US Sues Over Magnitsky Scandal-Linked Assets

Wall Street Journal

Prosecutors filed a civil complaint seeking the assets of 11 companies linked to a $230 million Russian tax-refund fraud uncovered by deceased Russian lawyer Sergei Magnitsky.

Mr. Magnitsky’s death in 2009 led to tit-for-tat recriminations between Washington and Moscow as the relationship between the two countries, which the U.S. had sought to “reset,” also deteriorated around other issues.

The 65-page complaint, filed Tuesday in New York federal court, accused 11 corporations of laundering a portion of the money through the purchase of real estate, including four luxury residential apartments and two commercial spaces in Manhattan.

“While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot, no matter how and where their fraud took place,” said Preet Bharara, the Manhattan U.S. attorney, in a statement.

Among the properties targeted by thee forfeiture are four units at 20 Pine St., in Manhattan, an “office-to condo pioneer” in the borough’s Financial District.

According to the complaint, a Russian criminal organization stole the identities of portfolio companies owned by Hermitage Capital Management, an investment fund operating in Russia. (The story of the alleged scam was reported in 2011 by Barron’s.)

The organization’s members used the stolen identities to make fraudulent claims for tax refunds by re-registering the portfolio companies in the names of the members, and then made sham lawsuits against the companies that resulted in judgements in their favor, the complaint said.

Members of the organization then used the judgements to request tax refunds worth about $230 million, which was approved by allegedly corrupt tax officials within one business day and disbursed two days later, the complaint said.

The organization’s members “engaged in a complicated series of transactions” to launder the proceeds and distribute them among the organization’s members, the complaint said.

Prosecutors say a portion of the funds traveled through several shell companies into a Cyprus-based real estate company which laundered the money into its real estate holdings, including the ones subject to the forfeiture action. The Cyprus based company, as well as the corporations holding the properties, are defendants in the forfeiture case.

Legal representation for the defendants couldn’t be located.

Hermitage retained lawyers, including Mr. Magnitsky to investigate the sham lawsuits after learning about them from a St. Petersburg court, the complaint said. The legal team uncovered the fraud scheme and reported it to the Russian tax authorities, who then launched an investigation into Mr. Magnitsky, arresting him in November 2008 on the allegations he reported to them.

Mr. Magnitsky died in Russian custody a year later. Moscow pledged to investigate his death, and a presidential panel said in 2011 that Mr. Magnitsky was killed by prison officials who for months intentionally denied him medical care. But Russia’s top law-enforcement body, the Investigative Committee, dropped the case earlier this year.

He was posthumously convicted of tax evasion in July.

The circumstances surrounding Mr. Magnitsky’s death led to legislation in the U.S., including sanctions on several alleged members of the organization. Moscow responded with a ban on Americans adopting Russian children. hairy girls срочный займ https://zp-pdl.com https://zp-pdl.com/best-payday-loans.php займ срочно без отказов и проверок

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