Curious things have happened to lawyers involved in a massive tax fraud investigation involving government officials in Russia. Sergei L. Magnitsky, the lawyer who initially uncovered the alleged fraud died in prison. This week, Nikolai Gorokhov, the lawyer representing Magnitsky’s family, is recovering from serious injuries after falling out of a window in his Moscow apartment building. Gorokhov fell just one day before he was scheduled to appear in a Moscow court.
Gorokhov was retained in 2011 to represent Hermitage Capital Management founder William Browder, as well as Magnitsky’s family. Browder, who founded Hermitage in 1996, was, at one point, considered the largest private foreign investor in Russia.
In 2007, Hermitage’s Moscow office was raided on allegations of tax evasion despite a belief by the company that it had actually paid more than required. Magnitsky, who was a lawyer as well as an auditor, was hired to find out what happened. Magnitsky came to believe that the tax fraud wasn’t happening inside Hermitage but inside Russia’s own government. He accused a wide network of police, judges, corporate owners, and the Russian mafia of contributing to, and in some instances, directing the fraud.
Magnitsky’s accusations were not well-received, and eventually, he was accused of working with Browder to evade 522 million rubles ($16.3 million U.S.) in taxes. Magnitsky was thrown into a Moscow prison and died before his trial. He was just 37.
Magnitsky’s cause of death was said to be acute heart failure and toxic shock, caused by untreated pancreatitis. Magnitsky’s family says that he had been denied medical treatment while in prison, allegations that were confirmed by Russia’s Presidential Human Rights Council, which also found that he had been tortured.
After his death, Magnitsky was tried and convicted for tax evasion. Yes, after his death. I spoke to Browder who advised that a posthumous conviction like that had never happened in Russia before Magnitsky. Browder, too, was convicted of tax fraud but in absentia – he had left Russia before his conviction after being labeled a “threat to national security.”
(You can read my previous story about Magnitsky here).
In 2012, in response to circumstances leading up to Magnitsky’s death, the U.S. passed the Sergei Magnitsky Rule of Law Accountability Act which imposes financial and travel sanctions on those alleged to have committed human rights violations. Not everyone in Washington is a fan. In 2016, Rep. Dana Rohrabacher (R-CA), who had briefly been bandied as a potential candidate for Secretary of State under President Trump, proposed removing Magnitsky’s name from the law. That didn’t happen, and today, in addition to the U.S. law, there are a series of global Magnitsky laws.
There’s another U.S. twist. Gorokhov is a key witness for the United States government in a related money laundering suit against Prevezon Holdings. In that suit, filed in 2013 by former Department of Justice attorney Preet Bharara, the feds allege that a Russian criminal organization “including corrupt Russian officials” defrauded Russian taxpayers out of approximately 5.4 billion rubles ($230 million U.S.) through a tax refund fraud scheme. To hide the fraud, the feds allege that money was funneled through an elaborate series of transfers.
What’s the U.S. connection? The money laundering allegedly included the purchase of Manhattan real estate with funds from the fraud. As a result, the suit seeks forfeiture of a number of assets and real estate holdings. Prevezon Holdings is incorporated in the Republic of Cyprus but is registered in New York State as a foreign business corporation. According to court filings, the sole shareholder of Prevezon Holdings since 2008 has been Denis Katsyv; if that name rings a bell, it’s because Katsyv is the son of Petr Katsyv, vice president of Russia’s state-run rail monopoly, and reportedly a business associate of Vladimir Yakunin, a confidant of Vladimir Putin. The case against Prevezon is ongoing. Browder believes that the case is “dependent on his [Gorokhov’s] showing up for trial.”
Just before his fall, Gorokhov was also expected to present new evidence into the Magnitsky case in Moscow. That evidence will reportedly show that Russian police were complicit in allowing those responsible for Magnitsky’s murder to escape prosecution. According to Browder, the evidence includes WhatsApp messages leaked from the criminals which prove a connection.
It may be that someone didn’t want that information made public. Russian news organizations have reported that Gorokhov fell while helping movers carry a hot tub into his apartment. Browder, however, tweeted that Gorokhov was “thrown from 4th floor apartment in Moscow.” Browder stands by his comments that it was “not an innocent act.”
Fortunately, Gorokhov is expected to make a full recovery. Browder says that Gorokhov is now out of the intensive care unit (ICU) and has no neurological damage and no paralysis. When Gorokhov will be released from the hospital – and whether he’ll be able to testify – isn’t yet known.
Browder had previously remarked to The New York Times, that “[b]asically, there is a trail of dead and seriously injured people leading from the Magnitsky case.” I asked him whether he worried about his own safety, especially in light of recent events. He still receives a number of direct and indirect death threats, he says. They are, he said, “from the Russian government.” I asked him to clarify whether he meant the Russian mob. “You’re making a mistake that a lot of Americans make,” he explained, saying there is “not a difference between government and organized crime in Russia.” I guess maybe it’s too many Goodfellas movies but the American perception is that the mob is a bunch of guys walking around in leather jackets killing people. The difference is, Browder says, that in Russia today, “it’s people walking around in Armani suits – and they work for the Ministry of the Interior.”
It’s easy to think about this series of events as if it was something out of Hollywood. It seems so out of touch with our reality. But these aren’t characters in a movie. Magnitsky was a real person. He had a wife and children. “Sergei was a lawyer,” Browder said, “like you.” I admitted that was one of the reasons the case had resonated with me for so long.
The fact that we’re still talking about a lawyer’s death all of these years later is, he says, “remarkable.” Magnitsky’s work, he says, lives on because he had exposed the Kremlin’s main money-stealing operation. Browder explained that the subsequent work – the series of Magnitsky laws around the world and tracing stolen money – has made things “extremely unpleasant” for Putin. Magnitsky’s legacy may just be the exposure of the entire Kremlin money-laundering pipeline in the West. Gorokhov was helping to continue that work.
After all of this time, with all of the threats, the prosecutions, there has to be something that would bring Browder some closure. “What,” I asked him, “would you consider justice?” He didn’t hesitate. “When Putin is no longer in power,” he said. “And when the people who killed Magnitsky are prosecuted.”