MOSCOW — Few things illuminate the dark underbelly of Vladimir Putin's Russia more starkly than the fact that a man who is among the most furiously denounced by the regime, and harshly prosecuted by law enforcement, is a mild-mannered corporate lawyer who's been dead for more than two years.
The case of Sergei Magnitsky — who uncovered what might well be the crime of the century and then made the mistake of testifying about it — has grown into a huge international scandal ever since he died, under highly suspicious circumstances, in a police holding cell in November 2009.
The story of how Magnitsky exposed a vast corruption ring at the highest official levels, and then was allegedly framed, tortured and murdered, has been well documented. It is detailed in reports by Moscow's independent prison watchdog, the Kremlin's in-house human rights commission, as well as a 75-page investigation commissioned by his employer, Hermitage Capital, a London-based asset management firm founded in 1996 that remains one of the largest foreign investors in Russia.
In late January, the Harvard and Columbia business schools released what may be the definitive study of the case, which is likely to push the international outrage factor up several notches.
Largely due to the efforts of Bill Browder, Hermitage's founder who has lived in London since being denied re-entry to Russia six years ago, lawmakers in the United States, Canada and at least five European Union countries are mulling legislation that would bar a list of 60 top Russian officials allegedly involved in the case from traveling, buying property or banking in those countries. The US has already imposed visa restrictions and other penalties. Russia’s foreign minister Sergei Lavrov and chief prosecutor Yury Chaika have denounced these sanctions as "unacceptable" pressure on Russia's legal system, which could possibly undermine the delicate Obama-era "reset" of relations between Moscow and Washington.
None of the officials implicated in Magnitsky's fate have been punished. Most have been exonerated. Some have been promoted or decorated with high state awards.
Last October, vengeful Russian police opened up an unprecedented posthumous investigation of Magnitsky. Critics say the move was mainly aimed at intimidating his family and supporters, and stifling any further revelations about the abuse of private business by predatory state officials.
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Last week, Russian prosecutors declared the investigation complete and said they will soon take the case against Magnitsky to court, in what experts say will be the first public trial of a dead person in Russian history. Browder will also be tried, in absentia.
"They are trying very hard to prove Magnitsky's guilt, even from beyond the grave, as a signal to all corrupt judges and cops that they can feel safe in what they're doing," says Yana Yakovleva, chair of the Business Solidarity Foundation, a Moscow-based lobbying group.
"In this country the state considers the pockets of private business to be its own pockets, to be tapped however it likes. When I say 'state,' I don't mean a law-governed machine but rather what we have here in Russia: groups of state officials who are supposedly in public service, but who actually use their positions for self-enrichment. You can hardly call it a state."
A brazen scam
As a lawyer working for Hermitage, Magnitsky discovered what he later testified to be a vast scam on the part of top Russian officials to embezzle $230 million that the Hermitage Fund's various companies had paid in taxes to the Russian state treasury in 2006.
According to statements he made at two sessions of the Russian State Investigation Committee, the operation began with a June 2007 police raid on Hermitage's Moscow headquarters, in which the corporate charters, official seals and other basic documents of several Hermitage-linked companies were seized.
The conspirators used those documents to secretly re-register the same companies with the Russian government under the names of "new management." They applied for a full tax rebate — more than a quarter billion dollars — which was granted in a single day and sent directly to private accounts opened up by the plotters.
"This story is just the tip of a vast iceberg of corruption and criminality in the Russian government," said Browder, who recently returned to London from the World Economic Forum in Davos, where he goes each year to urge the global business elite to pressure their Russian contacts about the Magnitsky case. "The only unique thing about this case is the amount of detailed evidence (we have amassed) about how corrupt officials in the law enforcement system work. . . Since we started publicizing our findings, dozens of other victims of the same officials have come forward to share their stories. What we have learned is that the same tactics applied to Sergei have been used in every other similar case."
Crime and exoneration
Since the huge sum rebated to phony Hermitage companies disappeared from the Russian state treasury, presumably with the connivance of top police, tax and government officials, the crime might have remained secret if Magnitsky hadn't discovered the fake company registrations and unraveled the plot.
Following his first appearance before the Investigation Committee in October 2008, the Ministry of Internal Affairs, which oversees the police, ordered a group of officers to investigate the case. They turned out to be exactly the same police officers who had carried out the June 2007 seizures at Hermitage's Moscow office. In late November 2008 they arrested Magnitsky and charged him, ironically, with tax evasion.
Within a year, Magnitsky was dead. Documents compiled by the independent investigations show that during that year he was held in appalling conditions in Moscow's infamous Butyrka pre-trial detention facility, where his health deteriorated and more than 20 requests for medical attention were ignored by prison officials.
