otherwise.

Browder is deeply connected.

Meanwhile a cottage industry has sprung up around Sergei Magnitsky's death, and the main purpose seems to be to shine a spotlight on Russian corruption, Browder's favorite topic. Browder and Jamison Firestone, of Firestone Duncan, play an active role in the quest for justice for their friend and colleague, Sergei Magnitsky. 


On November 18, 2009, two days after Magnitsky's death, a letter was allegedly written by managing partner Jamison Firestone and issued to clients and staff of Firestone Duncan. For some reason in the letter, Firestone spelled his name erroneously as Sergey Magnitskey. How does this happen with a man you've known for 15 years, your good friend and colleague?


November 18, 2009

Dear clients, partners and friends,

On the night of November 17, 2009 we lost our colleague and friend Sergey Magnitskey. Sergey was 37.

Sergey died in police custody where he had been held almost a year without trial or bail. He was held by a group of police officers who he had testified against; a group of officers who we believe committed a crime against a client and the Russian State.

Sergey died because he would not cooperate with criminals. He was repeatedly told that if he gave false testimony against his client he would be released and he refused. As time went on his captors put him in ever worsening conditions as a means of pressuring him to cooperate. His health deteriorated and after being diagnosed by prison doctors as needing medication and an operation, the police then increased the pressure on Sergey by denying him medical treatment.
 
We knew that Sergey was ill and that he was suffering. We did not know how bad his condition was but we did our best to bring his illegal detention and his deteriorating condition to the attention of the Russian authorities and we had a lot of help on the way. Despite our efforts and the efforts of many friends, the Russian authorities did not act and Sergey died of a condition that could have been cured with a simple operation and medication.

Many of you knew Sergey professionally, some of you had the opportunity to know him on a more personal level.

Sergey was a remarkable man. Honest, decent, kind, and incredibly knowledgeable. He had faith in Russian law and in Russia. He had a quite strength of character and in the end he maintained his integrity under impossible conditions.

There is a cry of shock and outrage in the press, both in Russia and abroad, and we shall add our voices to it. Like Sergey we believe that rule of law is worth fighting for and we shall do our best to see that his death has some meaning.

On a more personal level, we have lost a great friend; someone we all admired and the kind of person that Russia needs more of. We will miss him greatly. Sergey is survived by his mother, his wife and his two children. Their financial needs will be taken care of. It is the least we can do for our friend.

Respectfully,

Firestone Duncan
Ah, the rule of law -- always worth fighting for until the moment one gets pinched on the ass.

The Firestone letter lays out a case that Sergei's health deteriorated as a means of pressuring him to testify against his client, Browder. As it turns out, the cause of death is still not quite clear after all this time. Nor is it clear whether Magnitsky was healthy when he entered prison. There are many conflicting statements which, in itself, indicates that some parties want to muddy the waters and create confusion.

2. There is considerable confusion regarding the circumstances of Magnitsky's death.


Magnitsky may have had diabetes, chronic active hepatitis, and secondary cardiomyopathy.
He may have died from untreated gallbladder disease, calculous cholecystitis and acute pancreatitis.
He may have been beaten to death.
He may have had a heart attack, the "official" cause of death.


Magnitsky's supporters NOW focus on the untreated gallbladder disease, and the beating he allegedly received just before death, while admitting that he did have cardiomyopathy -- an enlarged heart -- which is a very serious underlying condition. Their story has changed over time. From the letter above, written two days after his death, they seemed confident that, "Sergey died of a condition that could have been cured with a simple operation and medication." The letter makes no mention of him being beaten. That would come later.

Caption reads (translation): "Sergei Magnitsky. Funeral. Pay attention to your hands"
http://newtimes.ru/articles/detail/11454




3. There are TWO competing investigations into the Magnitsky death. The official one comes from The Investigative Committee of the Russian Federation. This investigation gets very little press while coming under constant attack from the other investigation, the so-called "independent" investigation, run by a citizen's group / human rights organization with the official sanction of President Medvedev: the President's Human Rights Council report. The two investigations are generally at odds. Browder and Firestone support the "independent" investigation. The Investigative Committee dismisses it. News reports further add to the confusion by referring to the "independent" report as the President's report, and in general using terms that conflate and obscure the fact that there are TWO competing investigations.

