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Police in Russian fraud case implicate dead lawyer

By Kathy Lally
Washington Post Foreign Service
Tuesday, November 16, 2010; A13

MOSCOW - A year ago, lawyer Sergei Magnitsky died in prison here months after testifying about police involvement in the theft of millions of dollars in tax receipts. On Monday, the police accused the dead man of that very theft.

William F. Browder, a U.S.-born investor who was Magnitsky's client, calls the accusation evil.

"It's beyond absurd, beyond cynical - it is pure evil," Browder, the head of Hermitage Capital Management, said Monday. "They are trying to blacken the name of Sergei on the anniversary of his death at their hands, accusing him of the very crime they committed."

Magnitsky died Nov. 16, 2009, at age 37, after more than a year in pretrial detention. He had not been given medical treatment, although he was suffering from pancreatitis, and a public oversight committee called the conditions of his detention "torturous."

Well before that, Browder, whose Hermitage Capital had been the largest foreign investment fund in Russia, had become a business dissident, an activist stockholder who was denied entry to the country in late 2005. Magnitsky provided legal work for Hermitage, and Browder has been tireless in his efforts to pressure Russia into pursuing those involved in Magnitsky's arrest and death.

Last year, President Dmitry A. Medvedev ordered an investigation into Magnitsky's death, and about 20 prison officials were fired, but no charges have been filed. On Monday, the Interior Ministry - the police department - informed reporters that it had thoroughly investigated during the past year and pronounced Magnitsky guilty.

The case dates to October 2007, when Magnitsky alleged that three Hermitage companies had been stolen and registered in other names, using documents police had seized in a raid on Hermitage that June. Hermitage filed three criminal complaints in early December, describing a complicated scheme involving police and fake tax deductions that would result in a tax refund of $230 million to the stolen, shell companies.

Those complaints failed to prevent the fraud, Browder said. On Dec. 24, 2007, the swindle was carried out with a $230 million tax refund - the largest ever paid in a single day.

In June 2008, Magnitsky testified that police were involved in the scheme. In November, some of the same people he accused were appointed to investigate the missing $230 million, and later that month Magnitsky was arrested. One year later, he died.

"They spent the last year trying to figure out how to make this go away," said Jamison Firestone, managing partner of Firestone Duncan, the law firm where Magnitsky worked. "Now they want to pin it on Magnitsky."

Firestone, who left Russia while Magnitsky was in prison, said Magnitsky died refusing to falsely implicate Browder and Hermitage in the scheme.

On Monday, at a Moscow news conference, Irina Dudukina, spokeswoman for the Ministry of Interior Investigative Committee, accused Magnitsky of the crime.

"Magnitsky had a degree in economics and worked as an accountant and auditor. He was not a lawyer," she said. "And as an accountant, he was developing a tax-evasion scheme."

She said results of the investigation would be sent to prosecutors for action. And she offered Browder a deal: If he repaid the missing money, she said, criminal charges against him in another tax-evasion case would be dropped.

Casting a wide web of blame, Dudukina accused Congress of interfering with the investigation. In September, after hearing passionate testimony from Browder, Sen. Benjamin L. Cardin (D-Md.) and Rep. James P. McGovern (D-Mass.) introduced bills that would bar visas for about 60 Russian officials connected to the case.

"We believe this . . . is aimed at preventing investigators from taking part in investigative actions on the territories of these countries," Dudukina said.

Last week, at a conference in Bangkok, Transparency International, a worldwide anti-corruption organization, gave Magnitsky its Integrity Award for courage in pursuing corruption.

Before that, the Interior Ministry made annual awards for Russian Police Day. Five officials whom Firestone connects to the Magnitsky case were honored for their service, including spokeswoman Dudukina.

The Interior Ministry says it will pursue the case. So does Browder, who is promoting a documentary scheduled to be shown Tuesday in the Capitol Visitors Center and at parliaments in five other countries. It's called "Justice for Sergei."

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