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Aug 10 2017

The Russian Connection: Browder, Magnitsky, and Putin

Just who is Bill Browder and why is he so important to the investigation into the Russian meddling in the US 2016 election? Sanctions, of course. William Felix Browder is a 53 year American who is the Chief Executive Officer and co-founder of the investment fund Hermitage Capital Management (“Hermitage”), an investment firm that at one time was the largest foreign portfolio investor in Russia. He ran afoul of the Russian legal system in 2006 and found himself blacklisted by the Russian government as a “threat to national security” and denied entry to the country. Why would the Russian government do that? Back then The Economist reported that Browder was blacklisted because he interfered with the flow of money to “corrupt bureaucrats and their businessmen accomplices”. Browder then became the victim of Russian corporate raiding.

The real trouble, though, got under way in June 2007, with Mr. Browder stuck outside the country.

Dozens of police officers swooped down on the Moscow offices of Hermitage and its law firm, confiscating documents and computers. When a member of the firm protested that the search was illegal, he was beaten by officers and hospitalized for two weeks, said the firm’s head, Jamison R. Firestone. [..]

In the weeks after the police seized the corporate documents, someone used them to transfer the ownership of three of Hermitage’s holding companies to an entity based in Kazan, a provincial capital 450 miles east of Moscow. The entity’s registered owner was a man with a murder conviction, records show.

Now that the corporate raiders had seized the three Hermitage holding companies, they resorted to a classic strategy to try to drain them of money. [..]

In the end, the raiders got nothing from Hermitage.

After his visa was canceled, Mr. Browder, concerned about such an onslaught, had quietly moved his Russian assets offshore and sold most of them. The holding companies were shells. [..]

While Mr. Browder did not suffer grievous financial losses, his work in Russia has been ruined. He has only small investments left here, and has evacuated his Russian staff to London, fearing for their safety.

Mr. Browder has, over the last year or two, reinvented himself, and Hermitage now has more than $3 billion invested in other parts of the world.

The raids and the fraud perpetrated on the three Hermitage companies only yielded $230 million in taxes to the Russian government that unexplainedly disappeared. But then in November 2008, one of Hermitage’s auditors, a lawyer, Sergei Magnitsky, was arrested. Maginsky was an auditor at the Moscow law firm Firestone Duncan, working for its owner, Jamison Firestone. There he represented Hermitage. On June 4, 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. But what Maginsky had found was a huge money laundering scandal.

Magnitsky uncovered what he alleged to be a complicated scheme by which officials from the Russian Interior Ministry and the courts used forged Hermitage documents to claim ownership of Browder’s fund, and then sued the Russian government, saying that they, the new pseudo-owners of Hermitage, had overpaid their taxes by $230 million. The courts and the Russian tax system, by Magnitsky’s account, speedily obliged, shelling out $230 million to the new owners, who then invested in luxury apartments in Moscow and abroad.

He died in prison eleven months later under mysterious circumstances. He was just seven days short of the expiration of the one-year term during which he could be legally held without trial. A human rights council set up by the Kremlin found that he was physically assaulted shortly before his death. His case has become an international cause célèbre and led to the adoption of the Magnitsky bill by the U.S. government at the end of 2012 by which those Russian officials believed to be involved in the auditor’s death were barred from entering the United States or using its banking system. In retaliation, Russia blocked hundreds of foreign adoptions.

The Magnitsky Act was never about adoptions. So, whenever you hear “Russian adoptions” mentioned by the Trump regime, think “sanctions.”

However, There was some justice for Magnitsky. In 2012, the Organized Crime and Corruption Reporting Project (OCCRP) wrote the US Department of Justice moved to seize assets that were that were allegedly acquired with the missing $230 million.

On Tuesday, the US attorney for the Southern District of New York filed a complaint aimed at recovering some of those stolen funds. Prosecutors are asking that a number of high end apartments in the Wall Street area of Manhattan worth about $10 million and a number of bank accounts owned by a series of related companies be seized as illegal gains from the Magnitsky fraud.

United States Attorney Preet Bharara said in a press release: “Today’s forfeiture action is a significant step towards uncovering and unwinding a complex money laundering scheme arising from a notorious foreign fraud. As alleged, a Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate.”

Prosecutors are asking the court to seize the assets of Prevezon Holdings Limited, owned by Denis Katsyv, the son of the wealthy Russian public official Pyotr Katsyv. It is also asking for the assets of nine subsidiaries, which own four luxury apartments and two high-end Manhattan commercial spaces as well as numerous bank accounts.

The companies also face civil money laundering penalties.

“Manhattan may have some of the most desirable real estate in the world, but it is not the place to purchase it if you are allegedly doing so with dirty money,” said District Attorney Cyrus R. Vance, Jr.