In doc­u­ments issued on 14 July 2011, Inves­ti­ga­tor Boris Kibis of the Cen­tral Fed­eral Dis­trict of the Russ­ian Inte­rior Min­istry stated that the offi­cial posi­tion of the Russ­ian Inte­rior Min­istry is that the President’s Human Rights Com­mis­sion report was “inad­mis­si­ble” and the offi­cials in the Mag­nit­sky case have com­mit­ted no wrong­do­ing. Fur­ther­more, Kibis con­cluded there is no basis to open a crim­i­nal case against them....These lat­est con­clu­sions by the Russ­ian Inte­rior Min­istry fully con­tra­dict the find­ings by the President’s Human Rights Coun­cil, which deter­mined Mag­nit­sky was arrested unlaw­fully, denied med­ical care, and beaten to death in cus­tody. The Human Rights Coun­cil fur­ther con­cluded that the $230 mil­lion theft from the Russ­ian Trea­sury that was per­pe­trated by Inte­rior Min­istry offi­cials – as exposed by Mag­nit­sky prior to his arrest and death – has not been prop­erly investigated. Russian Interior Ministry Rejects the Findings of President Medvedev's Human Rights Council on the Magnitsky Case, 8/2/11

Unfortunately, we can't find the "documents issued on July 14, 2011" because the documents are not press releases but rather letters addressed to Browder's lawyers, and to our knowledge they have not been released in full or even authenticated by the Russian Interior Ministry.

A New York Times story published in December 2010 reveals many interesting details about the case, while promoting the findings of the scrappy, underdog human rights panel.


A citizen watchdog group took the lead by starting an independent investigation. Heading up this "obscure oversight panel" is a veteran human rights activist named Valery V. Borshchev. Borshchev has become a prominent figure in news coverage of the case. This "obscure oversight panel" became the President's Human Rights Council.

In fact, as the NYT article explains, Medvedev demanded that an investigation commence, and this independent group headed up by Borshchev used that Medvedev announcement as an "umbrella" protection to go into the prison and demand access. Thus did Medvedev facilitate the private inquiry which now opposes the official inquiry.

In a country ruled more by commands than by laws, a command had gone out: This time someone would have to be punished.
So the inspectors walked into Butyrskaya with uncommon confidence.
“We could cover ourselves with this comment and say, ‘The president demanded an investigation,’ ” said Lyubov V. Volkova, deputy head of the panel, known as the Public Oversight Commission. “It was like an umbrella. We could go in and say, show us this, show us that. We are under this umbrella.”

That was very helpful of Mr. Medvedev, or it was very brazen of the panel, or both. Certainly an investigation was already underway by the Russian authorities. But since Magnitsky died in prison, the Russian authorities were under accusation and therefore Browder and Firestone jumped on the need for an "independent" investigation. Lucky for them Mr. Borshchev and his scrappy team of old ladies were there to help.


We think Mr. Borshchev makes for a very good gatekeeper. Mr. Borshchev, who happens to have a long record of supporting certain causes.

4. We do not know what happened to Magnitsky in the final hours. People behaved strangely. Basic facts are in dispute. Information has gone missing.

According to the NYT article, one of the doctors who saw Magnitsky the Friday before he died (he died the following Monday) thought that he had acute pancreatitis. She went home for the weekend. This unidentified female doctor transferred Magnitsky to another prison on Monday, Matrosskaya Tishina prison, where he met a surgeon, Dr. Aleksandra V. Gaus, who noted his symptoms of acute pancreatitis and prepared to send him for treatment. However at the last moment, before sending the violently ill man for treatment, something strange happened. Dr. Gaus changed her mind.

At 7 p.m., Dr. Gaus said, he started to act erratically, and she changed her mind, determining that he was suffering from “acute psychosis and persecutory delusions.” She called a team of eight guards to forcibly subdue him, and they handcuffed him to the bed in an isolation cell to wait for a psychiatric emergency team. An hour and a half later, officials said, he collapsed when the psychiatrist was examining him, and was rushed to intensive care for resuscitation. He was declared dead at 9:50 p.m.
Mr. Borshchev was mulling over this account when he got a startling phone call. A few days earlier, he had left his card for the psychiatrist who was present at Mr. Magnitsky’s death. On the phone was the psychiatrist, Dr. Vitaly V. Kornilov, who told a different story: He and his team had been forced to wait at the clinic’s outer gates for a full hour — roughly from 8 until 9 p.m. — before they were allowed inside.
That is most interesting. Dr. Gaus changed her mind about treating him for his acute pancreatitis and ordered him handcuffed to a bed to await a team of psychiatrists, due to the fact that he was behaving erratically. The team reportedly took a long time to arrive. After 90 minutes he collapsed and died, reportedly while being examined by a psychiatrist, Dr. Vitaly Kornilov, who later told Borshchev that he was not examining Magnitsky when he died because he was forced to wait outside by the prison staff.

In another account of the case, we read that Magnitsky's condition deteriorated on the ambulance ride from one prison to the other, indicating that something unusual may have happened to him in the ambulance....?

