The Case of Sergei Magnitsky-Questions Cloud Story Behind U.S. Sanctions

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By Benjamin Bidder

The story of Sergei Magnitsky has come to symbolize the brutal persecution of whistleblowers in Russia. Ten years after his death, inconsistencies in Magnitsky’s story suggest he may not have been the hero many people — and Western governments — believed him to be.

There’s a tombstone in northeastern Moscow that bears the portrait of a man with a friendly yet somewhat uneasy smile. His name is Sergei Leonidovich Magnitsky. He was born in April 1972 in Odessa, Ukraine, and died in November 2009 in Moscow. To this day, 10 years after the fact, the circumstances of his death in a Russian pretrial detention facility remain unclear.

There are two versions of what happened to Magnitsky. The more well-known version has all the makings of a conspiracy thriller. It’s been repeated in thousands of articles, TV interviews and in parliamentary hearings. In this version of the story, the man from the Moscow cemetery fought nobly against a corrupt system and was murdered for it.

The other version is more complicated. In it, nobody is a hero.

The first version has had geopolitical implications. In 2012, the United States passed the Magnitsky Act, which imposed sanctions against Russian officials who were believed to have played a role in his death. The measure was signed into law by then-President Barack Obama after receiving a broad bipartisan majority. Back then, if there was one thing that politicians on both sides of the aisle could agree on, it was their opposition to a nefarious Russian state. In 2017, Congress passed the Global Magnitsky Act, which enabled the U.S. to impose sanctions against Russia for human rights violations worldwide.

The facilitator behind these pieces of legislation is Bill Browder, Magnitsky’s former boss in Moscow. “When he was put to the ultimate test, he became the ultimate hero,” Browder says of Magnitsky. Browder was born in the U.S.. For years, his company, Hermitage Capital Management, was one of the largest foreign investors in Russia. At the time, Browder was an advocate for Russian President Vladimir Putin in the West. That is, until he was prohibited from entering Russia in 2005.

Public Enemy No. 1

Today, Browder refers to himself as “Putin’s No. 1 Enemy.” From his office in London’s Finsbury district, Browder coordinates a campaign he calls “Justice for Sergei Magnitsky.” His goal is to get other countries to impose sanctions against Russia for what happened to his former employee. So far, four other countries have followed the U.S.’ lead. For now, Browder is concentrating on Europe. He has spoken to politicians in Norway, Sweden and France. He came to Berlin in May and spoke with the chairman of the Committee on Foreign Affairs in Germany’s federal parliament, the Bundestag. He also had an appointment at the Chancellery.

Browder tells a gripping story of how Magnitsky, the whistleblower, is believed to have died. This narrative is his ticket into the political sphere. It’s why he’s received by members of parliament, diplomats and human rights activists alike, often with open arms. They support his push for more legislation because they see it as setting an important precedent: Corrupt regimes all over the world that are violating their citizens’ rights must be held accountable and made to suffer consequences in the form of entry bans and frozen accounts as laid out by the Global Magnitsky Act. The law makes it more difficult, if only slightly, for autocrats to sneer at and ignore human rights.

But there’s another version of the Magnitsky saga, one that is more contradictory than Browder’s telling and more difficult to summarize. The legal documents that underpin it fill dozens of binders, not only in Moscow, but also in London and New York. After sifting through thousands of pages, one might begin to wonder: Did the perfidious conspiracy to murder Magnitsky ever really take place? Or is Browder a charlatan whose story the West was too eager to believe? The certainty surrounding the Magnitsky affair becomes muddled in the documents, particularly the clear division between good and evil. The Russian authorities’ take is questionable, but so is everyone else’s — including Bill Browder’s.

The cases raises uncomfortable questions for the West. In Europe and the U.S., critics of Russia often argue from a position of moral superiority. But with the Magnitsky sanctions, it could be that the activist Browder used a noble cause to manipulate Western governments.

One thing that stays the same no matter which version is told, is this: Magnitsky is dead and he was the victim of a terrible injustice.

Magnitsky’s Demise

On the evening of Nov. 16, 2009, Sergei Magnitsky died in a cell at Moscow’s “Matrosskaya Tishina” pretrial detention center. A prison doctor had diagnosed him with an inflammation of the pancreas four and a half months prior, but shortly before Magnitsky was scheduled to undergo surgery, he was moved to another prison — one without the necessary medical equipment for such an invasive procedure. The reason given for the move was that Magnitsky’s cell needed to be renovated. Could that possibly be true? Even after the whistleblower’s death, work still hadn’t commenced, according to an investigative commission. It began looking into the case shortly after Magnitsky’s death because the outrage in Moscow was so huge. The commission counted among its members respected human rights activists and opponents of the Kremlin. They analyzed notes and complaints filed while Magnitsky was in prison. They also interviewed the prison staffers who, instead of helping Magnitsky, let him die.

