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Russian Tax Fraud Funneled Via Estonia’s Banks, Prosecutors Say

Estonian bank accounts were used in 2008 to transfer about $10 million of funds connected to a Russian tax-fraud case, the state prosecutors’ office said.

The transfers, related to alleged embezzlement uncovered by lawyer Sergei Magnitsky, were uncovered in an investigation conducted last year by the financial intelligence unit of Estonia’s police, Carol Merzin, a spokeswoman at the state prosecutors’ office, said today by phone from the capital, Tallinn, confirming earlier comments by state prosecutor Piret Paukstys to newspaper Eesti Paeevaleht.

Estonian authorities opted not to open a criminal case because the transfers were made via Internet transactions, with the funds then moved to other countries using accounts belonging to non-resident companies represented by foreign nationals, according to prosecutors’ office. It declined to identify the banks involved.

Magnitsky, who advised London-based Hermitage Capital, alleged Russian officials committed a $230 million tax fraud. He died at age 37 in November 2009 after being beaten to death and denied medical care during almost a year in pre-trial detention on fabricated tax evasion charges, according to a Russian presidential human rights body.

Russian Prime Minister Dmitry Medvedev yesterday said Magnitsky’s case has been “politicized” by investors. It has sparked a diplomatic rift with the U.S. as Russia retaliated for human-rights sanctions passed by Congress by barring Americans from adopting Russian orphans.

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