Switzerland has opened a money-laundering probe at the request of Hermitage Capital Management Ltd., the first criminal investigation outside Russia linked to the death of lawyer Sergei Magnitsky in a Moscow prison.
The allegations involving a former Russian tax official are the most recent lodged by Hermitage founder William Browder as he asks authorities around the world to sanction officials he blames for Magnitsky’s death. The lawyer, who alleged Interior Ministry officials fraudulently collected a $230 million tax refund using documents seized from Hermitage, died in 2009 after a year in pre-trial detention.
“It’s been impossible to get any kind of real criminal investigation in Russia,” Browder said yesterday by phone. “It’s highly significant that a Western law enforcement agency is taking this seriously and is launching an investigation.”
According to Hermitage, once the largest foreign investor in Russia, Olga Stepanova authorized $155 million of the tax rebates in 2007 as head of Moscow Tax Inspectorate No. 28. Since then, at least $38 million flowed through bank accounts opened on behalf of companies incorporated by Stepanova’s husband, partly to buy homes in Dubai, Montenegro and Russia, London-based Hermitage alleged in a Jan. 28 letter to the Swiss Attorney General and Credit Suisse AG.
$38,381 Average Income
The couple’s average declared income from 2006 through 2009 was $38,381 a year, according to Russian income declarations included in Hermitage’s filing with the Swiss authorities.
“The Office of the Attorney General of Switzerland confirms having officially launched a criminal investigation in respect of suspected money laundering,” spokeswoman Jeanette Balmer said yesterday in an e-mail after she was asked about the Hermitage letter. “The investigation relates to persons unknown,” she said, declining to release further details.
Stepanova, now an adviser to the head of Russia’s arms procurement agency didn’t respond to e-mailed, faxed and phone requests for comment submitted to the agency’s press service yesterday. Her husband, Vladlen Stepanov, an employee of Moscow-based OOO Volsstroy, is on vacation until mid-May, according to a person who answered the company’s phone and said she would pass on a reporter’s contact number.
‘Sound Control Framework’
Credit Suisse declined to comment on the specifics of Hermitage’s allegations, saying the bank complies with “all applicable laws,” including those related to money laundering.
“We are confident that we have a sound control framework with the necessary internal policies,” the Zurich-based bank said yesterday in an e-mailed statement.
President Dmitry Medvedev has made fighting corruption one of his key objectives as he seeks to attract foreign investors to help reduce Russia’s reliance on energy exports. Lawmakers in the European Union and the U.S. are seeking to sanction the officials accused of involvement in Magnitsky’s death and the tax fraud with visa bans and asset freezes, including Stepanova.
Russia is the world’s most corrupt major economy, according to Berlin-based Transparency International’s 2010 Corruption Perceptions Index released in October. It ranked 154th among 178 countries, tied with Tajikistan and Kenya.
Hermitage, which once had assets of $4 billion in Russia, says Interior Ministry officials seized documents from its Moscow offices in June 2007 that enabled them to re-register ownership of its three Russian funds and fraudulently claim $230 million in tax rebates on Dec. 24, 2007.
Hermitage filed a criminal complaint and Magnitsky testified in the case before he was detained on tax evasion charges. Magnitsky, 37, died in November 2009 after 358 days in pre-trial detention during which he said he was abused and denied medical care to force him to drop the fraud allegations.
Alexander Bastrykin, who heads the Investigative Committee of the Russian Prosecutor General’s Office, said in a September 2010 interview with Rossiiskaya Gazeta, the government’s official newspaper, that there was “no reason” to believe Magnitsky’s death was connected to those prosecuting the criminal case against him.
The Interior Ministry said in November that Magnitsky himself orchestrated the tax fraud on Hermitage’s instructions.
Russia in 2009 put Browder on its international wanted list, saying he and Magnitsky participated in a tax evasion that deprived the government of more than 500 million rubles. Browder, an American who lives in London, has been barred from entering Russia since 2005.
Since the tax refunds at the heart of the Magnitsky case were authorized, Stepanova’s husband has acquired three properties valued at $7 million in Dubai’s Palm Jumeirah development and a seaside villa in Montenegro priced at $700,000 with money wired through Credit Suisse accounts, Hermitage said in a separate letter to the investigative committee.
A $20 million property outside Moscow is registered in the name of Stepanov’s 85-year-old mother, according to Hermitage.
Browder said he obtained the Credit Suisse bank statements from a person close to Stepanova and information on the property transactions from real estate records.
Russia’s Federal Tax Service said it reprimanded Stepanova for professional misconduct after an internal investigation into 4.4 billion rubles ($157 million) of “suspicious” value-added tax rebates approved by her office in 2010. Stepanova resigned in January, the Tax Service’s press office said.
A criminal investigation is underway into the VAT rebates based on a complaint filed by the tax authority, said Andrei Pilipchuk, a spokesman for the Interior Ministry’s economic crimes unit, in a phone interview yesterday.