By November 2009, he got worse, and doctors decided to transfer him back to Matrosskya Tishina for a more qualified treatment. Magnitsky got to the ambulance on his feet, and was feeling fairly well. Upon arrival, he suddenly fell into a fit of paranoid delusion; his condition quickly deteriorated.

Interestingly, the Russian authorities have recently charged two other doctors in the case with negligence and carelessness: Larisa Litinova and Dmitry Kratov. Others may be charged. These two doctors are on the Cardin list of 60 Russian officials subject to travel bans and asset freezes by the US.

WHY would Magnitsky suddenly start behaving as though suffering from acute psychosis? Why did Dr. Gaus not proceed to transfer the acutely ill man to hospital? Were his symptoms caused by severe pain or by something else? Could Dr. Gaus or someone else have drugged Magnitsky, causing him to have a psychotic episode and causing his death from heart failure? Who else had access to Magnitsky? Who was with him in the ambulance? Was the psychiatrist Kornilov present with Magnitsky at the time of death, or was he detained at the gates?


According to the NYT, the Investigative Committee says (no link from the NYT) that a coroner examined Magnitsky's body 12 hours after death and found his death "sudden and unpredictable as a lightning strike." The cause: heart failure due to dilated cardiomyopathy. Doctors found no evidence of pancreatitis. Dozens of doctors examined the case and found that, “The drawbacks in medical aid given to Magnitsky have no connection to his death.” To be clear, they seem to admit that he suffered drawbacks in medical aid, but that these lapses did not cause his death. Thus, SOMETHING ELSE must have caused his death. Nonetheless, that could not be determined either, due to the many contradictory statements and actions in the weeks before his death, such as:

  • None of the doctors showed concern over his heart, and diagnostic work done three weeks previous showed no heart disease.
  • No blood samples were taken when he arrived at the hospital, and little toxicology screening was done after his death.
Regrettable, especially about the toxicology screening. Also, confusing!

So it is difficult to know whether his symptoms were caused by septic shock, an overdose of some agent, or some other form of poisoning. And there was little explanation for the fact that he had been left in a cell for more than an hour in a state of acute distress.
It would seem to us, based on the facts as far as we can ascertain them, that poisoning can not be ruled out. In fact, the Moscow Times noted in July that Russians speculate about a possible doctors' plot. Note Borshchev still pushing for more people to be punished, including Alexei Anichin, who just a few weeks later was reassigned by Medvedev.

Russia’s Investigative Committee has blamed prison doctors for the death of lawyer Sergei Magnitsky – the first time the country’s law enforcement agencies have admitted he was killed unlawfully.

The announcement is prompting Russian media to speculate that a new “doctors’ plot” is being hatched to find a scapegoat in the case – a reference to Stalin’s last purge shortly before his death in 1953, in which Jewish doctors were accused of trying to poison the dictator.... “It was said earlier that [Magnitsky] died on his own, that nobody was to blame. Now it is at least acknowledged that he wasn’t provided with medical care,” Valery Borshchev, a member of the Moscow Helsinki Group, told The Moscow News. “Now the doctors’ fault is admitted, which is right because they are indeed guilty. But it’s still not enough. The investigators are to blame too, including Investigation Committee [official] Alexei Anichin, Matrosskaya Tishina governor Alexei Potapenko and Butyrka prison governor Dmitry Komnov.”
Borshchev said law enforcement agencies had yet to properly consider evidence that Magintsky was beaten to death in jail, and to probe officials involved in investigating Magnitsky’s death who themselves were accused by Magnitsky and Browder of fraud.
However, we must ask if some of these doctors did indeed cause Magnitsky's death, and if so, which ones, and if so, CUI BONO?

5. Contrary to the cottage industry narrative about the Russian authorities causing Magnitsky's death to cover up their own corruption, the Investigative Committee had a strong case against Magnitsky. The case ended upon his death, which was obviously a bad development for the Russian government. Bill Browder, on the other hand, had a motive to see Magnitsky dead: self-preservation. Browder gained from Magnitsky's death. The case against Magnitsky ended, and in addition, the suspicious death began a whole new rousing round of Russian Corruption.

