Death of lawyer raises new questions in Russian scandal

November 17, 2009

You might think that the scandal involving Hermitage Capital in Russia couldn’t get any more perturbing. If you have been following the case, you’ll be aware that the British investment fund, managed by American-born financier William Browder, has repeatedly accused Russian criminals and corrupt officials of stealing $230 million in funds from the Russian budget.


Now there are more serious questions for the Russian authorities. Today the Russian Interior Ministry revealed that Sergei Magnitsky, a lawyer acting for Hermitage who was arrested a year ago, has died in prison at the age of 37. They say that he died from “toxic shock and a heart attack”.


Over recent weeks Hermitage has complained that Magnitsky was kept in inhumane conditions and denied medical treatment despite deteriorating health. A copy of an official complaint by Magnitsky, submitted in September, was published by Hermitage immediately after his death. The Interior Ministry, however, stated today that Magnitsky had never complained about his health.


The news of Magnitsky’s death is a personal shock, because I met with him just a few weeks before his arrest last year. I was working on a Business Week story about suspicious financial dealings at two Russian companies, which had extraordinary similarities with the case publicized by Hermitage. Magnitsky was helpful but declined to comment for my story, citing fears for his personal safety.


He did, however, stick his neck out by testifying to the Russian authorities on behalf of Hermitage. According to subsequent testimony by Browder in the US, Magnitsky provided three witness statements to the Russian authorities, which included allegations against members of the Russian police. Shortly afterwards, Magnitsky was himself arrested in connection with an unrelated case of alleged tax evasion dating from several years ago. Since then he has been in detention awaiting trial.


In January, in an article in Business Week, I drew attention to Magnitsky’s case, noting that he was one of several lawyers working for Hermitage who had simultaneously become the target of unrelated criminal investigations. Magnitsky’s employer Jamison Firestone spoke to me about the risks which, he said, Russian lawyers run in such cases. “At worst, you will end up in prison, in exile, or dead,” he said.


Magnitsky’s death may draw more attention to the whole extraordinary Hermitage saga. This is still remarkably little known inside Russia, even though the central claim made by Hermitage – that a criminal conspiracy stole hundreds of millions of dollars from the Russian budget in 2007 – has since been quietly confirmed by the Russian authorities. They have charged only one person with this fraud, saying that he acted together with “persons unknown”.


Commenting on the Hermitage case last week, Dmitry Peskov, the spokesman for the Russian Prime Minister Vladimir Putin, said that it was “nothing special”.


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