Sergei Leonidovich Magnitsky (, ; ; 8 April 1972 – 16 November 2009) was a Russian tax advisor responsible for exposing corruption and misconduct by Russian government officials while representing client Hermitage Capital Management. His arrest in 2008 and subsequent death after eleven months in police custody generated international attention and triggered both official and unofficial inquiries into allegations of fraud, theft and human rights violations in Russia. His posthumous trial was the first in the Russian Federation.
Magnitsky alleged there had been large-scale theft from the Russian state, sanctioned and carried out by Russian officials. He was arrested and eventually died in prison seven days before the expiration of the one-year term during which he could be legally held without trial. In total, Magnitsky served 358 days in Moscow's Butyrka prison. He developed gall stones, pancreatitis, and a blocked gall bladder, and was denied medical care. A human rights council set up by the Kremlin found that he had been physically assaulted shortly before his death. His case became an international cause célèbre.
The United States Congress and President Barack Obama enacted the Magnitsky Act at the end of 2012, barring those Russian officials believed to be involved in Magnitsky's death from entering the United States or using its banking system. In response, Russia condemned the Act and claimed Magnitsky was guilty of crimes. Nearly a dozen other nations, as well as the European Union, have subsequently implemented or considered Magnitsky legislation.
In early January 2013, the Financial Times wrote that "the Magnitsky case is egregious, well documented and encapsulates the darker side of Putinism". p. 8.
Background Magnitsky was an auditor at the Moscow law firm Firestone Duncan, working for its owner, Jamison Firestone. He worked with Firestone Duncan client Hermitage Capital Management, an investment advisory firm accused of tax evasion and tax fraud by the Russian Interior Ministry.
Over the years of its operation Hermitage had, on several occasions, supplied to the press information about corporate and governmental misconduct and corruption in state-owned Russian enterprises. Hermitage's company co-founder, American Bill Browder, was expelled from Russia in November 2005 as a purported national threat; Browder arrived in Moscow, was told his visa had been annulled, and was deported the next day. Browder has said that he represented a threat only "to corrupt politicians and bureaucrats" in Russia, and believed that he was removed to leave his company open for exploitation.
Instigated by FSB General Viktor Voronin after Alexander Kuvaldin (), who was an operative of the "K" Directorate of the SEB of the FSB, addressed his findings in a report to Voronin recommending the prosecution of the Sergey Magnitsky of the Hermitage Capital fund, Voronin added his resolution about the report and sent it to the Moscow police department who initiated a criminal case against Magnitsky.
On 4 June 2007, Hermitage's Moscow office was raided by about 20 Ministry of Interior officers. The offices of Firestone Duncan were also raided. The officers had a search warrant alleging that Kamaya, a company administered by Hermitage, had underpaid its taxes. This was highly irregular, as the Russian tax authorities had just confirmed in writing that this company had overpaid its tax. In both cases, the search warrants permitted the seizure of materials related only to Kamaya. But, in both cases the officers illegally seized all the corporate, tax documents and seals for any company that had paid a large amount of Russian taxes, including documents and seals for many of Hermitage's Russian companies. In October 2007, Browder received word that one of the firms maintained in Moscow had a trial against it for an alleged unpaid debt of hundreds of millions of dollars. According to Browder, this was the first time he had heard of this court case and he did not know the lawyers who represented his company in court. Magnitsky was assigned to investigate the case.
Exposing the scandal In his investigation, auditor Magnitsky came to believe that the police had given the materials taken during the police raids to organized criminals, who used them to take over three of Hermitage's Russian companies and who fraudulently reclaimed $230m (£140m) of the taxes previously paid by Hermitage. He also claimed police had accused Hermitage of tax evasion solely to justify the police raids, so they could take the materials needed to hijack the Hermitage companies and effect the tax refund fraud. Magnitsky's testimony implicated police, the judiciary, tax officials, bankers, and the Russian mafia. In spite of the initial dismissal of his claims, Magnitsky's core allegation that Hermitage had not committed fraud—but had been victimized by it—was eventually validated. A sawmill foreman pleaded guilty in the matter to "fraud by prior collusion", though the foreman would maintain that police were not part of the plan. Before then, however, Magnitsky became the subject of investigation by one of the policemen against whom he had testified as involved in the fraud. According to Browder, Magnitsky was "the 'go-to guy' in Moscow on courts, taxes, fines, anything to do with civil law."
According to Magnitsky's investigation, the documents that had been taken by the Russian police in June 2007 were used to forge a change in ownership of Hermitage. The thieves used the forged contracts to claim Hermitage owed $1 billion (~$ in ) to shell companies. Unknown to Hermitage, those claims were later authenticated by judges. In every instance, lawyers hired by the thieves to represent Hermitage pleaded guilty on the company's behalf and agreed to the claims, thereby obtaining penalties for debts that did not exist; all while Hermitage officials were unaware of these court proceedings.