 

The case against Magnitsky ENDED upon his death, ending the case prepared by the Russian government. Although the Russian government has very recently decided to reopen the case, which we expect to keep things interesting. Especially since, according to reports summarized at Russian Mafia, the Interior Ministry had a very strong case against Magnitsky.
In “Hermitage” it was thought that Magnitsky in prison was put under pressure to make him testify against Browder, but he did not give up, and he paid for this. Colleagues of Magnitsky required attracting to criminal liability for defamation the Deputy of Interior Minister Alexey Anichin. After the death of Magnitsky, Anichin stated that all charges against the late are almost proven, but there was no court, and therefore he had no right to say this publicly.
Source: "Kommersant" from 05/07/2010
Perhaps it comes as no surprise that Mr. Anichin has recently been reassigned by Mr. Medvedev. He is also on the Cardin list of Russian officials banned in the US for complicity in Magnitsky's death. Is Mr. Anichin a corrupt official, or simply a competent one?

President Dmitry Medvedev has replaced several top officials in the Interior Ministry over the weekend in one of the biggest reshuffles the ministry has seen in recent years.
Three of the four dismissed generals are Interior Minister Rashid Nurgaliyev’s deputies: first deputy Yevgeny Shkolov, criminal police chief Mikhail Sukhodolsky and the head of the Interior Ministry’s Investigative Committee, Alexei Anichin.
Anichin has been named as a key figure in the case of Hermitage lawyer Sergei Magnitsky, who died in 2009, sparking an international outcry. His name has appeared in a list from US Senator Ben Cardin of allegedly corrupt Russian officials who should be denied US visas. In the list, Anichin is described as having “authorized a repressive criminal case against… Magnitsky on fabricated grounds.”
To help you decide, our team here at Suspicious Deaths has uncovered several sources for the story NOT being told: the case against Magnitsky. We encourage readers to visit these links. The case is confusing. It's a lot more confusing than Mr. Browder and Mr. Firestone would have you think, seeing as they and Mr. Magnitsky were all very busy managing the confusing Hermitage empire of shell companies and disabled employees.

http://marknesop.wordpress.com/2011/01/19/sergei-magnitsky-bill-browder-hermitage-capital-management-and-wondrous-metamorphoses/ -- EXCELLENT SUMMARY AND OCCAM'S RAZOR ANALYSIS

http://zed244.wordpress.com/2010/07/20/%E2%80%9Cnashi%E2%80%9D-chicago-style-updated/ -- RUSSIAN BLOGGER WHO CREATED THE BROWDER DOLLAR

http://translate.google.com/translate?hl=en&sl=ru&tl=en&u=http%3A%2F%2Fcompromat.ru%2Fpage_23653.htm -- EXTENSIVE COVERAGE ON THE RIGHT SIDEBAR

http://www.workoninternet.com/business/reviews/computers-internet/software-services/86891-law-firm.html -- EXCELLENT SHORT SUMMARY


http://75.126.244.46/person.php?id=159 -- COMPREHENSIVE DOSSIER ON BROWDER

http://sites.google.com/site/rusmafiaeng287/novosti/2010-08-06jamisonreedthenobleoutlawjamisonreedfirestone -- INSIDER ACCOUNT?

Just this past November, Russian authorities shook another witness out of the bushes in Ukraine, Vyacheslav Khlebnikov, general director of a Tatarstan-based company who confessed and implicated Magnitsky. Team Hermitage denies the charges and calls Khlebnikov a criminal.

The same week Russian police spokesperson Irina Dudkina gave a press conference in which she explained the evidence against Magnitsky:

Russian prosecutors insisted on Monday that Sergei Magnitsky, the lawyer who defended a British hedge fund in Russian courts in a tax evasion case, was the financial mastermind behind a huge fraud, and not just a lawyer.
"Magnitsky was an economist and worked as an accountant and auditor. In this capacity he devised tax evasion schemes," police spokesperson Irina Dudkina said at a press conference.

Dudkina presented charts and other evidence at the press conference.

Irina Dudkina, spokesperson for Russian police, presenting evidence against Magnitsky at a press conference on 11/16/10. source: http://www.itnsource.com/shotlist/RTV/2010/11/16/RTV2929410/?v=0&a=1

Story: On the eve of the anniversary of Hermitage Capital lawyer Sergei Magnitsky's death in a Russian prison, Russia's Interior Ministry reiterated its position that Magnitsky was not a whistleblower, but himself the author of a scheme to cheat the Russian government out of 5.6 billion rubles (180 million USD) in tax revenue.
The 37-year-old anti-corruption lawyer, who said he had discovered Hermitage-owned companies had been raided by crooked cops and used to defraud the Russian government of 230 million USD in taxes, was arrested in the summer of 2008 and placed in a cramped cell where rights advocates say he was denied medical care. Magnitsky died in Moscow's 'Matrosskaya Tishina' pre-trial detention centre on November 16, 2009.
Ministry spokesman Irina Dudkina on Monday (November 15) revealed scans of documents she said Magnitsky had forged, complete with official stamps bearing the name of his company "Duncan Firestone". She also showed a large chart outlining the different banks and companies she said helped launder money in schemes in which he allegedly participated.
"In this case, Magnitsky was an accountant and took part in developing schemes for tax evasion. That 's why it is impossible in this case to maintain that he was just carrying out orders from his employers without realizing the final goal of his activities. He was fully informed of what they were trying to achieve," Dudkina said.
Magnitsky's death drew international attention, prompting Russian President Dmitry Medvedev to push through a law allowing suspects in economic crimes to be released on bail. Last Friday (November 12), the anti-corruption group Transparency International awarded Magnitsky its "Integrity Award."
Dudkina did answer a question on the investigation into Magnitsky's death, saying experts confirmed he died of heart failure, and further investigation results would be published by the government's committee of investigation.

