Further Attack on the Hermitage Fund and Its Lawyers after Death of Sergei Magnitsky

December 4, 2009

PRESS RELEASE

Convicted Felon Hires Top Lawyer to Further Attack on the Hermitage Fund and Its Lawyers after Death of Sergei Magnitsky

4 December 2009  – Victor Markelov, the man convicted of the single largest tax rebate fraud in Russian history – $230 million – has hired a prestigious lawyer from his jail cell in a last-ditch effort to prevent HSBC and the Hermitage Fund from regaining control over their three stolen Russian investment companies and vindicating their Russian lawyers who defended the Fund against complex frauds involving Russian Interior Ministry officials. The hearing will take place on 7 December 2009 at 16:00 in Hall No 1 of the 10th Arbitration Court of Appeal, 68/70, building 1, Sadovincheskaya Street, Moscow.

In a separate development, Markelov also filed a $3,422 defamation lawsuit against William Browder, CEO of Hermitage Capital, Vedomosti, a Russian newspaper and Echo Moscow, a Russian radio station. A hearing is also scheduled for 7 December, 14:00, Hall 31 of the Presnensky District Court at 20 Zoologicheskaya Street, Moscow.

In both proceedings, Markelov, convicted in April 2009 for the theft of $230 million from the Russian budget, is represented by a Moscow-based lawyer, Oleg Kirilenko. Mr Kirilenko’s resume indicates that he has participated in arbitration proceedings involving the bankruptcies of large Russian metallurgical companies, and he has represented the Russian State Agency for Restructuring of Loan Organizations.

In June 2007, founding documents for the three Russian investment companies of the Hermitage Fund were seized by the Moscow Interior Ministry and shortly thereafter, the companies were fraudulently re-registered into the ownership of Kazan-based Pluton, a shell company owned by Markelov. The stolen companies were then used by a criminal group, including Markelov, to steal $230 million from the Russian Treasury. The companies could only have been re-registered using corporate documents and seals which were seized by Interior Ministry officials and held in their custody prior to the company’s re-registration. The fraudulent tax rebates were approved by Moscow Tax Authorities 25 and 28 in one day and paid out two days later. The payments were approved after consultations with the Moscow Interior Ministry officials, and despite the fact that HSBC and Hermitage had filed six -255 page criminal complaints three weeks previously about the frauds with the Russian General Prosecutor, the head of the Russian State Investigative Committee of the Prosecutors Office and the head of the Internal Affairs Department of the Russian Interior Ministry.

The theft of the companies and subsequent theft of $230 million were uncovered by lawyer Sergei Magnitsky, who later testified about the involvement of Interior Ministry officials in the crime. In retaliation Sergei Magnitsky was arrested following his testimony by those very same officials. He died on 16 November 2009 in detention, where he was kept without trial for 12 months in cruel and inhuman conditions, under pressure to give false statements.

On 28 September 2009 the Moscow Regional Arbitration Court made a ruling to return the stolen companies to the ownership of HSBC. The significance of this ruling is that it will stop the unlawful persecution of two other Hermitage Fund lawyers, initiated by officials in the Interior Ministry named in the HSBC complaints. The lawyers became the subjects of criminal investigations solely by virtue of their representing HSBC – as the legitimate owners of the companies. Investigators claim that powers of attorney given by HSBC to the Hermitage Fund lawyers should have been issued by Markelov, as he was the registered owner at the time, even though he obtained the companies through theft. Reasserting HSBC’s ownership of the companies will reaffirm the validity of the lawyers’ powers of attorney.

Victor Markelov, 45, a former sawmill employee, was found guilty on 28 April 2009 of the theft of $230 million dollars from the Russian state. He was not required to pay any fine. He is currently serving a 5-year sentence in a prison in Saratov, the town where he lived prior to his incarceration. To date Markelov is the only person to be convicted for the largest-ever theft from the Russian budget. Despite being alerted to the involvement of many officials which have been identified in criminal complaints filed by HSBC and Hermitage, the Interior Ministry has not pursued the stolen money or charged any of Markelov’s accomplices.

For more information:
+44 20 7440 1777
info@hermitagefund.com

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