Magnitsky Case Files Identify New Information on Russian Officials Involved In $230 Million Tax Fraud Cover-Up

April 18, 2012

New files from the posthu­mous case files against Sergei Mag­nit­sky reveal the name of the main “expert” wit­ness used to absolve Inte­ri­or Min­istry offi­cers from lia­bil­i­ty for the $230 mil­lion cor­rup­tion scheme uncov­ered by Sergei Mag­nit­sky. The expert was Max­im Tre­ti­akov, head of the legal depart­ment of Moscow Tax Office No 28, the office at the cen­tre of the cor­rupt tax refunds scheme. 

In return for his “friend­ly tes­ti­mo­ny”, the Inte­ri­or Min­istry offi­cers who them­selves had a con­flict of inter­est, exon­er­at­ed him and his col­leagues and claimed that the $230 mil­lion tax refund was exe­cut­ed by a “sawmill employ­ee” and a “job­less” indi­vid­ual, and that all bank records prov­ing oth­er­wise had burned in a truck explo­sion and can­not be traced. As a result, offi­cials from the Moscow Tax Office Num­ber 28 were able to con­tin­ue with their cor­rupt scheme, and were recent­ly shown to have exe­cut­ed $1 bil­lion in fraud­u­lent tax refunds over a four-year peri­od from 2006 – 2010. Fam­i­lies of the tax and Inte­ri­or Min­istry offi­cers involved in the scheme have become $47 mil­lion rich­er after the thefts and have been shown to invest in lux­u­ri­ous for­eign real estate and for­eign bank accounts.

“The fact that the head of the legal depart­ment at the tax office who over­saw the theft of the $230 mil­lion that Sergei Mag­nit­sky uncov­ered would be the expert wit­ness jus­ti­fy­ing the police actions sheds fur­ther light on the absur­di­ty and com­plete break­down of law in Rus­sia. In any oth­er coun­try, rev­e­la­tions like this would lead to mass res­ig­na­tions of cab­i­net min­is­ters,” said a Her­mitage Cap­i­tal representative.

Doc­u­ments from the case files indi­cate that Max­im Tre­ti­akov from the Moscow Tax Office No 28 pro­vid­ed “expert” tes­ti­mo­ny on 12 Feb­ru­ary 2008, two months after his Tax Office per­pe­trat­ed the $230 mil­lion tax refund. His tes­ti­mo­ny was obtained by Pavel Kar­pov, Inte­ri­or Min­istry offi­cer direct­ly impli­cat­ed in the $230 mil­lion tax refund. Pavel Kar­pov was named by Sergei Mag­nit­sky and in Her­mitage Fund’s com­plaints, along with offi­cer Artem Kuznetsov, for their role in the ille­gal seizure of doc­u­ments of Her­mitage Fund com­pa­nies that were used by Russ­ian offi­cials and crim­i­nals to fraud­u­lent­ly re-reg­is­ter those com­pa­nies and per­pe­trate the tax refund scheme.

Max­im Tre­ti­akov whose office approved the $230 mil­lion tax refund in one day, claimed that there was a legal jus­ti­fi­ca­tion for Inte­ri­or Min­istry offi­cers’ actions. To con­firm his exper­tise, Mr Tre­ti­akov said in his tes­ti­mo­ny to inves­ti­ga­tor Kar­pov: “My job respon­si­bil­i­ties include the rep­re­sen­ta­tion of the inter­ests of tax inspec­tion in court, sanc­tion­ing of deci­sions, and clar­i­fi­ca­tion of cur­rent legislation.”

A year lat­er, on 27 Feb­ru­ary 2009, Mr. Tre­ti­akov gave fur­ther tes­ti­mo­ny in rela­tion to the $230 mil­lion tax refund. He claimed he had not been aware that the refund was ille­gal and request­ed to be declared a “vic­tim,” claim­ing his “busi­ness rep­u­ta­tion suf­fered” from the refund. “On 19 Feb­ru­ary 2009 from the doc­u­ments received from the Inte­ri­or Ministry’s Inves­tiga­tive Com­mit­tee we learned that the direc­tors of Par­fe­nion and Mahaon, ear­li­er in 2007, pre­sent­ed to the tax inspec­tion Num­ber 28 in Moscow false doc­u­ments to jus­ti­fy the over­pay­ment of income tax for 2006 and thus received ille­gal­ly bud­get funds and caused dam­age to the busi­ness rep­u­ta­tion of tax office Num­ber 28 and mate­r­i­al dam­age for the refund­ed amount,” said Mr Tre­ti­akov in his 27 Feb­ru­ary 2009 testimony.

On the back of Mr Tretiakov’s tes­ti­monies, the Inte­ri­or Ministry’s inves­ti­ga­tion into the $230 mil­lion tax refund was closed in March 2011 con­clud­ing that the tax offi­cials, includ­ing Max­im Tre­ti­akov, were “tricked,” “mis­lead” and “unaware.” The only per­sons pros­e­cut­ed by the Inte­ri­or Min­istry for the largest sin­gle tax refund fraud in Russ­ian his­to­ry, were a sawmill employ­ee and an unem­ployed man. Both men had pre­vi­ous links to Inte­ri­or Min­istry offi­cers Artem Kuznetsov and Pavel Kar­pov named by Sergei Mag­nit­sky as involved in the scam (http://www.ft.com/cms/s/0/bdae02a8-e784-11df-b5b4-00144feab49a.html#axzz1sKATheoD) who were absolved from responsibility. 

At the same time, Mr Tretiakov’s tax office was in the mid­dle of a four-year $1 bil­lion tax refund embez­zle­ment scheme, accord­ing to the news­pa­per Novaya Gaze­ta (http://www.novayagazeta.ru/inquests/51924.html).

Tax Offi­cial Max­im Tre­ti­akov is Num­ber 45 on the U.S. Helsin­ki Com­mis­sion List of offi­cials involved in the tor­ture and death of Mag­nit­sky and the cor­rup­tion he uncov­ered. Inves­ti­ga­tor Pavel Kar­pov is Num­ber 21 on the list.

The scale and dura­tion of the tax refund scheme has raised ques­tions over the role of Alex­ei Kudrin, for­mer Russ­ian Finance Min­is­ter. Pub­lic ques­tions were for­mu­lat­ed by Andrei Illar­i­onov, for­mer eco­nom­ic advi­sor to the Russ­ian pres­i­dent (http://echo.msk.ru/blog/aillar/875912-echo/).In Kudrin’s reply on 11 April 2012, he said that nei­ther he, nor his sub­or­di­nates at the Fed­er­al Tax Min­istry and Trea­sury gave instruc­tions to exe­cute the ille­gal tax refunds (http://akudrin.ru/news/otvety-na-voprosy.html). This prompt­ed fur­ther ques­tions from Mr Illar­i­onov on 12 April 2012 (http://echo.msk.ru/blog/aillar/877960-echo/questioning) who is chal­leng­ing whether Mr Kudrin is fit to lead the Com­mit­tee for Civic Ini­tia­tives, an orga­ni­za­tion he unveiled on 5 April 2012, which stat­ed fight­ing cor­rup­tion as one of its goals (http://akudrin.ru/news/zayavlenie-o-sozdanii-komiteta-grazhdanskikh-initsiativ.html).

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