According to Valery Borshchev, head of the Public Oversight Commission, an independent watchdog mandated by Russian law to report on prison conditions — and the first independent group to look into Magnitsky's death — the denial of medical aid was consistent and probably purposeful: "The doctors in Butyrka didn't render assistance to Magnitsky because they were fulfilling the orders of the police investigator," he said. "Magnitsky died, ultimately, because the investigation created conditions resembling torture, aimed at extracting a confession of guilt from him."
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On the night that he died, prison officials kept an ambulance waiting for an hour while eight guards took Magnitsky into a small holding cell in handcuffs. Two prison doctors, who are the only ones with any connection to the case to be held accountable to any degree, stood by and did nothing. According to Borshchev, "It has been established that Magnitsky was beaten, even though he was in a critical state of health, in an effort to make him sign a document confessing his guilt. I don't think they intended to kill him but, taken all together, it led to his death."
In July last year the Kremlin's in-house human rights commission, which reports to President Dmitry Medvedev, concluded its own investigation into the case and found that Magnitsky had been illegally arrested, wrongly investigated by the same officers he had earlier accused of corruption, and beaten to death in prison. It further concluded that official bodies had resisted investigation into the fraud alleged by Magnitsky, that Russian courts had failed to provide him with proper legal redress and prison officials had covered up the circumstances of his death.
Upon receiving the report, Medvedev offered the only official admission of wrongdoing yet to be made. "Magnitsky’s case is of course a very sad case," the Russian president said. "The man is gone, and to all appearances, indeed some crimes were committed leading at least to this result."
Even Prime Minister Vladimir Putin, the once and probably future Kremlin leader, has admitted that there is a corrupt business-state nexus in Russia that breeds a reign of lawlessness.
In an economic-themed newspaper piece last week aimed at the upcoming presidential election, Putin appeared to blame private business rather than law enforcement agencies for perpetuating the problem. He refrained from mentioning any specific examples, but he nevertheless described the environment that created the Magnitsky case with surprising candor:
"Speaking plainly, we still have system-wide corruption," Putin wrote. "The cost of doing business varies depending on your 'proximity' to specific individuals within the government machinery. In these conditions entrepreneurs quite rationally tend to find backers and strike deals with them rather then observe the law. Then, having made their deals, such businesses try to suppress competition."
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An official report on Magnitsky case has been delayed 10 times, and was recently extended again until April. Meanwhile officials of the Interior Ministry have publicly exonerated the police officers who conducted the investigation and the tax officials who disbursed the huge rebate within a single day and with no questions asked.
According to the private investigation underwritten by Hermitage, several of those same officials have come into sudden and unexplained wealth that's enabled them to buy million-dollar homes, top-of-the-line automobiles and, in one case, a $3-million seaside villa in Dubai.
An official probe into the two prison doctors who stood by while Magnitsky died concluded in January, with the two doctors being rapped on the knuckles for "refusing to conduct diagnostic procedures and failing to prescribe the necessary treatment," according to official Investigation Committee spokesman Vladimir Markin. "As a result, Manitsky died of cardiac failure," he added, a judgment that critics say ignores evidence that he was severely beaten.
The people vs. the ghost
The new police investigation against Magnitsky's ghost rolls on, with prosecutors attempting in January to remove the Magnitsky family lawyer, Nikolai Gorokhov, from the case and replace him with one appointed by the state. That prompted the Moscow City Bar Association to send a sharp rebuke to the Interior Ministry noting that it is in breach of Russian law for the prosecution to attempt to appoint counsel for the family of a deceased defendant. Magnitsky's mother, Natalia Magnitskaya, has asked the Bar Association to inform all lawyers they should resist instructions from the Interior Ministry in this case.
"This case has gone beyond the limits of the law in so many ways, and the attempt to substitute me with a state lawyer was just another example," says Gorokhov. "They were frustrated about how to proceed with this farce, they didn't like my activity, and thought they might solve their problems better with that other lawyer."
Magnitsky’s new trial, along with the absent Browder, will be scheduled soon, a spokesman for the Moscow prosecutor’s office said this week.
Browder says he believes that the only way to focus the Russian official mind on doing the right thing is to threaten to take away the privilege of traveling, partying, and parking their money in the West. He spends his time these days shuttling between global capitals in an increasingly successful campaign for sanctions against the 60 Russians named in independent investigations as complicit in the Magnitsky framing, cover-up and death.
"The torture and murder of Sergei Magnitsky has been the hardest thing I've ever had to deal with in my life," he said. "My hope to obtain justice in Russia has been sorely disappointed as the entire Russian law enforcement system has circled the wagons to exonerate their own. . . But as we started to lobby foreign governments we noticed how agitated the Russian government has gotten about these sanctions becoming a precedent, (because) rich Russians tend to keep enormous amounts of money and property in the West, and any travel bans or asset freezes would affect them profoundly. . .
"The more agitated they have gotten, the more convinced we have become that this is an excellent policy."