The commission’s 20-page report offered detailed insights into the sadistic, cold-hearted nature of Russia’s prison system. In the months before his death, Magnitsky was constantly moved from one cell to another. His mother brought him medications that took 18 days to reach him. In September, he was forced to wear his jacket at night because his cell window lacked a pane of glass. His cell toilet often backed up. One time Magnitsky’s abdominal pains became so acute that his neighbor began desperately kicking against the door of his cell and calling for help. It took prison staff five hours to get Magnitsky to a doctor.

Magnitsky’s condition worsened on his last day. He was transferred back to the prison where he was originally supposed to be operated on months prior. There, the dying man began to panic. He was sedated and restrained with handcuffs. The files analyzed by the commission note the “use of a rubber baton.” Magnitsky was left alone in his cell, unobserved, without a doctor. “An ill person in severe condition was effectively left without medical attention for 1 hour and 18 minutes to die,” the commission wrote in its report, a chronology of merciless negligence. Yet it contains no evidence of a targeted murder.

According to Browder’s more dramatic telling of the story, Magnitsky’s arrest and death were a targeted act of revenge by Russian authorities against an anti-corruption activist. Browder says he tapped “my lawyer Magnitsky,” to investigate a case in 2007. Over the course of his research, Magnitsky supposedly stumbled onto a crime of unprecedented proportions — the biggest tax fraud in Russian history, perpetrated by a corrupt band of police officers and government officials.

The fraud involved a sum of $230 million (208 million euros) and a complex master plan, which, according to Browder, was run by two Moscow police officers, Artyom Kuznetsov and Pavel Karpov. The duo had initiated a fraudulent tax investigation against Browder’s Hermitage Capital Management and then seized three letterbox firms that had originally been founded by Browder’s people. With confiscated company deeds, the firms were transferred to middlemen who fabricated massive losses and requested the reimbursement of $230 million in taxes that Browder’s company had previously paid. Karpov, the policeman, denies any involvement in the fraud or Magnitsky’s death. “Browder is a liar,” he says. Kuznetsov could not be reached for a statement.

Browder’s Story

According to Browder, Magnitsky was onto Kuznetsov and Karpov. He also says the same officials had arranged for Magnitsky to be imprisoned and killed. Browder has told this version of events countless times. He testified in front of the U.S. Congress that Magnitsky had been “murdered.” Browder told Canadian parliamentarians: “Eight riot guards with rubber batons would beat him for one hour and 18 minutes. He was subsequently found dead on the floor of that cell.”

When asked, Browder cites the investigative committee’s report as evidence. He does the same on his website, where he also says the same officials incriminated by Magnitsky “intentionally tortured and ultimately murdered him.” The report, however, makes no such assertion of an intentional killing. The names of the two police officers, Kuznetsov and Karpov, don’t even appear in the original Russian version of the commission’s report. Kuznetsov is only mentioned in an English translation on Browder’s website.

By now, Browder’s campaign has created its own frame of reference and its own supposed evidence. Browder has often cited reports by the Council of Europe in recent years, though these are largely based on his own accounts. For instance, one Council rapporteur, former German Justice Minister Sabine Leutheusser-Schnarrenberger, referred to Magnitsky as an “independent lawyer.” But one look at documents readily available online is enough to discover that Magnitsky was employed as a tax expert at an auditing firm and had worked for Browder for years.

Browder claims to be fighting for justice. One of the reasons he’s so successful may be because he’s adept at aligning his story with the devastating image that Russia has been projecting for years. And many media outlets believe him. Browder has given countless TV interviews on the subject. In some of the shots, viewers can see articles from prominent international media Browder has hung on his office walls — the Washington Post, the Financial Times and Russia’s Novaya Gazeta. The reports are all framed and appear to lend credibility to Browder’s story. DER SPIEGEL has also written about Browder’s campaign and conducted interviews with him. The New York Times won the Pulitzer Prize for its reporting on Russia’s legal system, including on the Magnitsky case. There are films and plays too.

But the question remains: Just how solid are the facts upon which politicians and the media are basing their judgements of this case? Various inconsistencies and contradictions are apparent in some documents that Browder’s own people have published online. These include two photographs of interrogation protocols that allegedly prove how Sergei Magnitsky courageously reported the tax fraud of $230 million after discovering it. In his book, Browder writes, “Sergei set up an appointment at the Investigative Committee for 5 June 2008. (…) He sat in the chair, provided the evidence and gave his witness statement, explicitly naming Kuznetsov and Karpov.”