Trump’s son-in-law, Jared Kushner had some interesting dealings with Prevezon. Here’s a refresher about the so-called “fake news” about money laundering.

A Guardian investigation has established a series of overlapping ties and relationships involving alleged Russian money laundering, New York real estate deals and members of Trump’s inner circle. They include a 2015 sale of part of the old New York Times building in Manhattan involving Kushner and a billionaire real estate tycoon and diamond mogul, Lev Leviev. [..]

Leviev, a global tycoon known as the “king of diamonds”, was a business partner of the Russian-owned company Prevezon Holdings that was at the center of a multimillion-dollar lawsuit launched in New York. Under the leadership of US attorney Preet Bharara, who was fired by Trump in March, prosecutors pursued Prevezon for allegedly attempting to use Manhattan real estate deals to launder money stolen from the Russian treasury. [..]

Two days before it was due to open in court in May, the Prevezon case was settled for $6m with no admission of guilt on the part of the defendants. But since details of the Trump Tower meeting emerged, the abrupt settlement of the Prevezon case has come under renewed scrutiny from congressional investigators.

Four Russians attended the (June 2016) meeting (with Donald Jr.), led by Natalia Veselnitskaya, a lawyer with known Kremlin connections who acted as legal counsel for Prevezon in the money laundering case and who called the $6m settlement so slight that “it seemed almost an apology from the government”. Sixteen Democratic members of the House judiciary committee have now written to the justice department in light of the Trump Tower meeting demanding to know whether there was any interference behind the decision to avoid trial.

Donald Jr., Trump’s then campaign manager Paul Manafort, and son-in-law Jared Kushner met with Veselnitskaya; Rinat Akhmetshin, a Russian-American lobbyist; Robert Goldstone, a celebrity publicist who set up the meeting; Ike Kaveladze, a senior vice president at Crocus Group, the real estate development company founded by the Azerbaijani-Russian oligarch, Aras Agalarov, who initiated the Trump Tower meeting; and a translator. Akhmetshin is the only registered foreign lobbyist in that group. That meeting was at Trump Tower on June 9, 2016.

Back to Browder, who testified in late July before the Senate Judiciary Committee about enforcement of the Foreign Agents Registration Act enforcement. He explained his reasons for asking to testify and the importance of FARA.

Sergei Magnitsky was murdered as my proxy. If Sergei had not been my lawyer, he would still be alive today.

That morning I made a vow to Sergei’s memory, to his family, and to myself that I would seek justice and create consequences for the people who murdered him. For the last seven and a half years, I’ve devoted my life to this cause.

Even though this case was characterized by injustice all the way through, the circumstances of Sergei’s torture and death were so extreme that I was sure some people would be prosecuted. Unlike other deaths in Russian prisons, which are largely undocumented, Sergei had written everything down. In his 358 days in detention, Sergei wrote over 400 complaints detailing his abuse. In those complaints he described who did what to him, as well as where, how, when, and why. He was able to pass his hand-written complaints to his lawyers, who dutifully filed them with the Russian authorities. Although his complaints were either ignored or rejected, copies of them were retained. As a result, we have the most well-documented case of human rights abuse coming out of Russia in the last 35 years. [..]

Despite the White House’s desire to reset relations with Russia at the time, this case shined a bright light on the criminality and impunity of the Putin regime and persuaded Congress that something needed to be done. In November 2012 the Magnitsky Act passed the House of Representatives by 364 to 43 votes and later the Senate 92 to 4 votes. On December 14, 2012, President Obama signed the Sergei Magnitsky Act into law.

Putin was furious. Looking for ways to retaliate against American interests, he settled on the most sadistic and evil option of all: banning the adoption of Russian orphans by American families. [..]

For two reasons. First, since 2012 it’s emerged that Vladimir Putin was a beneficiary of the stolen $230 million that Sergei Magnitsky exposed. Recent revelations from the Panama Papers have shown that Putin’s closest childhood friend, Sergei Roldugin, a famous cellist, received $2 billion of funds from Russian oligarchs and the Russian state. It’s commonly understood that Mr. Roldugin received this money as an agent of Vladimir Putin. Information from the Panama Papers also links some money from the crime that Sergei Magnitsky discovered and exposed to Sergei Roldugin. Based on the language of the Magnitsky Act, this would make Putin personally subject to Magnitsky sanctions.

This is particularly worrying for Putin, because he is one of the richest men in the world. I estimate that he has accumulated $200 billion of ill-gotten gains from these types of operations over his 17 years in power. He keeps his money in the West and all of his money in the West is potentially exposed to asset freezes and confiscation. Therefore, he has a significant and very personal interest in finding a way to get rid of the Magnitsky sanctions.

The second reason why Putin reacted so badly to the passage of the Magnitsky Act is that it destroys the promise of impunity he’s given to all of his corrupt officials. [..]