From the above links we can glean certain details of the case against Magnitsky.


We learn that Browder hired expensive Russian lawyers who could have had Magnitsky moved, but did nothing.
According to a Latin wisdom: “done by the one who profits.” Dead Magnitsky could bring the dividends only to his former employer, owner of the Investment Fund “Hermitage Capital Management” William Browder.  From the safety of his London location, Browder hired influential attorneys for Magnitsky from the Moscow-based law firm “Gridnev and Partners”.  These high-profile lawyers would have no problem arranging better conditions for Magnitsky in jail, but they did not spend a dime on it.  Their real job was not to save Magnitsky, instead they were hired to protect Browder.  Before Magnitsky died, no one spoke about his indictment.  Browder and the lawyers made sure not to attract media’s attention to the case.  After Magnitsky’s death, however, Browder made him a scapegoat.


We learn that Browder and Magnitsky hired disabled people and Afghan veterans as fake "financial analysts," destitute people, paying them about $16 dollars a month, and collecting government subsidies for creating jobs for veterans and the disabled.
Using these people Browder made millions for himself, and created an investment portfolio worth 4 billion dollars.  He paid the invalids 500 rubles a month (about $16) when minimum legal wage was 4,000 rubles (about $130).   Now these people are considered criminals and they are testifying against him.
Here is a good summary of the case. Note the EVIDENCE.

Hermitage worked in Russia through a network of around 20 companies that were scattered throughout Russia. The attention of the police was drawn to those registered in Kalmykia, a local offshore zone at the time. All foreign investors encountered the same problem in 1997, when they were forbidden from trading in Gazprom stock on the Russian stock exchange. They could still buy it legally, as Gazprom ADR were traded in London, but the difference between quotes was more than 333% when the ADR were initially issued. The ban was imposed in order to help the government consolidate ownership of the gas giant. Such a promising profit margin made foreign investors look for alternatives, and they were easily found. “Grey” schemes of cross-ownership were widely used, and Hermitage was no exception. They opened two companies, “Saturn Investments” and “Dalnaya Step”, in Kalmykia; Browder was appointed CEO of both the companies. In order to minimize taxes they hired 4 disabled persons as financial analysts, 2 for each company, which made the companies eligible for additional tax remissions. One of the analysts turned out to be mentally handicapped – apparently this is the secret to beat Wall Street, I’m just little surprised that Goldman Sachs and Bank of America don’t use this winning strategy. As a result, companies paid only a 5.5% tax rate, instead of a full 35%. Thus, Hermitage violated the following laws: 1) the ban on trading in Gazprom stocks; 2) the requirements of the special tax zone, as none of the profits were invested in Kalmykia; 3) the application of the tax remissions, as all the disabled persons were on the payroll nominally (here are their testimonies: 1,2,3,4). The whole scheme was developed by Magnitsky himself; all entries in disabled persons’ employment record books were made in his handwriting, and signed by Browder (1,2). Later, the description of the scheme was found in Magnitsky’s seized computer. Hermitage claims that they weren’t involved in tax evasion, providing as a proof the stamp of the local tax office on their tax declaration. But that doesn’t make the scheme they were using legal, it simply meant that taxes were calculated correctly, according to the rate chosen by the taxpayer.

Browder set up companies as special-purpose vehicles in the offshore drilling territory of Kalmykia. He put his foreign investors money in these companies and bought the Gazprom shares at a low price, skirting the rules on foreign ownership of Gazprom stock.

Through this scheme, instead of the assessed 15% tax on dividends, he paid only 5%.  He avoided the 24% regional tax on income, and to cut the Federal tax in half, he “hired” the veterans and the disabled.  As a result, he paid 5.5% to the Russian Treasury instead of 38%.

Five-point-five percent instead of thirty-eight percent? Sounds like TAX EVASION to us. Maybe we misunderstand. But we presume these are the sorts of things discovered and documented by the Russian Interior Ministry, by the people on Ben Cardin's list.


