June 28, 2016
Sergei Magnitsky was a Russian lawyer hired by an Anglo-American investment fund operating in Moscow to investigate the apparent diversion of as much as $230 million in taxes due to the government. He became a whistleblower after discovering that the money had been stolen by the police, organized crime figures and other government officials. After he went to the authorities to complain he was unjustly imprisoned for eleven months. When he refused to recant he was both beaten and denied medical treatment to coerce him into cooperating, resulting in his death in jail at age 37 in November 2009. He has become something of a hero for those who have decried official corruption in Russia.
The Magnitsky case is of particular importance because both the European Union and the United States have initiated sanctions against the Russian officials who were allegedly involved. In the Magnitsky Act, sponsored by Russia-phobic Senator Ben Cardin and signed by President Barack Obama in 2012, the U.S. asserted its willingness to punish foreign governments for violations of human rights. Russia reacted angrily, noting that the actions taken by its government internally, notably the operation of its judiciary, were being subjected to outside interference. It reciprocated with sanctions against U.S. officials as well as by increasing pressure on foreign non-governmental pro-democracy groups operating in Russia. Tension between Moscow and Washington increased considerably as a result and Congress will likely soon approve a so-called Global Magnitsky Act as part of the current defense appropriation bill. It expands the use of sanctions and other punitive measures against regimes guilty of egregious human rights abuses though it is unlikely to be applied to U.S. friends like Saudi Arabia and Israel. It is also sponsored by Senator Ben Cardin and is clearly intended to intimidate Russia.
The tit-for-tat that has severely damaged relations with Russia is based on the standard narrative embraced by many regarding who Magnitsky was and what he did, but is it true? I had the privilege of attending the first by invitation only screening of a documentary “The Magnitsky Act: Behind the Scenes,” produced by Russian filmmaker Andrei Nekrasov. The documentary had been blocked in Europe through lawsuits filed by some of the parties linked to the prevailing narrative but the Newseum in Washington eventually proved willing to permit rental of a viewing room in spite of threats coming from the same individuals to sue to stop the showing.
Nekrasov by his own account had intended to do a documentary honoring Magnitsky and his employers as champions for human rights within an increasing fragile Russian democracy. He had previously produced documentaries highly critical of Russian actions in Chechnya, Georgia and Ukraine, and also regarding the assassinations of Russian dissident Alexander Litvinenko in London as well as of journalist Anna Politkovskaya in Moscow. He has been critical of Vladimir Putin personally and was not regarded as someone who was friendly to the regime, quite the contrary. Some of his work has been banned in Russia.
After his documentary was completed using actors to play the various real-life personalities involved and was being edited Nekrasov returned to some issues that had come up during the interviews made during the filming. The documentary records how he sought clarification of what he was reading and hearing but one question inevitably led to another.
The documentary began with the full participation of American born UK citizen William Browder, who virtually served as narrator for the first section that portrayed the widely accepted story on Magnitsky. Browder portrays himself as a human rights campaigner dedicated to promoting the legacy of Sergei Magnitsky, but he is inevitably much more complicated than that. The grandson of Earl Browder the former General Secretary of the American Communist Party, William Browder studied economics at the University of Chicago, and obtained an MBA from Stanford.
From the beginning, Browder concentrated on Eastern Europe, which was beginning to open up to the west. In 1989 he took a position at highly respected Boston Consulting Group dealing with reviving failing Polish socialist enterprises. He then worked as an Eastern Europe analyst for Robert Maxwell, the unsavory British press magnate and Mossad spy, before joining the Russia team at Wall Street’s Salomon Brothers in 1992.
He left Salomons in 1996 and partnered with the controversial Edmond Safra, the Lebanese-Brazilian-Jewish banker who died in a mysterious fire in 1999, to set up Hermitage Capital Management Fund. Hermitage is registered in tax havens Guernsey and the Cayman Islands. It is a hedge fund that was focused on “investing” in Russia, taking advantage initially of the loans-for-shares scheme under Boris Yeltsin, and then continuing to profit greatly during the early years of Vladimir Putin’s ascendancy. By 2005 Hermitage was the largest foreign investor in Russia.
Browder had renounced his U.S. citizenship in 1997 and became a British citizen apparently to avoid American taxes, which are levied on worldwide income. In his book Red Notice: A True Story of High Finance, Murder and One Man’s Fight for Justice he depicts himself as an honest and honorable Western businessman attempting to function in a corrupt Russian business world. That may or may not be true, but the loans-for-shares scheme that made him his initial fortune has been correctly characterized as the epitome of corruption, an arrangement whereby foreign investors worked with local oligarchs to strip the former Soviet economy of its assets paying pennies on each dollar of value. Along the way, Browder was reportedly involved in making false representations on official documents and bribery.
