Corruption drags down Russian economy

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One of the most notorious cases involves a criminal lawsuit under way in a Moscow court, in which government employees are accused of defrauding Russian taxpayers of a half-billion dollars and, adding insult to injury, using the legal system to punish those who sought justice.

According to Bill Browder, head of the Hermitage Fund, a hedge fund that was once the biggest foreign investor in Russia, scammers within the government have taken over companies that have paid taxes, then created fake losses to retroactively reclaim taxes as a rebate.

Last week, an attorney for Mr. Browder’s hedge fund, Sergei Magnitsky, died in a Moscow prison hospital. He had been in pretrial detention for nearly a year, during which he claimed that police made offers to release him if he testified against Hermitage.

“He entered prison as a healthy 37-year-old and exited the prison dead,” Mr. Browder told the Associated Press by telephone. He said Mr. Magnitsky had developed pancreatitis in jail and was repeatedly denied medical attention.

Attempts by The Washington Times and the AP to contact authorities for comment on the case were unsuccessful.

Mr. Browder, who now lives in London, has been blacklisted as a “threat to national security.”

His attorney’s death is likely to deepen Western concerns about the risks faced by anyone who challenges the authorities in Russia. Several independent journalists and human rights activists and lawyers have been victims of unsolved slayings in recent years.

Analysts say corruption is so widespread that even those determined to combat graft don’t know where to start or whom to trust.

“Nothing will change with this case,” Yulia Latynina, a prominent investigative journalist who tracks state corruption, said of the Hermitage Fund situation. The government’s “response has been crude and fantastic. It’s quite evident that the people behind this are high up in the system.”

In the case of the Hotel Moscow, politics and crime meet, with a twist.

Investigators say businessmen with close links to the city government were given a majority stake in the reconstruction contract after the contract had been issued to another company, Decorum Corp.

The businessmen adopted a variation of the same name, Dekorum, prior to assuming control, and partnered with the Moscow Development Co. to form a new company called Dekmos. Among the main stakeholders was Ashot Yegiazaryan, a veteran banker and member of parliament suspected of having ties with criminal networks.

One investigator, a former Western intelligence officer who monitors Russian organized crime and asked not to be named because he works in Russia and does not want to compromise his investigations, said that for the past two decades Mr. Yegiazaryan has colluded with Moscow government officials to secure properties illegally and development rights at a fraction of their real value.

In the early 1990s, Mr. Yegiazaryan founded Moscow National Bank, where, according to the Novaya Gazeta newspaper, a leading independent daily, he used high-level official contacts to divert tens ofmillions of dollars in state funds. It soon became one the largest banks in Russia.

Mr. Yegiazaryan departed as the bank’s fortunes soured, and subsequently moved on to co-own Unikombank. Within several years, the bank declared bankruptcy. By then, he had also left that company.

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