Wait there's more.
From just two of his Kalmyk firms Saturn Investments and Far Steppe, Browder was able to obtain fraudulent tax refunds from the Russian Treasury for $20 million.  There are also Orient K, Oasis M, Reland, Cameo and others that no one looked into.  But Browder did not only cheat Russia.  He also cheated his own investors.  In the memorandum of the investment fund Hermitage Capital Management, Browder declared to his investors that the taxes were 38%.
Browder was able to close the Saturn Investments’ case with the help of bribing, but he wasn’t so lucky with Far Steppe, the judge handling the case turned out to be an honest one. So Browder filed bankruptcy for Far Steppe and stole the money of his investors by moving it through two small banks into “temporary” companies.  $25.8 million were lost in Browder’s endless Kalmyk Steppe.
Stealing from the Russian people... stealing from his investors..... ?

We wonder who these investors might be and whether they would appreciate such behavior. It seems odd that we don't hear anything about the investors getting screwed.

We learn that some of the money used to set up these companies came from NY banks.
What exactly was Browder’s “business” about?  Through these special-purpose Kalmyk firms he purchased papers of strategic Russian companies: Sberbank, Surgut Neftegaz, Rosneft, Gazprom. The money for this came not  only from the Investment fund Hermitage Capital, but also from mysterious sponsors in New York, whose address matches with the corporate headquarters address of CitiBank, which is known for its connections to FBI.  When Browder gained control of majority of stock of the Russian Corporations, he started blackmailing them with lawsuits and attempting to control their financial operations.  Browder prohibited Sberbank from issuing additional shares.  He did not let Rosneft raise its capital and interfered during its merge with Ugansk Neftegaz. He forced Surgutneftegaz to sell its dominant shareholders package.  Just one of Browder’s Kalmyk companies, Reland, filed 4 lawsuits against Gazprom. Browder’s business strategy: the worst Russian economy is doing, the better it is for his American sponsors.
In November of 2005 Browder was expelled from Russia and refused a re-entry visa. However as Head of the Moscow branch of Hermitage Capital, he found a way to work in Russia on a guest visa. He considered it unnecessary to comply with the laws and rules of this country. He was sure that he can solve all his problems with money. The criminal case against Browder for unpaid taxes in Kalmykia was opened in 2004. Eight times he was able to close it with bribes. Only in four years, in February of 2008 the case was finally reopened. He is scared to death of the open trial and international warrant, that’s why from his faraway London location he announced that anybody who had anything to do with discovering his fraudulent and criminal activities are corrupted and are Magnitsky’s murderers. He makes media appearances, and with his ally American Senator Benjamin Cardin he creates “blacklists”.  Remarkably, he developed an amnesia regarding the disabled Russian veterans that he used and incriminated. But the name of Magnitsky, whom he left to die in jail, he repeats like a magic spell, every chance he gets. While Sergei Magnitsky was locked up in jail, Browder traveled the world. He visited South Africa and Arab Emirates. In the luxurious Carlton Towers hotel he held an extravagant farewell for the vanished in prison Magnitsky.
Today Browder keeps lying to his investors and to the entire world, covering up his tax fraud and criminal activity with Magnitsky’s name.  This is called the bloody PR…
6. The tax refund of $230 million is at the center of the case. Browder claims it was stolen by corrupt Russian officials, high level operatives basically, who raided Firestone Duncan's offices, stole company stamps, used them to set up false documents, then applied for a refund from the tax office, which refund was processed with unheard of speed.

Russian police say they have closed the case file on the country's largest tax fraud. It occurred on December 24 in 2007, when Moscow tax officials approved a same-day refund of 5.4 billion rubles -- or $230 million -- to a gang masquerading as officers of Hermitage Capital, once the largest hedge-fund manager in Russia and founded by financiers Edmond Safra and Bill Browder. Interior Ministry police claim the complex scam was pulled off by a sawmill worker and a burglar, both currently serving five-year sentences, in cahoots with four others, all of whom are now dead. One had a fatal heart attack before the crime took place. A second fell from his balcony. The third plummeted out a penthouse window. And then there was Sergei Magnitsky, a 37-year-old lawyer for Hermitage who died in prison after complaining police were torturing him to retract evidence that the $230 million had been stolen by a ring of corrupt tax officials, Interior Ministry cops and career criminals. Crime and Punishment in Putin's Russia, April 2011
Almost all the money is still missing. Irina Dudkina, the spokeswoman mentioned above, told Barron's that bank records were all destroyed in a truck that crashed and exploded in 2008. What are the odds?! It was Browder who pushed for the investigation, Browder who wants to get to the bottom of it all. Because he is allegedly the VICTIM of this crime. The story goes on to unpack the role of the tax official, Olga Stepanova, and her family, and how large sums of money appeared in various accounts of the Stepanovas in various places like Cyprus and Dubai.