The new owner, based in Tatarstan, turned out to be Viktor Markelov, a convicted murderer released two years into his sentence. The company's fake debt was used to make the companies look unprofitable in order to justify a refund of $230 million in tax that the companies had paid when they had been under Hermitage's control. The refund was issued on Christmas Eve 2007 and was the largest tax rebate in Russian history.
Hermitage contacted the Russian government with the findings of its investigation. The money, which was not Hermitage's, belonged to the Russian state. Rather than opening a case against the police and the thieves, the Russian authorities opened a criminal case against Magnitsky.
Custody and death
Magnitsky was arrested and imprisoned at the Butyrka prison in Moscow in November 2008 after being accused of colluding with Hermitage. Held for 11 months without trial, he was, as reported by The Telegraph, "denied visits from his family" and "forced into increasingly squalid cells." He developed gall stones, pancreatitis and calculous cholecystitis, for which he was given inadequate medical treatment during his incarceration. Surgery was ordered in June, but never performed; detention center chief Ivan P. Prokopenko later said that he "...did not consider Magnitsky sick... Prisoners often try to pass themselves off as sick, in order to get better conditions."
On 16 November 2009, eight days before he would have had to be released if he was not brought to trial, Magnitsky died. Prison officials at first attributed his death to a "rupture to the abdominal membrane" and later to a heart attack. Reporters learned that Magnitsky had complained of worsening stomach pain for five days prior to his death and that by the 15th, he was vomiting every three hours, and had a visibly swollen stomach. On the day of his death, the prison physician, believing Magnitsky had a chronic disease, sent him by ambulance to and later transferred him to Matrosskaya Tishina prison's medical unit, which was equipped to help him. But the surgeon there—who described Magnitsky as "agitated, trying to hide behind a bag and saying people were trying to kill him"—prescribed only a painkiller, and left him to receive a psychiatric evaluation. Magnitsky was found dead in his cell a little over two hours later.
According to Ludmila Alekseeva, leader of the Moscow Helsinki Group, Magnitsky had died from being beaten and tortured by several officers of the Russian Ministry of Interior."Letter from Alekseeva to Russian Prosecutor's Office", Russian - Untouchables The official death certificate stated "closed cerebral cranial injury" as the cause of death (in addition to the other conditions mentioned above), and the post-mortem examination showed numerous bruises and wounds on Magnitsky's legs and hands. Another post-mortem from 2011 summarized the death as being caused by "traumatic application of the blunt hard object (objects)" as confirmed by "abrasions, ecchymomas, blood effusions into the soft tissues".
Journalist Owen Matthews described Magnitsky's suffering in Moscow's Butyrka prison:
According to [Magnitsky's] heartbreaking prison diary, investigators repeatedly tried to persuade him to give testimony against Hermitage and drop the accusations against the police and tax authorities. When Magnitsky refused, he was moved to more and more horrible sections of the prison, and ultimately denied the medical treatment which could have saved his life.
Aftermath and official investigations An independent investigatory body, the Moscow Public Oversight Commission, indicated in December 2009 that "psychological and physical pressure was exerted upon" Magnitsky. One of the Commissioners said that while she had first believed his death was due to medical negligence, she had developed "the frightening feeling that it was not negligence but that it was, to some extent, as terrible as it is to say, a premeditated murder."
An official investigation was ordered in November 2009 by Russian president Dmitry Medvedev. Russian authorities had not concluded their own investigation as of December 2009, but 20 senior prison officials had already been fired as a result of the case. In December 2009, in two separate decrees, Medvedev fired Alexander Piskunov, deputy head of the Federal Penitentiary Service, and signed a law forbidding the jailing of individuals who are suspected of tax crimes. Magnitsky's death is also believed to be linked to the firing of Major-General Anatoli Mikhalkin, formerly the head of the Moscow division of the tax crimes department of the Interior Ministry. Mikhalkin was among those accused by Magnitsky of taking part in fraud.
Opalesque TV released a video on 8 February 2010, in which Hermitage Capital Management founder Bill Browder revealed details of Sergei Magnitsky's ordeal during his 11 months in detention. On 25 June 2010 radio-station Echo of Moscow announced that Russian Ministry of Internal Affairs Department for Own Security started investigations against Lieutenant Colonel Artyom Kuznetsov, who has been accused of improper imprisonment of Magnitsky. The investigation was in response to an appeal by the Hermitage Capital Management and United States Secretary of State Hillary Clinton. In February 2011, the investigation, which had not yet identified any suspects, was extended to May.
In November 2010, Magnitsky was given a posthumous award from Transparency International for integrity. Magnitsky, according to the awards committee, "believed in the rule of law and died for his belief." A film produced to highlight Magnitsky's persecution has been shown to the American Congress and British, Canadian, German, Polish, and European parliaments.