-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
By Jason Bush
MOSCOW, Nov 16 (Reuters Breakingviews) - It's been a year since Sergei Magnitsky, a Russian lawyer for London-based hedge fund Hermitage Capital, died in custody after being denied medical treatment. The case has become an international cause celebre -- and a key test of whether President Dmitry Medvedev is serious about modernising Russia and eradicating corruption. But the clear answer appears to be that either he isn't, or he's impotent.
This is the only conclusion to be drawn from the latest developments. Magnitsky was arrested in 2008 shortly after accusing Interior Ministry officials of colluding with gangsters in the theft of some ${esc.dollar}230 million. The stolen money came from a fraudulent refund of taxes paid by Hermitage -- once the largest foreign investor in Russia -- after three of its subsidiaries were illegally re-registered to new owners with criminal records. All the documents the perpetrators needed to commit the fraud had been confiscated by police weeks earlier.
That was embarrassing for Russia's police ministry. How to explain the fraud, while denying that corrupt officials were involved? Three years later, the police have come out with an alternative theory: the money was actually stolen by Magnitsky himself. How do they know? Because of the "confessions" of two of the fraud suspects belatedly arrested by the police.
The story looks patently absurd, not least because Hermitage and its trustee, HSBC, warned Russian authorities about the gangsters' fraudulent activities three weeks before they stole the money. More generally, Hermitage has been protesting about the fraud, and fighting the theft of its Russian subsidiaries, ever since it found out about them.
But it has also been obvious from the start that no one in authority was seriously interested in finding the real culprits. The bigger question is why President Dmitry Medvedev, who has repeatedly promised to fight "legal nihilism", allows this farce to continue. It may be because, according to Russian media investigations, the Magnitsky affair possibly implicates powerful officials in the FSB, the secret police.
Whatever the reason, Medvedev's failure is obvious. Russia is sliding even further down the international corruption rankings, and foreign investors remain spooked by its unabated lawlessness. On the anniversary of Magnitsky's death, this doesn't look about to change soon.
CONTEXT NEWS
-- Nov. 16 marked the first anniversary of the death in prison of Sergei Magnitsky, a tax lawyer at law firm Firestone Duncan in Moscow, who advised British hedge fund Hermitage Capital Management, managed by American-born investor William Browder. The European Commission in October called the case "an important litmus test of whether President Medvedev is serious in his recent calls for modernisation and rule-of-law in Russia."
-- Officials of Russia's Interior Ministry held a press conference on Nov. 15 to outline their version of a ${esc.dollar}230 million tax rebate fraud that is central to the case. A ministry spokeswoman stated that two suspects in the fraud, Vyacheslav Khlebnikov and Viktor Markelo, testified that they acted in collaboration with Magnitsky. She said that police suspect Magnitsky of preparing the documents used by the fraudsters.
-- Hermitage issued a statement calling the new allegations against Magnitsky "absurd and cynical". It also released copies of letters written in 2007 by Hermitage's lawyer, and Hermitage's trustee, HSBC Management Ltd, to top Russian law enforcement officials, as well as the official replies. Hermitage said that these represented "proof that three major law enforcement agencies in Russia were fully aware of the ongoing crime to steal ${esc.dollar}230 million three weeks before the crime took place and they did nothing to stop it."
-- On Nov. 12, international anti-corruption watchdog Transparency International posthumously awarded Magnitsky one of its annual Integrity Awards. On Oct. 26, Transparency International published its annual ranking of corruption perception by country. In terms of transparency, Russia fell from 146th to 154th place, out of 178 countries, placing it on par with Congo, Laos and Papua New Guinea.
-- For previous columns by the author, Reuters customers can click on [BUSH/]
(Editing by Pierre Brian??on and Sarah Bailey)
Our Standards: The Thomson Reuters Trust Principles.
