Sergei Magnitsky was a humble Moscow lawyer who stumbled across possibly the greatest corporate tax fraud Russia has ever known. It was a discovery that would ultimately cost him his life.His investigations uncovered a web of alleged corruption involving senior members of the police, judges, officials, lawyers and the Russian mafia. Despite death threats, he refused to leave Russia, instead deciding to probe deeper into the apparent fraud – uncovering two other suspected cases.
One of the policemen he had testified was at the heart of the crime was appointed to investigate him. Magnitsky was subsequently arrested on suspicion of tax avoidance and jailed.
He was detained while awaiting trial for a whole year. In that time, it is claimed he was denied visits from his family, and was forced into increasingly squalid cells. He apparently contracted pancreatitis and despite being in pain was allegedly repeatedly refused medical help.
On November 16, 2009, Magnitsky is said to have made one final plea to see a doctor. He was taken to a medical unit, where he was put in a straitjacket and died. Just 37, he left a wife and two children behind.
The tragic series of events can be traced back to 2007. In June that year, Hermitage Capital Management, the London-based hedge fund that was once Russia’s largest foreign investor, was raided by police on tax avoidance charges. Concerned, Hermitage’s boss, Bill Browder, called his Moscow lawyers Firestone Duncan to check. Magnitsky was one of Firestone’s top lawyers.
It took little time for Magnitsky to establish the allegations were baseless. But he didn’t stop there. After some probing, Magnitsky discovered evidence which suggested that the police had stolen the seals and documents to Hermitage’s Russian subsidiaries. He then claimed to have discovered that, through a complex series of phantom legal claims, the fake owners had recovered the $230m of tax Hermitage had paid in Russia in 2006.
The only way such a complex fraud could have been conducted, though, was with the co-operation of police, lawyers, judges, tax officials and even senior state officials.
Magnitsky’s allegations were initially dismissed. But his investigations were to prove so compelling the Russian authorities ultimately acknowledged a fraud had been committed. A sawmill foreman quietly pleaded guitly to “fraud by prior collusion by a group of persons and in an especially large amount” in relation to the case, just a month before Magnitsky’s death. The sawmill foreman subsequently testified that the police were not involved.
Magnitsky and his Hermitage colleagues believed the foreman was being made a scapegoat to protect the bigger beasts. No official inquiry has been launched into Magnitsky’s allegations. Magnitsky’s death has turned him into a martyr for truth, justice and the fight against corporate corruption in Russia. A play based on the endless notes recording his treatment in prison has been performed in Moscow. Opposition politicians in Russia have campaigned for justice. Numerous international complaints have been made against his treatment.
The US and European Union have introduced bills banning 60 Russian officials linked to the crime from entering the country. A documentary on Magnitsky’s struggle has been produced and was screened in the Houses of Parliament on the anniversary of his death. Last year, he was posthumously awarded 2010 Integrity Award by Transparency International. His friends, led by hermitage and Firestone Duncan, are continuing his fight.