The Telegraph: Russia jails sawmill foreman for largest ‘tax fraud’ in country’s history

October 19, 2009

Viktor Markelov has pleaded guilty to “fraud by prior collusion by a group of persons and in an especially large amount” in a Moscow court, after the case was brought to the authorities’ attention by Hermitage Capital Management, the hedge fund battling to expose corporate corruption in Russia.

According to the verdict, Mr Markelov, 42, “a foreman for deliveries of lumber from sawmill DOZ-160”, used three former Hermitage subsidiaries to reclaim RUB5.41bn (£106m) of capital gains taxes paid by the hedge fund in a highly complex fraud. He will serve five years “in a correctional colony … with no fine”. There is no mention of any attempt to recover the lost taxes in the verdict or pursue other conspirators.

Mr Markelov’s sentence was reduced from 10 years after the court took “into consideration personal information”. It omitted to mention that he had previously been sentenced to two-and-a-half years for manslaughter.

Hermitage, the biggest foreign investor in the Russian stock market until 2006, has claimed that the sophisticated fraud could only have been committed with the collusion of senior figures in the nation’s law enforcement agencies and tax offices.

Bill Browder, the founder of Hermitage, has stepped up his campaign against Russian corruption by posting his allegations on YouTube.

Article by Philip Aldrick was published in The Telegraph.

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