Russia, Where You Can Prosecute a Ghost

July 11, 2013
via Yulia Bragina, Sky News

The tweet containing the picture above says it all:

Today, Russian courts found deceased investment fund lawyer,  Sergei Magnitsky, guilty of tax evasion, along with his former client, William Browder (tried in absentia). Magnitsky was convicted on charges based on an investigation that he, himself, spearheaded that was based on evidence that he, himself, uncovered. He then died in prison while awaiting trial. The case is infamous, and has sparked worldwide outrage. Most notably,  the United States passed the Magnitsky act,  a law that tried to hold accountable the Russian officials who were implicated in his death.

The great irony that is echoed in this headline is that Sergei Magnitsky died the day before he was set to be released from prison because the deadline for trying Magnitsky was set to expire. In other words, the title of this piece is not tongue-in-cheek: Russia really did prosecute a ghost.

What’s missing from most news coverage of this incident, however, is that the Magnitsky case played a role in the downfall of the Serdyukov clan, a group that once held extensive power in both the interior and tax ministries.  The Interpreter’s editor, Michael Weiss, detailed the downfall of the Serdyukov clan for The Atlantic. He traces the beginning of the fall back to Anatoly Serdyukov. Serdyukov married the daughter of one of Putin’s closest friends, which sparked a significant career move. Serdyukov, a furniture salesman, was appointed as his father-in-law’s deputy at the St. Petersburg Tax Office, and then rose through to become Minister of the Russian Federal Tax Service and, eventually, Defense Minister. That was before Serdyukov cheated on his wife. Serdyukov’s 33 year-old mistress was then indicted on charges that she stole $100 million from a military real-estate company, which sparked a series of other investigations, infuriated Putin, and got Sedyukov fired.

The investigations stemming from Serdyukov’s mistress’s fraud implicated eventually unearthed a scheme perpetrated by a company called Rengaz. The Rengaz scheme was designed to benefit a company called Gazprom – the employer of Serdyukov’s father-in-law and longtime friend of Vladimir Putin , Viktor Zubkov. These investigations didn’t go far, but it was Sergei Magnistky that brought them back to life. Magnistky discovered that the fraud perpetrated against his own client, Hermitage Capital, was modeled after a tax-refund fraud pioneered by RenGaz. Furthermore, the two cases were processed by the same Tax Offices, offices filled with Serdyukov appointees.  Weiss explains that it was this discovery that ended the careers of several high-profile officials, and eventually landed Magnitsky in prison:

 “The facts uncovered by our client,” wrote Hermitage’s law firm, “suggest the that frauds detailed below would not have been possible without the direct involvement of officials from Moscow Tax Services, in particular from Moscow Tax Authorities Number 25 and 28.” Serdyukov’s old appointee Tatiana Shevtsova, who was now the deputy head of the Federal Tax Service, responded to the complaint by claiming that it didn’t concern her agency as it was alleging criminality, which was the Interior Ministry’s remit. Magnitsky then testified on June 5, 2008 and named two Interior Ministry officials — Major Pavel Karpov and Lieutenant Colonel Artem Kuznetsov — as well as active Russian judges as the key players in a conspiracy to defraud the Russian taxpayer. There followed Magnitsky’s own arrest by the Interior Ministry as a suspect as in the very crime he had exposed.

This investigation left Magnitsky dead, but it also toppled a Defense Minister, two Interior Ministers, and many inside their respective offices. However, these crimes have not been prosecuted, and Serdyukov have effectively been exonerated by both Putin and Dmitry Medvedev. And while the rest of the world is investigating the firms associated with crimes uncovered by Magnitsky, Russia has tried and convicted a ghost.

And possibly created another. The most disturbing finding in Michael Weiss’s investigation may be that Alexander Perepilichny, a healthy 44 year old who helped uncover more crimes by the syndicate that perpetrated the Hermitage case, was found dead by a roadside in the UK. Surrey police now day that the death is “not suspicious.”