Russia's spy agency authorised a raid on a British investment firm in Moscow that led to a massive tax scam by allegedly corrupt officials and the death of a lawyer who tried to expose the fraud, new papers show. Sergei Magnitsky, a Moscow-based lawyer, died in November 2009 during pre-trial detention after he was arrested by a group of officials who were being investigated for tax fraud. No one has been imprisoned for his death.
Instead prosecutors have begun a posthumous investigation against Mr Magnitsky and Bill Browder, the British founder of the London-based hedge fund Hermitage Capital, which has campaigned to bring to justice those responsible for the lawyer's death. Mr Browder said the government's investigation against him for an alleged 2001 tax evasion, which he denies, has resulted in a series of previously undisclosed criminal case files being released to the public for the first time.
Among the 70 evidence files that have been handed to his lawyers are at least three bundles containing memos from the FSB, Russia's spy agency. Mr Browder says the files show how the agency's anti-fraud department – known as Department K – played a key role in beginning the investigation into Hermitage, as a result of which the company became the victim of a $230m tax fraud.
Mr Browder told The Independent: "The FSB always operated in a closed system and they never anticipated that giving us access to the criminal case files would open up a Pandora's box and allow everybody to take a look at the criminality that pervades the entire Russian government."
Mr Browder claims that the documents show how on 22 May 2007 the head of Department K, General Viktor Voronin, signed off on a raid by Ministry of Interior officials against the offices of Hermitage and its law firm in Moscow. During that raid, two vans full of documents and company seals were seized as evidence. Unbeknown to Hermitage these were later used to transfer three subsidiary companies out of their possession. The new owner of the companies then applied for a tax rebate worth $230m.
The new documents also shed light on the whereabouts of those seals during the period in between when the raid and the fraud took place. One memo, dated 23 October 2007, states that the company seals had been transferred to Department K for "analysis". The seals were used to fraudulently transfer the three companies away from Hermitage just two months later, although there is no evidence in the documents that FSB officials from Department K took part in the fraud.
Before his arrest Sergei Magnitsky had blamed a network of allegedly corrupt Ministry of Interior officials for the scam, many of whom had relatives who had suddenly grown inexplicably rich. These officials had him arrested and he died one year later.