As a consequence of what came to be known as the Magnitsky scandal, Browder was eventually charged by the Russian authorities for fraud and tax evasion. He was banned from re-entering Russia in 2005, even before Magnitsky died, and began to withdraw his assets from the country. Three companies controlled by Hermitage were eventually seized by the authorities, though it is not clear if any assets remained in Russia. Browder himself was convicted of tax evasion in absentia in 2013 and sentenced to nine years in prison.
Browder has assiduously, and mostly successfully, made his case that he and Magnitsky have been the victims of Russian corruption both during and since that time, though there have been skeptics regarding many details of his personal narrative. He has been able to sell his tale to leading American politicians like Senators John McCain, Ben Cardin and ex-Senator Joe Lieberman, always receptive when criticizing Russia, as well as to a number of European parliamentarians and media outlets. But there is, inevitably, another side to the story, something quite different, which Andrei Nekrasov presents to the viewer.
Nekrasov has discovered what he believes to be holes in the narrative that has been carefully constructed and nurtured by Browder. He provides documents and also an interview with Magnitsky’s mother maintaining that there is no clear evidence that he was beaten or tortured and that he died instead due to the failure to provide him with medicine while in prison or treatment shortly after he had a heart attack. A subsequent investigation ordered by then Russian President Dimitri Medvedev in 2011 confirmed that Magnitsky had not received medical treatment, contributing to this death, but could not confirm that he had been beaten even though there was suspicion that that might have been the case.
Nekrasov also claims that much of the case against the Russian authorities is derived from English language translations of relevant documents provided by Browder himself. The actual documents sometimes say something quite different. Magnitsky is referred to as an accountant, not a lawyer, which would make sense as a document of his deposition is apparently part of a criminal investigation of possible tax fraud, meaning that he was no whistleblower and was instead a suspected criminal.
Other discrepancies cited by Nekrasov include documents demonstrating that Magnitsky did not file any complaint about police and other government officials who were subsequently cited by Browder as participants in the plot, that the documents allegedly stolen from Magnitsky to enable the plotters to transfer possession of three Hermitage controlled companies were irrelevant to how the companies eventually were transferred and that someone else employed by Hermitage other than Magnitsky actually initiated investigation of the fraud.
In conclusion, Nekrasov believes there was indeed a huge fraud related to Russian taxes but that it was not carried out by corrupt officials. Instead, it was deliberately ordered and engineered by Browder with Magnitsky, the accountant, personally developing and implementing the scheme used to carry out the deception.
To be sure, Browder and his international legal team have presented documents in the case that contradict much of what Nekrasov has presented in his film. But in my experience as an intelligence officer I have learned that documents are easily forged, altered, or destroyed so considerable care must be exercised in discovering the provenance and authenticity of the evidence being provided. It is not clear that that has been the case. It might be that Browder and Magnitsky have been the victims of a corrupt and venal state, but it just might be the other way around. In my experience perceived wisdom on any given subject usually turns out to be incorrect.
Given the adversarial positions staked out, either Browder or Nekrasov is essentially right, though one should not rule out a combination of greater or lesser malfeasance coming from both sides. But certainly Browder should be confronted more intensively on the nature of his business activities while in Russia and not given a free pass because he is saying things about Russia and Putin that fit neatly into a Washington establishment profile. As soon as folks named McCain, Cardin and Lieberman jump on a cause it should be time to step back a bit and reflect on what the consequences of proposed action might be.
One should ask why anyone who has a great deal to gain by having a certain narrative accepted should be completely and unquestionably trusted, the venerable Cui bono?standard. And then there is a certain evasiveness on the part of Browder. The film shows him huffing and puffing to explain himself at times and he has avoided being served with subpoenas on allegations connected to the Magnitsky fraud that are making their way through American courts. In one case he can be seen on YouTube running away from a server, somewhat unusual behavior if he has nothing to hide.
A number of Congressmen and staffers were invited to the showing of the Nekrasov documentary at the Newseum but it is not clear if any of them actually bothered to attend, demonstrating once again how America’s legislature operates inside a bubble of willful ignorance of its own making. Nor was the event reported in the local “newspaper of record” the Washington Post, which has been consistently hostile to Russia on its editorial and news pages.
A serious effort that a friend of mine described as “hell breaking loose” was also made to disrupt the question and answer session that followed the viewing of the film, with a handful of clearly coordinated hecklers interrupting and making it impossible for others to speak. The organized intruders, who may have gained entry using invitations that were sent to congressmen, suggested that someone at least considers this game being played out to have very high stakes.
The point is that neither Nekrasov nor Browder should be taken at their word. Either or both might be lying and the motivation to make mischief is very high if even a portion of the stolen $230 million is still floating around and available. And by the same measure, no Congressman or even the President should trust the established narrative, particularly if they persist in their hypocritical conceit that global human rights are best judged from Washington. They should in particular hesitate if they are considering tying policy towards Russia based on a presumption of guilt on the part of Moscow without really knowing what actually did occur. That could well be a decision that will bring with it tragic consequences.