Russian lawyer Sergei Magnitsky has been found guilty of tax fraud by a Moscow court. The details of that case render the decision questionable; if it were not so tragic, the decision itself would be a farce.
Magnitsky was found guilty on July 11, nearly four years after he died in a Russian prison, virtually certainly as a result of abuse he had endured at the hands of his captors.
Sergei Magnitsky’s trial and conviction was, as one of his friends and defenders pointed out, “one of the most shameful moments for Russia since the days of Joseph Stalin.”
Magnitsky was an auditor for Hermitage Capital Management, a London-based hedge fund that did business in Russia. In 2008, he discovered and reported the theft of more than $200 million in funds. It was a complicated scam. Russian law enforcement and tax officials accused Hermitage of tax evasion.
Then, those officials used documents obtained during that investigation to send hundreds of millions of dollars of tax refunds to co-conspirators at affiliated companies. The officials then spirited the money overseas. For uncovering the massive fraud, Magnitsky himself was arrested for tax evasion and jailed.
The charges against him included hiring individuals in a legal Russian offshore tax haven who were classified as “disabled,” which entitled the company to tax benefits.
Magnitsky defended himself by pointing out that all the tax decisions were legal and that the people hired were genuine employees, not part of a tax avoidance scheme.
While in prison, Magnitsky died of pancreatitis in 2009. A subsequent investigation by Russia’s own presidential human rights commission determined that he had been badly beaten while in prison and denied medical care.
His death became an international cause celebre. The United States Congress passed the Sergei Magnitsky Act, which blacklisted Russian officials accused of complicity in the case, hit them with financial sanctions and refused them entry into the U.S. The Russian Duma (parliament) responded with a blacklist of its own against U.S. officials it accused of human rights violations. But it also concluded that tit-for-tat blacklists were an insufficient response and felt compelled to up the ante.
In a move as absurd as it was needlessly cruel, the Duma barred Americans from adopting Russian orphans, punishing two entirely separate — and innocent — groups of people.
Any hope of justice for Magnitsky has been abandoned. The prison doctor accused of negligence in his death was acquitted. The subsequent investigation into his death was dropped for “lack of evidence of a crime.”
Meanwhile, the CEO of Hermitage Capital Management, Mr. William Browder, was also tried in absentia and found guilty of tax fraud at the same trial as Magnitsky, and sentenced to nine years in prison. (In a moment of sanity, the court concluded there was no point in sentencing Magnitsky to prison time.)
Mr. Browder has denied the charges and said the trial was politically motivated. He has vowed to appeal the case and fight for justice for Magnitsky. It is indicative of the Russian case that Interpol rejected a warrant for Mr. Browder and deleted all information it had on him because it concluded that the case against him “was of a predominantly political nature.”
It is difficult to understand Russian motivations. Officials are plainly embarrassed that their scam was uncovered and that their misdeeds received international censure. But they have not been reprimanded nor have they been stripped of their ill-gotten gains.
The ongoing vendetta against Magnitsky only focuses attention on this case and the lengths to which his antagonists are prepared to go to darken his reputation — nearly four years after his death — magnify the injustice. Moreover, now the entire Russian legal and law enforcement system looks complicit — and by extension, the political system too, as no case of this nature could proceed without approval from the highest levels of the Russian government.
There appears to be utter indifference to the damage this case is doing to Russia’s international image and sheer delight in the distance that the possessors of power in Russia can go to punish those who defy them.
The entire judicial process in this case suggests that the driving force in Russia is the pique and raw emotional satisfaction of besting once again a man who was a thorn in the side of a corrupt nomenklatura. It should unnerve anyone who wishes to do business in Russia and undermine their confidence in the rule of law that is supposed to protect their investment.
By all accounts, Sergei Magnitsky’s only crime was doing his job as defined by the business code of Russia and upholding his responsibility as an auditor to his employers. For that he was imprisoned, beaten and denied medical care.
Together they cost him his life. The retribution that has been exacted against him for doing his job defies logic and reason. His treatment goes beyond tragedy.