As Russian tax lawyer Sergei Magnitsky slowly died in a Russian prison from abuse and neglect, US$230 million (5.4 billion Russian Rubles) in taxes stolen from his client disappeared into a maze of phantom companies, crooked banks and offshore accounts. Magnitsky, accused of the largest tax scam in Russian state history despite being the whistleblower who reported it, knew who pulled off the theft but not who the powerful people behind them were.
He died rather than admit to a crime he didn’t do. Magnitsky was the loser. But the winners until now have not been identified. Reporters from the Organized Crime and Corruption Reporting Project (OCCRP), Barron’s and Novaya Gazeta, spent months tracking banking records and offshores companies to identify two beneficiaries of the deal: businesses of a Russian state transportation official’s son and the ex-husband of a tax official who granted the refunds.
The Money Flow
The scam began with a Russian police raid on the offices of Magnitsky’s client: Hermitage Capital Management investment fund. People impersonating company employees then used official stamps and documents seized in the raid and pled guilty to various crimes. The company was fined amounts that offset the company’s earnings for the year, and the impersonators then filed for a giant tax refund.
Three phantom businesses, shell companies that exist only on paper, applied at Moscow tax offices #28 and #25 on behalf of Hermitage for a refund which was instantly granted. Magnitsky, who reported the fraud, believed wrongly that if officials only knew what was happening they would react. They reacted by imprisoning him for tax evasion, demanding he write a confession, denying him medical care and beating him repeatedly. He lasted one year dying in 2009.
Link to the detailed report (copyright OCCRP) : click here
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