The money arrived at Credit Suisse through a globe-spanning trail of shell companies created by a Who's Who of offshore-secrecy consultants -- including a New Zealand agent whose operation we've previously found amid North Korean arms trafficking and money laundering for a Mexican drug cartel (see "Small New Zealand Firm's Link in Smuggling Case," Jan. 4, 2010).
That New Zealand case links to the plane seized in Thailand carrying missiles allegedly from North Korea to Iran. From there we could go into Victor Bout, Wachovia Bank, money laundering of Mexican drug money, etc. We don't have time for that but we think it's safe to say that whatever is going on with this case with Mr. Browder, it connects into other high elements of organized crime.

And so the main question here is whether Mr. Browder was a victim or was he the perpetrator of this tax fraud, availing himself of these shell companies to launder the money. 

Because if he is the perpetrator, he would presumably have people on the inside of the Russian government who would be in positions to arrange things to happen, like tax refunds, and to arrange things to disappear, like evidence, etc. That is the DEFINITION of organized crime. It is organized. There are people on the inside who make things happen officially.

BUT, would Browder the American possibly have such contacts in Russia? Based on the information we uncovered about his background and his partners, we would think YES. And we are not the only people who think that, but one has to do A LOT OF SEARCHING THROUGH THE THICK WEEDS to come to this conclusion.

In the alternate version of events that we offer for your consideration, supported by the diligent work of many others in the above links, Magnitsky was the accounting mastermind behind the tax fraud. The Russian authorities were onto Browder for years but he had bribed his way out of several earlier lawsuits. The raid at Firestone Duncan took place and various documents and seals were confiscated. All key Hermitage employees quickly left for London except Magnitsky, who was booked to leave as well but the police arrested him first. That mishap was spun as Magnitsky heroically staying behind to be the whistleblower.

We are not sure about the raid, and whether Browder had some corrupt people in on the raid, because certainly it seems that Hermitage made delicious lemonade out of those lemons. The stamps and documents were seized, which became "stolen." And from there the whole tax refund narrative became possible with the "stolen" seals. We find this account of the raid most interesting along those lines, but can't understand why the dates are completely off.

We find this Occam's razor analysis the most likely explanation for what happened -- an excellent analysis by Mark Chapman of The Kremlin Stooge blog and one of his contributors, kovane.

So representatives of HCM approached one Oktay Gasanov, whose acquaintance Semyon Korobeynikov specialized in that sort of tax scam. They created duplicates of seals (later, an expert examination showed that the stamps on the false tax rebate applications had NOT been made with the ones seized during the search of Hermitage’s office), and reregistered all three companies to Korobeynikov’s associates. One of them, Markelov, later testified that he had once met with Magnitsky, who prepared the false tax rebate applications and stamped them with the duplicate seal. HCM wanted some insurance and refused to open new accounts in Korobeynikov‘s bank, insisting on using old accounts, opened in HSBC Bank. The companies then went on with losing the bogus cases in court, creating losses. [inoculation - ed.] And that’s where Hermitage made an egregious blunder that ruined their entire ruse. The court fees were paid from the accounts in HSBC bank already AFTER Hermitage’s claim about the hijacking of Makhaon, Rilend and Parphenion. Everyone was in a bit of hurry – the tax rebate applications had to be filed before the end of the year, when suddenly in October 2007 Gasanov died of a heart attack. He was the single liaison between Hermitage and Korobeynikov, and the latter had everything he needed to organize the scam. So he decided it would be much merrier to go on without Hermitage. Such a turn of events couldn’t have made Browder happy, and HCM started ringing all the alarm bells. They quickly “investigated” the scam and wrote letters to the Investigative Committee, Prosecutor General’s Office and MVD on the 7th of December, 2007, revealing all details. But it was too late – on the 24th the tax rebate applications were filed, and on the 26th all $230 million were transferred to the accounts opened in Korobeynikov’s bank beforehand. Later, Korobeynikov died in an accident – he fell from the balcony of his country house, tying the single loose end in this case. Browder tried to force Renaissance Capital to reveal the information about the circumstances of their entities’ involvement in the similar scam, but it seems without result. The Russian police investigation only revealed additional evidence that Hermitage had had something to do with the tax fraud – the constituent documents of allegedly hijacked companies were found in possession of one of Hermitage’s lawyers. And part of the money was recovered later: only $25 million of the whole $230 million, but that’s it.
So it's still a little confusing we think, but our main goal is not to clear everything up from 7000 miles away, which we certainly can't do and will leave that to the fine journalists and bloggers who understand financial skullduggery, but we are happy to poke big holes in the Hermitage narrative. We want people to understand at least one thing: just because there's corruption in Russia, it does not follow that Bill Browder wears a fucking halo. 