For these reasons, Putin has stated publicly that it was among his top foreign policy priorities to repeal the Magnitsky Act and to prevent it from spreading to other countries. Since its passage in 2012, the Putin regime has gone after everybody who has been advocating for the Magnitsky Act. [..]

The Russian government has also used its resources and assets to try to repeal the Magnitsky Act. One of the most shocking attempts took place in the spring and summer of last year when a group of Russians went on a lobbying campaign in Washington to try to repeal the Magnitsky Act by changing the narrative of what had happened to Sergei. According to them, Sergei wasn’t murdered and he wasn’t a whistle-blower, and the Magnitsky Act was based on a false set of facts. They used this story to try to have Sergei’s name taken off of the Global Magnitsky Act that passed in December 2016. They were unsuccessful.

Who was this group of Russians acting on behalf of the Russian state? Two men named Pyotr and Denis Katsyv, a woman named Natalia Veselnitskaya, and a large group of American lobbyists, all of whom are described below.

Pyotr Katsyv, father to Denis Katsyv, is a senior Russian government official and well-placed member of the Putin regime; Denis Katsyv was caught by U.S. law enforcement using proceeds from the crime that Sergei Magnitsky uncovered to purchase high-end Manhattan real estate (the case recently settled with the Katsyv’s paying $6 million to the U.S. government). Natalia Veselnitskaya was their lawyer.

In addition to working on the Katsyv’ s money laundering defense, Ms. Veselnitskaya also headed the aforementioned lobbying campaign to repeal the Magnitsky Act. She hired a number of lobbyists, public relations executives, lawyers, and investigators to assist her in this task.

Her first step was to set up a fake NGO that would ostensibly promote Russian adoptions, although it quickly became clear that the NGO’s sole purpose was to repeal the Magnitsky Act. This NGO was called the Human Rights Accountability Global Initiative Foundation (HRAGI). It was registered as a corporation in Delaware with two employees on February 18, 2016. HRAGI was used to pay Washington lobbyists and other agents for the anti-Magnitsky campaign. (HRAGI now seems to be defunct, with taxes due.)

Through HRAGI, Rinat Akhmetshin, a former Soviet intelligence officer naturalised as an American citizen, was hired to lead the Magnitsky repeal effort. Mr. Akhmetshin has been involved in a number of similar campaigns where he’s been accused of various unethical and potentially illegal actions like computer hacking.

Veselnitskaya also instructed U.S. law firm Baker Hostetler and their Washington, D.C.-based partner Marc Cymrot to lobby members of Congress to support an amendment taking Sergei Magnitsky’s name off the Global Magnitsky Act. Mr. Cymrot was in contact with Paul Behrends, a congressional staffer on the House Foreign Affairs Committee at the time, as part of the anti-Magnitsky lobbying campaign.

Veselnitskaya, through Baker Hostetler, hired Glenn Simpson of the firm Fusion GPS to conduct a smear campaign against me and Sergei Magnitsky in advance of congressional hearings on the Global Magnitsky Act. He contacted a number of major newspapers and other publications to spread false information that Sergei Magnitsky was not murdered, was not a whistle-blower, and was instead a criminal. They also spread false information that my presentations to lawmakers around the world were untrue.

As part of Veselnitskaya’s lobbying, a former Wall Street Journal reporter, Chris Cooper of the Potomac Group, was hired to organize the Washington, D.C.-based premiere of a fake documentary about Sergei Magnitsky and myself. This was one the best examples of Putin’s propaganda.

They hired Howard Schweitzer of Cozzen O’Connor Public Strategies and former Congressman Ronald Dellums to lobby members of Congress on Capitol Hill to repeal the Magnitsky Act and to remove Sergei’s name from the Global Magnitsky bill.

On June 13, 2016, they funded a major event at the Newseum to show their fake documentary, inviting representatives of Congress and the State Department to attend.

While they were conducting these operations in Washington, D.C., at no time did they indicate that they were acting on behalf of Russian government interests, nor did they file disclosures under the Foreign Agent Registration Act.

United States law is very explicit that those acting on behalf of foreign governments and their interests must register under FARA so that there is transparency about their interests and their motives.

Since none of these people registered, my firm wrote to the Department of Justice in July 2016 and presented the facts.

Putin really, really wants the Magnitsky Act repealed since he could be made subject to it and barred from entering the US. It’s certain that Trump is hiding his financial connections to Russia, thus the reason for all the lies, firings, not so veiled threats and cozying up to Putin.

Special counsel Robert Mueller is now putting pressure on Paul Manafort, who could face years in prison for his dabbling in money laundering through his real estate deals and the Cyprus banks that are closely linked to the Russian end of the scam. And the Senate Judiciary Committee got an earful from Browder.