Contradictions

The protocol itself tells a different story. Magnitsky does indeed mention the names of the two police officers nearly 30 times and describes their role during a search. But at no point does he make a concrete accusation against them personally. In a second protocol of a statement made on Oct. 7, Kuznetsov and Karpov are not mentioned at all. The first document also shows that Magnitsky did not make his statements entirely of his own free will, but as a witness in an ongoing investigation. According to other documents, the trial had been underway since February. This was confirmed to DER SPIEGEL by Magnitsky’s lawyer at the time, Dmitry Kharitonov, who said his client had been summoned to testify.

Browder has a well-documented talent for selling a set of facts so that it supports his own version of events. In Moscow, this was part of his business model as an investor. According to its own calculations, Hermitage Capital Management generated a 1,500 percent return on its investments within just a few years. According to Russian investigators, a company in Browder’s fund structure had wrongly paid only 5 percent in taxes, when in fact 15 percent should have been due. A double taxation agreement with Cyprus should not have been applied. Browder denies this.

One way or the other, Browder’s business model was lucrative. Hermitage bought cheap shares in Russian state-owned corporations, such as Gazprom or Sberbank, from the late 1990s onward. Then he took on the conglomerates’ leadership, denounced the widespread corruption and demanded reforms. If these came to fruition, the value of Browder’s shares rose. If they didn’t, at least the publicity of his fund grew.

Browder had his eye on Gazprom especially. In 1998, the company was worth $3.5 billion. Within seven years, that number had jumped to $160 billion. Hermitage held many shares through shell companies. Several of them perfunctorily hired mentally disabled people who they described on paper as, “analysis division experts.” In fact, the people had no knowledge of this field, as several courts would later discover.

The companies took advantage of tax breaks that were intended for firms with workplace disability rates of at least 50 percent — and not as a tax-saving model for Western investment funds. Over the course of their years-long investigations into Hermitage, Russian authorities stumbled upon a man who was helping Browder come up with his tax-saving models: Sergei Magnitsky. Browder says the practice of skirting taxes was common at the time.

When Browder talks about his fate in front of Western audiences, he makes it sound as if the investigations into Hermitage were completely arbitrary. In his book and during interviews, Browder claims that Kuznetsov, the investigator, appeared out of nowhere in 2007. This is significant because it appears to underscore that the trial was “politically motivated, fabricated” and initiated for the sole purpose of obtaining the necessary documentation for the long-planned $230-million fraud.

‘A Measure of Vindication’

But the date Browder provided is incorrect. Kuznetsov’s name appeared in letters to Browder’s company in June 2006. At the time, the police had demanded the firm surrender its bank data. There is also proof that Browder’s team knew about the letters. Indeed, they were in Browder’s possession.

There is another interrogation protocol that Browder did not prominently publish online like the other two. It is from October 2006, long before Magnitsky is said to have first exposed the big tax fraud that Browder says caused him to fall out of the authorities’ good graces.

According to the protocol, Magnitsky was questioned by investigators about one of the dubious letterbox firms that gave employment contracts to people with disabilities. He claims that Browder’s people asked him to “to ‘be’ CEO for a period of reorganization.” Other documents show that Magnitsky was involved in the companies as early as 2002.

Some of the people accused by Browder have begun to fight back against the allegations. The Moscow policeman Pavel Karpov, for one, who Browder claims worked with Kuznetsov to have Magnitsky arrested and killed in retaliation for his testimony, filed a defamation lawsuit against Browder in London in 2012.

The presiding judge, Justice Simon, ruled the British courts had no jurisdiction over the matter. But in his written verdict, he also wrote scathingly about Browder, calling him a “story-teller” who did “not come close to pleading facts which, if proved, would justify the sting of the libel.” Simon also wrote that his assessment was to be explicitly understood as “a measure of vindication” of Karpov.

The only problem was the judge’s words hardly made it into the public discourse at the time. The Guardian and other British media wrote about Karpov’s humiliating defeat in the courts. Some of the language they used can be found in press releases from Browder’s campaign.

A second trial in New York concerned the frozen accounts of a wealthy Russian political clan, the Katsyv family. The U.S. government imposed the sanctions because Browder had insisted that money from the million-dollar fraud had wound up with the Katsyvs. In response, the Russians hired star New York-based lawyers to defend themselves against the accusations.

Justice or Vendetta?

Browder, an otherwise talkative person, tried to avoid questioning. One video shows him running away when someone tries to present him with a subpoena. In April 2015, he was required to appear in court. Under oath and confronted with numerous documents, he answered meekly — quite differently than during his public appearances. Lawyer Mark Cymrot, a surly litigator with a moustache, spent six hours examining him. Cymrot asked: Was Magnitsky a lawyer or a tax expert?

He was “acting in court representing me,” Browder replied.

And he had a law degree in Russia?

“I’m not aware he did.”

Did he go to law school?

“No.”

How many times have you said Mr. Magnitsky is a lawyer? Fifty? A hundred? Two hundred?

“I don’t know.”

Have you ever told anybody that he didn’t go to law school and didn’t have a law degree?