So let's conclude with a little vignette about Bill Browder.....the self-made man at the center of this case.


Gideon Lichfield, a writer for the Stanford Business report, apparently attended Browder's 40th birthday party in Moscow in 2006.

As the fake Lenin declaimed, the real Browder simpered, and the virtual Browders pontificated silently around us, we watched with both amusement and embarrassment, exchanging snide jokes about his overblown ego while stuffing our faces with sushi and downing cocktails at his expense....quite a lot of people—including not a few of Browder's birthday guests—do not really like the man. Since his visa to Russia was revoked a year ago, there has been not a little schadenfreude that the upstart has finally gotten his just deserts—as well as feverish speculation about whom he finally pushed that one step too far. Browder's demeanor is a strange mix of caution and directness, like someone who is permanently ready both to be attacked and to meet it head on. But he owes his success, in large part, to an ability to make enemies without overly caring...."When you make a lot of money investing," he says, "it releases a certain chemical in your body and it's as addictive as crack cocaine."

This is the man who complains incessantly about Russian corruption, and accuses Russian officials of causing the death of Sergei Magnitsky, and gets the support of people like Senators Cardin, Kyl and Lieberman, Hillary Clinton, et. al. to make a blacklist to punish 60 high level Russian officials doing their jobs uncovering corruption in Russia, and literally causing a geopolitical upset between the US and Russia over Sergei Magnitsky. Because the Russian officials are doing a bad job? Or, are they doing their jobs too well for some people?



"The lady doth protest too much, methinks." ~ Shakespeare

12 comments:

  1. Fabulous job, AP, of collating and organising this mammoth amount of material and presenting so many conflicting reports in such a way to make it all comprehensible. Full marks!

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  2. thanks James. team effort. it took a village...

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  3. OK, let's see if this time I can get my comment through.

    I don't know how AP ever came across this suspicious death, but, for me it was an eye popper.

    At best we scratched the surface. At best.

    The suspicious and timely death of Edmond Safra alone...... I wonder about his wife?
    I wonder about the nurse that allegedly accidentally set the fire and why the original news of Safra being attacked seemed to be missing.
    His death alone reeks of coverup and complicity, but between who?
    The sale of Hermitage sure seemed to be a factor.

    As for Magnitsky he looks like the fall guy.

    All in all a very sordid affair

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  4. Oh and one more thing.
    Was thinking about Khordorkovsy/Yukos and Clearwater

    This whole affair brought that one back to my mind

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  5. Thanks for the enthusiastic plug about my brilliant analysis, but I only wrote the lead-in paragraphs; all the analysis work and research in that post at The Kremlin Stooge was actually done by kovane, a frequent commenter at my blog and a Russian living in Moscow. He does indeed do great work.

    Mark

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  6. hi Pen,

    yup the Safra death is very interesting and i am still researching along those lines.

    there's a very interesting paragraph about the wife here, scroll down about 2/3rds.

    http://www.abeldanger.net/2010/10/krayleigh-enterprises-prison-based.html

    evidently the Safra family did not approve of Lily.

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  7. Hey AP

    why does that not surprise me? about the wife?

    I was reading something somewhere about her, and how she slept through the whole attack and fire??

    Really, because according to the article the place they lived in was so big, I mean it was unimaginable how big this place is.

    And I am thinking, ah, that is a bit over the top.... Even if one doesn't hear a kerfuffle, I would think the smell of smoke would wake someone up? You know wouldn't smoke detectors go off?
    Where I live recently we have had two fires, one more then a mile away, I could smell the smoke all the way to my house.
    But the wife doesn't within a contained apartment? As mentioned, no smoke detectors blaring that piercing sound?
    Really? fishy, fishy, fishy

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  8. yes Pen, we agree about her. you can read more about her and her philanthropy here:

    http://adrianasassoon.wordpress.com/2009/05/24/nacolily-safra/

    Mark, i added kovane to the link back to your place.

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  9. Great work as always AP and team.

    BTW I see Suraci's blog is down. Nothing untoward I hope. If you read this Suraci I've always appreciated your writing and I hope you'll be back in some form.

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  10. Nice article, thanks for the information.

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  11. Yes - Hamlet, Act III scene II, i believe.

    Nice work, really thorough.

    No time for idle surfers and part timers here.

    Perfect.

    Carol x

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