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 10^th 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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