U.S. Traces US$7.5 Million from Russian Fraud Scheme uncovered by Magnitsky

Published: 17 April 2017

Sergei MagnitskySergei Magnitsky (Photo: VOA)

By Vanja Lakic

The U.S. Department of Justice has traced more than £6 million (US$ 7.5 million) of a $230 million tax refund fraud scheme uncovered by deceased Russian lawyer, Sergei Magnitsky, to a UK bank account, the Telegraph reported Thursday.

In 2008, Magnitsky uncovered evidence while working for Hermitage Capital that police, tax officials and judicial institutions had colluded in one of the largest corporate raids in the country’s history.

He presented documents to the Russian government showing that, with the help of Interior Ministry employees, officials from two Moscow tax bureaus and 11 judges, a convicted killer had stolen ownership of three of Hermitage Capital Management’s Russian-based holding companies and fraudulently claimed a US $230 million tax refund on their behalf according to an OCCRP report.

Soon after Magnitsky was arrested by the same police officers whom he accused of covering up the fraud. He was thrown into jail, where he died of mistreatment and inadequate medical care.

A chart from the U.S. Department of Justice obtained by the Telegraph shows funds flowing through a series of foreign companies before being channeled into three main firms including Renaissance Capital Investment Management Ltd, a Moscow-based investment bank now controlled by billionaire oligarch Mikhail Prokhorov.

Renaissance Capital, which has employed a string of KGB spies, has not been accused of being aware or complicit in the fraud against Hermitage but Hermitage’s lawyer claimed in 2009 court testimony that there was evidence to suggest that it may be "implicated in the tax rebate fraud."

Renaissance Capital declined to answer questions about the U.S. Department of Justice’s investigation but a spokesman said the firm "strongly refutes any allegation that seeks to link him [former head of the company] to any sort of malpractice."

Former British justice minister, Dominic Raab, called for UK authorities to investigate the case.

"No one wants the UK giving this kind of blood money the veneer of respectability," he said.