I have long argued that there exists a component of Russia’s failure to reform, deepen democracy, and respect rule of law as a normative member of the international community that is solely the responsibility of Western complicity – our banks, our energy firms, our investors, and our businesses which have been more than willing to prop up authoritarian governments, regardless of their human rights records. This new lawsuit, launched by William Browder and Hermitage Capital, alleging corruption at the highest levels of the Russian government to defraud the country’s biggest investor, may bring some changes to the traditional equation of risk and politics in Russia.
From the New York Times:
The filing is a new twist on Mr. Browder’s case, which began almost four years ago. His lawyers say the wire transfers will show a fraud larger than previously disclosed — remarkable even by the standards of Russia.
In its sweep and scale, the case has echoes of the Bank of New York money-laundering scandal in the late 1990s, though this time there are no allegations that American banks other than the subsidiary of a Russian investment company were involved.
Mr. Browder wasexpelled from Russia in a politically tinged visa refusal in 2005, andrelocated his business, Hermitage Capital Management, to London. Later,he said subsidiary companies he had formed in Russia to invest in Gazprom, the Russian gas monopoly, were used by others to acquire a fraudulent tax refund of $230 million.
Now, the filing by Mr. Ashcroft, whose law firm is based in KansasCity, Mo., suggests that companies other than his own were also used ina similar fraud. The court papers contend that at least another $100million that foreign investors in Gazprom had paid to Russianauthorities in taxes up to 2006 were later stolen in schemes involvingfraudulent refunds.
Mr. Ashcroft’s filing says that Hermitagewas subjected to “a series of events that might seem unlikely to befallan influential global investment firm.”
“Certain Russianofficials and private citizens entered into a conspiracy to reregisterto themselves three investment companies owned by the Hermitage Fund,”the filing says, with the goal to “apply for and receive fraudulent taxrefunds of over $230 million from the Russian Treasury, and finally, to funnel these proceeds through bank accounts in Russia and the United States.”