“No.”

DER SPIEGEL visited Browder in London and asked him to clarify some inconsistencies and contradictions in his story. The result was a four hour-long interview and a grudging search for information, facts and details. The meeting, which took place in a glass conference room in Browder’s Finsbury office, provided insights into his tactics: Together with his Russian partners Ivan Cherkasov and Vadim Kleiner, Browder laid out dozens of documents that supposedly corroborated his version of events. Not all of them would stand up to further scrutiny.

One of the documents was a previously unpublished email from Sergei Magnitsky. It supposedly confirmed that he went to the authorities of his own volition as a whistleblower. Yet the document also makes clear that Magnitsky was instructed to come forward by a higher-ranking lawyer working for Browder. This lawyer, a Russian, admitted during the interview in London that Magnitsky had been sent as a stand-in for the CEO of a letterbox company who investigators in Moscow had actually wanted to speak to.

To further back up their story, Browder and his team also presented an article by an American journalist who had spoken to Magnitsky shortly before his arrest. The police officers Kuznetsov and Karpov had Magnitsky arrested “immediately” after the publication of the article. But nothing in the article would explain why Magnitsky was arrested. In it, he doesn’t mention Karpov or Kuznetsov. The author of the article, when contacted, said he couldn’t imagine that it was his piece that triggered Magnitsky’s persecution.

Browder’s campaign has turned him into a global celebrity. His publisher advertises his book, “Red Notice,” as a New York Times bestseller. In interviews, he calls for Russia to be largely isolated. He attacks politicians who disagree with him. He called John Kerry, the former U.S. secretary of state, a “lapdog” and accused him of “appeasement.” Browder has also called for Russia’s banishment from the SWIFT banking network, which would have devastating consequences for the Russian population. But is that really necessary to ensure “Justice for Sergei Magnitsky?” Or has Browder’s campaign turned into a personal vendetta?

Too Good Not to Be True

Another strange thing about this case is that those involved sometimes change their stories completely and begin saying the opposite of what they said before. Take Zoya Svetova, for instance: The Moscow-based human rights activist co-wrote the investigative commission’s report. She is a Kremlin opponent and writes reports for MBKH News, the media project of the exiled Russian oligarch Mikhail Khodorkovsky. Svetova has been intensively involved with the Magnitsky case and published regular articles about it. She is also planning to write a book.

In July, Svetova said in an interview with DER SPIEGEL that even 10 years after Magnitsky’s death, she didn’t think much of the theory that he was the victim of a murder plot. It was more likely that Magnitsky got into an argument with the doctors and the staff because he wasn’t being medically treated. “They were beating him to pacify him,” Svetova said, adding that the beatings in and of themselves did not indicate a targeted murder. There was no evidence of this, she said. “What sense would it make to murder him?” So that he wouldn’t talk about the $230 million fraud anymore? By that point, news of the fraud was everywhere. “Magnitsky did not reveal any secret,” Svetova said in July.

The investigative commission report she helped co-write mentions that pressure had been placed on Magnitsky while he was in prison. “They wanted testimonies against Browder. That was the motivation. He should have accused Browder of not paying taxes. Magnitsky was a hostage. He himself was of no interest to them. They wanted Browder,” she said.

Svetova also said that while Magnitsky’s fate was dreadful, it wasn’t atypical. Failure to provide assistance as well as abuse are common in Russian prisons, she said. She wrote an article on the subject in 2010. According to information from the Council of Europe, around 4,000 prisoners died in Russia in 2014. In Germany, 150 died. “You have to know,” Svetova said, “the Russian penitentiary system is very brutal.”

Shortly before this article was published, however, Svetova suddenly changed her story. Now she had the feeling “that he was moved deliberately to the ‘Matrosskaya Tishina’ prison to kill him.” She said that since July, she had gone back and re-examined all the old documents and that she now had a completely different view of things.

In August, the European Court of Human Rights announced its ruling in the Magnitsky case: Russia must pay the deceased’s relatives 34,000 euros ($37,500) because the state should have protected the prisoner’s life and health. Nowhere in its verdict was there any mention of murder. The judges did, however, take apart the claim that the whistleblower had been imprisoned out of revenge. Magnitsky’s arrest was not without cause, they wrote, nor were the authorities’ actions malicious. The investigations into Magnitsky began in 2004, long before he first approached the authorities, it says on page 39 of the court’s written verdict. But that didn’t stop Browder from describing the ruling as a “resounding victory.”

His campaign has created a kind of perpetual motion. Browder was recently received by diplomats in Finland, which currently holds the presidency of the Council of the EU. They summoned him to discuss a European version of the U.S.’ Magnitsky sanctions. “This law will become a reality in the EU,” Browder tweeted in mid-October. His chances of success aren’t bad: His story is simply too good not to be true.

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