Magnitsky documentary suggests fraud, collusion between Russian officials, police detectives

MOSCOW — Shortly before the Russian government was defrauded of $230 million in 2007, the officials who approved the whopping tax refund at the heart of the scheme traveled to a sunny Mediterranean resort with the police who would later investigate the theft.

This wasn’t their first trip abroad together, nor was it the first or last scheme that would be traced back to the same set of tax officials and police, along with a banker who handled the proceeds of the thefts. Their relationship, newly revealed in travel records provided to The Washington Post, illustrates a level of collusion at the heart of the Russian government that allows corruption to flourish despite repeated official promises to vanquish it.

(Alexander Zemlianichenko/ASSOCIATED PRESS) - Nataliya Magnitskaya, mother of lawyer Sergei Magnitsky, holds a portrait of him as she speaks with the AP in Moscow on Nov. 30, 2009.

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The 2007 case, unveiled by a Russian lawyer named Sergei Magnitsky, has become widely known. Magnitsky’s death in custody in 2009 has prompted the U.S. Congress to take up a bill named in his honor that would impose sanctions on Russian officials connected to his death, freezing their assets and prohibiting visas.

Russian authorities have said the tax officials were tricked into approving a fraudulent return. The prospect of U.S. sanctions has infuriated the Russian government, which has vowed to retaliate if the law is passed.

But it had not been clear until now how close the Russian officials entangled in the Magnitsky case were to each other — that they were part of a tight group that traveled together to European capitals in between repeated multi-million-dollar scams.

“It’s about murder, it’s about corruption, it’s about a lack of rule of law, and it has come to represent a lot of what is wrong in Russia,’’ David J. Kramer, president of Freedom House in Washington, said, referring to Magnitsky’s death.

So far, the Russian tax officials and police detectives have been promoted instead of punished, even as they amassed great personal wealth on official yearly salaries of $10,000 and less. They have been protected despite a protracted campaign by Magnitsky’s employer, William Browder, founder of Hermitage Capital, one of the companies used in the tax-fraud scheme.

Browder’s persistence in pursuing his own investigation has rallied powerful advocates behind him, including Sen. Benjamin L. Cardin (D-Md.) and Sen. John McCain (R.-Ariz.). Kramer said that Browder’s efforts have revealed a level of official impunity that would otherwise have remained hidden.

McCain was present Tuesday when Browder presented the results of his latest investigation, distilled into a 17-minute video called “The Magnitsky Files: Organized Crime Inside the Russian Government.” The documentary, supported by stacks of documents that were also made available to The Post, asserts that the close-knit circle of tax officials, police and criminals stole at least $337 million between 2006 and 2007 in schemes involving fraudulent tax refunds. The $230 million Hermitage scheme was preceded by a similar fraud that netted $107 million and a failed attempt to extort $20 million that left the victim who refused to pay serving a jail sentence.